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Products
The products of the paint industry can be classified into two major segments decorative (architectural) paints and industrial paints.
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Decorative paints: The decorative paint segment can be classified into interior paints and exterior or cement paints. 80% of the decorative paints account for interior paints, which consists of premium, medium and economy categories. The premium category consists of plastic emulsions, the medium-priced category consists of synthetic enamels and the economy category consists of distempers.
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The products under the decorative finishes can be limestone coatings, primers, distempers, cement paints, matt/lustre finishes, enamels, emulsions (first quality), and premium emulsions.
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Consumption of paints is skewed towards decorative paints which account for 70% of paints sold in India. This is in a sharp contrast to the trend in developed countries, where the ratio is skewed towards the industrial segment.
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This segment is marked by the presence of a large number of players from the organized as well as unorganized sector. Competition is high and margins tend to be low in this segment. Products of this segment are relatively price sensitive.
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Demand for decorative paints is seasonal with bulk of sales taking place during the festival seasons from September to December. Besides sales remain slack during the monsoon months from June to August.
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Entry barriers in term of technological and funds requirements are relatively lower in the paints sector. It is estimated that a plant of 1 m tpa will cost around Rs 120 m. However decorative paints are marketing-savvy products and backed by large advertisement campaigns and dealership networks. These serve as high cost entry barriers for new companies in this business. The huge investments required in setting up a vast marketing and dealership network, to advertise and develop a brand over a period of time can only be afforded by companies in the organized sector. It is for this reason that smaller companies and small scale sector units are slowly losing market share to the organized sector.
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Industrial Paints:
Industrial paints comprising 30% of the market include automotive paints, high performance coatings, coil coatings, powder coatings, marine paints and general industrial coatings. The automotive segment is further bifurcated into OEMs and auto refinishes. The automotive and general industrial coatings occupy top slot in terms of production.
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Demand for these paints is relatively price inelastic, but is prone to business cycles and depends on industrial and economic growth. Major end user industries include shipping, capital goods, white goods and heavy industries.
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The industrial paints segment due to specialized technology and high capital expenditure attracts fewer players. Most Indian companies have tied up with or are in the process of tying up with international paint majors to have access to the latest technology. A tie-up with a global paint manufacturer also enables the domestic company to supply to local customers of its partner. For example, Goodlass Nerolac is a major supplier to Maruti Suzuki because of Kansai, its Japanese collaborator and Suzuki relations. It is for the same reason that Asian Paints (tie-up with PPG Industries, USA) is a major supplier of paints to Opel Astra.
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