Paint Industry in India

An Overview

The paint industry worldwide is classified into 2 segment viz. decorative and industrial segment in India constitutes nearly 70% of the market whereas the scenario is just the reverse in the developed countries.

Decorative Segment is dominated by the unorganised sector which now accounts for 70% of the total paint production as against 75% three to four ago. The unorganised sector has an advantage over the organised sector since it is fully exempted from the 20% excise duty and other government levies.

Major Players in the Indian Paint Sector

In the organised sector Asian is the market share of 31% followed by Goodlass Nerolac with a share of 16%.

Industry is characterised by low capacity utilisation

Paint industry is characterized by low capacity utilisation as most of the companies get the work done on job work basis This is because of the longer processing time required in the paint industry when paint is manufactured in smaller batches the production falls. Most of the plant operate at 50% capacity with the exception of Berger paints which manages a capacity utilisation of around 70%. The main reason for this is that it has strong presence in the premium enamel and emulsion segment and does not switch between decorative and industrial paint like the other manufactures.

There is tremendous potential for the paints manufacturers in India because as against an average percapita consumption of paints in India is very less. Economic liberalisation is attracting international giants like BASF Germany,

Curtlauds UK and Jotun Norway. Jotun, has announced plans to set up a powder coating plant, while International Paints UK, intends to set up a marine paints plants. Since decorative paints are a consumer product Sales are price elastic any change in the government policy on the excise duty has a direct bearing on the sales. Over the last 4 years, the government  has reduced  the excise duty from a peak of 40% to current 20%.

The entire benefit of the duty reduction has been passed to the consumer which has not only enabled this segment to come out of the recession but also enabled the organised sector to increase its market share at the expanse of organised sector. The share of organised sector has increased from 20% To 25% as a result of reduction in excise duty.

Distribution channel plays an important role in the industry. Awareness and perception of specific brand is more important than the corporate brand equity. Asian Paints, the market leader has around 16,000 dealers in its network which are spread across the country. Goodlass nerolac comes second with around 9,000 dealers.