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CMR IMG Q2 2016: INDIAN PAINTS SECTOR
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Sharp decline in crude oil prices, and a consequent decline in raw material prices.
Rising demand in Urban India, aDributable to increased purchasing power and changing consumer preferences.
Government’s sharp focus on infrastructure: Make in India; Housing for All; Smart CiLes Mission; Sagarmala Project; Bharat Mala Project; Rurban Mission.
FY15: In Perspective
Improved economic growth and lower inflaLon levels resulted in increased consumpLon. Historically, Indian paint industry has grown close to 1.2 Lmes of GDP growth.
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Industry Overview
[Source: CMR Analysis and Industry EsLmates]
Indian paints Industry is esLmated at ~Rs.406 Bn, out of which organized sector accounts for ~65% (~Rs.264 Bn) of the total market.
• Organized Sector: Top organized players include Asian Paints, Kansai Nerolac, Berger Paints and ICI. Top 5 companies control 80% of the organized market.
• Unorganized Sector: In the unorganized segment, there are about 2,000 units having small and medium sized paint manufacturing plants.
65% ORGANIZED MARKET
35% UNORGANIZED MARKET
DECORATIVE PAINTS
INDUSTRIAL PAINTS
72% 28%
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Demand Side View
#1 Rising demand in Urban India.
#2 Rural India undergoing transformaLon; demand rising in Tier II and III ciLes
#3
Reduced duraLon of painLng cycles from about 6-‐8 years earlier to about 3-‐3.5 years now
#4
Increased purchasing power and changing consumer preferences
Rising demand in the auto industry, due to falling crude oil prices, new product launches, expected interest rate cuts.
Government’s mega push on infrastructure
#5
#6
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Supply Side View
Titanium Dioxide (TiO2) is the single most important pigment in paints, forming around 25-‐30% of the total raw material cost. TiO2 prices in India fell ~11% YoY and ~1% MoM.
Mineral TurpenLne, a petroleum disLllate, is the most widely used solvent in paint manufacturing. Its prices depend on crude oil.
The containers for carrying paints are made from various crude oil derivaLves. A drop in crude oil prices translates into savings.
#1
#2
#3
Major paint players are focusing on product InnovaLon, customer Experience enhancement and special offerings. Some recent examples include brands like Green & Eco friendly from Nerolac Impressions Eco Clean and Berger Breathe Easy, Dulux Weathershield etc. IniLaLves such as Asian Paint’s ColorNext (annual colour forecasLng iniLaLve) and Berger Paint’s Lewis Berger Preview also underline differenLaLon.
#4
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Market Share (in %) [FY15]
• Turnover represents Sales net of excise duLes • Turnover includes Joint Ventures & Subsidiaries in India but excludes
overseas operaLons
54.1
17.5 15.4 2.1
[Market Share in %]
10.9
[Source: CMR Analysis and Industry EsLmates]
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Revenue Segmentation (in %)
4 96
Chemicals CoaQngs
55 31
DecoraQve CoaQngs
AutomoQve CoaQngs
14
General Industrial and Performance
CoaQngs
80 20
DecoraQve CoaQngs
Industrial CoaQngs
82 5
DecoraQve CoaQngs
Industrial CoaQngs
13
InternaQonal Ops.
[Source: CMR Analysis and Industry EsLmates]
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DecoraLve paints segment will witness higher growth, thanks to Government focus and incenLves to the housing sector
A normal monsoon will be vital to the growth prospects.
VolaLlity of the Indian currency and internaLonal oil prices will also challenge the paints industry.
FY16: Outlook
Industrial paints segment will see growth, as auto industry demand picking-‐up. The Government focus on infrastructure will be a key growth contributor.
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About CMR
CMR is a young bouLque firm that enables its clients to find answers to its most pressing business concerns and challenges, through market research, market intelligence and go-‐to-‐market services.
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