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The phenomenal growth on the housing sector front, rapid urbanization, availabil
ity of easy to secure housing loans all have being the prime drivers of growth i
n the decorative paint segment.
An average growth of about 10 percent in the automobile sector contributes 50 pe
rcent to the revenues in the industrial paints segment.
Industrial paints add 30 percent and the decorative segment adds to 70% to the p
aint industry revenue in India. New developments in roads, ports, etc adds up to
the revenues of protective coatings for civil applications.
Per capita paint consumption in India is only 1.2-1.4 liters. The industry is le
ss than half the size of the Chinese market by volume and about one fifth of the
U.S. market by volume. Even Sri Lanka and Pakistan have higher per capita paint
consumption.
The size of the Indian industry is around 940 million liters and is valued at ap
proximately $2 billion. The organized sector comprises 54% of the total volume a
nd 65% of the value.
In the last ten years, the industry has grown at a compounded annual growth rate
(CAGR) of 12-13%.
Price sensitivity factors
The industry is raw-material intensive. Of the 300 odd raw materials, nearly hal
f of them are imported petroleum products. Thus, any deficit in global oil reser
ves affects the bottomline of the players.
The major raw materials titanium dioxide, phthalic anhydride and peutarithrithol
constitute 50 per cent of the total cost. Besides, this, there are other raw ma
terials such as castor, linseed and soybean oils, turpentine. The raw materials
cost sums up to a whopping 70 per cent. Any increase in the prices of these raw
materials could adversely affect paint prices.
Most of the paint majors have to import nearly 30 per cent of their raw material
requirements thus changes in import policies can affect the industry.
The prices of packing materials such as HDPE, BOPP and tinplate have reduced con
siderably. However, the decision of the Central Government to ban import of tinp
late waste could lead to a spurt in the prices of the tinplate in the near futur
e.
India also imports a small volume of specialty wood finishes including polyester
and polyurethane water-based coatings, and special effect emulsions. The Indian
paint market has the potential to grow over the next decade at 15-20% per annum
as the current per capita consumption is much lower than other developing count
ries and less than half of China.
The low per capita paint consumption until recently can be linked to the large n
umber of kuccha (temporary), and semi-pucca homes (semi-temporary), low purchasi
ng power, the small size of homes, the long repainting cycle, and use of chuna (
lime powder) and French polish (paint substitutes).
In the decorative segment, the next decade should see a value growth in the regi
on of 15-20% per annum due to reduction in poverty levels, construction of new h
omes, higher inclination to spend, increasing decor-consciousness and gradual re
placement of chuna.
The automotive OEM segment too should grow at least at 15% per annum powered by
the projected high growth in the automotive segment.