For a country known traditionally for its riot of colours, India is understandably a natural market for paint manufacturing companies.
Now with increased activity in the housing sector and projected demand for infrastructure projects, not to mention an increase in automobile population, the Indian paints sector is looking to double its size to Rs 50,000 crore by 2016 from the current Rs 26,000 crore. As per AC Nielson's assessment for the coating industry, in terms of volume, the size of the sector is 3.1 million tonne with decorative paints being 2.4 million tonne and industrial accounting for 0.7 million tonne. The per capita paint consumption, currently estimated at 2.57 kg, is expected to grow to over 4 kg. While the industry may be acquiring oomph through sustained business, there are problems such as rising input costs. The year has been challenging for the industry as a whole, due to subdued demand across key sectors and rising inflation.
Paint manufacturing is highly raw material intensive and the cost of production is incumbent on the supply situation in the market for raw materials. The companies use more than 300 ingredients to manufacture paints out of which a third are derived from petroleum derivatives. Ergo the fortunes of the paints industry are largely dictated by rising crude oil prices. Key paint companies include Asian Paints, Kansai Nerolac, Shalimar Paints, Jenson & Nicholson (India), Akzo Nobel India, Berger Paints (India) and ICI.
Seventy per cent of the manufacturing is in the organised sector and controlled by the big players, while close to 2,000, small and medium manufacturing firms occupy the unorganised segment. The demand for paints comes from two broad categories - decoratives and industrial. Decorative accounts for 77.3 per cent of the overall market, and includes both interior and exterior wall paints, wood finishes, and enamel. The demand for such paint is mainly from households and it is a high margin and price sensitive business, which revolves around the festive season (September-December). Asian Paints is the market leader in this segment. The main categories of industrial paints, in which Kansai Nerolac is the leader, include automotive coatings, powder coatings and protective coatings. These are far more technology intensive than decorative paints.