Sirca Paints India Ltd Management Discussions

MACROECONOMIC LANDSCAPE

The global economy remained resilient during FY 2025-26 despite geopolitical uncertainties, evolving trade dynamics, and fluctuations in commodity prices. According to the International Monetary Fund (IMF), global GDP growth is estimated at approximately 3.1% in 2026, supported by easing inflationary pressures, stable consumer demand, and continued investments in infrastructure and technology. While growth across major economies remained uneven, sectors linked to housing, renovation, and interior aesthetics continued to witness healthy demand.

The paints and coatings industry benefited from rising urbanization, increasing renovation activity, and growing consumer preference for premium and sustainable products. However, volatility in crude oil and petrochemical derivatives continued to influence raw material costs across the industry. Despite these challenges, longterm demand drivers such as residential construction, premium home improvement, and luxury interior finishes remained intact, supporting growth opportunities for decorative paints and wood coatings manufacturers.

[Source: International Monetary Fund (IMF), World Economic Outlook, April 2026]

For the speciality wood coatings industry, the global macroeconomic backdrop in FY 2025-26 translated into a series of tailwinds and headwinds. The global wood coatings market was estimated at approximately 3.54 million tonnes in 2026, growing at a CAGR of over 3.61% during 20262031. Asia-Pacific continued to dominate global wood coatings consumption, accounting for approximately 56.68% of global market volume in 2025, driven by the regions position as the worlds largest furniture manufacturing and export hub. Polyurethane resins held the leading position in the resin-type segment with a 60.14% share, while waterborne systems emerged as the fastest growing technology segment, driven by tightening environmental regulations.

[Source: Mordor Intelligence, Wood Coatings Market Report, January 2026 — https://www.mordorintelligence.com/ industry-reports/wood-coatings-market]

India continued to be one of the fastest- growing major economies during FY 2025-26, supported by strong domestic consumption, rising infrastructure investments, expanding manufacturing activity, and sustained urbanization. As per the National Statistical Office (NSO), Indias real GDP growth is estimated at around 7.4% for FY 2025-26, significantly outperforming many global economies.

The governments continued focus on infrastructure development, housing, smart cities, and urban modernization has created a favorable environment for

the construction and real estate sectors. Rising disposable incomes, increasing home ownership, and changing consumer preferences have accelerated spending on home decor, modular furniture, premium interiors, and renovation activities.

These trends have directly supported demand for decorative paints, wood coatings, texture finishes, and premium surface solutions. The ongoing shift towards premiumization, coupled with shorter repainting cycles and growing awareness of aesthetic and durable finishes, continues to drive growth in the organized paints industry. Given its strong portfolio comprising Sirca, Unico, Oikos, and Welcome, the Company remains well positioned to capitalize on the growing demand for premium wood coatings, decorative paints, and interior finishing solutions across India.

[Source: Economic Survey 2025-26; National Statistical Office (NSO); Reserve Bank of India Annual Report 2025-26]

India continued to be one of the fastest- growing paint markets globally during 2025, supported by sustained urbanization, rising disposable incomes, premium housing demand, increasing renovation activity, and strong government investments in infrastructure.

The decorative paints segment remains the largest contributor to industry revenues, accounting for nearly three- fourths of the market, with demand driven by residential housing, repainting cycles, home improvement, and premium interior finishes.

The Indian market also witnessed heightened competitive intensity with new capacity additions and aggressive market expansion by leading players. Despite pricing pressures and slower urban demand during parts of 2025, longterm fundamentals remain supported by favourable demographics, increasing housing stock, and a shift toward premium products.

The global wood coatings industry continued to benefit from increasing demand for premium furniture, modular kitchens, engineered wood products, flooring, cabinetry, hospitality projects, and luxury residential developments. Consumer preferences are shifting toward environmentally friendly, water-based, UV-curable, and low- emission wood coatings that provide enhanced durability, scratch resistance, colour retention, and superior surface aesthetics. Manufacturers are also investing in faster curing technologies and high-performance polyurethane systems to improve efficiency and finish quality.

Asia-Pacific remains the largest regional market due to expanding residential construction, increasing furniture production, and growing disposable incomes.

• Growth in modular furniture

• Rising luxury housing

• Water-based polyurethane coatings

• UV-curable coating systems

• Low-VOC formulations

• Sustainable wood finishing technologies

• Digital colour matching and automation

Over the next 2-5 years, management?s focus is centered on driving sustainable growth, expanding market presence, strengthening product offerings, and improving operational efficiency.

Expanding our retail footprint in geographies where our presence remains underpenetrated, particularly in Maharashtra, Gujarat, and South India.

Strengthening the distribution and market reach of the Wembley product portfolio, with a focus on increasing dealer penetration and brand visibility.

Continuing to enhance our premium and luxury product offerings while introducing new industrial coating solutions to address a broader spectrum of customer requirements and diversify revenue streams.

Increasing our presence across both OEM and retail channels by expanding the distribution network and deepening relationships with key customers and partners.

Investing in influencer engagement programs, including architects, interior designers, contractors, and woodworking professionals, to drive brand preference and product adoption.

Driving cost optimization initiatives across procurement, manufacturing, logistics, and operational processes to improve efficiencies and support profitability.

Enhancing manufacturing capabilities, supply chain effectiveness, and digital infrastructure to support future growth and scalability.

Strengthening dealer development, customer engagement, and brandbuilding initiatives to improve market share and customer loyalty.

Management remains committed to balancing growth investments with profitability, strengthening its competitive position across retail, industrial, and OEM segments, and creating long-term value for all stakeholders.

Continued investments in residential, commercial, and infrastructure projects are expected to support demand for decorative paints and wood coatings.

Rising urbanization and increasing construction activity provide long-term growth opportunities for the industry.

Growing disposable incomes and evolving consumer preferences are driving demand for premium finishes and aesthetically superior coating solutions. The increasing focus on home improvement and interior design is expected to boost the consumption of high-value wood coatings.

The rapid growth of the organized furniture market, modular kitchens, wardrobes, and customized interiors is creating significant demand for wood coating products. This trend is expected to support sustained growth in the wood finishes segment.

Increasing environmental awareness and regulatory focus are accelerating the adoption of water-based and low- VOC coating solutions. Companies with innovative and environmentally friendly product portfolios are well-positioned to capitalize on this emerging opportunity.

The industry remains dependent on petrochemical-based raw materials such as resins, solvents, and pigments. Fluctuations in global commodity prices and supply chain disruptions may impact input costs and profitability.

The wood coatings and paints sector faces strong competition from established domestic and multinational players. Sustaining market share requires continuous investment in product innovation, branding, and distribution network expansion.

Increasingly stringent environmental regulations relating to emissions, chemical usage, and product safety may result in higher compliance and operational costs. Adapting to evolving regulatory requirements remains critical for long-term sustainability.

Demand for wood coatings is closely linked to construction activity, furniture manufacturing, and consumer discretionary spending. Any slowdown in real estate, infrastructure development, or economic growth may adversely affect industry demand.

Sirca Paints is targeting revenue growth of 25-30% CAGR while sustaining EBITDA margins of 19-21%, with a long-term vision of achieving f 1,000 crore in revenue by FY29. To support this growth, the Company plans a capex of f5-6 crore in FY27 towards acrylic manufacturing capacity expansion and continued localization of acrylic and UV coatings.

Growth will be driven by the pan-India expansion of the Wembley and Valentino brands through Sircas distribution network, deeper penetration in western and southern India, and increased presence in Tier II and Tier III cities through new depots, dealer additions, and Sirca Studios. The Company also aims to strengthen its OEM and institutional business, while initiating exports under the Wembley and Valentino brands, targeting a 3-4% contribution to revenue. With a diversified portfolio and expanding market reach, Sirca remains well-positioned for sustainable and profitable growth.

Sirca has implemented robust internal controls and compliance systems in line with regulatory requirements, with a focus on process automation and risk management. The organization supports talent development through ongoing training and a performance-driven culture, resulting in high employee engagement.

This analysis contains forward-looking statements based on current expectations. Actual results may materially differ due to changes in external conditions, global economic volatility, input cost movements, or changes in government regulatory and tax policy

The Management advises readers that the risks detailed in this report are not exhaustive and are provided solely for informational purposes. This report may also contain forward-looking statements, and actual results may differ significantly from those projected. Investors and stakeholders are therefore urged to exercise their own judgment when evaluating the various risks associated with the Company.

At Sirca Paints India Limited (SPIL), risk management is a continuous and evolving process aimed at proactively identifying, evaluating, and mitigating risks across all business operations. Given that risk perception is influenced by the size, scale, geography, and market segment in which the Company operates, SPILs strategy focuses on maximising areas of control and minimising exposure to uncontrollable external factors.

The Company recognises that business environments are cyclical and ever- changing. Accordingly, SPIL has designed a robust and adaptive risk management model that ensures preparedness for emerging risks while enabling resilience and sustainable growth.

An essential responsibility of the Board of Directors is proactive risk management, which remains deeply embedded in SPILs governance charter. The Board provides strategic oversight of risk exposure, while the management team is entrusted with day-to-day risk monitoring and mitigation. Guided by the philosophy of “no risks, no rewards,” the management ensures that risks are identified, assessed, and addressed in a structured and timely manner.

Designated personnel and specialised teams are responsible for compliance, internal controls, and external coordination. Formal mechanisms for risk reporting, escalation, and corrective action ensure transparency and accountability

RISK MANAGEMENT STRUCTURE Internal Audit Team - Facilitates identification of risks and mitigants and validates the robustness of controls through regular assessments and reporting.

Audit Committee - Reviews the effectiveness of internal controls, regulatory compliance, and enterprisewide risk processes.

Risk Management Committee - Develops, implements, and monitors the Companys risk management policies and frameworks.

Risk Management and Mitigation - SPIL recognises that managing risks is critical to safeguarding shareholder and stakeholder interests, ensuring compliance, and facilitating sustainable growth. In line with SEBI (LODR) Regulations, 2015, and the Companies Act, 2013, the Company has constituted a Risk Management Committee of Directors to oversee risk policies, ensure execution of strategies, and monitor risk mitigation practices.

Market volatility, fluctuations in input costs, and foreign exchange exposure may impact profitability. Advance hedging, disciplined financial planning, and diversified sourcing strategies

Evolving Regulatory Landscape Emerging environmental, safety, and product quality regulations may impact operations.

Dedicated Corporate Quality & Safety (CQS) team ensures compliance with global standards, benchmarks with industry best practices, and proactively adapts to new regulatory changes

Operational & Supply Chain Risk Disruption in raw material availability, logistics, and inflationary pressures.

Diversified supplier base, long-term contracts, inventory management, and demand-supply forecasting models.

Competition (existing and new), changing customer preferences, brand positioning, and technological shifts.

Continuous innovation in product offerings, digital initiatives, brand-building campaigns, and contingency planning.

Handling hazardous raw materials and waste in manufacturing processes. Implementation of Behaviour-Based Safety (BBS) programs, periodic risk assessments, advanced safety equipment, and training.

Risk of fraud, misconduct, or policy noncompliance.

Strong whistleblower mechanism, periodic fraud risk assessments (FRA), disciplinary action framework, and independent audit checks.