Paint Industry in India
Autor: Johnny Dorian • November 18, 2015 • Term Paper • 1,301 Words (6 Pages) • 1,305 Views
Paint Industry in India
The Indian paint industry is estimated to be a Rs.40,600 crore industry and by 2017 is expected to reach Rs.62,000 crores with a rise in disposable income of the average middle class coupled with increasing investment on education, urbanisation, development of the rural market and various launches of many innovative products. India is the second largest consumer of paint in India. The paint industry has a high correlation to the GDP growth rate. Over the FY05-14 period, the industry’s revenues have grown at 12.8% vs a GDP growth rate of 7.6% (implying a multiplier of ~1.7x). However, over FY12-14 growth has slowed to ~10%, given the slowdown in GDP. ASSOCHAM (Associated Chambers of Commerce and Industry of India) expects the Indian paint industry to grow at a 20% CAGR in 2016-17.
The paint industry in India can be divided into two segments:
- Decorative: The decorative segment constitutes nearly 78% of the total paint industry in India. The decorative segment is consumption driven and has a B2C model. The key factors driving the demand for decorative paints include rising consumption leading to a shortening of the repainting cycle, new housing construction and rising urbanization.
- Industrial: The industrial segment constitutes nearly 22% of the total Indian paint industry. Demand in this segment is driven primarily by the auto sector, and industrial and infrastructure activities. A cyclical recovery in auto demand and pick-up in road construction activities, both of which should drive demand for this segment.
The paint industry has both organized and unorganized players. The unorganized players account for 36% of the total paints market while 64% of the market belongs to organized players. There are more than 2,000 small paint companies in India that serve small regional markets. Gradually these companies are turning into vendors for bigger firms.
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Crude derivatives form approximately 40% of the total raw material costs. The sharp fall in crude prices from USD 115/bbl in Jun 2014 to USD 55/bbl in Dec 2014 should result in gross margin improvement for the Indian paint companies. The share of the organised segment of the Indian paint industry has risen gradually by 200bps over FY09-FY14 and now constitutes nearly 64% of the total industry. Incumbents like Asian Paints have improved their market share in the organised segment over FY09-14 (its market share increased from 44% in FY09 to 50% in FY14).This has been driven primarily by three factors – investment in advertisement and promotions (A&P), expanding the distribution network and continuous introduction of new products to improve the product portfolio.
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