The Indian paint industry – an overviewnews Paint is a mixture of four elements – 07 April 2007 file to cabinet attach label bookmark send to friends add note add to tracker print currency converter informachine tools Highlights
•The Indian paint industry is a Rs 49 billion sector.
•The demand for paints is relatively price-elastic but is linked to the industrial and economical growth.
•The per capita consumption of paints in India is very low at 0. 5 kg per annum if compared with 4 kgs in the South East Asian nations and 22 kgs in developed countries.The global average per capita consumption is 15 kg.
•In India the organised sector controls 70 percent of the total market with the remaining 30 percent being in the hands of nearly 2000 small-scale units.
•In India the industrial paint segment accounts for 30 percent of the paint market while the decorative paint segment accounts for 70 per cent of paints sold in India.
•In most developed countries, the ratio of decorative paints vis-A -vis industrial paints is around 50:50.
•All the industry majors have a vast dealership network and are required to maintain high inventory levels most of the paint leaders have technical tie-ups with global paint leaders.
Sector comments Paint is a mixture of four elements – solvents, binders, pigments and additives. Solvents give the paint a liquid flow while the binder binds it to the surface. Pigments impart colour and opacity to the paint and the additives give it special resistance properties. Sector trends The recession in the construction and automobile sector had thrown in shades of grey across the Industry spectrum, but the revival in these sectors is cause for cheer for the paint industry as well.
The balance sheets of the industry majors are now painted with bright colours. Sector specifics 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. Market profile The leaders in the organised paint industry are Asian Paints (India) Ltd. (APIL), Goodlass Nerolac Paints Ltd. (GNPL), Berger Paints, Jenson & Nicholson Ltd. J&N) and ICI (India) Ltd. Asian paints is the industry leader with an overall market share of 33 per cent in the organised paint market. It has the largest distribution network among the players and its aggressive marketing has earned it strong brand equity. The Berger Group and ICI share the second slot in the industry with market shares of 17 per cent each. GNPL has a market share of 15 percent in the organised sector. The market can be further split into decorative paints and industrial paints. 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 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. 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 Ace are entrenched in the market.
GNPL, the number-two in the decorative segment, with a 14 per cent market share too, has now 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. The share of industrial paints in the total paint consumption of the nation is very 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 50:50. 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. GNPL dominates the industrial paints segment with 41 per cent market share. It has a lion’s 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, India’s largest passenger car manufacturer, besides supplying to other customers like Telco, Toyota, 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 after Goodlass Nerolac in the industrial segment with a 5 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.
Price sensitivity factors Various factors that have influenced the pricing of paints are summarised below:
•The industry is raw-material intensive.
Of the 300 odd raw materials, nearly half of them are imported petroleum products. Thus, any deficit in global oil reserves affects the bottomline of the players.
•The major raw materials titanium dioxide, phthalic anhydride and peutarithrithol constitute 50 per cent of the total cost. Besides, this, there are other raw materials such as castor, linseed and soybean oils, turpentine. The raw materials cost sums up to a whopping 70 per cent. Any increase in the prices of these raw materials could adversely affect paint prices. Most of the paint majors have to import nearly 30 per cent of their raw material requirements thus changes in import policies can affect the industry.
•The prices of packing materials such as HDPE, BOPP and tinplate have reduced considerably. However, the decision of the Central Government to ban import of tinplate waste could lead to a spurt in the prices of the tinplate in the near future. Technology collaboration All the paint majors have tie-ups with global paint leaders for technical know-how. Asian Paints has formed a JV with PPG Industries Inc to service the automotive OEMs.
Berger has a series of tie-ups for various purposes. It has a technical tie-up with Herbets Gmbh of Germany in addition to its joint venture with Becker Industrifag. With the agreement with Herbets coming to an end in 2001, Berger has now allied with the Japanese major Nippon Paints to boost its OEM turnover since the Indian roads are being flooded with Japanese automobiles. It also has an agreement with Orica Australia Pvt. Ltd. to produce new generation protective coatings. The company also has tie-ups with Valspar Corp and Teodur BV for manufacturing heavy duty and powder coatings.
Incidentally, ICI makes paints with the technical support of Herbets, which has been recently acquired by by E I Du Pont de Nemours of the US. Interestingly, Du Pont, which is a leader in automotive coatings in the US, has a technical tie-up with Goodlass Nerolac for the manufacture of sophisticated coatings for the automotive sector. Goodlass also has technical collaborations with Ashland Chemcials Inc, USA, a leader in the petrochemical industry, Nihon Tokushu Toryo Co and Oshima Kogyo Co Ltd, Japan. Overseas expansion
If the global Goliaths are foraying into the Indian paints market aggressively, the Indian paint companies are also spreading their wings. Asian Paint exports its paints to over 15 countries. It also has joint ventures in Fiji, Tonga, Nepal, Vanuatu, Solomon Islands, Australia, Oman and Mauritius. In October 1999 it acquired 76 per cent equity stake in Delmege Gorsyth & Co (Paints) Ltd, the second largest paint company in Sri Lanka with a 12 per cent market share in Sri Lanka’s Paint Industry. Within a short span of just five years, the company has emerged as the number one player in these markets.
Conclusion The industrial paints are slated to grow at an annual rate of 10 to 12 per cent per annum for the next few years. The industrial paint manufacturers would benefit from the burst in the passenger car sales. The two-wheeler industry has also registered a good show in the current year. The commercial vehicles segment, a star performer last year with 33 per cent growth, is expected to average a growth of only 15 per cent this year. However, the raising titanium dioxide prices and the negligible growth in agriculture this year, will play spoilsport.
Considering the past trend, the paint industry is expected to show at least twice the growth of Indian GDP in the ensuing years. The reduction of excise duties from a high of 40 per cent to 16 per cent in the last five years, has made the numerous small-scale units unviable, as they no longer have a price advantage over the organised sector. This has helped the organised paint Industry a lot. The industry is in a consolidation phase and only those Indian paint companies with a strong technical alliance, better distribution network and an ability to compete in the global markets would emerge victorious in the paint war.
Summary In A Profile of the Indian Paint Industry, 3rd Edition, IRL revisits the Indian market offering a collective review of major developments since 2005 and then looks into the future by examining sector-by-sector growth for the mainstream markets. Furthermore, insight and industry opinion is brought to the marine paints and can coatings markets as IRL expands its coverage.
Value data for the Indian markets has also been included for the first time. Geographical Coverage: •India •Product Coverage:
•The report provides up-to-date statistics and information on the following:
•History of paint production History of paint imports and exports with analysis and comment
•Paint consumption and per capita use •Market segmentation by paint type and end-use sector
•Information on paint producers •Trends in end-user industries •Market forecasts and growth rates Content
•about This Report
•Forecasts
•Units of Volume and Value
•Methodology
•Rounding
•Economic Data
•Demographic Data oGeographical Distribution of Population oAge Distribution of Population
•Climatic Data
•Mergers and Acquisitions Review
•Investments Surrounding The Indian Paint Industry
•Technology Licences and Agreements
•Asian Paints Asian Paints: The Multinational Dimension in Brief
•Kansai Nerolac Paints
•Berger Paints India
•Ici India
•Shalimar Paints
•Introduction
•SWOT Analysis of The Small-Scale Sector
•Outlook for The Small-Scale Sector
•Profiles of Medium- and Small-Scale Paint Producers in India oAcro Paints oAddisons Paints and Chemicals /Amalgamations Group oAdvance Paints oAgsar Paints oAnupam Paints and Coatings oBombay Paints oChemisol Adhesives oCico Group oCipy Polyurethanes oGamma Coatings oGardwel Industries oIndolac Paints oKishore Polyurethanes oKripton Powder Coatings oMarpol oM K Products A Profile of The Indian Paint Industry oMrf oNavair International oNitco Paints oOrbit Coatings oPidilite Industries oRajdoot Paints oSbl Coatings oSchenectady Beck India oSinghal Paints oSnowcem India oStar Paint and Oil Industries oSurfacoats oTitan Paints and Chemicals oVaruna Paints oZigma Paints
•Foreign Trade oImports oExports
•Paint Consumption oHistory of Paint Demand
•Paint Production and Balance of Trade oper Capita Paint Consumption
•Overview
•Architectural Coatings oOverview of Product Types in The Indian Architectural Paint Market oBasic Facts and Drivers oMarket Breakdowns Paint Retailing and Distribution oColour Choice and Colour Mixing oThe Rural Markets oRecent Developments in The Indian Decorative Paint Market
•Protective (Heavy Duty) Coatings
•Automotive OEM Coatings •Automotive Refinishes
•Coil Coatings
•Can Coatings
•Marine Paints
•Powder Coatings oTechnologies
•Indian Small-Scale Paint Association
•Isspa Contact Details
•Indian Paint Association oIpa Contact Details
•Indian Paint Research Centre (Iprc) oIprc Contact Details oA Profile of The Indian Paint Industry
•about This Report
•Forecasts
•Units of Volume and Value
•Methodology
•Rounding Forecast Growth in The Indian Paint and Coatings Market, 2006-7 to 2011-2 (Tonnes and % Pa)
•Economic Data oIndia’s Major Trading Partners in 2005
•Demographic Data oProjected Age Distribution of The Indian Population (Millions) oIndian Population, Population Density and Growth in 2001
•Climatic Data oMean Climatic Conditions in Northern and Eastern Indian Regions oMean Climatic Conditions in Central and Southern India
•Technology Licences and Agreements oLicensing and Cooperative Agreements in The Indian Paint Industry
•Asian Paints
•Kansai Nerolac Paints
•Berger Paints India
•Ici India Shalimar Paints
•Introduction
•SWOT Analysis of The Small-Scale Sector
•Outlook for The Small-Scale Sector
•Profiles of Medium- and Small-Scale Paint Producers in India
•Foreign Trade oSummary of Indian Paint Imports, 2001-2005 (Tonnes) oSummary of Indian Paint Imports, 2001-2005 (US$ Thousand) oTop 10 Import Sources for Paints and Coatings in India in 2001 (Tonnes and % Share) oTop 10 Import Sources for Paints and Coatings in India in 2005 (Tonnes and % Share) oHistory of Trade with Major Import Partners, 2001-2005 (Tonnes) oSummary of Indian Paint Exports, 2001-2005 (Tonnes) Summary of Indian Paint Exports, 2001-2005 (US$ Thousand) oTop Five Export Destinations for Paints and Coatings from India in 2001 (Tonnes and % Share) oTop Five Export Destinations for Paints and Coatings from India in 2005 (Tonnes and % Share) oHistory of Trade with Major Export Partners, 2001-2005 (Tonnes)
•Paint Consumption oHistory of Indian Paint Demand and Growth, (Tonnes and %) oA Profile of The Indian Paint Industry •Paint Production and Balance of Trade oIndian Paint Production and Balance of Trade, 2002-2007 oper Capita Paint Consumption in Selected Countries of The World (200/4)
•Overview Split of The Indian Paint and Coatings Market by Segment, 2007 (Tonnes and Rs Million)
•Architectural Coatings oSplit of The Indian Decorative Paint Market by Volume, 2006-7 (Tonnes and %) oSplit of The Indian Decorative Paint Market by Volume, 2004-5 (Tonnes and %) oSplit of The Indian Decorative Paint Market by Value, 2006-7 (Rs Million and %) oSplit of The Indian Paint Market by Grade, 2006-7 (%)
•Protective (Heavy Duty) Coatings oSplit of The Indian Protective Coatings Market: Onshore vs Offshore Applications, 2007 (%) oSplit of The Indian Protective Coatings Market by Chemical Technology, 2007 (%). Automotive OEM Coatings •Automotive Refinishes oSplit of The Indian Refinish Market by Technology, 2007 (%) oSplit of The Indian Refinish Market by Technology, 2004/5 (%) oSplit of The Indian Refinish Market by Quality, 2007 (%) oMarket Shares of Companies in The Indian Automotive Refinishing Sector, 2007 (%)
•Coil Coatings oSplit of The Indian Coil Coatings Market by Substrate, 2007 (%) oMarket Shares in The Indian Coil Coatings Market, 2007 (%) oSplit of The Indian Coil Coatings Market by Technology, 2007 (%) oSplit of The Indian Coil Coatings Market by Application, 2007 (%)
•Can Coatings Marine Paints •Powder Coatings oMarket Shares in The Indian Powder Coatings Market, 2007 (%) oOutput Share of Major Powder Coatings Producers in India, 2005-6 (%) oSmall-Scale Indian Powder Coatings Manufacturers oIndian Powder Coatings Market by Technology, 2006/7 (% Share) oIndian Powder Coatings Market by Application, 2006/7 (% Share)
•Indian Small-Scale Paint Association
•Indian Paint Association
•Indian Paint Research Centre (Iprc) oForecast Growth for The Indian Paint Market, 2006-7 to 2011-2 (Tonnes and % Pa) Paints[Key Points | Financial Year ’09 | Prospects | Sector Do’s and Dont’s] The market size of the Indian paints sector has been pegged at Rs 170 bn in value terms and is very fragmented. While in value terms, the industry grew by 17% to 18% in FY09, in volume terms, the growth stood at 9% YoY, the lowest in the last five years. The per capita consumption of paints in India stands at 0. 5 kg per annum as compared to 1. 6 kgs in China and 22 kgs in the developed economies. India’s share in the world paint market is just 0. 6%.
• The unorganised sector controls around 35% of the paint market, with the organised sector accounting for the balance. In the unorganised segment, there are about 2,000 units having small and medium sized paints manufacturing plants. Top organised players include Asian Paints (30% market share), Kansai Nerolac (20% market share), Berger Paints (19% market share) and ICI (12% market share).
• Demand for paints comes from two broad categories: Decoratives: Major segments in decoratives include exterior wall paints, interior wall paints, wood finishes and enamel and ancillary products such as primers, putties etc. Decorative paints account for over 75% of the overall paint market in India.
Asian Paints is the market leader in this segment. Demand for decorative paints arises from household painting, architectural and other display purposes. Demand in the festive season (September-December) is significant, as compared to other periods. This segment is price sensitive and is a higher margin business as compared to industrial segment. Industrial: Three main segments of the industrial sector include automotive coatings, powder coatings and protective coatings. Kansai Nerolac is the market leader in this segment. User industries for industrial paints include automobiles engineering and consumer durables.The industrial paints segment is far more technology intensive than the decorative segment.
• The paints sector is raw material intensive, with over 300 raw materials (30% petro-based derivatives) involved in the manufacturing process. Since most of the raw materials are petroleum based, the industry benefits from softening crude prices.
• With the steady decline in excise duties (from 40% to 16% over five years), viability of small-scale units has eroded considerably. Without the price advantage, these units have found it difficult to compete with their peers in the organised sector.
The unorganised sector has been consistently losing market share to the organised sector. Key Points________________________________________ SupplySupply exceeds demand in both the decorative as well as the industrial paints segments. Industry is fragmented. DemandDemand for decorative paints depends on the housing sector and good monsoons. Industrial paint demand is linked to user industries like auto, engineering and consumer durables. Barriers to entryBrand, distribution network, working capital efficiency and technology play a crucial role.
Bargaining power of suppliersPrice increase constrained with the presence of the unorganised sector for the decorative segment. Sophisticated buyers of industrial paints also limit the bargaining power of suppliers. It is therefore that margins are better in the decorative segment. Bargaining power of customersHigh due to availability of wide choice. CompetitionIn both categories, companies in the organised sector focus on brand building. Higher prices through product differentiation are also followed as a competitive strategy. TOP
Financial Year ’09________________________________________
• FY09 was a tough year for the paints industry as the economic slowdown took its toll. Since the paint sector tracks the overall GDP growth, because the latter was lower than the strong growth recorded in the past, the growth in topline for the top three players was not as strong as in the previous years. For instance, while Asian Paints did well on the topline front during the first half of 2009, things took a turn for the worse in the third quarter wherein sales and profits were severely impacted as the global financial crisis worsened.
For the year however, Asian Paints managed to log in a strong growth in topline as demand picked up in the fourth quarter. Kansai Nerolac on the other hand did not do too well and the industrial paints especially the automotive paints business of the company was impacted as the demand for automobiles waned.
• There was a sharp contrast in the movement of raw material prices as well. The first half of the year saw crude prices escalating sharply thereby denting the profit margins of paint companies. For instance, Asian Paints was compelled to raise the prices of its solvent based products 6 times. While prices considerably softened in the last quarter of the year, the fall was not enough to offset the crude price hike during the first half of the year. As a result, paint companies had to make do with falling margins.
• All the key players are in an expansion phase. While Asian Paints is setting up a plant in Rohtak, Haryana and one in Maharshtra, Kansai Nerolac is undertaking brownfield expansions at its Lote and Bawal plants and a greenfield project in Hosur, Tamil Nadu. TOP Prospects________________________________________ The market for paints in India is expected to grow at 1. 5 times to 2 times GDP growth rate in the next five years. With GDP growth expected to be over and above 7% levels, the top three players are likely to clock above industry growth rates, especially given the fact that protection that was available to unorganised players has come down significantly.
• Decorative paints are expected to witness higher growth going forward. The fiscal incentives given by the government to the housing sector have benefited the housing sector immensely. This will benefit key players in the long term. This apart, above normal monsoons in the current year would lead to higher agricultural output thereby increasing demand for paint from rural areas. We expect paint demand to grow by 12% to 15% in the next two to three years, largely led by post festive season demand.
• Demand in case of industrial segment is also expected to increase going forward. This is on account of increasing investments in infrastructure. Domestic and global auto majors have long term plans for the Indian market, which augur well for automotive paint manufacturers like Kansai Nerolac and Asian-PPG. Increased industrial paint demand, especially powder coatings and high performance coatings will also propel topline growth of paint majors in the medium term.
• The reduction in peak customs duty from 12. 5% to 7. 5% will lower the import cost of key raw materials. With more residual income with the population, home loan disbursals are expected to grow at 25% CAGR in the next three years, which is a positive for paint companies. Identifying a paint stock: Do’s and Don’ts PAINTS SECTOR QUOTES | MYSTOCKS | | RSS ADVERTISEMENT
We Value Your Privacy In the consumer’s hierarchy of needs, the importance of housing cannot be understated. Given the fact that the housing sector has been growing at an impressive rate in the last five years on the back of various factors like tax incentives and the decline in interest rate, it is pertinent to look at sectors that benefit from this scenario. Apart from banks, cement, steel, the paint sector also benefits in a large way. In this article, we look at factors that have to be borne in mind while identifying a paint stock. Profile
The application of paints can be broadly divided into three categories viz. decoratives, industrial and automotive. The decorative segment is broadly divided into interior paints (emulsions, enamels, wood finishes) and exterior paints. Historically, not much emphasis was placed on the level of technology in the manufacturing of decorative paints in light of the large presence of unorganised sector. The growth in revenues is dependent on the housing sector. Here demand is from both new houses and repainting. The industrial and automotive paint manufacturing however, is technology ntensive wherein domestic majors have tied up with select global majors like Nippon Paints, DuPont, PPG and Kansai for technology. Industrial paints have applications in automobiles, consumer durables, infrastructure projects (roads and ports) and in the manufacturing sector (protection and powder coatings). The growth in revenues therefore, is directly linked to investments by corporate sector and infrastructure development. Having looked at the profile of the sector in general, the next step is to analyse factors that impact revenues and costs.
We have concentrated on operating profit here because the sector is not capital intensive in nature as compared to commodity sectors. Since depreciation to sales on an average is low at 3% of sales, it is pertinent to consider operating profits. Revenues Since Revenues = Quantity sold * Average price, we consider factors that affect these two broader heads independently. A. Quantity Sold The Indian paint sector is highly fragmented i. e. there are both organised and unorganised players. It is estimated that organised players account for around 60% of paint sales in the country.
This has risen from around 40% five to six years back. One of the key reasons for this shift is the decline in excise duty over the years. Since unorganised players were not paying taxes, they were able to sell products at a cheaper rate without any significant investments in technology. With the advent of fall in excise duty, unorganised players are losing competitiveness. This is further helped by lowering of customs duty, which results in cheaper raw material cost for organised players. So, watch out for announcements on these fronts in the annual Budget.
As we mentioned earlier, there is the decorative paint segment and industrial paint segment. Decorative Paint Demand for this segment is seasonal in nature i. e. demand increases in festive seasons. Festive season demand in turn is dependent on monsoons and economic performance. Good monsoons result in higher agricultural output and has a positive effect on the GDP growth. Decorative paint demand has a good co-relation with GDP growth. So, when GDP growth is higher, the paint sector will benefit and vice versa. In order to capitalize on the demand, paint companies like FMCG companies, need a well spread distribution network.
A retail network with a computer dealer tinting machines has proved to be highly productive. Reforms also play a vital role in providing a fillip to decorative paint demand. By reforms we mean change in interest rates, land reforms, increased thrust on infrastructure by the government, better irrigational facilities to the rural sector and excise/customs duty structure. Investors therefore, have to place utmost importance to any change in regulation on these broader factors. Industrial Paints Increased demand for automobiles tends to have a positive impact on automotive paint manufacturers.
Demand for automobiles in turn is dependent on income growth prospects and interest rates. Automotive paint manufacturing is technology intensive and Indian manufacturers have technical collaboration with foreign players like Kansai, Nippon and PPG of USA. In the case of automotive paint manufacturers, the ability to pass on any rise in input is weaker i. e. bargaining power of customers is higher. As far as industrial paint segment is concerned, increased spending in infrastructure plays a vital role in boosting paint demand.
So, when the government announces higher public spending, it benefits industrial paint manufacturers. B. Price The ability of a paint manufacturer to increase prices depends on which segment it operates in either decorative or industrial. In industrial paints, the bargaining power of customers (i. e. auto manufacturers, industrial majors and government agencies), is higher. As a result, whenever there is an escalation in input cost, industrial paint manufacturers are not in a position to pass on the cost to customers. The importance of economies of scale is higher in industrial as compared to decorative paints.
However, though decorative paint sector is extremely competitive, there is room for raising prices. This would depend on factorslike brands, product-mix (exteriors, wood finishes and interiors) and the market share. Since paint demand is seasonal, manufacturers tend to decrease prices in the festive season. Unlike the past where paint selection was restricted to construction companies, the dealer tinting machines have played a vital role in increasing customer involvement. Therefore, the sector is investing more on brand building and consequently has a FMCG aura to it.
So, investors have to understand the industrial and decorative sales mix. If a predominantly decorative paint player has plans to increase contribution from industrial sector, margins could come under pressure and vice versa. Having looked at the revenue side, consider the factors that impact the cost side. Crude prices and dollar rate Raw material cost typically account for around 50% of sales of a paint company. There are more than 300 raw materials used in manufacturing of paints with titanium dioxide being the key raw material. It accounts for around 30% of sales.
While some are crude derivatives, in the manufacturing process of some materials, crude is used as a source of energy. So, whenever there is an increase in crude prices in the international markets, paint companies feel the pressure. Of course, factors like economies of scale in sourcing do have a positive impact on large players. Since domestic manufacturers mostly import titanium dioxide due to lack of quality (there are two types here) in the domestic market, rupee-dollar movement in critical. When a spurt in crude prices is accompanies by rupee depreciation against dollar, paint manufacturers face a double-whammy.
So, investors need to keep a close watch on this factor. Another critical factor is thestrength of the supply-chain of a company. Since this sector is highly working capital intensive (more than 300 raw materials), manufacturers with a wide spread distribution network benefit. Having looked at the broader sector dynamics, what are the ratios that investors have to analyse before investing in a paint company? 1. Operating margin: Margin for a paint company, as we mentioned earlier, is dependent on the industrial/decorative sales mix and economies of scale.
Ascertain the sales mix and where the sales mix is heading. If the sales mix is shifting favorably towards decorative, margins could improve provided the distribution is well spread. 2. Working capital to sales: Since the sector is working capital intensive, high working capital to sales ratio indicates cash locked in inventory or debtors. Compare working capital to sales with competitors and ascertain the reason for any diversion. The lower the working capital, the better it is, as cash flow tends to be strong. To that extent, interest costs tend to be lower. 3.
Price to earnings: Since revenue growth prospects of paint majors are co-related to economic growth, price to earnings ratio is a good indicator. Premium will be accorded to those companies that have managed to perform GDP consistentlyover a five-year period. Companies will higher operating margin, favorable decorative mix and lower working capital to sales will command a premium. 4. Management: Indian paint sector has both domestic and international players. For MNC paint majors, it is pertinent to look at the parent’s strategy for India in the broader context.
Ascertain whether the management of the company has managed to outperform competitors in a downturn. Since the paint sector is fragmented, consolidation is a long-term reality. Therefore, it is important to consider whether a company can survive in the long-term and reward shareholders adequately, as there are a number of Indian family managed business houses. The Indian paint sector is slowly shredding its commodity image and moving towards a FMCG status. A study of global players like Sherwin Williams of US and Kansai of Japan would also help investors.
Paint Companies in India bring to you a wide range of paints, varnishes, pigments and coatings for the perfect finishes for the home interior and exteriors decor and beautification. The paints industry in India has flourished into a full-fledged manufacturing and sale market catering to the international standards being demanded for the painting jobs. The top paints manufacturers and painting companies like Asian Paints India, Nerolac India Paints, Berger, Dulux India Paints, Shalimar Paints etc. also provide an online visual gallery and shade cards citing all the available colors and paints products.
While choosing paint for your home or office, check if the paint is: oStain Resistant oGrease and Dirt Resistant oScrub Resistant oHeat Resistant oWater-Resistant Painting is a vital ingredient in any decor. Different surfaces require different kinds of products. The surfaces may vary from walls – interior, exterior and textured to wood and glass surfaces, metals, faux finishes, doors and handles to cars and special decorative paints for bedrooms and kids rooms and many such special requirements. The India paints companies have given many products to suit each individual need.
You can get all varieties of plastic paint, acrylic paint, primers, emulsions, latex paints etc. in a wide spectrum of colors to choose from. Selection of home and office paint goes far beyond just the matching or desired color. The texture and quality of the paint applied is what matters the most for the perfect finish you are looking for. Some of the common problems one might face with the painting jobs done on their surrounding surfaces are blistering, cracking or flaking, blocking, sagging, yellowing, fading or surfactant leaching. Types of Paints in India
The types of paints available in the market and their utility is: oAcoustic Paint: It is specially designed for acoustic tiles oAlkyd Resin Paint: Best suitable for trim, doors, faux finishes and other maximized use areas. oDripless Paint: This paint is thicker and is most suitable for application on ceilings oLatex Paint: The applicability of this paint is easier than most other and it dries much quickly. It is also easier to be washed. oOne-Coat Paint: It is the more expensive version of the latex and alkyd paints and is mostly chosen for surfaces that require flawlessness in color. Primers: This paint is the initiation for all interior paint works. oRubber-Base Paint: This is best for concrete and bricks. oTextured Paint: If need is to cover any flawed surface in your house get this paint. It works well on ceilings. Besides these home decorating and improvement paints and office paint you can also get industrial paints, aircraft paint, airplane paint, aviation paint and many other paint products with the paint shops in India. The paint companies in India house a wide range of paint products that cater to all your needs.
A whole spectrum of colors with your own textured options and application patterns are available with the paint companies. Each company has its own specialized product and some also offer home paint services. The cost of a painting job may vary with the paint chosen – acrylic, emulsion, primer etc. , the paint tools being used and the painting company hired. A comprehensive list of the paint companies in India has been mentioned below. You can also get info on the top paint companies like Nerolac, Asian paints, Berger, Dulux, Shalimar etc.
