With industrial paints, coatings and varnishes sector has experienced a shift from unorganised to the organised market with the GST introduction and aimed for a better market due to GST cut. The industry is estimated to be Rs 75 000 Crore market by 2022. Automotives being the largest consumer of the industry, has put these businesses under pressure. This article takes a look at the current conditions and identifies possible avenues for growth in the future.

 

The industrial paint includes auto OEM paints and protective coatings, auto refinish, GI (General Industrial) paints, powder coatings. Auto OEM paints and protective coatings and auto refinish paints are used by auto producers for painting automotive interiors and exteriors, GI paints are used for construction, heavy engineering & agricultural equipment. The industrial paint segment accounts to a market share of around 40 per cent of the total paint industry. It is highly dependent upon automotive sector. 

 

Saurabh Chhabra, Senior Manager, Concept International Business Consulting Pvt Ltd, says, “Kansai Nerolac Paints is strong in automotive paint business. It has the collaboration of Kansai of Japan and gets all the technical expertise from their principals. They have the capability to come out with the new systems and products. Similarly, Berger Paints India Limited is strong in Protective coatings, Asian Paints Limited is very strong in the decorative segment and SPL has the advantage of can coatings. This indicates that these companies can think in terms of being focused in a segment. This will lead to developing the ‘niche’ market.”

 

Automobile segment generates over 45 per cent of the demand of industrial paint, and growth in automobile sector is expected to be five per cent year-on-year. The sector would remain one of the biggest consumers of industrial paints and provide sustainable business opportunities.

“The decorative business segment in India registered a high double digit volume growth and delivered strong performance across regions. The Automotive coatings JV (PPG-AP) business was affected by the severe slowdown being witnessed in the automobile industry. Even the Industrial Coatings JV (AP-PPG) business was impacted by demand slowdown. Benign raw material prices, however, supported the margins for the entire coatings business,” says KBS Anand, MD & CEO, Asian Paints Ltd.

 

“In the International operations, key units like Egypt and Sri Lanka continued to witness challenging business conditions impacting the overall performance. Both the segments in the Home Improvement category viz. the Kitchen (Sleek) and Bath (Ess Ess) business, performed well in the quarter” adds Anand.

 

The Indian paint industry is a raw-material intensive industry, acquiring over 65 per cent of input costs from raw-material inputs. The Indian paint manufacturing industry has been facing the pressures of increasing raw-material cost. The primary cost being the spiraling prices of crude oil. The Indian paint industry is still heavily reliant on raw-material imports for fulfilling its requirements. Maruthi Ram Ramaswamy, Professor and HOD, Department of MBA, at BNM Institute of Technology, Bengaluru, says, “The industrial paint segment is far more dependent on imports, needing about 40 per cent of its raw-material requirement to be imported. The demand for industrial paints has increased substantially because of expansion of many industries. It may be power plants, petrochemical plants, fertilisers plants, textile industries, automobile industries and so on. The production of paints involves the blending of around 300 different raw materials and it is the process type. The three main steps involved in the manufacture of paints are dispersion, adjustment and packing.”

 

According to the industry SKUs, better the brand name and recognition, better the market share. Companies like Asian Paints, Kansai Nerolac have focused on building brand image with their decorative paint categories. They have extensively targeted media for the same and it has helped them to carve out a considerable market share.

 

When foreign brands enter the market, it helps to create a competitive market. A study reveals that the foreign companies have not affected the Indian paint companies. In fact, it has helped in improving quality through use of latest technology adopted by Indian companies to offer competitive products at competitive prices,” observes Ramaswamy.

 

Ramaswamy also held that the industrial paints have developed R&D centres which facilitates customised development of the solutions for various industries. Many from the organised market have collaborated with the institutes to study better environment-friendly solutions for the industry. Experts believe that the GSTs introduction helped to create more share of organised sector in the industry and now avenues like third party R&D labs, contract manufacturing and logistics of sensitive raw materials as it is regulated have opened to create more business and competition in the industry.

 

Industrial coating industry is currently building well into aviation and space technologies engaging collaborated efforts from governments PSUs and private sector. Ramaswamy states, “ISRO, IITs and industry players are coming on a single platform to develop better products. Industrial paint and coating industry requires precision as the paint is derived through a series of experiments and later these experiments are converted into a scalable process.”

 

“Companies in India are working ahead to carve out their own niche markets. Based on their client base, the companies are working towards developing solutions for one industry application rather getting their products in each application,” observes Abhay Tiwari, Research Associate, Tokyo Technological Institute. 

 

Indian industrial paint manufacturers depend on Indian Sub-continent. Bangladesh and Sri Lanka saw boom in automobiles, some time back. But with Indian automotive industry slowdown, these markets also witnessed sluggish growth. This has left Indian paint manufacturers in a massive slowdown. Some automotive companies have also stopped manufacturing due to fall in demand. 

 

Tiwari observes, “Motor coil insulating varnish is one of the most useful varnishes which is used largely for the coating over the armature coils. Motor coil insulating varnishes, are made by using specific natural resin. Melamine resins etc. with specific solvent or, different solvent mix. This category is worst hit as application and demand of such varnishes is limited.”

Some categories like plastic coating, printing varnishes, food and pharmaceuticals industry specialised storage coatings will still manage to survive well. 

 

Chandrashekhar Rane, Manager-Business Development, Advance Paints Ltd, says, “Majority of the paints demand comes from original equipment manufacturers (OEMs) in automobile and the two wheeler segment has seen picking up. Protective coatings demand has remained strong. This may be due to the recent drop in oil-based emulsions price with crude prices eased.”

 

New segment to rescue

There are new segments in industrial like metro coaches, rail coaches, ropeways (lifting auto) and most importantly the growing industry of electronics. Some specialised applications in defence sector will also add on to industry potential. Tiwari believes, “Wherever there are regulated markets, there is a need for coatings, varnishes and paints to prevent products from getting exposed to air, water and other contact areas.”

 

The India powder coatings market is heading toward growth expansion phase over the coming years. This is attributed to the presence of a large consumer base such as automobile, agriculture equipment manufacturers, and others in India. The automobile sector has shown a noteworthy growth in India, specifically in West and North India due to which there is a rise in consumption of powder coatings.In addition, there is a significant increase in demand for powder coatings from furniture and general industrial applications. Powder coatings demand for furniture application is increasing owing to the surge in demand for outdoor furniture. A rise in a requirement for outdoor furniture boosts the demand for thermoplastic powder coatings. 

 

Printing industry has large applications of varnishes for functions like glow and matte effects, waterproofing and durability. All functions apply in packaging as well but sometimes varnishes are also used to offer rigidity to the products like boxes and cartons. Aniket Rane, Director, Maximus Graphic Art, says, “Commercial applications of varnishes will find a place in printing industry. Print varnishes are not always functional. Some international manufacturers have their product manuals with their machinery. These manuals are ideally waterproof depending upon the conditions the machine is subjected to. An airline manual that a pilot has can withstand water for a longer duration than any other manuals as functionality is significant here.” Lastly, the industrial paints industry is hoping that the automotive sector to come back to normal and will explore for new avenues for its market. 

 

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The industrial paint segment is far more dependent on imports, needing about 40 per cent of its raw-material requirement to be imported. The demand for industrial paints has increased substantially because of expansion of many industries. It may be power plants, petrochemical plants, fertilisers plants, textile industries, automobile industries and so on.

Maruthi Ramaswamy, Professor and HOD, Department of MBA, at BNM Institute of Technology

 

Majority of the paints demand comes from original equipment manufacturers (OEMs) in automobile and the two wheeler segment has seen picking up. Protective coatings demand has remained strong. This may be due to the recent drop in oil-based emulsions price with crude prices eased.

Chandrashekhar Rane, Manager-Business Development, Advance Paints Ltd

 

Companies in India are working ahead to carve out their own niche markets. Based on their client base, the companies are working towards developing solutions for one industry application rather getting their products in each application.

Abhay Tiwari, Research Associate, Tokyo Technological Institute.