Real estate sector revival draws new entrants into paint biz

The expectation of revival in the housing sector and growing people’s aspirations post-Covid pandemic has buoyed many corporates to plunge into the paint industry despite established challenges from players and rising input costs.

Barring the last two years, the existing paint companies have grown their business double-digit every year. The Indian paint industry is estimated to have an annual turnover of ₹50,000 crore.

Market share

The top four paint companies – Asian Paints, Berger Paints, Kansai Nerolac and Akzo Nobel India – account for over 65 per cent of the overall paints and coating and 75 per cent of the decorative paints market.

The decorative paint category constitutes almost 75 per cent of the overall market, including multiple categories such as exterior wall paints, interior wall paints, wood finishes and enamels. The industrial paint category account for the remaining market.

New foray

Having tapped the colour coated steel market, Sajjan Jindal-led JSW Paints was the first large corporate to enter the decorative paint business in 2019 with ₹600 crore investment targetting the southern markets. Last year, it became the pan-India player and pumped in another ₹750 crore.

It was followed by Aditya Birla Group’s Grasim Industries with ₹5,000 crore investment plan and has already received environmental clearance for two of its plants at Panipat and Ludhiana. It plans to go pan-India with five paints manufacturing units.

Competition

However, the latest entrant, JK Cement’s decision to venture into the paints business, was not taken so kindly. The company announced a greenfield capex of ₹600 crore to create decorative paints capacity of about 150,000- kilo litres, about 4 per cent of industry capacity.

AS Sundaresan, Joint Managing Director & CEO, JSW Paints said, the industry has been steadily growing for decades. It is expected to leap further with the government’s focus on housing for all and real estate revival. The building materials space is getting more organised than other sectors giving the much-needed thrust for large corporates to make the foray into this business.

JSW Paints initially faced stiff resistance from existing players. The company filed a case in the Competition Commission of India seeking a probe against Asian Paints for allegedly hindering its entry into paints business by its dominance in the market for the manufacture and sale of decorative paints.

JSW Paints, which became a pan-India player last year, is on course to achieve the ₹1,000 crore sales target set for this fiscal despite the Covid challenges, said Sundaresan.

The entry of new players has not deterred the existing paint companies from making the fresh investment. India’s largest paint and coating producer, Asian Paints last November announced ₹960 crore investment to expand the installed capacity at its Ankleshwar plant in Gujarat.

The second-largest paint company by market share Berger Paints is setting up its biggest-ever greenfield venture in Uttar Pradesh with an investment of ₹700 crore. The largest decorative paint company Kansai Nerolac also increased its capacity last year.

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