Booming Paint Industry in India

Paints and their allied products like enamels, varnishes, pigments, printing inks and synthetic resins protect national assets from corrosion. These are increasingly being used in automotive, engineering and consumer durable sectors. Thus, economic development has a direct bearing on the paint industry. The paint industry is constantly upgrading its technology to meet the changing needs of the consumers.

The industry is broadly divided into two segments-decorative and industrial paints. The decorative paints which accounts for 75 per cent of the organized sector, are meant to protect valuable assets like buildings. This market is highly price sensitive. The industrial paints accounts for the rest 25 per cent share and are meant to protect white goods appliances from corrosion.

The size of the paints industry in India is around Rs 95 billion. The current demand is estimated at 650,000 tonnes per annum. This industry is seasonal in nature. There are around 26 paint units in the organized sector, accounting for around 65 per cent of the total output. The unorganized sector has about 2000 units. The total output at present is of the order of 4.5 lakh tonnes.

Major players in this sector includes Asian paints which has a market share of 44 per cent, followed by Kansai Nerolac 20 per cent, Berger paints 17 per cent, ICI 12 per cent and Shalimar paints 4.4 per cent and others 2.6 per cent. Today a number of foreign players have subsidiaries in India. Berger is strong in decorative segment and is the leader in protective coatings. Kansai Nerolac is the leading player in automotive OEM finishes and powder coatings. ICI (India) is a major player in decorative emulsion segment. The industrial paints market is valued at Rs 21 billion.

India’s paint industry has a bright future. The Indian paints market has the potential to grow over the next decade at 15 to 20 per cent per annum owing to more investments in the housing segment and improving infrastructure ,high  growth in the Indian automobile industry , etc. which in turn would mean greater demand for paints, as most people aspire for better lifestyle. Moreover the per capita consumption is also low. The demand for premium-category paints is likely to increase with rise in construction of commercial infrastructure. The players with aggressive marketing strategies and comprehensive product portfolios will grow at a faster rate. The emerging trends in technology and marketing indicate that the industry is likely to consolidate in the coming years with industry leaders improving their market share.

Paint makers turn to India for growth

The rural market has grown at a rate of around 20% a year, which is way above the growth rate in urban centres

Like other consumer goods companies, paint makers have also started looking beyond cities. Their New Year resolution is to enter the legions of villages and small towns or increasing their reach if they are already present there. For, they believe only India promises accelerated growth.
“Rural market is a big hope for us. It is driving our sales. We are expanding our distribution network in these locations to make the most of this opportunity,” Ramakanth V Akula, president (decorative), Nippon India, told Business Standard.
2013 was tough for the sector. Hopes of a revival in demand after a good monsoon and during the festive season were dashed by high inflation. Companies say paint is a discretionary expenditure — consumption falls during periods of rising inflation.
To their surprise, paint makers have found that while demand remained tepid in cities, consumption was rising in rural areas. A top official of a Japanese paint maker said requesting anonymity: “The rural market has grown at a rate of around 20 per cent a year (in financial year 2013). This is way above the growth rate in urban centres. We expect further increase in sales outside metros, as rural India's incremental consumption expenditure is witnessing a handsome growth.”
The increasing reach of media in villages has also helped paint makers, making easier for them to advertise their products in these regions. Companies have also discovered that demand for premium paints is high even in remote locations.
"Due to good monsoon rural India has bucked the trend. Rural centres in states like Punjab and Tamil Nadu are driving major part of our sales," Abhijit Roy, managing director of Berger Paints in India, said.
The market size of the paint industry in India is estimated at around Rs 29,000 crore. Industry players expect close to 12% growth in business volume and 10-12% rise in turnover this financial year. "Next fiscal can only be better than what the industry has seen so far this year. Rural reach will be crucial as most of the companies would be battling it out in the hinterlands," the official with the Japanese paint maker said.
The rural opportunity combined with easing prices of rutile, a key raw material, promise 2014 to be a better year for Indian paint companies.

Posted By: Reema Kapoor 
ICIS , NOIDA

KEY DEVELOPMENTS AND CURRENT STATE OF THE INDIAN OIL AND GAS SECTOR

The oil and gas sector in India is a critical component of the country’s economy, accounting for 15 percent of the country’s gross domestic product (GDP).Economic growth is directly linked with energy demand, and a conservative estimate of 7 per cent growth is expected to double India’s per capita energy consumption from 560 kilograms of oil equivalent (kgoe) in FY10 to 1,124 kilograms of oil equivalent (kgoe) by FY32. As oil and gas is one of the main sources to meet the required demand for energy in India, its demand is forecast to rise further. In 2011, natural gas accounted for 10 per cent of the country’s total energy requirements, whereas estimates suggest that this figure will reach 20 per cent by 2025, with oil and gas together accounting for approximately 45 percent of the total demand.

Market reports estimate that this growth is expected to take the size of the Indian gas market to that of the gas market in Japan, the largest consumer of liquefied natural gas (LNG) in Asia, by the end of 2015. Despite having significant reserves in India, the increase in demand is expected to be primarily met through imports.

To cope up with the increasing demand, the government has allowed 100 per cent FDI in the oil and gas sector, enabling some large partnerships such as the US$ 7.2 billion deal between British Petroleum (BP) and Reliance Industries. In order to further aid the development of the sector, the government introduces legislations such as the New Exploration Licensing Policy (NELP) to enable companies to bid for exploration rights, and encourage private sector participation. The participation of the private sector is expected to bring in monetary resources and technological capabilities, especially in the field of deep sea exploration while simultaneously reducing the dominance of PSUs in the country’s competitive landscape.

Posted By:

Reema Kapoor

ICIS

Indian paint industry forecast to double by 2018

The Indian paint industry was given a market value of US$5 billion at the beginning of 2013, and has been forecast to double by the time we reach 2018.

Though the paint industry witnessed some slowdown in the last few years due to global economic uncertainties and growing urbanization, good growth has been forecast for the next five years.

In recent years several factors have contributed to the fortunes of the Indian paint industry including the adoption of the latest technologies, innovative product launches, aggressive marketing strategies, comprehensive product portfolios, and value added services offered by companies.

In recent years, there has been a major transition in the type of products and services brought in by manufacturers and an evolving preference towards mid and premium segment products. Innovation has been seen all around the market landscape of decorative and industrial paint categories.

As the paints market has grown and evolved there has been increased demand for premium products. This has come about as buyers have become more aesthetically aware, and have the means to opt for better value products, even at higher prices.

As with other fields, some challenges also exists in this promising sector that can affect the growth trajectory of the paint industry, if not handled accordingly. For instance, the industry is highly raw material-intensive and any fluctuation in the availability of raw material leads to substantial price fluctuation in paint production costs.

In terms of volume, the industry stood at 3.11 million tonnes, of which the decorative segment accounted for an approximate nearly 77% share in 2012.

The 70:30 trend within the decorative and industrial segments is expected to continue in the future, mainly because of the growth in urbanisation and the increase in disposable income.

The country looks set to continue to enjoy a healthy growth rate compared to other economies, backed by the increasing level of disposable income, and demand from infrastructure, industrial and automotive sectors.

Posted By:

Reema Kapoor

ICIS

The Petrochemical Industry Outlook in India

The petrochemical industry has been one of the of the fastest growing industries in the Indian economy; it provides the foundation for manufacturing industries such as pharmaceuticals, construction, agriculture, packaging industry, textiles, automotive, etc. The petrochemical industry in India is oligopolistic with four main players dominating the market, namely Reliance Industries Ltd. (RIL) along with Indian Petrochemical Ltd. (IPCL), Gas Authority of India Ltd (GAIL), and Haldia Petrochemicals Ltd. (HPL).

The major driver for the growth of petrochemical industry in India is its (India's) ongoing economic development. With the Government announcing an infrastructure development program of over INR 500 Billion, coupled with growth in key end-use sectors like auto, personal / lifestyle products, and retail (packaging), a boost is expected in the demand for petrochemical products in India. The Government has set in place policies to promote investment in the petrochemical sector, and several key domestic companies have unveiled ambitious expansion plans for the next few years. Two major elements in this support are the decision to allow 100 percent foreign direct investment projects in this sector, and establishment of a series of special economic zones (SEZs) and a number of petroleum, chemicals, and petrochemical investment regions (PCPIRs).

The future of the Indian petrochemicals industry is bright with domestic demand driving the market for products. With Government support slowly falling into place, the future could see more investments from multinationals as well as domestic companies.