Indian Paint Industry

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This an in-depth overview of paint sector in India :

Industrial Analysis
The size of the paints market in India is estimated at Rs 110 bn, with the contribution of the organised and unorganised segments in the ratio of 65:35. Reduction of excise duties over the last few years, 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 sector loses its competitive edge, it is also losing market share to the organised sector players. In view of the low per capita annual consumption of paints in India (0.5 kg, compared to 4 kg in South East Asian countries, 22 kg in developed countries and a global average of 15 kg), the domestic paints industry has tremendous potential. The paints industry is working-capital intensive, rather than fixed-asset intensive. As in consumer non-durables, distribution strengths and brand building are of paramount importance. The Indian paint industry witnessed robust growth in turnover on the back of increased volumes during the festival season. Both decorative and industrial segments performed well during the quarter. Moreover, the margins received a boost with the domestic currency continuing to rise against the greenback, causing a substantial reduction in cost of imported inputs. This in turn induced some of the players in the industry to reduce the prices 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 rising 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 automotive segment is a major consumer of the latter. Decorative paints can further be classified into premium, medium and distemper segments. Premium decorative paints are acrylic emulsions used mostly in the metros. The medium range consists of enamels, popular in smaller cities and towns. Distempers are economy products demanded in the suburban and rural markets. Nearly 20 per cent of all decorative paints sold in India are distempers and it is here that the unorganised sector has dominance. Industrial paints include powder coatings, high performance coating and automotive and marine paints. But two-thirds of the industrial paints produced in the country are automotive paints. Decorative and industrial paints are the segments within the sector, in a 70:30 proportion. Brand equity, a wide range of shades, distribution strength and efficient working capital management are key success factors in the decorative paints segment. A strong distribution network acts as an entry barrier.Within the decorative segment, enamel is the largest sub-segment, accounting 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 like Diwali, and the summer, when painting 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 another entry barrier. The slowdown in the automobile sector has affected the overall growth of the industrial segment, as the former contributes around 50% of the latter's revenues. Other sub-segments are marine paints, powder 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 50:50. The demand for decorative paints is highly price-sensitive and also cyclical. Monsoon is a slack season while the peak business period is Diwali festival time, when most people repaint their houses. The industrial paints segment, on the other...
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