Paint industry

Saurav Kumar

PAINT INDUSTRY

ANALYSIS

CONTENTS

1. INTRODUCTION

2. GLOBAL SCENARIO FOR PAINT INDUSTRY

3. INDIAN SCENARIO

4. MICHEAL PORTER FIVE FORCES MODEL

5. HERFINDAHL INDEX

6. PERFORMANCE ANALYSIS

7. FUTURE OUTLOOK

INTRODUCTION

The Paint Industry is divided into two major segments:

Decorative Paint-

Industrial Paint-

The Paint industry impacts on Indian economy

Paint market to grow 20% annually in next two years Source : Assocham

Current market size of Paint industry is 40,600 crore in 2014 which is expected to

grow at a CAGR of 20% and expected to reach Upto 62,000 Crore by 2016

Source ipaindia.org

GLOBAL SCENARIO OF PAINT

INDUSTRY

• One of the key factors of the paint market growth is the rapid development of the global construction

industry.

• The paint and coatings industry largely depends on the purpose of the market, such as the need to meet

the key industrial sectors are construction, steel, marine, automotive and wooden furniture.

• The global paint consumption, total sales of $ 120 billion, an output of 39.82 million tons shows there is

rise in consumption of paint in 2012 which is grown at 5.43% in 2013 and 2014.

• The Asia-Pacific region is still the world's largest paint consumption ranked first in a yield of 42% in

2012. Asia, China accounted for more than half of consumption, and the slowdown in the rapid expansion

of the past.

Wold Paint and Coating Industry Association

WORLD'S TOP TEN PAINT COMPANIES

Sr No Company Country Website Revenue

1AKZONOBEL Netherland www.akzonobel.com $ 18.29 billion

2PPG Industries United States www.ppg.com $ 14.83 billion

3SHERWIN-WILLIAMS United States

www.sherwin-

williams.com $ 7.94 billion

4DUPONT United States www.dupont.com $ 5.35 billion

5BASF Germany www.basf.com $ 4.99 billion

6RPM Inc United States www.rpminc.com $ 4.08 billion

7DIAMOND Paints United States www.diamondpaints.us $ $ 3.73 billion

8VALSPAR United States www.valspar.com $ 3.57 billion

9SACAL United Kingdom www.sacalpaint.com $ 3.35 billion

10NIPPON Paint Japan www.nipponpaint.com $ 2.98 billion

Source : World Paint and Coating Industry Association

GLOBAL SCENARIO OF PAINT (PRODUCTION) AND (REVENUE)

Source : World Paint and Coating Industry Association

INDIAN SCENARIO

Source- Assocham

1. The current market size of Indian Paint Industry is 40,600 Crore which is

expected to grow Upto 62,000 crore by 2016

2. Asian paints dominates the Indian Paint industry followed by Berger Paints

and Nerolac.

3. The paints sector is raw material intensive, with over 300 raw materials

(50% petro-based derivatives) involved in the manufacturing process. Since

most of the raw materials are petroleum based, the industry benefits from

softening crude prices.

4. The major drivers of Paint industry are rapid urbanization, GDP, IIP, progress

in real-estate.

TOP PAINT COMPANIES BY MARKET SHARE

Companies Price Sales Mcap Net Profit Sales % M Cap % Net Profit %

Asian Paints 632 10,925.22 60,583.07 1,165.77 50% 67% 69%

Berger Paints 399 3,384.82 13,836.18 233.72 15% 15% 14%

Kansai Nerolac 1,889.00 3,334.69 10,179.28 204.67 15% 11% 12%

Akzo Nobel 1,271.00 2,417.90 5,932.12 99.8 11% 7% 6%

Shalimar Paints 147 520.77 278.85 -8.55 2% 0% -1%

Asian PPG Indus. 0 382.33 0 32.95 2% 0% 2%

Jotun India 0 304.54 0 -41.02 1% 0% -2%

NCL Alltek & Sec 0 142.18 0 8.12 1% 0% 0%

Grand Polycoats 0 81.86 0 4.34 0% 0% 0%

Cipy Poly Uretha 0 78.96 0 5.66 0% 0% 0%

Source Capitaline.com

TOP TEN PAINT COMPANY BY SALES

Companies Sales

Asian Paints 10,925.22

Berger Paints 3,384.82

Kansai Nerolac 3,334.69

Akzo Nobel 2,417.90

Shalimar Paints 520.77

Asian PPG Indus. 382.33

Jotun India 304.54

NCL Alltek & Sec 142.18

Grand Polycoats 81.86

Cipy Poly Uretha 78.96

TOTAL PAINT COMPANIES IN INDIA

Companies Asian Paints Ind Saurashtra Paint American Paints Keytuo Chemicals

Asian Paints Rajit Paints GNP (Madras) Macfarlane & Co Maha Classic Pai

Berger Paints Jenson & Nich. Beepee Coatings Addisons Paints Mahalaxmi Paints

Kansai Nerolac Nitco Paints Sarika Paints Nilchem Infrastr Mahavir Paints

Akzo Nobel PSL Corrosion Hardcast.& Waud Pelican Paints Sil Business

Shalimar Paints DIC Coatings Killick Nixon Abhi Technocoat

Asian PPG Indus. Deve Paints Special Paints Ashirwad Innovat

Jotun India Berger Auto Ravi Paints & Ch Decorative Paint

NCL Alltek & Sec Mysore Paints Skylon Engineers Esdee Paints Ltd

Grand Polycoats Coimb. Cots Multilac Surface Garnish Paints P

Cipy Poly Uretha Fillon Technolog Incon Protective Hello Paints Pvt

Source: Capitaline.com

PORTER’S FIVE FORCES MODEL

Major Points

SupplySupply exceeds demand in both the decorative as

well as the industrial paints segments. Industry is

fragmented.

DemandDemand for decorative paints depends on the housing

sector and good monsoons. Industrial paint demand is

linked to user industries like auto, engineering and

consumer durables.

Barriers to entryBrand, distribution network, working capital efficiency and

technology play a crucial role.

Bargaining power of

suppliers

Price increase constrained with the presence of the

unorganised sector for the decorative segment.

Sophisticated buyers of industrial paints also limit the

bargaining power of suppliers. It is therefore that margins

are better in the decorative segment.

Bargaining power of

customers

High due to availability of wide choice.

CompetitionIn both categories, companies in the organised sector

'HERFINDAHL-HIRSCHMAN INDEX -HHI'

• Herfindahl-Hirschman Index is a measure of the size of firms in relation to the industry• and an indicator of amount of competition among them.

• A HHI index below 0.01 (or 100) indicates a highly competitive index.

• A HHI index below 0.15 (or 1,500) indicates an un concentrated index.

• A HHI index between 0.15 to 0.25 (or 1,500 to 2,500) indicates moderate concentration.

• A HHI index above 0.25 (above 2,500) indicates high concentration

HERFINDAHL INDEX

PAINT COMPANIESCompanies Sales Market Share HHI

Asian Paints 10,925.22 0.50642 0.25647

Berger Paints 3,384.82 0.15690 0.02462

Kansai Nerolac 3,334.69 0.15458 0.02389

Akzo Nobel 2,417.90 0.11208 0.01256

Shalimar Paints 520.77 0.02414 0.00058

Asian PPG Indus. 382.33 0.01772 0.00031

Jotun India 304.54 0.01412 0.00020

NCL Alltek & Sec 142.18 0.00659 0.00004

Grand Polycoats 81.86 0.00379 0.00001

Cipy Poly Uretha 78.96 0.00366 0.00001

21,573.27 0.318705

Source=Capitaline.com

PAINT INDUSTRY PROFITABILITY ANALYSIS

Companies Net Profit Profit Margin

Asian Paints 1,165.77 68%

Berger Paints 233.72 14%

Kansai Nerolac 204.67 12%

Akzo Nobel 99.8 6%

Shalimar Paints -8.55 -1%

Asian PPG Indus. 32.95 2%

Jotun India -41.02 -2%

NCL Alltek & Sec 8.12 0%

Grand Polycoats 4.34 0%

Cipy Poly Uretha 5.66 0%

1,705.46

Companies Export

Asian Paints 45.99

Berger Paints 3.23

Kansai Nerolac 11.05

Akzo Nobel 2.01

Shalimar Paints 1.23

PAINT INDUSTRY EXPORT

• The major drivers of paint industry are cost of raw material, IIP data, GDP

Disposable income of people urbanization and standard of living.

• Asian paints is market leader and expected to come with more innovations

and share price growth.

• Paint industry has a very positive outlook in the coming years.

FUTURE OUTLOOK