Coming out of two Covid hit years at the start of 2022, Indian industry was expecting a smooth sail, but the Russia Ukraine conflict in late February led to skyrocketing of crude oil prices and resultantly in raw material prices. Coatings World presents an overview of Indian paint & coating industry and its performance in 2022 in this feature.

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Overview of Indian paint & coating industry

INR 700  (USD 8.64) billion Indian paint & coating industry has been among the fastest growing major paint & coating industry for a number of years. Major headwinds such as Covid and high crude oil prices in 2022 have had a significant impact on the volume in 2020 and on profitability of the paint companies in 2022, but industry’s overall performance has been satisfactory on volume and value fronts.

According to a forecast by Indian Paint Association, Indian paint & coating industry will be worth INR 1,000 billion ( $12.34 billion) during the next five year, a growth of 43pc from the current levels. 

Architectural segment

Architectural segment has been the mainstay of Indian paint & coating industry. The segment witnessed strong growth in 2022 on the back of vibrant construction sector. Though, the last quarter of the year, which is traditionally a strong growth period for the decorative paints business in the country proved a muted period for Indian architectural paints industry due to extended monsoon and shorter Diwali  period.

Healthy construction pipeline in the country, ambitious schemes by Indian government such as ‘Housing for All’, and rising urbanisation have been the main demand drivers of architectural coatings in the country. These factors are expected to play a major role in the future growth of the architectural paint consumption in the country in the medium and long term.

Economic growth, urbanisation and purchasing power, are three key demand drivers of architectural paints growth in any country. India is ticking all the boxes right in this aspect. With a 6.8pc GDP growth in 2022, rising urbanisation, and increasing purchasing power of a vast section of population, the country is offering huge opportunity for the growth of architectural paints.

Urbanisation in particular will play the most important role in the growth of the coating industry in the architectural segment. Currently 34pc of India’s population resides in urban area. The pace of urbanisation has increased significantly over the last two decades. This pace is likely to continue, and it is estimated that 590 million people will start living in our cities by 2030, going up to 820 million by 2050. By 2035, the percentage of population in India at mid-year residing in urban area will be 43.2pc, according to a 2022 UN report.

Speaking during the Asian Paints quarter 3 earnings conference call in January 2023, Amit Syngle, Managing Director and CEO of the company said, “During the first nine months (April- December 2022) of the current financial year, Asian Paints has achieved 13pc volume growth and 23pc value growth as compared to the same period in 2021 in the overall decorative business.”

Table- Performance of all the major Indian paint companies during 2022

 Source- Financial reports of all the mentioned companies  
 *For Shalimar Paints and Indigo Paints the financial results are for six months period ( April- Sep 2022)      

Industrial segment

Accounting for more than 30pc of India’s paint & coating industry, industrial segment of the paints & coating industry has rapidly grown over the years. Primarily driven by steady growth in the automotive segment, industrial coating segment is expected to increase its share in the overall paint & coating industry in the coming years.

Growth in the automotive coating segment has been driven by growing automotive industry in the country. India has overtaken Japan to become the third largest vehicle market in 2022 after China and the US, selling more than 4.25 million vehicles riding on pent- up demand and enhanced production by carmakers.

According to the Society of Indian Automotive Manufacturers (SIAM), 4.13 million vehicles — including passenger and commercial — were sold in the country between January and November 2022.

Record high raw material prices

Russia-Ukraine conflict had an adverse impact on raw material prices for the Indian paint & coating producers during the most of 2022. High crude prices for the most part of the year 2022 resulted in high raw material costs for Indian paint & coating producers. Major paint producers increased their prices five times in quick succession during May- October 2022. Thankfully, prices of key inputs such as crude-based monomers and titanium dioxide eased during October- December 2022 period, providing a much needed relief for the paint & coating producers.

High raw material prices had an adverse impact on the profitability of the paint & coating producers. Despite the successive price hikes, paint producers were unable to pass-on the full increased costs to consumers.

For example, country’s second largest paint & coating producer, Berger Paints reported a 20.5pc year-on-year decline in its consolidated net profit during the October-December 2022 period to INR 2,012 million, though the company registered an year-on-year increase of 5.6pc to INR 26,936 million in the quarter. Higher revenues but declined profits indicate that there was a quantum increase in raw material cost as compared to the year 2021.

On similar lines, Kansai Nerolac Paints reported a 13pc decline in consolidated net profit at INR 1089.7 million during October- December 2022, impacted by higher expenses. The company had posted a consolidated net profit of INR 1253.2 million in the year-ago period. Sales revenue from operations during October- December 2022 stood at INR 1.827 billion as against INR 1.810 billion in the corresponding period last fiscal.

Intensifying competition

Indian paint & coating industry has been an oligopoly for quite long. However, with the entry of a few big-ticket new players in the last two years the industry dynamics have changed. These new entrants are subsidiaries of some of the largest business conglomerates in the country. With deep pockets, these companies have the ability to quickly scale up their production capacities and production footprints.

Grasim Group, flagship company of Aditya Birla Group, a company with an annual turnover of $ 12 billion is the latest entrant in the Indian paint & coating industry. In December 2022, the company announced its plans to foray in the country’s paint & coating industry.
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ⁱ  Source- Asian Paints

ⁱⁱ  Diwali is the most celebrated festival in India. Most of repainting exercise in India takes place before this festival.

ⁱⁱⁱ Coatings World will have a dedicated feature on all the big-ticket entrants in the last two years in Indian paint industry in a subsequent issue, later this year.