My husband owns a paint shop and he deals in leading paints of the country like Nerolac, Asian paints and some small brands too. These paint companies want their products at competitive prices while increasing their customer base. I often hear my father in law who is also into the same business talk about the changing times in this field. With Major Indian and global paints manufacturers holding a lion’s share of the market, it is quite a challenge for the small manufacturer to hold forte and capture more customers.
In a price-sensitive paints industry, low on margins and high on raw material costs, a new player may find it difficult to grow a market for his products. There is enough profit to be made, provided one continues to expand his customer base. Paint is a volumes business, the more you sell, the more profit you make.
India’s robust economic growth has had a direct impact on the infrastructure sector that has grown at around 10% in the fast five years. The sector is also seeing record inflows with global players which have given a big impetus to several downstream businesses such as cement, steel, construction equipment and paints. A robust economic expansion (in India) will occur in concurrence with a booming construction sector, thereby benefiting the paint industry. The current per capita architectural (decorative) paint consumption in India is among the lowest in the world and has significant growth potential.
There are mainly two segments of the paints industry
1. Decorative (architectural) and
2. Industrial paints.
Decorative paints comprise exterior and interior wall paints, wood finishes, enamel and other products such as primers. Asian Paints is the market leader in this segment. Industrial paints find major usage in the automotive, aviation and consumer durables sectors. Three main segments of the industrial sector include automotive coatings, powder coatings and protective coatings. Kansai Nerolac holds a major share of this market. The per capita consumption of paints in India is quite low as compared to that in developed countries. With construction activity picking up fast, the demand for paints is only set to grow.
Paint is a highly price-sensitive commodity. Any change in the cost of raw material could impact the manufacturing cost of the final product. With crude and petrochemical prices touching new highs, the cost of production would invariably be affected. Rural market also holds big promise for paint companies. Taking a cue from FMCG companies, paint manufacturers could work on products targeted specifically for the rural markets. Demand for architectural (decorative) paint in India is projected to increase 8.7% per year through 2011 to one million metric tons, among the strongest performances expected of any country in the world.
Big players dominate India’s paints market like Kansai Nerolac, Asian Paints and Berger Paints. Several international paint companies are also entering India. India’s booming real estate sector is driving the demand for both decorative and industrial paints. Paints demand is to grow to 2 million tons by the start of the next decade. Rural markets too offer new opportunities for growth.