Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Painting a colourful future - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Nov 12, 1999

    Painting a colourful future

    This year finance minister Yashwant Sinha's budget sops to the housing sector must have really brought joy to the paints industry. The industry, which was reeling from lacklustre demand from user industries like housing, automobiles and engineering, really got a fillip out of the 'feel good factor' of the budget. With the economy getting back on growth mode, things are looking up the Indian paints industry.

    The Indian paints sector, valued at US$ 1 billion, is very fragmented. Manufacturers operating in the organised segment (60 percent of total market) have large-scale operations, unlike their counterparts in the unorganised segment who operate on a smaller scale. There are over 2,000 units in this segment accounting for 40 percent of total market. However, with the steady decline in excise duties (from 40 percent to 18 percent over five years), viability of small-scale units has been eroded considerably. Without the price advantage, these units have found it difficult to compete with their peers in the organised sector.

    The per capita consumption of paints in India stands at a lowly 0.5 kg per annum, compared to nearly 4 kgs in some South-East Asian nations, and about 22 kgs in developed economies like the USA and Germany. Paint demand tends to be cyclical as it is influenced by the economy and has grown at a CAGR of 10% over the last five years. Demand for paints can be classified into two broad categories: demand for decorative/Architectural finishes and Demand for Industrial finishes.

    Decorative paints account for 70 percent of market, and include acrylic and oil-bound distempers, enamels, plastic emulsions. Demand for decorative paints arises from household painting, architectural and other display purposes. Demand in the festive season (September-December) is significant, as compared to other periods. This segment is price sensitive.

    Industrial paints comprising 30 percent of market include automotive paints, coil coatings and power coatings. User industries include automobiles engineering and consumer durables. The industrial paints segment is more dependent on technology than the decorative segment.

    The paints sector is raw material intensive, with over 300 raw materials (50 percent petro-based derivatives) involved in the manufacturing process. Since most of the raw materials are petroleum based, the paints industry benefits from a downturn in the petrochemicals industry.

    In FY99, the sector posted 8 percent volume growth (12 percent in FY98). Most of the growth was attributed to demand from the small car segment, which witnessed a number of launches. Decorative paints witnessed demand slump in view of depressed housing activity. Industrial paints demand was also low in view of the downturn in industrial growth in FY99. Raw material supply was steady. Overall raw material prices appreciated by 10.5 percent during the year.

    With the Indian Paints Association estimating paints demand to rise from 600,000 tonnes per annum to nearly 1,000,000 tonnes by 2003, the sector can look forward to healthy growth in the near future. Higher housing demand will lead to strong demand in the decorative segment. Tax sops offered in the FY2000 Union budget for housing loans are moreover, expected to fuel demand. The industrial paints segment is also expected to post robust growth as a result of the demand upturn in major user industries like automobiles, engineering and consumer durables. The auto segment in particular promises to be a major growth area as auto companies have outlined new launches over the next few years.

    With the decreasing price gap between organised and unorganised segments, demand for branded paints in semi-urban and rural areas will increase. Increasing demand from these segments will see the larger players beef up their marketing and distribution networks in semi-urban and rural areas and leverage their brands to corner market share. In the long run, small-scale units will be forced to merge with large-scale ones to survive. At the same time, larger domestic manufacturers will tie-up with international majors to access technology. This consolidation will increase the bargaining power of suppliers and also protect margins in the long run.



    Equitymaster requests your view! Post a comment on "Painting a colourful future". Click here!


    More Views on News

    Asian Paints: Destocking Ahead of GST Impair Sales Volumes (Quarterly Results Update - Detailed)

    Aug 17, 2017

    Asian Paints registers 20.1% YoY decline in profits during 1QFY18 with low single-digit volume growth in the decorative paints segment.

    Asian Paints: Good Performance Across Segments (Quarterly Results Update - Detailed)

    May 18, 2017

    Asian Paints registers 10.4% YoY growth in profits during 4QFY17 with double-digit volume growth in the decorative segment.

    Asian Paints: Volumes Weighed by Notebandi (Quarterly Results Update - Detailed)

    Feb 17, 2017

    Asian Paints has reported a 2.6% YoY increase in the topline and a 0.6% YoY decline in the bottomline during the quarter.

    Asian Paints: Prolonged Monsoon Impacts Volume (Quarterly Results Update - Detailed)

    Oct 28, 2016

    Asian Paints has reported a 10.2% YoY increase in the topline while the bottomline has grown by 18% YoY

    Asian Paints: A Robust Performance (Quarterly Results Update - Detailed)

    Aug 3, 2016

    Asian Paints has reported a 9.1% YoY increase in the topline while the bottomline has grown by 17.9% YoY.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms