Exploring The Paint Industry
Indian paint industry has evolved since its inception in 1920 from merely decorative paints market depending mainly on festivals to a more diversified market. The estimate size of Indian paints market is about US2.5$ billion contributed by organized and unorganized segments in the ratio of 65:35. This gap has been steadily decreasing providing level playing field to both by steady and steeped reduction in excise duties over the last few years from 40% to 14% as organized sector is subjected to excise duty.
India has one of the lowest per capita paint consumption at 1kg/annum as against 15-25kg/annum of a few of the developed countries, while for the few countries like US, Japan etc per capita consumption is more than 25 kg/annum. Low per capita consumption with rural penetration of only 10% has prompted many domestic and global manufacturers to step up their production capacity to tap this latent potential.
The Indian paint industry is segmented into decorative and industrial market. Decorative market catering to housing sector has been valued at US 1.7 billion and Industrial market catering to automobile OEM, industries and railways has been valued at US$0.8 billion. With current demand of 6,50,000 tonnes the per capita consumption of India is amongst lowest in the world.
Owing to boom in housing sector, increasing urbanization, easy availability of loans and shift from kuccha or semi permanent to permanent housing structure the demand for decorative paints segment is increasing which constitute 70% of Indian paint industry. However, due to rapid industrialization, increase in manufacturing over the past few years the ratio of industrial to decorative paints is expected to be 50:50 in line with the global trends.
The global players like Akzo Nobel, Sherwin Welliams, Nippon and Jotun have set up their shops in India. They are unlikely to affect the domestic players as it would require some time to match the scale, reach the brand equity, distribution network, and brand loyalty that is currently being enjoyed by the existing players. However, serious efforts are being made by them to capture market share through organic growth, Sherwins William has acquired domestic decorative paints company, Netco Paints, while Akzo Nobel has taken over ICI paints. Thus over the long-term the intense competition well take a toll on operating margins of the players thus shifting the focus from price increase to cost optimization.#p#分页标题#e#
GLOBAL AND INDIAN SCENARIO 全球和印度的情况
The total market of paints industry worldwide is 95 billion $. The global top ten players are 1) Akzo Nobel, 2) PPG Industries Inc. 3) Sherwin-Williams Co. 4) DuPont Performance Coatings 5) BASF Coatings 6) The Valspar Corp. 7) Kansai Paint Co., Ltd. 8) RPM International Inc. 9) Nippon Paint Co. 10) Jotun
The year 2009-2010 was a very challenging year for the international paint industry because of the global economic crisis. There were lower sales in the period as compared to the previous period.
Indian Market 印度市场
Total market share of Indian Paint industry is Rs 170 billion. Decorative paints is Rs 110 billion and Industrial Paints is Rs 60 billion.
Buoyant Demand in India:
Demand for Decorative paints was very good throughout the year
Rural and small town demand significantly better than large towns
Construction activity revived and increased capex spend across sectors
Industrial paints grew well due to growth in automotive and durable segments
Paint companies are anticipating a higher demand growth with rising higher GDP, higher disposable incomes and better lifestyles.
Demand for paint comes from two broad categories-Decorative and Industrial
The decorative paints contribute to around 65% of the total paint market in India. This segment is the most unorganized of the overall paint market. There are around 2000 companies in this segment. The major players are Asian Paints, Berger Paints, Nerolac Paints and Dulux Paints. Asian Paints is the market leader in this category.
The decoartive paints are used in homes, offices, buildings, architectural purposes and other display purposes (hoardings, banners, etc.). The major demand of decorative paints arises in festive seasons. But now the trend is changing, customer do not wait for any occasion. Also, the preferences in buying are also changing. The decoartive paint segment is very sensitive to price but also it is a huge margin business.
Types of decorative paints in India
The major categories in decorative paints are Interior wall paints, Exterior wall paints, Enamels, Emulsions, Varnishes (metal & wood) and other subsidiary products like primers, putties, etc.
Composition of Decorative Paints
Figure Decorative Paints in India
Decorative Sector Features:
Enamels are oil based paints which have a glossy finish in them. These paints are basically used on hard surfaces like walls, metals and wood. Now days they also find applications in signboards, banners, hoardings, etc.#p#分页标题#e#
Other types of enamels available in market are a) water based enamels which have low VOC b) solvent based enamels which are highly resistant to stains and water.
Enamels is a steady growth segment in India. The product comes in premium, luxury and economy ranges.
Emulsions are produced by mixing two or more than two unblendable liquids. In India, Water based emulsions have a very good market. Also, this category is a very high growth one. The majority of the products are premium ones.
Other features of emulsions are a) subtle metallic textures in Gold and Silver b) rich metallic shades with unique grain texturing c) marble like impression on interior walls d) silky glowing appearance e) high stain resistance f) anti-fungal properties
Distempers are water based wall paints in which pigments are mixed with water, glue, etc. Earlier, the trend was to use lime wash, but now distempers offers a low price and better quality than locally made products. Distempers can be aggrisevely priced in rural market where customers do not spend much on premium products.
Unique properties of distempers are long lasting, attractive matt finish, durable and value for money product.
Exterior emulsions are water based and acrylic based and is used on exterior walls. It is the fastest growing segment in India. Various features of exterior emulsions are all weather paints; withstand extreme tropical conditions, anti algal and anti fungal, protection against alkali and UV degradation, etc.
Varnishes are transparent and protective films used on wood and metals. They provide excellent weather resistance, light fastness & preserves natural beauty of wood on exteriors for years. Also, they are resistant to scratches and stains. In India, the varnish market has gone down because of wall papers and sunmicas, but still it can grow if technology innovations are made.
The industrial paints contribute to around 35% of the total paint market in India. This segment is highly organized one because of technolgy intensive nature and high investments. There are few companies in this segment, majority of which are foreign tie-ups. The major players are Akzo Nobel, Asian Paints and Nerolac Paints. Akzo Nobel (earlier ICI India) is the market leader in this category.
Consumer durables, FMCG,
Infrastructure construction (roads, highways, dams, etc.),
Protective coatings (nuclear, thermal or hydel power plants, chemical, petrochemical or fertilizer plants, refineries, sugar, pulp and paper industry, offshore structures, pharmaceuticals etc.)#p#分页标题#e#
Floor coatings (across all industries)
Types of industrial paints in India
The major categories in industrial paints are Automotive paints, High perfromance coatings, Powder coatings, Coil coatings and Marine paints.
Composition of Industrial Paints
Figure Industrial Paints Composition
Automotive Paints is a very high growth sector because India is becoming an automobile hub and in recent years many major automobile companies like BMW, Volkswagan, General Motors, Skoda, Mercedes Benz have entered or expanded their capacity. Also, demand from two wheeler makers is also increasing due to consumption from large Indian Middle Class. So, this sector has a huge potential in it.
Nerolac and Asian Paints are the leading OEM players and Akzo Nobel is the leading player in the replacement market. The product range is a) Intermediate coats/primer surfaces b) top coats c) touch up paints d) heat resistant paints e) transit protection films
Various features provided by automative paints are
protection of vehicles during transit from dust, chemicals, bird droppings,
heavy metals free,
protection against UV rays,
stone chip protection,
resistance to sunlight and weather and
Powder coatings are used for decoration and protection of consumer durables (electronic equipments, FMCG products), auto components, material handling equipments, gas cylinders, glasses, helmets, barrels and containers.
Increase growth in this category due to increased sales of auto ancillaries and consumer durables (majorly due to rapid GDP growth). Berger and Nerolac lead in this solid powder coating segment.
Powder Coating is applied to metal products by electrostatic spray, the coated item is then heated and the powder melts into smooth, continuous film. There are no liquids or solvents.The key benefits of powder coatings are
Ease of application
Excellence of finish
Excellence of performance
High Performance Coatings
High performance coatings are used in mega investment projects like refineries, thermal, nuclear, hydel power generation, petrochemicals, fertilizers, etc. There has been a steady growth in sales of high performance coatings due to large investments in these industries in last decade.
Coil Coatings are solvent based paints used in sheets and coils. Akzo Nobel and Asian Paints lead this segment. The coil coatings are used in steel industries and its downstream industries. #p#分页标题#e#
Shalimar and Bombay Paints are the major players in these anti-corrosive, underwater paints used for ships and containers.
These high performance paints are used in fertilizers, petrochemicals etc. for prevention of corrosion.
Concrete floors are a huge investment for any industry. There are various limitations attached with concrete flooring: Weakening of the reinforcement and concrete surface due to chemical spillage, presence of cracks and surface porosity allows various oils to seep in, accumulation of dust and possibilities of microbial growth.
To protect concrete floors from its limitations, floor coatings were introduced. These coatings are hard wearing and abrasion resistant. They have excellent mechanical properties and provide floors that are tough and long lasting. They can also be used to prevent water from seeping across floors. At present, there is no pace in the sales of floor coatings but in future, its utility will help in increasing its market share.
The cost of road markings is fractional in comparison to the cost of the road, but it is very important in terms of safety. The properties of road markings are retro-reflective, fast drying, highly durable and 100% acrylic.
General Features which people look for buying paint:
Selection of home and office paints
Matching or desired color
Asian paint ltd. was established in 1942, currently being the Asia's third largest paint company. Asian paints is the largest player in decorative segment enjoying the market share of 26%. Its global operation is taken care by subsidiaries Berger International, Apco Coatings, SCIB paints and Taubmans.
Major Brands of Asian Paints:
Ace, Apex ultima, Royal, Royal Play, Apex duracast, tractor emulsion, utsav and wood finisher.
Deltron, Delfleet, Bilux, Aspa, deco prime.
Standalone Sales grew by 18.1% in value terms.
Consolidated Sales stood at Rs 6455 Crores.
Standalone PAT grew by 106.2%
Consolidated profit after minority interest stood at 821 Crores.
Key Focus Area:
Company is investing heavily on expanding Retail network to cater to growing demand in decorative and industrial segments.
Improvement in customer satisfaction with slew of initiatives like Colorworld stores, online service offering catalog covering entire palletes of shades and providing the cost estimation Etc.#p#分页标题#e#
Strengthening of Supply chain to cater to growing demand:
Rohtak Plant commissioned in April 2010with initial capacity of 1,50,000KL.
Capacity of Sriperumbadur plant has been increased to 1,40,000KL.
Aquired land in Kesurdi in the state of Maharahtra to set up the next plant.
Kansai Nerolac Paints Ltd
The history of Nerolac Paints dates back to 1920. Nerolac Paints was established as Gahagan Paints and Varnish Co. Ltd. in Mumbai. In 1933, it transformed to Goodlass Wall India Ltd. and became a Pvt Ltd. Company in 1946, before getting the name Goodlass Nerolac Paints Pvt. Ltd in 1957. And recently in 2006, it acquired the present name Kansai Nerolac Paints Ltd. but these changes in names haven't deterred the reputation Nerolac Paints hold. Nerolac is the subsidiary of Japan based Kansai Paint company ltd. a top ten company in the world. Nerolac is the second largest company in India. Nerolac enjoys the largest market share in industrial segment.
Major Brands of Kansai Nerolac Paints:
Impressions, Beauty Gold, Excel, Suraksha, wonderwood, Satin enamel, Synthetic Enamel
Nerolac Pearl luster finish, Nerolac synthetic flat paint, Nerolac with Titanium.
Standalone Sales grew by 18.5% in value terms.
Consolidated Sales stood at Rs 1971 Crores.
Standalone PAT grew by 67.8%
Consolidated profit after minority interest stood at 165 Crores.
Key Focus Area:
With rural sector contributing to only 10% to overall market, Nerolac is gearing up to make inroads into rural market in major way.
Nerolac's major focus is on expanding distribution mainly in rural market of Maharashtra, Gujrat and Madhya Pradesh as rural population in these three states has a sizeable disposable income.
Company is restoring to various cost cutting measures in the areas of inventory management, material costs, working capital management and overhead controls.
Nerolac with the huge success of its one-stop-shop store, Impressions, is planning to increase its store from existing seven numbers to thirteen by year end.
Nerolac is planning to invest the 400 Cr over the next two years to augment the production capacity of its Hosur plant from existing 1,50,000 tonnes to 1,80,000 tonnes.
Akzo Nobel Paints
AkzoNobel is the largest global paint and coating company and a major producer of speciality chemicals. It has presence in more than 80 countries, India being one of the major market. It started its operation in India back in 1911, when Brunner & Co an arm of ICI in UK opened a trading office in Calcutta to sell alkalies and dyes. In 2008 AkzoNobel became owner of the entire equity share capital of Imperial Chemical Industry Ltd. by virtue of which it became the subsidiary of AkzoNobel. To leverage the global strength of Akzonobel brand, the name of ICI paints has been changed to Akzon Nobel India ltd in 2010.#p#分页标题#e#
Major Brands of Akzo Nobel Paints:
Dulux valvate touch, Dulux supper smooth, Dulux weather shield, Dulux tile shield, Dulux light and space, Dulux 3 in 1 stay clean.
Dulux satin finish, Dulux super gloss 5 in 1, Dulux melamine, Dulux synthetic clear varnish, Dulux NC clear lacquer.
Standalone Sales grew by 5.17% in value terms.
Consolidated Sales stood at Rs 1040.80 Crores.
Standalone PAT decreased by 45.9%
Consolidated profit after minority interest stood at 159 Crores.
Key Focus Area:
Company has planned to double its distribution network and its capacity in next four years.
Akzo Nobel has identified land in south India for setting up its fourth facility and targeting it to get over by 2012.
Akzo Nobel is planning to launch global products portfolios with emphasis on innovative technology and greater focus on R&D centres.
AkzoNobel is committed to the cause of environment, something which is reflective in its agenda of creating lead free paints.
BASIC MANUFACTURING PROCESS OF PAINTS
The major challenges faced by Indian Paints Industry are as follows:
Intensive nature of raw material
The prices of paints largely depend on the cost of raw material. There are around 300 odd raw materials required for the manufacturing of paints. The major raw-materials are titanium dioxide, phthalic anhydride and peutarithrithol. These constitute around 50 percent to total cost. Titanium dioxide alone contributes 30 percent to the cost. The other raw materials like linseed, castor, soyabean oils, etc. add up to the whole raw material cost of 70 percent of total cost. So, the prices of paints are very much dependent on raw materials and any fluctuations in the price of raw materials will eat up the margin of the company.
Nearly 30% of the 300 raw materials are petroleum based derivatives. So, any change in crude oil prices will lead to change in the prices of raw materials. From last 2-3 years, there was lot of fluctuations in crude oil prices because of which margins of the paint companies got hit. The pressure further increased due to recession and there after decrease in consumption.
Cyclical nature of decorative paints
The demand of decorative paints is cyclical in nature i.e. it increases for a period, then decreases and after certain period of time it again increases thus showing cyclical pattern. It happens because people generally have their houses white-wash during festive seasons. Also, once houses get painted, then it needs a white wash after 4-5 years.#p#分页标题#e#
The demand is influenced by monsoon also. When there is a good monsoon, then there is an increase in agricultural and industrial output. This has a positive impact on disposable income with people and hence a good demand. But if the monsoon is not good, then the demand will get affected especially in decorative paints segment.
The majority of paints manufactured in India contain a large amount of lead, mercury and chromium. These elements are very hazardous in nature and can pose a threat to health of human beings. Now the policies are becoming very strict and thus companies are required to come up with newer manufacturing processes so as to produce paints with a low amount of VOC (volatile organic compound) and minimal aromatic content. Also, the content of lead, chromium and mercury should be very less thereby making the paint eco safe.
Import policies - The import policies plays a very significant role in determining the prices of paints because around 30% of the raw materials has to be imported from foreign countries. So, any change in import tax regime will have an impact on the costing.
Exchange rate - Since the major raw materials are imported, any movement in rupee-dollar prices is very critical and hence need to be closely looked. For example, whenever rupee depreciates against dollar, the buyer has to shelve out more money.
Supply chain - The paint industry requires a lot of working capital because the manufacturer has to buy 300 raw materials and from different vendors. So, the company which has a very robust vendor and distribution network will largely benefit from it.
Technology advancements - the paint industry is highly technology intensive due to which small players find it very difficult to invest in newer technologies and thus succumb to competition from foreign companies. Large players have tied up with foreign companies and they are still dominant in the market.
In India, the per capita consumption of paints is very low as compared to other developed countries. So, there is a lot of growth potential for paint companies. The major areas where Indian Paint Companies can leverage their growth potential are:
Around 70% of the total population of India resides in rural areas and the rural sector contributes only 10-15% of the total consumption of paints. So, there is a large growth potential in rural market. In rural areas, there are many households who have disposable income but distribution network is not in place. Also, in this year, improvement in agriculture and allied sectors, coupled with good monsoon has improved the demands. Also, the various government schemes have improved the earnings of rural people. the industry can increase its revenue from rural market by introducing low cost paints and coatings. Also, the companies will have to increase advertising budget for rural areas coupled with developing distribution network.#p#分页标题#e#
In India, rapid industrialization is taking place because of liberal policies and huge foreign investment in India. India is becoming an industrial hub for automobiles, consumer durables and various other industries. With the rapid growth, demand of Industrial coatings will go on increasing.
At present, the share of industrial paints is 35-40% which has a potential to touch 50% in few years. Also, due to large investments in steel, power, refinery sectors, the sales of high performance coatings and coil coatings is increasing.
Real estate sector
India is registering a constant GDP growth of around 7.5% to 9% after there was a slowdown in economy two years back. Now the real estate sector is booming with large investments in housing sector and construction sector. There is a rapid increase in sales of decorative paints and architecture paints and it will continue in future. Also, the customer preference in buying paints is moving towards water paints because of environmental issues.
South Asian countries and Developed economies
Indian paints have a very good market in USA, UK and European countries. With the recessionary measures taken and the revival of global economy, the exports will revive and will steadily move in upward direction.
Also, the other avenues of growth are developing economies like Nepal, Bangladesh, Sri Lanka, Pakistan, Bhutan, Mynmmar and Arabian countries like UAE, Egypt, etc.
India as a paint manufacturing hub
The Indian paint industry saw a significant change in reduction of excise duties, custom duties which led to reduction in the prices of raw materials. Also, there was a restriction on increasing the capacity of plant which was removed afterwards by the government. Now, since India offers cheap labor and various other tax benefits (sponsored by centre and states for inclusive growth), it has a deep potential to become a major manufacturing hub of decorative and industrial paints.
The major Indian players have already started taking steps in this direction. The sector experienced a lot of capacity expansion, joint ventures with foreign companies, foreign acquisitions and investments in technology in the last decade. Thus, India has become a very viable option for establishment of paint manufacturing plants.