Indian Paint Industry

The size of the paints grocery store in India is estimated at Rs 110 bn, with the contribution of the organised and unstructured departments in the ratio of 6535. Reduction of excise duties over the last-place few long time, from 40% to the present level of 14%, has helped create a level playing field between the unorganised and the organised segments, as the former is not subject to excise duty. As the unorganised celestial sphere loses its competitive edge, it is also losing market sh be to the organised sector imposters.In view of the pocket-sized per capita annual consumption of paints in India (0. kg, comp ard to 4 kg in South East Asian countries, 22 kg in create countries and a global average of 15 kg), the domestic paints assiduity has tremendous potential. The paints industry is working-capital intensive, rather than fixed-asset intensive. As in consumer non-durables, distribution strengths and bulls eye building are of paramount importance. The Indian paint i ndustry witnessed buirdly growth in turnover on the back of growth volumes during the fiesta season. Both ornamental and industrial segments performed well during the quarter.Moreover, the margins received a rise with the domestic currency continuing to rise against the greenback, causing a meaning(a) reduction in cost of imported inputs. This in turn induce some of the players in the industry to reduce the wrongs of select products to pass on the benefit to the customers. Further, players are going in for capacity expansions to reap the benefits of the climb demand for paints Segments On product lines, paints can be differentiated into decorative or architectural paints and industrial paints.While the former caters to the housing sector, the self-propelling segment is a major consumer of the latter. Decorative paints can further be classified into exchange premium, medium and distemper segments. Premium decorative paints are acrylic resin emulsions utilise mostly in the m etros. The medium sick consists of enamels, popular in smaller cities and towns. Distempers are economy products demanded in the suburban and rural markets. intimately 20 per centime of all decorative paints sold in India are distempers and it is here that the unorganised sector has dominance.Industrial paints include pulverization coatings, juicy performance oating and automotive and marine paints. But two-thirds of the industrial paints produced in the earth are automotive paints. Decorative and industrial paints are the segments within the sector, in a 7030 proportion. Brand equity, a wide range of shades, distribution strength and efficient working capital management are key success agentive roles in the decorative paints segment. A strong distribution earnings acts as an entry barrier. Within the decorative segment, enamel is the larger-than-lifest sub-segment, bill for over 50%, followed by wall finishes, primers and wood finishes.The season for decorative paints is from October to March, a period characterised by festivals handle Diwali, and the summer, when characterization is normally carried out. The industrial segment pertains mainly to automobiles. In this segment, technological competence, product range and customised solutions are of utmost importance. Technological strength is an other entry barrier. The slowdown in the automobile sector has affected the overall growth of the industrial segment, as the former contributes most 50% of the latters revenues.Other sub-segments are marine paints, powderise coatings for white goods like refrigerators and washing machines, and industrial coatings. Within the paints sector, the proportion of the industrial paints segment is likely to increase in the next few years and the ratio is likely to become 5050. The demand for decorative paints is exceedingly price-sensitive and also cyclical. Monsoon is a slack season while the peak line of business period is Diwali festival time, when most peopl e repaint their houses. The industrial paints segment, on the other hand, is a high volume-low margin business.In the decorative segment, it is the distribution network that counts while in the industrial segment the deciding factor are technological superiority and tie-up with automobile manufacturers for assured business. The tract of industrial paints in the total paint consumption of the nation is actually low compared to global standards. It accounts for 30 per cent of the paint market with 70 per cent of paints sold in India for decorative purposes. In most developed countries, the ratio of decorative paints vis-A -vis industrial paints is around 5050.But, with the decorative segment bottoming out, companies are increasingly focussing on industrial paints. The future for industrial paints is bright. In the next few years, its share would go up to 50 per cent, in line with the global trend. Decorative Sector Composition ( to be check for accuracy of figures) Enamels 50% Diste mper 19% Emulsions 17% exterior coats 12% Wood Finishes 2% Decorative Sector Features Enamels Steady growth. These are oil base paints which are widely used for painting on all surfaces including walls, wood and metals.They also find application in painting of hoardings and signboards and repainting of commercial vehicles. Emulsions Shift from distemper and enamels to emulsions. High growth area. These are premium qualtity oil based wall paints. Distempers High growth in low priced low quality distempers as consumers are upgrading from limewash. These are water based wall paints priced at a much lower range than the preceding(prenominal) two. Exteriors Exterior emulsion fastest growing segment in the Indin headstone market.Industrial Sector Composition ( to be check for accuracy of figures) self-propelling Paints 50%High Performance Coating 30% Powder Coating 10% Coil Coating 5% Marine Paints 5% self-propelled Sector High growth sector with a number of peeled entrants li ke Mercedes Benz, Mitsubishi, Daewoo, Hyundai, Honda, Fiat, commonplace Motors, traverse. However, recently there is some slackness in Auto demands. Two wheeler market booming due to demend from large Indian middle class. Goodlass and Asian Paints are the leading OEM players and ICI is the leading player in the replacement market PowderCoatings Increase growth due to increased sales of white goods and auto ancillaries.Berger and Goodlass lead in this solid powder coating segment used for decoration and protection of white goods, electronic equipment and auto components. High Performance Coatings Steady growth due to increase investments in refinery segment and power sectors, particularly Thermal and Nuclear. Coil Coatings solution based paints for sheets and intertwines. ICI and Asian Paints lead this segment. Marine Shalimar and Bombay Paints are the major players in these anti-corrosive, underwater paints used for ships and containers. Chemicals These high performance paints ar e used in fertilisers, petrochemicals etc. or prevention of corrosion.APIL dominates the decorative segment with a 38 per cent market share. The company has more than 15,000 retail outlets and its brands Tractor, Apcolite, Utsav, Apex and booster are entrenched in the market. GNPL, the number-two in the decorative segment, with a 14 per cent market share too, has direct increased its distribution network to 10,700 outlets to compete with APIL effectively. Berger and ICI have 9 per cent and 8 per cent shares respectively in this segment followed by J&N and Shalimar with 1 and 6 per cent shares.GNPL dominates the industrial paints segment with 41 per cent market share. It has a lions share of 70 per cent in the OEM passenger car segment, 40 per cent share of two wheeler OEM market and 20 per cent of commercial vehicle OEM market. It supplies 70 per cent of the paint requirement of Maruti, Indias largest passenger car manufacturer, besides supplying to other customers like Telco, T oyota, Hindustan Motors, Hero Honda, TVS-Suzuki, Mahindra & Mahindra, Ashok Leyland, Ford India, PAL Peugeot and Bajaj Auto.GNPL also controls 20 per cent of the consumer durables segment with clients like Whirlpool and Godrej GE. The company is also venturing into new areas like painting of plastic, coil coatings and cans. APIL, the leader in decorative paints, ranks a poor second aft(prenominal) Goodlass Nerolac in the industrial segment with a 15 per cent market share. But with its joint venture Asian-PPG Industries, the company is aggressively targeting the automobile sector. It has now emerged as a 100 per cent OEM supplier to Daewoo, Hyundai, Ford and General Motors and is all set to ride on the automobile boom.Berger and ICI are the other players in the sector with 10 per cent and 9 per cent shares respectively. Shalimar too, has an 8 per cent share. Raw Material scenario The paint industry is cranky material-intensive, in terms of value and quantity of raw materials used. Raw material be account for around 70% of total production costs. Imports constitute around 30% of the raw material requirements. The most critical raw materials used are titanium dioxide (TD) (rutile and anatase grades), phthalic anhydride (PAN) and pentaerithrithol PENTA).Some other raw materials like dress hat oil, soyabean oil, linseed oil and mineral turpentine are also used. increase prices of raw materials, on the one hand, and the inability to pass on the price increases from recession and competitive pressure, on the other, are major areas of concern. Of the 300 raw materials (30% petro-based derivatives), nearly half of them are imported petroleum products. Thus, any shortfall in global oil reserves affects the bottomline of the players.