Paint Industry: Key Factors to Analyze

(A) Introduction of Indian Paint Industry

The Indian paint industry is over 100 years old. Until World War II, the industry consisted of small producers & 2 foreign companies.

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 few other countries like US, Japan etc, per capita consumption is more than 25 kg/annum. Thus, low per capita consumption with rural penetration of only 10%, prompted many domestic and global manufacturers to step up their production capacity to tap this latent potential.

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(B) Key Features of the Indian paint industry

1. Intensive dependence on raw material

Paint Industry is raw material intensive industry. Manufacturing of paints involves along with other products, over 300 raw materials (50% petroleum derivatives). Therefore, the availability of raw material and the price at price at which they are available certainly affects the price of finished products.

Since most of the raw materials are petroleum based, the industry benefits from softening of crude prices.

The main raw material for paint manufacturing:

  1. Binders
  2. Pigments (titanium dioxide, zinc oxide etc.)
  3. Solvents (mineral turpentine)
  4. Resins and Additives
indian paint industry analysis with raw material expense of the key players

2. Advertising expenses

The organized domestic decorative paints industry is a comfortable oligopoly with a few big players constituting bulk of the segment. These players also utilize different strategies to tap the growing demand in the market for a larger share. This is because, there is very less difference in products. Thus the players spend constantly on advertisement for showing how they differ from the other players.

As there is tough competition among major players thus these players spend good amount on advertisement to increase their products’ reach to the customers.

In addition, these players launch various creative campaigns via digital advertisements and Television adds. For instance, making Bollywood celebrities brand ambassador is one of the key strategies of these players to communicate with their customers.

indian paint industry analysis with detail of advertisement expense by key players

3. Distribution Network

The dealer network or the distribution network is also a basic key factor in Indian Paint industry. Certainly it contributes a lot to the growth of the company as it tells the market presence of the company.

Dealer Count for Asian Paints, Berger Paints and Kansai Nerolac (FY20):

indian paint industry analysis with details of distribution network of key players

Revenue per Dealer (FY20):

indian paint industry analysis with details of revenue per dealer of the major players

Distribution network of Asian Paints is almost double as compared to other two players which means that the company has huge market presence. Moreover, the revenue generated per dealer by Asian paints is also much more than other two players. Certainly Asian paints with no doubt, the largest paint company in India.

Dealer network of Berger paints and Kansai Nerolac is almost same. Secondly, Berger is the 2nd largest paint company in India. On the other hand, Kansai Nerolac is leader in Industrial Paint segment in India.

4. Manufacturing Facilities

indian paint industry analysis with details of key players manufacturing units
  • Asian Paints being the largest paint company in India owns highest number of manufacturing plants across India. Secondly, Berger Paints which has 14 manufacturing plants across the country.

(C) Constituents of Indian Paint Industry

The domestic paint industry consists of the decorative & industrial paint segments. The estimated industry is Rs. 50,000 Crores

Revenue mix of the leading players:

indian paint industry analysis with description of key players of the industry
  • Asian Paints is the largest paint company in India and it deals in both decorative and industry segment. But the decorative segments constitutes more than 90% of the company products and the Industrial business is only 9%.
  • Berger Paints is the second largest paint company in India constituting 83% to decorative category and 17% to industrial paints.
  • Kansai Nerolac is leader in Industrial Paints in India.
  • Akzo Nobel is 4th largest player in Indian Paint Industry having the ratio of 61: 39 in decorative and industrial paints.

(i) Decorative Paints Segment

The decorative paint segment includes multiple categories depending on the nature of the surface like interior wall paints, exterior wall paints, wood finishes, enamels as well as ancillary products like primers, putties etc. The decorative paint category constitutes almost 75% of this market.

industry analysis by PA Wealth Advisors

(a) Interior/exterior paints/emulsions/enamels :

Interior paint is made to be scrubbed, resist staining, and allow cleaning. Exterior paints are made to combat against fading and mildew. Enamel paints (oil/solvent-based paints) can be used on a wide variety of surfaces including metals, glass, wood and masonry surfaces, because of their hard, durable and washable features.

(b) Distemper

Distemper paints are water-based paints. Considered as a better version of whitewash, distemper paints are a cheaper option for emulsions and even last for more than 4 years.

(c) Putty

Putty, generally applied after primer, ensures smooth and even finish before painting and increases longevity of the paint. The putty market, valued at Rs 50 – 60 billion and is highly fragmented as well.

(d) Cement Paints

Cement paints can be applied on the exterior as well as interior walls. It is suitable for coating concrete as well as decorating indoor and outdoor walls.

(e) Wood coatings

These are primarily used on sidings, windows, doors, with stains and sealers used on cabinets, furniture, flooring and decks, in order to increase durability, resistance to moisture and improve aesthetics.

(f) Primers and thinners

Primer ensures better adhesion of paint to the surface, shields the material from paint and increases paint’s durability. Thinners are used to reduce the viscosity of paint for its application.

(ii) Industrial Paints

The industrial paint category constitutes the balance 25% of the Indian paints market. This segment depends on business cycles and economic conditions. Growth of the industrial paint segment highly depends on the automotive sector. The auto sector is the leading consumer of industrial paints with 40-50% of the demand coming from it.

Paint Industry analysis by PA Wealth Advisors

(a) Automotive & Refinish Paint

Automotive refinish coatings enhance the appearance of vehicles and also improve their durability. These are far superior to the conventional coatings, which are non-biodegradable and harmful to the environment.

(b) GI Coating

Used primarily for construction, heavy engineering and agricultural equipment etc. Industrial coating space faces challenging times on account of continued slowdown in overall investments in the manufacturing sector and tight liquidity conditions for the small to mid-size companies.

(c) Protective Coating

Protective coatings form thin layers of solid material applied to a substrate, with the coating acting as a barrier to inhibit or prevent corrosion.

(d) Powder Coating

Powder coatings are usually used for coating metals to prevent corrosion and finishing applications. They are superior to liquid coating as they are free from volatile organic compounds unlike liquid coatings.

(D) Market Share of top 5 Players in Paint Industry

market share of asian paints, berger paints, nerolac, Akzo Nobel & shalimar paints

(E) Key Players

(i) Asian Paints Ltd.

The Branding Source: New logo: Asian Paints

Asian Paints is India’s leading and Asia’s third largest paint company. Driven by its strong consumer-focus and innovative spirit, the company has been the market leader in paints since 1967. Today, it is double the size of any other paint company in India. The company offers a wide range of paints for decorative and industrial use and also offers Wall Coverings, adhesives and services under its portfolio. The company is also present in the Home Improvement and Decor segment and offers bath/kitchen products. 

(ii) Berger Paints India Ltd.

Berger Paints

The company having its headquarter is located in Kolkata, India. Berger Paints India Limited is the second largest paint company in the country with a consistent track record of being one of the fastest growing paint companies.The company is present in international locations including Poland, Nepal, Bangladesh, and Russia. Its product range includes Exterior Wall Coatings, Interior Wall Coatings, Berger Metal & Wood Paints, Undercoats, Express Painting and Construction Chemicals.

(iii) Kansai Nerolac Paints Ltd

Kansai Nerolac Paints

Kansai Nerolac Paint Ltd was founded in the year 1920. It is headquartered in Mumbai, Maharashtra. Its product range includes decorative paints, coatings, industrial (re)finishing products, basic and industrial chemicals etc. The company makes the second largest position in the Industrial Paint Coating Sector.

(iv) Akzo Nobel India Ltd

Akzo Nobel India Ltd (also known as Dulux Paints) was founded in the year 1993.  It is headquartered in Netherlands. It is one of the leading paints and coatings company. Its product range includes Basic and industrial coatings, chemicals, decorative paints, industrial (re)finishing products. 

(F) Growth of Indian Paint Industry

The Indian paint industry is witnessing a gradual shift in the preferences of people from the traditional whitewash to high-quality paints like emulsions and enamel paints. Therefore, this provides the basic stability for growth of Indian paint industry.

Besides, it is creating a strong competitive market, where players are utilising different strategies to tap the growing demand in the market for a larger share. Moreover, rise in disposable income of the average middle class, urbanisation, development of the rural market, and various launches of many innovative products, like odour free, and dust & water-resistant paints, are major drivers that are propelling the growth of the paint market in India.

(G) Risk factors

(i) Raw Material Prices

Paint Industry is raw material intensive. Therefore, if the price of crude oil fluctuates, it directly impacts the price of paints as it constitutes basic raw material.

(ii) Economy Slowdown

The slowdown in the economy directly affects the paint industry. Also, paint being a discretionary spend item, there is a likelihood of customers putting their paint requirements on hold for some time, thereby impacting renovation demand.

(iii) Climate Changes

The vagaries of the monsoon – extended monsoon in some regions and on the other hand, deficit rainfall in few regions, affect demand from the rural sector. An extended monsoon can reduce the number of dry days before the festive season and deficit rainfall affects income.

(iv) Dependent upon Infrastructure

Slowdown in infrastructure and construction activities affects the overall demand for paint companies. Delay in the revival of the auto industry would continue to pose a threat to the growth of industrial paints demand.

Many companies are trying to set new trends to gain the market position. As in the new era, where technology changes in every second these companies are also trying to make innovation in their products so that they have an competitive advantage among other players in the market.

(i) Entrance into Hygiene Solutions

As the pandemic happened across the world there were shortage of Hygiene products like hand sanitisers and disinfects. As a result, various paint companies entered into providing Hygiene solutions. Asian Paints, Berger Paints and Kansai Nerolac, all these companies provides various Hygiene products.

(ii) Interior Design Service by Asian Paints

Interior Design Trends That Will Shape the Next Decade

Interior Design Service, a tailor-made solution that offers design expert consultation, personalized designs, unparalleled project management and hassle-free execution.

(iii) Safe Painting Service by Asian Paints

Safe Painting Service by Asian Paints

Safe painting service will give hassle-free painting experience. By opting for this service you will get expert consultants to help you make the task of painting your house seamless and easy. During the situation of Covid – 19 this is most suitable service for painting the house.

(iv) Express Painting by Berger

Express Painting by Berger

Berger Express Painting is a service all-rounder in home painting, waterproofing and wood coating solutions. It is faster than traditional painting. Moreover, it gives you on site support.

(v) Colour My Space App by Nerolac

Colour My Space App by Nerolac

During this digital era, Nerolac introduced Colour My Space app which is very easy to function and most importantly it provides one stop solution for all kinds of painting needs. It provides various options like colour pick up, Budget planner and other creative ideas.

(vi) Dulux Visualizer App by Akzo Nobel

Dulux Visualizer App by Akzo Nobel

Just like “colour my space app” by Nerolac, Akzo Nobel also came up with Dulux Visualizer App. You just need to point the app to the location you wish to watch the desired results and see the magic that happens. The App moreover helps to get an idea of the kind of shades one wishes to go ahead.

(vii) Dulux Colour Play™ Testers

Dulux Colour Play™ Testers

The colour play tester helps to check the colour on the wall.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry’s Publications. 

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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