In the March quarter, when leading paints majors posted declines of 11-22 per cent, Shalimar Paints, a one-time market leader, posted a modest four per cent growth. Established in 1902, Shalimar dropped from leadership position to several notches below the present market leaders. As the company sailed through a successful rights issue of Rs.2 billion and focussed on scaling up R&D and production facilities, MD Ashok Kumar Gupta spoke to Senior Editor E Jayashree Kurup on how the organisation plans to re-establish leadership position in a couple of years. The change happened about five years ago when stakeholders decided to revive the company's position. The organisation banks on research at the Nashik unit to push it into consistent growth in performance. MD Ashok Kumar Gupta, who took over in 2020, has not only pushed the company into consistent growth, approximately twice the industry average over the past few years, but also steered the company through a successful rights issue worth Rs.2 billion. This gave the company enough capital to scale up and seek to achieve leadership position in the Indian paints segment. He spoke to Construction World about strategies to restore the brand to its earlier glory. What is the strategy to regain lost ground? We have a huge legacy dating back to 1902. A couple of decades ago, we were a leading company in the sector. In between, we did not focus on research and new products and dropped behind others. A few years ago we took a calculated decision for a makeover. Since then, we have been regaining ground. Any journey that is halted in between takes a while to restart. We held first or second position in the industry and over half a dozen players have overtaken us. In our makeover journey, the first starting point has been research and development (R&D). We had a small set-up which is being completely revamped at our Nashik plant and will be comparable to our competitors. It will have a full team of scientists. The team is hired and the set-up is being upgraded with new equipment. In another three months, the setup will be ready. This research team accounts for 10-15 per cent of our total workforce. We are modernising our production facilities. If you aim to become leaders in the industry, your facilities, infrastructure and capabilities have to be at par with the best in the industry, if not better. In the next 24 months, all our facilities will be at par with the industry. Today even though our products are a shade better than many in the industry, our production facilities are not at par. The third focus is on upgrading the size and quality of the team. We are doubling the size of our team and upgrading the team’s quality as well. We have been going to the top institutes of the country for recruitment. Who invested in Shalimar Paints and for how much stake? Infra.Market allocated Rs 3 billion to service existing debts, boost working capital for expansion and modernise operations. It was in February 2022 immediately after the association announcement with Shalimar. Infra.Market currently has an equity stake of 24.99 per cent. How will this impact Shalimar’s positioning in the market? The company is committed to strengthening its research and development (R&D) capabilities, revamping manufacturing units, expanding product portfolios and enhancing the brand's presence and visibility in the market. Are you upgrading the product mix, range or quality? We had a good R&D 20 years ago. The products were the best. The product quality continued to be good but our range was limited. For example, over the last 20 years wood has become a good user of paint. Earlier, they used to put varnish and be done with it. We still have varnish with us, but the polyurethane, melamine and finishes, etc., were not part of our range. We have decided to come up with the entire range of wood products that our competitors have. In the next three months we will be almost at par with the industry and in the next two years, we will be a shade better than the industry. To come on par with the industry we have a good lab. We hired the best scientists from the industry and have given them the best equipment to work with. We expect that in the next six months all the products will be at par with the industry. Our next strategy is to match international quality. Globally they are talking about water-based paints. It will take us a year-and-a-half to two years to switch to water-based paints. Currently you do not have good water-based paints in India. For this we are looking at collaboration with global partners to bring technology to scale up fast. Currently, we are working on a sourcing collaboration with a European company. In due course, we will change it to a technological collaboration to get the formulation from them. Subsequently, we will be manufacturing these in our own plants. Currently we will import them as completely-knocked-down (CKD) kits. Maybe we will also get them in the semi-knocked down (SKD) condition as well where we import in bulk and refill it here. Two years down the line, once we have assessed the demand that we have generated for these products, we will manufacture them here as well. Today infrastructure as well as building construction is on the upswing. What is your focus? In the paint industry there are different verticals. Decorative segment is primarily used for walls and ceilings as well as steel railings. This needs to be done every year or two and is the largest segment for any paint company. The industrial segment is very large too. Large factories, large steel structures which need to be painted, such as petrol and oil tanks and pipelines, all come under industrial use. They are also known as protective coatings. There is the marine segment that deals with ships and boats and the automobile segment as well. Shalimar has focussed primarily in three areas - significantly in decorative (65 per cent of total sales), protective coating (30 per cent) and marine coatings (5 per cent) for small boats category. In the decorative segment, our focus has been on emulsions for finishing. Our focus is also on aluminium coating paint. They protect all your steel structures - fencing, outside gates and railings. We are one of the best in aluminium paints. We are at 70-80 per cent of our target and will soon scale up to 90-95 per cent of our target. Within two years with our collaboration, we will be at par or even better than industry standards. In industrial paints our focus is on pipelines. We are one of the largest in terms of pipelines and industrial uses. In marine, our focus has been on small boats all over the country. India is not a big manufacturer of ships per se, but is a big manufacturer and repairer of small boats. Does each production facility manufacture a different product? We have three factories - one in Sikandrabad in Uttar Pradesh (UP), one in Nashik in Maharashtra and a third in Chennai in Tamil Nadu. About 70 per cent of products are common among the three factories, about 30 per cent are unique. All bitumen paints are only made in our Sikandrabad plant in UP. All packaging products are made in the Nashik Factory and all coal tar products are made in the Chennai factory. Demand is well spread. There is more demand in the South and West as compared to the East. All paint manufacturing units are spread across these three areas. Somehow paint consumption is limited in the East. When you upgrade manpower, what is the break-up? Pure research manpower (10-15 per cent) is primarily chemical technologists from the leading institutions and trained in paints technology. They do research in the types of bases and chemicals required in paints. The largest component of our manpower (40 per cent) is the sales and marketing force that interacts with users and dealers and are the eyes and ears on the ground. Production workforces in our three plants (20-25 per cent) are largely technology people. The fourth is the support staff (20 per cent) - logistics, human resources, finance, etc. Do you train the industry as well? In the decorative segment, we work closely with the painter community who are our champions. We interact regularly with about 20,000 painters and train them on paint usage and the latest products. Today, a new breed painting contractors take the entire project, design and execute it. We work closely with them. Are your products Green certified? Firstly, all our plants have zero discharge in air and water. Secondly, our buckets are recycled or end of life processed, in line with the government mandate. In products we are going for green technology. Paint used to be based on crude oil as the base. Fumes emanating from paints could affect your health. We are going away from oil-based to water-based paints. In steel pipes, paints are moving from oil to bitumen-based paints. We are one of the first to develop it. We are still working on it. It should be ready in six months to a year. Our entire focus is on healthy paints. We are working on making paints significantly risk-free. A unique product we are trying to develop is emulsion paints which when applied on surfaces deactivate viruses that come in contact with them. It is only 5 per cent more expensive. This is for houses. In hospitals, we would make it more intense since they cannot be painted so frequently. But it will make workplaces more healthy. Has the ‘Make in India’ and G20 impacted you? About 95 per cent of paints are manufactured domestically. We are trying to even procure raw materials within the country. Some minerals like titanium dioxide are just not available here and crude oil has to be imported. Are you manufacturing for export? We export a small amount to Nepal, Sri Lanka, Africa, Middle East and Abu Dhabi. Your social impact campaigns have stood out. Was that a planned strategy? Our Har Ghar Khoobsoorat was a disruptive campaign about inclusiveness. The purpose of the campaign was disruption. We were not visible then and the primary purpose of the campaign was disruption. We wanted to make a statement that we will be disruptive. Sales last year grew 39-40 per cent as compared to the industry average of 18-19 per cent. We are now working on a different marketing strategy, planning a lot of below the line (BTL) activity to stay closer to the painter, distributor and the user. Does each region in India have different colour preferences? We see a trend towards the northern region going towards subtle lighter colours, especially in the interiors - yellow, pink, green, etc. The South still goes for darker colours. How have your production and sales numbers grown? Three years ago, we were at Rs 2.5 billion, last year Rs 4.9 billion and will target much higher numbers in the coming year. Our growth has to be well over the industry average. Shalimar was very well known for industrial paints and is still a market leader. We are targeting a 30 per cent growth in this segment and 20 per cent in the decorative segment. Give details about investments. We have the capacity to produce 60-70 kilolitres of paint annually. We are looking at bumping it to over 200 kilolitres. We are focussing on automation to double capacity. Of the Rs 2 billion for investment, over 10-15 per cent will be in R&D and the rest in production. In three years, we expect at least 20 per cent sales revenue from export. But these are still projections.