CMR Paints Report 2016

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PAINTS

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Sharp decline in crude oil prices, and a consequent decline in raw material prices.

Rising demand in Urban India, a;ributable to increased purchasing power and changing consumer preferences.

Government’s sharp focus on infrastructure: Make in India; Housing for All; Smart CiGes Mission; Sagarmala Project; Bharat Mala Project; Rurban Mission.

FY15: In Perspective

Improved economic growth and lower inflaGon levels resulted in increased consumpGon. Historically, Indian paint industry has grown close to 1.2 Gmes of GDP growth.


Industry Overview

[Source: CMR Analysis and Industry EsGmates]

Indian paints Industry is esGmated 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%


Demand Side View

#1 Rising demand in Urban India.

#2 Rural India undergoing transformaGon; demand rising in Tier II and III ciGes

#3

Reduced duraGon of painGng 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


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 TurpenGne, a petroleum disGllate, 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 derivaGves. A drop in crude oil prices translates into savings.

#1

#2

#3

Major paint players are focusing on product InnovaGon, 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. IniGaGves such as Asian Paint’s ColorNext (annual colour forecasGng iniGaGve) and Berger Paint’s Lewis Berger Preview also underline differenGaGon.

#4


Market Share (in %) [FY15]

• Turnover represents Sales net of excise duGes • Turnover includes Joint Ventures & Subsidiaries in India but excludes

overseas operaGons

54.1

17.5 15.4 2.1

[Market Share in %]

10.9



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.



DecoraGve paints segment will witness higher growth, thanks to Government focus and incenGves to the housing sector

A normal monsoon will be vital to the growth prospects.

VolaGlity of the Indian currency and internaGonal 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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CMR Paints Report 2016

Economy & Finance

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