A Dive into India's Decorative and Industrial Paint Industry

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Industry Overview

The Indian paint industry, with an estimated value of INR 73,000 Cr.  in 2024, is divided into decorative paints (INR 57,000 Cr., 78% market share) and industrial paints (INR 16,000 Cr., 22% market share). Organized players contribute to ~80% of the industry's value, driving growth through strategic initiatives. The industry's long-term growth potential is evident in the projected value CAGR of 12% from FY24 to FY34.

Segment Analysis

Decorative Paints: Anticipated to expand at a CAGR of 12% (FY24-FY34E), this segment is propelled by factors like increasing disposable incomes, urbanization, and a reduction in repainting cycles from 7-8 years in 2011 to 4-5 years currently. The organized sector's growth within this segment is expected to be even higher, at ~10% per annum, driven by factors like the introduction of economy-priced products and aggressive distribution expansion.

Industrial Paints: Projected to grow at a CAGR of 13% (FY24-FY34E), this segment is fuelled by infrastructure development and the automotive industry's expansion. Technological advancements and the growing demand of ~6% for high-performance coatings further contribute to this growth.

Regional Dynamics

West and South India: These regions are expected to witness faster growth due to urbanization trends and increasing disposable incomes. The share of paintable households in urban areas has increased from 53% in 2011 to 71% in 2024, with further growth expected. Organized players are expanding their presence in these regions to capitalize on this trend.

North and East India: These regions represent a significant portion of the existing market, with a combined share of ~60% of the distribution network for major players like Berger Paints. The focus is on penetrating Tier 2/3 cities and rural markets by introducing economy-priced products and expanding distribution networks.

Investment Thesis and Drivers

Low Per Capita Consumption: India's per capita paint consumption stands at 4.4 kg, significantly lower than China (7.2 kg) and the US (15.8 kg). This indicates substantial potential for growth as the economy develops and living standards improve.

Urbanization and Rising Incomes: India's urbanization is at 35-36% in FY24, and the urban population living in cities is estimated to surpass 43% of the total population by 2035. Hence, the demand for housing and home improvement is expected to rise, driving paint consumption.

Shortening Repainting Cycles: The repainting cycle has decreased from 7-8 years in 2011 to 4-5 years in 2024 due to changing consumer preferences and a growing emphasis on aesthetics.

Rise in Paintable Area: In India, the average carpet area per household has witnessed slim growth over 2011-24E (CAGR of 0.5%). The resulting total paintable area growing at 4.3% CAGR over 2011-24E combines interior and exterior areas. The total paintable area is estimated to grow at a CAGR of 5.3% over 2024-34E supported by a growth in carpet areas of ~1% CAGR over the same period.

Government Initiatives: The government has placed special emphasis on infrastructure development in India, with an 11% hike in budgetary allocation for FY25. Under the 'Smart Cities Mission' to develop infrastructure in 100 cities, 8,035 projects worth INR 1,68,200 Cr.  have been sanctioned, of which 87% are complete with another 1,046 projects worth INR 27,000 Cr.  ongoing. These government-backed initiatives will drive the demand for the paint industry.

Key Players in the Paint Industry

Asian Paints: Holding a 52% market share in the decorative paints segment, Asian Paints focuses on expanding its product portfolio, including forays into home décor and the low-economy segment. Asian Paints has an extensive retail network of 1,62,000 touchpoints, providing a significant advantage in reaching consumers. Asian Paints has 11 paint manufacturing plants across India, 8 of which are for decorative paints. Globally, it operates in 14 countries and has 17 in-house paint manufacturing facilities abroad. The company is setting up a manufacturing facility for VAE (vinyl acetate-ethylene emulsion) and VAM (vinyl acetate monomer) in India, at an investment of INR 21,000 Cr. over the next 3 years, with an installed capacity of 1,50,000 MT/ 1,00,000 MT p.a.

Berger Paints: With a 16% market share in decorative paints, Berger Paints is known for its innovative products and strong presence in industrial coatings. Historically, Berger had a stronger presence in North and East India which make up 60% of its distribution network, and now is expanding its distribution network in West and South India. The company is present in 8 countries, with 25 of its manufacturing units located across India and 4 overseas. In Uttar Pradesh, Berger’s largest plant commenced production in February 2023, adding 4,00,000 KL/MT p.a. of capacity at an investment of more than INR 10,000 Cr.

Kansai Nerolac: Kansai Nerolac is the largest industrial/auto paints company and holds a 7% market share in decorative paints, leveraging its 'Paint+' strategy. The company has 8 manufacturing plants in India and an upcoming greenfield facility at Vizag. Kansai Nerolac is also expanding its manufacturing capacity to sustain volume growth, through both, greenfield and brownfield expansions, at a total investment of INR 3,200 Cr.

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