The Indian paint industry is over 100 years old. Its beginning can be traced back to the setting up of a factory by Shalimar Paints in Calcutta (now Kolkata) in 1902. Until World War II, the industry consisted of small producers and two foreign companies. After the war, the imports stopped, which led to the setting up of manufacturing facilities by local entrepreneurs. Still, the foreign companies continued to dominate the market. Initially British paint companies such as Goodlass Walls (now Goodlass Nerolac), ICI, British Paints (now Berger Paints), Jenson & Nicholson and Blundell & Eomite dominated the market.

The industry has been doing well for the past couple of years. In spite of global economic slowdown the industry is performing well. The Indian paint market has the potential to grow over the decade at 15-20% per annum as the current per capita consumption is much lower as compared to other developing economies. The per capita consumption of paints in India is 1.25 kg against 51.7 kg in Qatar, 38 kg in Singapore or 25.8 kg in the U.S. Even China has a per capita consumption of 2.5 kg and Sri Lanka 3.5 kg

History

The history of Indian Paint Industry is as old as the history of the Indian people. The earliest examples of Indian painting are cave paintings going back to 10,000 B.C. The tradition of painting in Indian subcontinent grew and developed over time, resulting in a fully developed and finest style, incorporating the culture and faith of the region and religion. Indian paints always embrace rich color and clear symbolism, using specific iconography to make religious figures clearly recognizable.

The Manufacturing Process

Making the paste

Pigment manufacturers send bags of fine grain pigments to paint plants. There, the pigment is premixed with resin (a wetting agent that assists in moistening the pigment), one or more solvents, and additives to form a paste.

Dispersing the pigment

The paste mixture for most industrial and some consumer paints is now routed into a sand mill, a large cylinder that agitates tiny particles of sand or silica to grind the pigment particles, making them smaller and dispersing them throughout the mixture. The mixture is then filtered to remove the sand particles.

Instead of being processed in sand mills, up to 90 percent of the water-based latex paints designed for use by individual homeowners are instead processed in a high-speed dispersion tank. There, the premixed paste is subjected to high-speed agitation by a circular, toothed blade attached to a rotating shaft. This process blends the pigment into the solvent.

Thinning the paste

Whether created by a sand mill or a dispersion tank, the paste must now be thinned to produce the final product. Transferred to large kettles, it is agitated with the proper amount of solvent for the type of paint desired.

Canning the paint

The finished paint product is then pumped into the canning room. For the standard 8 pint (3.78 liter) paint can available to consumers, empty cans are first rolled horizontally onto labels, then set upright so that the paint can be pumped into them. A machine places lids onto the filled cans, and a second machine presses on the lids to seal them. From wire that is fed into it from coils, a bailometer cuts and shapes the handles before hooking them into holes precut in the cans. A certain number of cans (usually four) are then boxed and stacked before being sent to the warehouse.

The size of the paints market in India is estimated at Rs 110 bn, with the contribution of the organised and unorganised segments in the ratio of 65:35. Reduction of excise duties over the last few years, from 40% to the present level of 14%, has helped create a level playing field between the unorganised and the organised segments, as the former is not subject to excise duty. As the unorganised sector loses its competitive edge, it is also losing market share to the organised sector players.In view of the low per capita annual consumption of paints in India (0.5 kg, compared to 4 kg in South East Asian countries, 22 kg in developed countries and a global average of 15 kg), the domestic paints industry has tremendous potential. The paints industry is working-capital intensive, rather than fixed-asset intensive. The Indian paint industry witnessed robust growth in turnover on the back of increased volumes during the festival season. Both decorative and industrial segments performed well during the quarter. Moreover, the margins received a boost with the domestic currency continuing to rise against the greenback, causing a substantial reduction in cost of imported inputs. This in turn induced some of the players in the industry to reduce the prices of select products to pass on the benefit to the customers. Further, players are going in for capacity expansions to reap the benefits of the rising demand for paintsSegments:Decorative paints can further be classified into premium, medium and distemper segments.

Premium decorative paints are acrylic emulsions used mostly in the metros.

Medium range consists of enamels, popular in smaller cities and towns.

Distempers are economy products demanded in the suburban and rural markets. Nearly 20 per cent of all decorative paints sold in India are distempers and it is here that the unorganised sector has dominance.Decorative and industrial paints are the segments within the sector, in a 70:30 proportion. Brand equity, a wide range of shades, distribution strength and efficient working capital management are key success factors in the decorative paints segment. A strong distribution network acts as an entry barrier.Within the decorative segment, enamel is the largest sub-segment, accounting for over 50%, followed by wall finishes, primers and wood finishes. The season for decorative paints is from October to March, a period characterised by festivals like Diwali, and the summer, when painting is normally carried out.

The demand for decorative paints is highly price-sensitive and also cyclical. Monsoon is a slack season while the peak business period is Diwali festival time, when most people repaint their houses. In the decorative segment, it is the distribution network that counts while in the industrial segment the deciding factor are technological superiority and tie-up with automobile manufacturers for assured business.70 per cent of paints sold in India for decorative purposes. In most developed countries, the ratio of decorative paints vis-Ã -vis industrial paints is around 50:50. But, with the decorative segment bottoming out, companies are increasingly focussing on industrial paints. The future for industrial paints is bright. In the next few years, its share would go up to 50 per cent, in line with the global trend.

Decorative Sector Composition ( to be check for accuracy of figures)Enamels 50% Distemper 19% Emulsions 17% Exterior Coatings 12%

Raw Material scenario:The paint industry is raw material-intensive, in terms of value and quantity of raw materials used. Raw material costs account for around 70% of total production costs. Imports constitute around 30% of the raw material requirements. The most critical raw materials used are titanium dioxide (TD) (rutile and anatase grades), phthalic anhydride (PAN) and pentaerithrithol (PENTA). Some other raw materials like castor oil, soyabean oil, linseed oil and mineral turpentine are also used. Increasing prices of raw materials, on the one hand, and the inability to pass on the price increases from recession and competitive pressure, on the other, are major areas of concern. Of the 300 raw materials (30% petro-based derivatives), nearly half of them are imported petroleum products. Thus, any deficit in global oil reserves affects the bottomline of the players.

Total contribution to the economy/ sales

The market for paints in India is expected to grow at 1.5 times to 2 times GDP growth rate in the next five years. With GDP growth expected to be over and above 7% levels, the top three players are likely to clock above industry growth rates. There are high volumes of low cost distempers sold in India, which amounts to approximately 200,000 tons per annum at an average cost of Rs35 per kg ($0.88) at the present rate

Indian housing sectors boom, increasing urbanization had made easy availability of housing loans and a shift from semi-permanent to permanent housing structures have been driving growth in the decorative paints segment accounting for nearly 65-70% of the Indian paint industry. Seasons are also involved in the demand for decorative paints, where consumption peaks around festive time.

Globally, Indian Industrial Paints segment accounts for a major share which indicates that this segment offers many opportunities for paint manufacturers. In June 2009 with a recovery in realty sector, the production volumes in the sector have substantially recovered. In the year 2009-2010 the Production of paints grew by a robust 25.2% during as compared to a 40 basis points drop in production in the corresponding year-ago period.

As the production of passenger cars is expected to grow by 15.3% in 2010-11 the demand for automotive paints will continue to remain healthy as sales are expected to grow in double-digits. And with realty majors launching new projects, construction activity is expected to gain momentum and generate demand for decorative paints. Rise in demand is expected to be supported by higher supply as the industry is expected to commission additional capacity in 2010-11.

Brief about the industry

The paint industry volume in India has been growing at 15% per annum for quite some years now. As far as the future growth prospects are concerned, the industry is expected to grow at 12-13% annually over the next five years. FY11 was a challenging year for the industry as a whole due to subdued demand across key sectors and rising inflation.

The unorganised sector controls around 35% of the paint market, with the organised sector accounting for the balance. In the unorganised segment, there are about 2,000 units having small and medium sized paints manufacturing plants. Top organised players include Asian Paints, Kansai Nerolac, Berger Paints and ICI.

Demand for paints comes from two broad categories:

Decoratives: Major segments in decoratives include exterior wall paints, interior wall paints, wood finishes and enamel and ancillary products such as primers, putties etc. Decorative paints account for over 72% of the overall paint market in India. Asian Paints is the market leader in this segment. 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 and is a higher margin business as compared to industrial segment.

Industrial: Three main segments of the industrial sector include automotive coatings, powder coatings and protective coatings. Kansai Nerolac is the market leader in this segment. User industries for industrial paints include automobiles engineering and consumer durables. The industrial paints segment is far more technology intensive than the decorative segment.

Production of Paints & Varnishes

 Feb ’09

Feb ’10

Apr-Feb ’09-10

Apr-Feb ’10-11

In Tonnes 63,526 86,200 753,289 943,324

YoY % growth -4.7 35.7 -0.4 25.2

Source:CSO

The paints sector is raw material intensive, with over 300 raw materials (30% petro-based derivatives) involved in the manufacturing process. Since most of the raw materials are petroleum based, the industry benefits from softening crude prices.

Key points

Supply Supply exceeds demand in both the decorative as well as the industrial paints segments. Industry is fragmented.

Demand Demand for decorative paints depends on the housing sector and good monsoons. Industrial paint demand is linked to user industries like auto, engineering and consumer durables.

Barriers to entry Brand, distribution network, working capital efficiency and technology play a crucial role.

Bargaining power of suppliers

Price increase constrained with the presence of the unorganised sector for the decorative segment. Sophisticated buyers of industrial paints also limit the bargaining power of suppliers. It is therefore that margins are better in the decorative segment.

Bargaining power of customers

High due to availability of wide choice.

In both categories, companies in the organised sector focus on brand

Competition building. Higher pricing through product differentiation is also followed as a competitive strategy.

Financial year 2011

FY11 was a mixed bag for the paint companies. While all the 3 players viz. Asian Paints, Kansai Nerolac and Berger Paints reported strong growth in sales, operating margins came under severe pressure due to raw material price inflation. Top-line growth was boosted by strong demand from the decorative paints segment. Nonetheless, the demand environment in the industrial segment continues to remain challenging due to rising interest rates.

Performance on the margins front was a big disappointment. Rising prices of crude oil and titanium dioxide increased the overall expenditure thereby impacting profitability growth. However, companies are undertaking a gradual and calibrated price increase to shield margins. Nonetheless, as a complete pass on of raw material price increase is not possible in the industrial segment, the blended margins continue to suffer.

All the key players are in an expansion phase. Asian Paints' plant in Khandala, Maharashtra is under construction and is expected to be commissioned by 4QFY13. Kansai Nerolac's capacity expansion plans at Jainpur and Hosur culminated during the year. Berger Paints has also undertaken capacity expansion for its plants located in Andhra Pradesh and Goa. Further, it is also contemplating to set up a manufacturing facility in Pune, Maharashtra.

Future prospects The market for paints in India is expected to grow at 1.5 times to 2 times GDP in the next

five years. With GDP growth expected to be over 7% levels, the top three players are likely to clock above industry growth rates, especially given the fact that protection that was available to unorganised players has come down significantly.

Decorative paints segment is expected to witness higher growth going forward. The fiscal incentives given by the government to the housing sector have benefited the housing sector immensely. This will benefit key players in the long term.

Although the demand for industrial paints is lukewarm it is expected to increase going forward. This is on account of increasing investments in infrastructure. Domestic and global auto majors have long term plans for the Indian market, which augur well for automotive paint manufacturers like Kansai Nerolac and Asian-PPG. Increased industrial paint demand, especially powder coatings and high performance coatings will also propel topline growth of paint majors in the medium term.

Key Inputs The paint industry is raw material intensive. Paint involves the mixing of various raw

materials in various proportions. The raw materials are of a wide variety. On an average, raw materials account for 60% of net sales (industry average). In case of small-scale units it forms up to 70% of the net sales.

High cost and erratic availability of raw materials mark the Indian paint industry. Around 300-400 raw materials are required to manufacture different kinds of paints. The high number of raw materials and finished goods highlights the working capital intensity of the sector.

Most of the raw materials are petroleum based. Thus paint companies benefit when the petrochemical industry goes into its cyclical downswing. A hike in the price of petroleum products raises input costs negating the impact of a cut in import tariffs on raw materials.

Raw materials frequently run into short supply, resulting in high inventory cost. The shortage of one specific material could result in severe manufacturing problems It is estimated that 18-20% of the total raw materials used the industry are imported.

Most paint companies are hit by the fact that they do not make the raw materials themselves. For example, phthalic anhydride (PAN) is manufactured from orthoxylene and which goes into the production of paints along with titanium dioxide. Asian Paints is the only paint company that manufactures PAN. The other paint companies have to import their stock. Since PAN prices generally outpace international orthoxylene prices by almost 50% paint companies end up paying a fortune when prices rise. In such a situation Asian Paints benefits by selling PAN in the open market.

Raw materials are divided into three major groups, namely, pigments (titanium dioxide, zinc oxide etc.), solvents (mineral turpentine) and resins and additives.

Pigments are finely ground solids of different shades to give colour, durability, consistency and other properties to paint. It is also one of the major raw materials, accounting for one-third of the total raw materials cost.

Amongst the vital pigments used in the process of paint manufacture is Titanium dioxide (TiO2) and the industry consumes around 60% of TiO2. This pigment is available in two grades: anatase and rutile, of which anatase is exclusively used in interiors while rutile is preferred in exteriors. India has abundant raw materials for the manufacture of TiO2, especially ilmenite of which it has 12% of the world’s deposits. It is ironical that the paint industry presently imports TiO2 in excess of Rs.1 bn - a figure that may touch Rs 2 bn by the turn of the century. TiO2 is responsible for the demand-supply gap. If the strong demand growth boosts domestic production of TiO2, there will be an increased usage in various sectors. If the raw materials are properly utilized, India has the potential to emerge as a net exporter of TiO2 in the next five years.

Production of titanium di-oxide in India

Year  Anatase Rutile Total

91 11,500 9,000 20,500

92 13,000 10,000 23,000

93 13,250 10,200 23,450

94 13,300 17,700 31,000

95 13,500 25,250 38,750

Source Chemical WeeklyFig in Tones Per Annum

Solvents are volatile organic compounds (VOC) used to dissolve, suspend or change the physical properties of other materials. They are generally used to bring down the viscosity of paints to the desired level, which also reduces the cost of paint formation. They constitute 70%-75% of the paint liquid and ultimate escapes into the atmosphere when the fluid dries. Solvents such as ethylene glycols and alcohols are finding wider use as co-solvents in new water-borne formulations.

Binders are generally oils, resins and plasticisers that give paints its protective property. Most resin manufacturers make alkyds, polyesters, emulsion polymers, epoxy resins, amino resins, powder coating resins etc.

Additives are added in small proportion to the paint to improve its performance characteristics in various ways. Skinning inhibitors, fungicides, wetting agents, driers are included in this categor

Demand for anatase and rutile grade TiO2

Year  Anatase Rutile Total

87 10,000 20,000 30,000

90 9,200 27,560 36,760

95 10,310 41,235 51,545

2001 15,475 61,885 77,360

Source Chemical WeeklyFig in Tones Per Annum                                                          

Rural market a new segment for the industry

Rural market has emerged as the new segment for the players in the decorative market and most of the players have identified this segment as a thrust area and are launching new economy brands to cater to the need of this segment.

Goodlass Nerolac has launched its synthetic distemper "Goody Synthetic" paint to add to its range of wall finishes. The product has been packaged in a "festive look" polythene bag containing one kg of synthetic distemper. The product is available across the country and has a surface drying time of 30 minutes. Company officials claim that a one kg bag has a coverage of 160 square feet per coat. The new product falls in category-III paints and has an emulsion base which acts as a binder. The company perceives Goody Synthetic Distemper as a mass-base product. Hence it is being supported by below-the-line-promotion based on retailer margins and driven by price.

Comparative position of major players in the decorative segment of the paint industry

CompanyPremium Brand

RankIntermediate Brand

RankEconomy Brand

Rank

Asian Paints Royale 2Apcolyite & Tractor

1Utsav & Tractor

1

Goodlass Nerolac 

Allscape 4Nerolac & Nerocem

2Goody Synthetic

2

Berger PaintsLuxol 3 Rangoli 3 Butterfly 3

ICI India Dulex 1     Maxilite 3

Industry is characterised by low capacity utilisation

Paint industry is characterized by low capacity utilisation as most of the companies get the work done on job work basis This is because of the longer processing time required in the paint industry when paint is manufactured in smaller batches the production falls. Most of the plant operate at 50% capacity with the exception of Berger paints which manages a capacity utilisation of around 70%.

The main reason for this is that it has strong presence in the premium enamel and emulsion segment and does not switch between decorative and industrial paint like the other manufactures.

There is tremendous potential for the paints manufacturers in India because as against an average percapita consumption of paints in India is very less. Economic liberalisation is attracting international giants like BASF Germany,

Curtlauds UK and Jotun Norway. Jotun, has announced plans to set up a powder coating plant, while International Paints UK, intends to set up a marine paints plants. Since decorative paints are a consumer product Sales are price elastic any change in the government policy on the excise duty has a direct bearing on the sales. Over the last 4 years, the government  has reduced  the excise duty from a peak of 40% to current 20%.

The entire benefit of the duty reduction has been passed to the consumer which has not only enabled this segment to come out of the recession but also enabled the organised sector to increase its market share at the expanse of organised sector. The share of organised sector has increased from 20% To 25% as a result of reduction in excise duty.

Distribution channel plays an important role in the industry. Awareness and perception of specific brand is more important than the corporate brand equity. Asian Paints, the market leader has around 16,000 dealers in its network which are spread across the country. Goodlass nerolac comes second with around 9,000 dealers.

  Major firms in an industry:- 

Growth of the paint industry has been consistent with the growth of Indian GDP.  Paint industry has been growing at a rate of 1.5 to 2 times of Indian GDP growth. The Decorative segment shows a seasonal trend with sales peaking during the festive seasons in the months of September to November, whereas the demand is low in the monsoons.

The top 5 companies make up more than 80% sales of the organized market. The market share of the organized sector is continuously improving as consumer preference is shifting towards better products offered by the leading brands. Established Foreign companies have entered the Indian market by acquiring existing Indian companies. Kansai Paints, Japan entered the Indian Market by acquiring Nerolac, Akzo Nobel, the world’s largest Paint company, entered the Indian market by acquiring ICI Paints (now Akzo Nobel India.)

In India, Indian Paint industry’s total market size is US$1400 million. The organized sector of the industry is 55%. The 45% unorganized sector has about 2500 units. The big players and their market share-value of the organized sector are

•Asian Paints 37%•Goodlass Nerolac 15.9%•Berger Paints 13.8%•ICI 11% (Akzo Nobel India Limited )•Jenson & Nicholson 5.7%•Shalimar 4%•Others 12%

Asian Paints is the market leader in the Indian Paint Industry and gets the major portion of its revenue from the Decorative segment. Over the years, it has outperformed its peers in every aspect by wide margins. This is mainly due to its strong moat (competitive advantage) which lies in its strong Brand Equity and an extensive Distribution Network. The company’s Net sales, Net Profit and Book Value have grown with a 5 year CAGR of 22%, 27% and 28% respectively. Also the company’s debt is very low and its ROIC has been 40% on an average over the last six years.

Kansai Nerolac holds the second position in the Indian Paint market, and is the market leader in the Industrial Paint Segment, owing to its leadership position in the Automobile Paint segment. It is the subsidiary of Kansai Paints Ltd., the leading Japanese paint company. Berger paints has the third position and derives its major revenue from the Decorative segment. Akzo Nobel (former ICI Paints) is the subsidiary of the world’s largest Paint Company and is at the fourth position. Shalimar Paints is at the fifth position.

Company Net Sales(FY 2011) in crs.

Net Sales Growth Rate (5 year CAGR)

Net profit(FY 2011) in crs.

Net profitGrowth Rate(5 year CAGR)

Net Profit margins(6 year Average)

ASIAN PAINTS 6607.2 22% 773.55 32.53% 10.03%KANSAI NEROLAC

2266.2 15% 186.52 13.59% 8.17%

BERGER PAINTS 2096.2 16% 148.31 16.04% 6.84%AKZO NOBEL (ICI)

1087.6 5% 121.6 17.63% 8.53%

SHALIMAR PAINTS

404.4 15% 11.67 27.23% 2.36%

I. ASIAN PAINTS:-

Asian Paints is India's largest paint company and the third largest paint company in Asia today,with a turnover of Rs 30.2 billion (around USD 680 million). The company has an enviablereputation in the corporate world for professionalism, fast track growth, and building shareholder equity. Asian Paints operates in 21 countries and has 29 paint manufacturing facilities in the worldservicing consumers in over 65 countries.Asian Paints is a great marketing success in a branded consumer product business. The companysucceeded where others failed in three areas:First, it understood the requirements of the Indian paints market better than the MNCs which didnot bother to respond to local consumer needs. It was the first to introduce small pack sizes, avariety of shades and a wide range of paint types (enamels, distempers, emulsions) to suit different pockets

This company, established in 1942 has been a market leader in the paints industry in India since 1968. Today it is almost triple the size of its nearest rival in India. Asian Paints manufactures a wide range of paints for decorative and industrial (including automotive) use. The fully integrated company is ranked among the top ten decorative coatings companies in the world. Apart from these the company also manufactures various accessories like wall primer, wood primer, putty etc. Asian Paints had acquired Berger International in order to expand its reach in the overseas market.

Asian Paints is a giant of the Indian paint industryAsian Paints is the clear market leader in the Indian paints industry with about 37 % marketshare. The top four players that include Berger, Kansai & ICI (Akzo Nobel) apart from AsianPaints, have cornered around 60% of the total market share. Other players in the organized sectoraccount for only 5% of the industry market share. The unorganized sector is a large one but is veryfragmented, constituting 35% of the total paints market. The organized section of the industry isgrowing faster than the unorganized sector.

The competition in the paint industry is becoming more intense with the entry of foreign players like Jotun, Nippon & Sherwin Williams. The Indian paint industry has grown at an average of 15.3% from FY05 to FY10.

Huge capacity addition plansStrong volume visibility has resulted in Asian Paints continuing its streak of capacity addition. Thecommercial production at its new paint manufacturing facility at Rohtak, Haryana has started. Theplant has an initial capacity of 1.5 lakh kl per annum. The project cost for setting up this capacitywas Rs .500 cr. The plant capacity can be scaled up to 4 lakh kl per annum in future expansions.The company is also planning to set up a manufacturing plant in northeastern parts of AndhraPradesh with a capacity of 1 lakhs tonnes per annum. The company is considering this locationbecause it is well connected with all parts of the country. Though the investment in the proposed

plant was not disclosed but the management has said that they would like to set up one of thelargest plants in India, if the Andhra Pradesh government provides them with land. The proposedproject will be classified under mega projects category. This decision was taken by the company

after the state government denied permission, due to environmental concerns, to set up the plant atPatancheru on the outskirts of Hyderabad where the company has a manufacturing facility andwanted to go in for brownfield expansion.

In-house manufacturing of raw materialMost paint companies are hit by the fact that they do not make raw materials themselves. Forexample, Phthalic Anhydride (PAN) is manufactured from orthoxylene, which goes into theproduction of paints along with titanium dioxide. Asian Paints is the only paint company in Indiathat manufactures PAN. The other industry players have to import this stock. Since PAN pricesgenerally outpace international orthoxylene prices by ~50%, paint companies end up paying afortune when prices rise

Shift to enamels & emulsion would lead to significant growthAsian Paints benefits by selling Phthalic Anhydride (PAN) in the open market.Growth is expected in future, in the paints industry through an increase in enamels and emulsionuse. At present 19% of the revenue in the industry is realized through the distemper segment. Butgoing ahead, the share of distemper is expected to come down, while that of enamels and emulsionis expected to go up. This would lead to better realizations and higher margins for the company.

Extensive distribution networkAsian Paints has a very large distribution network in India. It boasts of 90 depots across the country. It has over 27,000 retailers as compared to 6,500 of Kansai Nerolac.

Geographically diversifiedThe Asian Paints group operates in five regions across the world i.e. South Asia, South East Asia,South Pacific, Middle East & Caribbean through its five corporate brands viz. Asian Paints, BergerInternational, SCIB Paints, Apco Coatings and Taubmans. The company along with itssubsidiaries has operations in 17 countries across the world with 23 paint manufacturing facilities,servicing consumers in 65 countries. It is the largest paint company in eleven countries.

KANSAI NEROLAC PAINTS:

The history of Nerolac Paints dates back to 1920. Nerolac Paints was established as Gahagan Paints and Varnish Co. Ltd. in Mumbai. In 1933, it was renamed to Goodlass Wall India Ltd. and later became Goodlass Nerolac Paints Pvt. Ltd in 1957. And recently in 2006, it acquired the present name Kansai Nerolac Paints Ltd.

Kansai Nerolac Paints is a subsidiary of Japan based Kansai Paint Company Limited that is one of the top ten coating companies in the world. Nerolac is the second largest in India with a leading position in industrial and automotive paints and also in powder coatings.

Products: The paint products by Nerolac Paints for Home and Office Walls include:

Interior Surfaces Paints that include-Water Based Emulsions such as Nerolac Impressions – 24 Carat/ Metallic/ Disney, Nerolac Beauty – Premium Acrylic Emulsion/ Silky Smooth/ Smooth FinishWater based Distempers such as Beauty Premium Acrylic Distemper/ Oil Bound Distemper.Solvent Based Paints such as Nerolac Pearls Luster Finish / Synthetic Flat Paint Interior.Enamels such as Nerolac Synthetic, Nerolac Satin, Goody Synthetic, Impressions Hi-Performance

Exterior Surfaces Paints that include -

Emulsions such as Impressions Excel – Anti Peel/ Total, Suraksha Advanced.Cement Paints such as Nerocem With Titatnium +Special Paints such as Nerotex Matt Decorative and Protective Exterior Finish, Nerolac Impressions Everlast Self Cleaning with Piolite.Paints for Wood Surfaces like PU Interior +, Multisealer, Water Clear Lacquer, Wood Stains, NC Sealer/Wood Filler/Thinner.For Metal Surfaces – Nerolac Impressions Hi – Performance Enamel, Nerolac Satin Enamel, Nerolac Synthetic Enamel.Industrial paints include automotive, powder, general industrial and high performance coatings.

Services:Online Guide - Nerolac Paints India offers an online guide to painting jobs, a list of the dealers network, a complete shade card citing all the shades and colours available in the paint you want, painting cost calculator, online color visualizer and Vaastu solutions for your house.

Nerolac Assured Paint Service - This is painting services for your home by expert craftsmen of Nerolac. This service is available in select cities like Mumbai, Bangalore, Delhi, and Kanpur etc.Nerolac Disney Collection was launched in a tie-up with Walt Disney Company (India). Nerolac gained a lot of popularity in this category targeted specially for kids since the kids room décor is incomplete without their most favorite Disney characters Mickey, Donald, Goofy and Pluto.

Website: www.nerolac.comHead Office Address: Nerolac House, Ganpatrao Kadam Marg, Lower Parel, Mumbai 400 013. Tel: 91-22-2493 4001

The company to invest Rs 400-crore to expand capacity in FY13The company is planning an investment of Rs. 400 crore for capacity expansion. It plans to increase the capacity to 3 lakh tonnes from the existing 2.05 lakh tonnes by September 2012. The company believes that this will be helpful in catering to future customer demands.

The company is eyeing a double-digit revenue growth in FY12. The industry is growing by 15% and management expects a similar revenue growth in FY13. The company has five manufacturing units and it might go for another one depending on the need. It is planning to open 5-10 exclusive Nerolac Impressive Zone every year, adding to the existing twenty-eight. The company is planning to have 600 smaller stores - Nerolac Colour Stylers - on franchise basis - by the next year, up from the present three hundred.

SHALIMAR PAINTS:

Shalimar Paints was incorporated in India in 1902 as Shalimar Paint Color & Varnish Co. Ltd. It became a public limited company in 1961 and adopted the present name Shalimar Paints Limited in 1963. Shalimar Paints was the first large-scale manufacturing unit in India and also in the whole South-East Asia region. Shalimar Paints have their corporate office in Mumbai.

Some of the most commendable achievements by the Shalimar Paints R & D units are being the first Indian company to develop a radiation resistant paint for nuclear power plants coating and another would be aviation coatings epoxy/ vinyl system for ester lubricant resistant aircraft finish.

Products: The whole range of Shalimar Paints products include:Exterior Paints - such as  Xtra Premium 100% Acrylic Exterior Finish, Superlac Acrylic Emulsion, Shaktiman Exterior Acrylic EmulsionHusain Collection - Based on the acrylic copolymer emulsion, Husain Collection is fast drying, and smooth in flow and leveling and gives a smooth and silky finish

Other Interior Wall Finishes – such as No.1 Silk Emulsion, Mela Acylic Distemper.Synthetic Enamel Paints- Superlac Hi – Gloss Synthetic Enamel/ Satin Finish Soft Sheen Synthetic Enamel/ Luster Finish, Diamond Synthetic Enamel,  Goldmin Synthetic EnamelOther Paints such as Cement Paints,Wood Finishes, Putty, Primers, Aluminium Paint, Multi Purpose Varnishes, Wood Polishes, Dry Colours, Road Marking Paints.Industrial Paints – The industrial paints products by Shalimar Paints cater to high performance coatings in the heavy industries like petrochemicals, nuclear and thermal power, heavy machinery manufacturers, construction industries etc. along with coatings finish for two wheelers, tractors, cylinders and textile machinery. Metal decoration coatings and Indian marine industry also are among the major clients of Shalimar Paints.

OVERVIEWPLANT LOCATIONS & CAPACITIES, FY2010• 3 manufacturing plants at Howrah, Sikandrabad and Nasik with a total installed capacity of 57,000 tonnes p.a. (FY10)•Howrah plant was the first large scale paint manufacturing plant to be set up in the whole of South East Asia

•The Sikandarabad plant was acquired in 2003 from American Paints, which had a licensee arrangement with Sherwin Williams, USA •All the manufacturing units are ISO 9001:2008 accredited

•The Howrah & Nasik plants also have resin manufacturing facilities, which helps Shalimar operate effectively in industrial paints

•A fourth plant with an installed capacity of 18,000 tonnes p.a. is being set up in Chennai, Tamil Nadu and is expected to start production by April 2012Shalimar’s plants are strategically located and enable it to serve the entire country in an efficient manner

CHENNAI PLANT Currently serve South India out of our Nasik plant. The Chennai plant will enable us to better

serve the South market, which is the largest & amongst the fastest growing markets

The current status of the Chennai plant is as below Land acquisition is complete

Plant design has been finalized

Necessary clearances have been applied for

Civil construction is expected to start by May 2011

Increased focus on institutional customers, offer products tailored to their needs Launch differentiated products for the retail customers

Introduction of environment friendly lead free paints

Shalimar has a strong pan-India presence through a hub and spoke network consisting of Regional Distribution Centres (RDCs), depots and dealers for decorative paints, through which they cater to the retail customer

The RDCs have been brought into operation recently –they help minimize inventory at the depot & also ensure minimal stock out situations

Services:The Shalimar Paints website has a ‘Color Space’ where you can find over 5000 shades for choosing a particular shade. Shalimar Color Space Tinting Systems use the colorants of the premium international quality to ensure the widest possible range of colors to choose from.Another popular category is the Hussain Collection Shade Card which is available online. The advantages of Hussain collection are that there is a whole spectrum of colors in shade card to choose from.

The Website also gives Dealer locator, color visualizer,  a cost calculator and painting tips that ensures optimum use of the paint products and the best finish.

Website: www.shalimarpaints.comCorporate Office Address: Shalimar Paints Limited, 5th Floor, ‘C’ Wing, Oberoi Garden Estate, Chandivili Farm Road, Chandivili, Andheri (E), Mumbai – 400 072. Phone: 91-22-28574043 Email: info@shalimarpaints.com

BERGER PAINTS:

Berger Paints was the creation of Mr. Lewis Berger, who  in 1760, through his  shades had offered people a chance to transform their homes through the power of imagination. Berger Paints India Limited has been in India since 1923.

Products:Industrial Paints - Berger Paints  manufacture varnishes, dry colours, enamels, pastes, distemper, ships paints, boiler components and various other kinds of Industrial paints.  Some of the brands manufactured are Castle, Parrot, Duroglaze, Murisan, Synthetic, Soligum, Apexior, etc.Decorative Paints -In Decorative Paints, Berger has paints and paint systems for every application – interior, exterior, concrete, plaster, metal and wood, special kids room décor paints.- as well as special applications like water storage, etc.Interior Wall Paints - include Luxol Silk Luxury Premium Emulsion, Rangoli Easy Clean Emulsion, Rangoli Super Acrylic Emulsion, Bison Super Emulsion and Bison Acrylic Distemper

Exterior Wall Paints – include Weathercoat Long Life, Smooth 100% Acrylic Emulsion, Weathercoat Textured Exterior Emulsion,  Walmasta Antifungal Exterior Emulsion, Durocem Extra Waterproof Cement Coatings.Special Surface Paints - include Enamels for Metal Surfaces like Luxol Hi Gloss Synthetic Enamel, Luxol Duroglaze Rich Matt Enamel, Luxol Luster Enamel.Wood Finish Coatings like Woodkeeper PU Clear and Woodkeeper Melamine.

Services: Berger Paints India has specialized painting services like:Lewis Berger Home Painting - If you are looking for a painting solution, the experts at Lewis Berger will take care of everything right from the selection of the product to be used, well-trained painters, supervision, and painting materials delivery to clean up process. This service is available in all major cities in India including Delhi, Bangalore, Mumbai, Chennai and Kolkata.Illusions - You can get designer finishes for your house walls and offices by using the decorative paints service by Berger Paints.Galaxy – This is a Berger Paints specialty service for kids. You can create a glowing  night sky in the ceiling of your kids’ room by this easy-to-use self-help kit.Berger Kidz - The popular cartoon network characters of Johnny Bravo, Powerpuff Girls, Dexter etc. can be brought to your kids in their room. Call up Berger Kidz Home Painting Service.

Website: www.bergerpaints.comAddress of Head Office: Berger House, 129 Park Street, Kolkata 700017. Ph : +91 33 2229 9724 / 2229 6005 / 06 / 16 Telex : +91 21 6606 / 5791 Fax : +91 33 2249 9009 / 9729. e-mail : berger@vsnl.com

ICI PAINTS:

Imperial Chemical Industries (ICI) is a major paints, adhesive and specialty products business with products and ingredients developed for a wide range of markets. ICI is present in Asia Pacific, Europe and the Americas. However, in the beginning of 2008 ICI became a part of Akzo Nobel, the world’s largest coatings manufacturer, the number one in decorative paints and performance coatings, and a leading supplier of specialty chemicals. Visit the Official site of Akzo Nobel at:   www.akzonobel.com

ICI Paints, headquartered in UK and manufactured in 24 countries, has some of the world’s top paints and decorative product brands. ICI’s Paints division in India is a susidary of ICI Dulux Institutional, a world leader in paints.  The Indian subsidiary, ICI Dulux India which is popularly know as Dulux Paints India, owes its success to  strong brands such as ICI’s exterior emulsion brands – Weathershield and Supercote and retail brands like Dulux Velvet Touch, Acrylic Emulsion and Gloss. Visit the official site of ICI Dulux Paints at: www.icidulux.co.in

Products:Interior Walls and Ceilings - The well-known paints include the much publicized Dulux Velvet Touch Paints, Dulux Supreme 3-in-1, Dulux Acrylic Emulsion, Dulux Satin Finish, Maxilite Distemper, Supercote Interior Emulsion.Special diamond glaze and matt finish paints by Dulux are also gaining popularity.Exterior Wall Paints – Include Dulux Weathershield Max, Dulux Weathershield Tex (for textured finish),  Supercote, ICI Paints Exterior Acrylic Primer, ICI Pre Treatment Coat.Designer finishes – Include a new product Duette, a two tone pattern finsh with more than 20 Lakh colour combinations to choose from.Metal Surfaces Paints – Include ICI Dulux Satin Finish,  Supergloss 5-in-1, ICI Dulux GlossWood Surface Paints - Include ICI Dulux Satin Finish, Supergloss 5-in-1, Dulux Gloss, Dulux Timbertone Melamine, supermatt satin wood paint.Tiles Protective Coatings – Include Dulux Tileshield.Other paint products - include endurance paint, floor paints, full cover texture paints, heritage range of paints, lumitec and nature’s touch designs, quick dry gloss finish paints, vinyl silk look and vinyl matt finish paints.Special kidzone at Dulux Paints caters to the kids room décor paints and themes.

Services:Dulux Paint Studio – Dulux has a Paint Studio in select cities, for Colour consultancy and Painting service, where trained colour consultants will help you choose the right colour combinations with the help of specially designed software and painting experts are available for painting your home.

Website: www.iciindia.comAddress of the Head Office (India): ICI India Limited, Paints Business, DLF Plaza Tower, 10th Floor, DLF Qutab Enclave Phase 1, Gurgaon 122 002, Haryana, India. Tel: +91 124 2540400, Fax: +91 124 2540841

JOTUN PAINTS:

Jotun group, a Norwegian paint manufacturer which is headquartered in Sanderfjord, Norway, is one of the world’s leading manufacturers of paints,  Coatings and powder coatings. The group has 71 companies and 40 production facilities on all continents. In addition, Jotun has agents, branch offices and distributors in more than 70 countries.

Jotun Paints inaugurated its first manufacturing facility in India, in April 2008 at Ranjangon in Pune  and will soon set up a manufacturing unit in North India. The manufacturing unit in Pune mainly caters to Kerala, Karnataka, Tamil Nadu and Maharashtra and will move to the northern markets such as Gujarat, Delhi and Haryana subsequently. Jotun has launched retail outlets in a many towns and cities of India.

Products:Jotun Paints has created highly advanced Marine Coatings,  Protective Coatings, Decorative paints and Powder coatings. The entire range of Jotun Decorative paints includes interior emulsions,exterior wall paints, epoxy and polyurethane systems, alkyd-based enamels for wood, steel and plastered surfaces.

Emulsion Paint: Fenomastic Gold, Fenomastic, Durosan and Jollyfix are emulsion based paints recommended for use on surfaces such as plaster, gypsum board, concrete, asbestos cement panels and rendered blockwork.Enamel Paint- Gardex and Bengalac are alkyd based enamel paints available in different gloss levels. They are ideal for use on a variety of interior and exterior surfaces.Textured paint: To create special looks with a blend of texture and colours, you can vary the

texture  from fine and medium to heavy and special or  alternate between a coarse or smooth finish, matt or glossy.

Website: www.jotun.comThe Factory Address: Jotun India Private Ltd, Pune. Tel: +91 02138 671300Sales office: Jotun India Private Ltd, Mumbai. Tel: +91 22 28224600, +91 22 28205900(+fax)

Growth Drivers of the Industry

1. Increasing level of income and education – The increasing proportion of young population along with increasing disposable incomes is leading to a change in consumer habits. The Indian economy is shifting from a savings economy to a spending economy. With more income at their disposal, people are now ready to pay for better products and paint is no exception.

Educated consumers are more brand conscious and seek value in what they consume. Thus, paint companies offering value-added features like non-toxicity, weather protection, texture, eco-friendly production, etc. will attract more demand. These value-added products enable the manufacturers to earn a better premium as compared to the regular paints, thus offering higher margins.

2. Increasing Urbanization: Urbanization is leading to a shift from temporary houses to permanent houses. Urban houses are well-designed in its interior as well as exterior aspect. This calls for more houses being painted using medium and premium paints. For urban houses, interior design is becoming a fashion statement and a lot of paint is used to decorate the interiors. This will lead to an increase in the per capita consumption of paint which will increase the overall demand of paint. Urbanization also brings more nuclear families. More nuclear families mean more number of houses even for the existing population thus further driving the demand.

3. Increasing share of organized sector: Decrease in taxes on key raw materials will improve the position of the organized players. The Organized sector is expanding its distribution network and adopting the installation of tinting machines at retail outlets. These tinting machines offer a wide variety of colour shade options to choose from. The unorganized players are not in a position to offer such facility as it is comparatively capital intensive. Shift in use, from distemper segment towards premier segment is also shifting market share from the unorganized sector to the organized sector.

4. Development of the Realty, Automobile and Infrastructure sector: The growth of the paint industry is largely dependent on the development of the realty and housing sector, as decorative segment generates about 70% of the total paint demand from this sector.  The Automobile segment generates more than two-third of the demand for Industrial paints, and hence is the growth driver for Industrial Paints. The Infrastructure segment creates direct demand for paints as well as creates indirect demand through supporting the growth of the realty, automobile, FMCG and other industries where paint is used.

The growth potential in the above 3 sectors is immense, the paint industry being dependent on these 3 sectors is expected to grow along with them.

5. Availability of financing options: Easier housing finance and auto finance is expected to favour more people to buy houses and travel in personal vehicles. This will drive the growth of housing and automobile sector, of which the Paint industry will get its share.

6. Increasing Penetration in the Rural Markets: Paint usage in rural areas is generally in the distemper segment, hence dominated by the unorganized players. Demand in rural areas is dependent on agriculture, which is dependent on the monsoons. With the development of irrigation facility, the dependence of agricultural output on monsoons will be on a decreasing trend. Also, with the modernization of agriculture and accompanying development of rural India, consumer preferences are expected to improve. Paint companies are expanding their distribution network in rural parts of India, which is a relatively untapped market for the organized players. These factors supported by the increasing penetration of the paint companies will help drive the demand for paints.

Future Outlook:

Cost of raw materials: The Cost of Raw materials is an important factor as the industry is raw material intensive. Fluctuation in the prices of Titanium dioxide and Petroleum directly affect the production cost. This is more of a concern for the Industrial segment as compared to the Decorative Segment, as it is comparatively easier to pass on the costs in case of decorative paints. Also, a large portion of raw materials are imported, leaving the cost factor vulnerable to exchange rate fluctuation.

•    MNC’s entering the Indian Paint Market: The entry of Established foreign players in the Indian market may increase the competition among the players of the industry. This may lead to price competition which may impact the profit margin of the companies. As a result, the increase in volume growth may not equally reflect in the profit growth for the companies.

The Indian paint Industry has a wide potential for growth which is demonstrated by the fact that the per capita consumption of paint in India is merely around 1 kg as compared to about 20 kg in the developed countries or a global average of about 15 kg. So, the absolute consumption of paint in India is definitely expected to rise.

The market share of the organized sector is on an increasing trend.  Also, the contribution of industrial segment will increase with the continuing economic development of the country. With India moving towards becoming a developed economy, the decorative to industrial paint ratio of 70:50 is expected to move towards the global average of 50:50.     Thus the Indian paint industry is in its growth phase and is expected to grow at a rate faster than that of GDP. The future prospects of the industry are strong.

Companies which have high revenues, efficient operations and distribution network, comfortable debt levels and robust capacity expansion plans will be best suited to capitalize on the growth prospects.It is very important that while investing in a company, an investor selects an industry, where the long-term future prospects are bright. We have seen that in the long run the Indian Paint industry is expected to have good growth.

The Indian paint industry has evolved a lot in recent times, both in terms of industry structure and product portfolio. Not long ago, paints were largelyconsidered to be a luxury item. Such a mind‐set has changed significantly of latedue to the growing awareness on preventing corrosion through paints, byproviding a massive fillip to the paint industry. Indian paints industry isRs.15,000 crore market.Based on these 11 major economies, the Asia‐Pacific paint market has beenrated at almost 13.9 million tons in 2009, and is forecast to grow by about 7.9% peryear in the period to 2014.

China and India are the major growth drivers in the region with paint demand in these two countries likely to continue growing at more than 10% pa in the coming years.

Structural growth story with strong linkages to economyThe Indian Paint Industry is a direct play on the growing India Consumption story. Analysis of the past data trends suggest strong correlation between paints volume growth and India GDP growth.

A boom in the Indian housing sector, increasing urbanisation, easy availability of housing loans and a shift from semi‐permanent to permanent housing structures have been driving growth in the decorative paints segment,which accounts for nearly 65‐70% of the Indian paint industry. There isseasonality involved in the demand for decorative paints. Consumption peaks around festive time.

Conclusion :With growing income levels, both in urban as well as rural India on theback of various government initiatives like NREGS, Farm loan waivers, paycommission led salary hikes etc, we expect the per capita consumption toimprove in the medium as well as long term.

Rising income levels:According to McKinsey, proportion of low income groups is expected todecline from 24% in FY05 to 10% in FY10e. This will act as a significant catalystfor demand growth in decorative paints.

Increasing media exposure:With better awareness levels, we expect a gradual shift from unbranded tobranded segment as well as improvement in product mix for players like AsianPaints as demand for emulsions continues to outpace enamels and distempers.

Rising urbanisation:This will lead to creation of new homes, in‐turn, fuelling incremental demand.Currently, only 28% of Indian population is urban.

Increase in nuclear families:This is a consequence of younger demographics (60% of India’s population is below 30 years of age), with proportion of working population expected to increase from 40% in FY05 to 48% in FY15e.

Asian Paints falls 4% on excise duty hike

Shares of Asian Paints fell on Monday by 4 per cent as the excise duty hike in Budget 2012 is set to hurt profit growth at the largest paints company. The budget hiked the excise duty rate for manufacturers to 12 per cent from 10 per cent. 

According to Kotak Securities, a stockbroking firm, in 2010-11, the excise duty accounted for 9.4 per cent of the company’s sales of Rs 7,706 crore.

According to another analyst estimate, the company’s operating profit (income minus expenditure) could be lower by 8.5 per cent after the budget.

The street is more worried about Asian Paint's ability of the company to pass on such a hike to consumers in a tough market. Analysts say that Asian Paints faces a tough task as consumers have already postponed decisions on spending money to paint their new homes or renovate existing homes. A hike in products could further hurt sales.

The budget reduces the import duty on titanium dioxide, a key ingredient for paint, by 2.5 per cent to 7.5 per cent.

This should benefit Asian Paints, Berger Paints, Kansai Nerolac Paints and Shalimar Paints. Shares of all companies except Asian Paints gained in value.

However, prices of titanium dioxide prices are at a record high and rose at least by 5 per cent since January 2012. The cut in the duty compensates for the hike in the price by global makers of titanium dioxide.

Asian Paints is the biggest maker of paints and the excise duty hike hurts the company the most in comparison to smaller players. The company’s market cap is Rs 29,465 crore.