PAINT INDUSTRY ANALYSIS

Presented By,

Rarichan Mathew

PAINT INDUSTRY• Paint is any liquid or mastic composition that, after

application to a substrate in a thin layer, converts to a solid film. It is most commonly used to protect, colour, or provide texture to objects

• First company in paint Industry - Shalimar Paints, Color & Varnish Company,

• The paints was generally imported from the Britain

• In India Asian paints has the greatest market share of 49%

• Growth rate - 17% CAGR over the past seven years

• In FY12, the paint industry stood at Rs 26,040 cr.

Source : http://www.moneycontrol.com/news/business/indian-paint-industry-

INDIAN PAINT ASSOCIATION (IPA)

• Came into existence on the 1st of July, 1960

• To promote and protect the interest of the industries engaged in the manufacture of paints, enamels, varnishes and all other materials associated with the production and sale of those commodities.

• President Ramakanth Akula

PAINT INDUSTRY

Major Products End User

Raw Materials(56%)

Employee Cost(12%)

Selling & Administration Expenses (23%)

Decorative Products:Paint Emulsions, Varnishes,, Enamels, Distempers, Wood

finishes, Metal finishes, Specialized paints (weather

protection, Non-Toxic)

Industrial Products:Powder coatings, Surface coatings, Floor coatings,

High performance coatings, Specialised coatings(thermo protective, rust protective,

non-combustible, etc.)

(71%)Households,

Construction firms

(29%)Automobile OEM’s, Consumer Goods

Manufacturers, Marine Industry

Major Inputs

INDIAN SCENARIO

Indian Paint Industry

Decorative Segment(71%)

Premium Range (High end acralic

emulsions)

Metro & Large Cities

Medium Range (Enamel paints)

Small Cities

Distemper Range (Low end paints)

Sub-urban & Rural Areas

Industrial Segment (29%)

Automotive sector(about 2/3

rd share)

Consumer Durables, Marine

Paints & Other OEMs

Source : http://www.indiainfoline.com/article/news/indian-paint-market

5 MAJOR PAINT COMPANIES

Competitor AnalysisCompany Business Model Founded on Headquarters Net Sales

Growth Rate

Net Profit Growth

Rate

ASIANPAINTS

Overall market leader due to leadership in decorative segment

1942 Mumbai, Maharashtra

22% 32.53%

KANSAI NEROLAC

Market leader in automotive industrial paint segment

1920 Mumbai, Maharashtra

15% 13.59%

BERGER PAINTS

Major revenue from decorative segment, also in industrial paints

1923 Kolkata 16% 16.04%

AKZO NOBEL INDIA

Major revenue from decorative segment, also in automotive segment

1911 Gurgaon, Haryana

5% 17.63%

SHALIMAR PAINTS

Mainly focuses on decorative & non-automobile industrial coatings

1902 Mumbai,Maharashtra

13% 27.23%

Others Decorative segment and Industrial paints

- - -

Source: Company reports, Bloomberg, BP Equities Research (www.bpwealth.com)

Market Share in India (2013)

49%

17%

14%

6%5%

9%

Asian Paints

KANSAI NEROLAC

BERGER PAINTS

AKZO NOBEL INDIA

SHALIMAR PAINTS

Others

Source: Company reports, Bloomberg, BP Equities Research (www.bpwealth.com)

Global Scenario

Source : http://www.moneycontrol.com

PESTEL ANALYSIS

POLITICAL FACTORS India, the largest democratic country in the world The political situation is more or less stable in nature Export oriented Economy

ECONOMIC FACTORS Market based economy Second fastest growing economy in the world India is the third largest in term of purchasing power Introduction of FDI in paint sectors

SOCIAL FACTORS

India is the second largest populated economy in the world

Rise in price of raw material

Import of raw material

TECHNOLOGICAL FACTORS

Emerging of IT sector

Modernization of paint like (waterproof paints, Teflon coating, creating colors shops etc.)

Lead free paints

ENVIRONMENTAL FACTORS

Impact of volatile organic compounds (VOCs)

Lead free paints

Season and climate changes

LEGAL FACTORS

Pollution Control Law

Health and Safety Law

Environmental Law

MICHAEL PORTER’S FIVE FORCE MODEL ANALYSIS OF PAINT

INDUSTRY

THREAT OF NEW ENTRANTSPaint market in India is dominated by few players, making

it difficult for anyone newly entering the industry to compete.

It is estimated that 18-20% of the total raw materials used in the industry are imported

Working capital needed is high-causes difficulty to local players & big firms enjoy economies of scale

Big players have high brand image & quality products & good promotional activities to attract customers

Threat of new entrants is Low

THREAT OF SUBSTITUTES

In rural areas lime wash is used as substitute

Another alternative for decorative wall paints available today is Wallpaper

Availability of Paint varieties are there

Buyer propensity to substitute is low

Relative price performance of Decorative walls is High

Availability of substitutes is Low

BARGAINING POWER OF SUPPLIERS

Raw material intensive production- over 300 raw materials make the final product

Raw materials-pigments, binders, additives, solvents, etc.

Titanium Dioxide is one of the key pigment used in he production of paint and is facing a global supply shortage. Thus supplier of this material has solid bargaining power.

Other raw materials-crude derivatives-have high price fluctuations affecting industry profits

Bargaining power of suppliers is Medium

BARGAINING POWER OF BUYERS Households and Industrial Users are the main customers of this

industry.

For housing requirements, the buyers are building contractors who buy in bulk and end people who paint their house. Customers are more price sensitive because for them number of options are available and decisions are made based on quality, price and differentiating factors like weather protection, environment friendly paints

Industrial segment is low margin high revenue business and buyers of these segments are knowledgeable about their needs. Therefore, price comparison is done effectively by the customers. However, The leading Industrial paint suppliers have their expertise in their favour, which limits the bargaining power of buyers.

Bargaining power of buyers as a whole is Medium.

COMPETITIVE RIVALRY

About 80% of organized sector contributed by top 3 players

Current market growth rate can provide ample room of opportunity for all the players of the industry to flourish.

Asian Paints is the only paint company that manufactures PAN(phthalic anhydride) which is one of the main raw material for paint industry.

Presence of unorganized sector –can cause competition

Competitive rivalry is Low

Porter’s Five Force Model for Paint Industry

Competitive Rivalry: Low

Threat of Substitutes:Low

Bargaining Power of Buyers:Medium

Bargaining Power of Suppliers:Medium

Threat of new Entrants:

Low

FUTURE PROSPECTS• Indian paint market is expected to reach 49,545

Cr. by 2016 - 17

• Use of water based paints is growing in the Indian paint market, new trends are catching up including paints with low VOC, no added Lead, Mercury, Chromium, odourless paints

• Decorative paints segment is expected to witness higher growth going forward. The fiscal incentives given by the government to the housing sector have immensely benefited the housing sector. This will benefit key players in the long term.

http://www.indiainfoline.com/article/news/indian-paint-market