Indian Paint Industry overview and opportunity of the foreign companies in the Indian Market.

1. Paint Industry in India – Bright or Tight?
A Whitepaper
©2017 Concept International Business Consulting Pvt. Ltd.
1
Paint Industry in India – Bright or Tight?
INTRODUCTION
Indian paint industry has witnessed a paradigm shift in the preferences and requirement of the
customers – A shift from using traditional whitewash to superior quality paints such as enamel and
emulsions.
The paint industry in the country is the 7th
largest in the world and is valued at USD 6 Bn (4 million
metric tonnes by volume) for 2016-17. CIBC estimates that the industry would continue to exhibit
a double-digit growth of 12%-13% over next 4-5 years.

2. Paint Industry in India – Bright or Tight?
A Whitepaper
©2017 Concept International Business Consulting Pvt. Ltd.
2
MARKET SCENARIO
The Indian paint industry has seen substantial traction over last few years and has been named as
second largest paint market in Asia. The fact that India’s economic growth rate has been ahead of
its other counterparts in Asia, the associated infrastructure development has been the key reason
for a surge in demand of paint products.
The paint market is broadly categorized into the two segments - Decorative Paint and Industrial
Paint with ~70% of the market is controlled by Decorative paints that comprises household/wall
paintings, architectural and other display products.
➢ The Indian paint market is expected to have already touched USD 6
billion in FY 2016-17, with ~38-40% of the contribution from unorganized
sector
➢ The industry is expected to reach USD 10 billion by 2020, growing at a
CAGR of over 13% over 2016-20
70%
30%
Decorative Paint
Industrial Paint
Decorative vs Industrial Paint Market 2016 (in %)
Total Domestic Demand Size ~ USD 6 billion
The growth of industrial paint segment that constitutes
30% of the market size, is highly dependent upon
automotive sector. The sector has been leading consumer
of the industrial paints with 45% of the demand coming
from it.
“India’s GDP growth is
expected to recover from
demonetization and GST
implementation effects to
resort to 7% basepoint and
likely to sustain the fortunes of
construction industry”

3. Paint Industry in India – Bright or Tight?
A Whitepaper
©2017 Concept International Business Consulting Pvt. Ltd.
3
GST IMPACT -
Implementation of Goods and Services Tax (GST) hasn’t had any significant impact on the paint
industry. The paints are categorized in 28% GST slab which doesn’t really differ from the existing
rate that the industry is paying at present (with VAT, excise and VAT on excise all put together).
So, it is neutral situation (no-loss no-gain) for the paint industry post GST commissioning. In
addition, the industry is highly organized with unorganized players comprising 20%-25% of the
market. As such, it will benefit the organised players (even if marginally) and they can expect
some market share gains.
KEY MARKET PLAYERS
The leaders in the organized paint market comprises big names such as Asian paints, Kansai
Nerolac, Berger Paints and Akzo Nobel to name a few. While in the unorganized segment (that is
~20%-25%), there are about 2,000+ players having small to medium sized paints manufacturing
facilities.
Asian paints has been the market leader and controlling ~30% market share, followed by Kansai
Nerolac, Berger and Akzo Nobel.
Before
GST
Post
GST
VAT
Excise
Cess*
12.5%
12.5%
3%
~27%
SGST
CGST
28%
* Cess is charged upon the excise value and
not on price after excise
**Though there is absolute increment of
~1% in GST vs earlier tax rate, the input
credit benefit neutralizes the same
**

4. Paint Industry in India – Bright or Tight?
A Whitepaper
©2017 Concept International Business Consulting Pvt. Ltd.
4
PERFORMANCE AND FUTURE PLANS OF KEY MARKET PLAYERS

5. Paint Industry in India – Bright or Tight?
A Whitepaper
©2017 Concept International Business Consulting Pvt. Ltd.
5
Asian Paints
Asian paints will be investing about USD 153 Mn towards two new production facilities being setup
at Mysuru and Vizag in the Southern part of the country. The first phase of both the plants is
expected to be commissioned in FY 2018-2019.
Berger Paints
Berger Paints has recently entered into two MOUs with two foreign companies – one with Promat
International Ltd. (Belgium) for cooperation in the field of passive fire protective coatings and the
other with Chugoku Marine Paints Ltd. (Japan) for co-operation and collaboration in the field of
marine and related industrial paints.
Kansai Nerolac
To boost the production capability, Kansai Nerolac Paint Ltd. is creating new production facilities at
Saykha in Gujarat, Amritsar in Punjab and Vishakhapatnam in Andhra Pradesh.
AkzoNobel
In December 2016, with an investment of ~ USD 5 Mn, AkzoNobel India commissioned a specialty
coatings production facility in Noida that has annual manufacturing capacity of 600 kiloliters. In the
same month, it also bought BASF India’s industrial coating business. The company is setting up a
facility in Mumbai to expand its manufacturing footprints. AkzoNobel India has six manufacturing
facilities in India in the cities of Navi Mumbai, Gwalior, Raigad, Hyderabad, Bengaluru, and Mohali.

6. Paint Industry in India – Bright or Tight?
A Whitepaper
©2017 Concept International Business Consulting Pvt. Ltd.
6
KEY INDUSTRY DRIVERS
Key Points
#1,2
• Government reforms/stimulus to boost
economy is going to have a bigger impact
on infrastructure and construction
industry, thus creating high demand for
paints
✓ For instance, Pradhan Mantri Awas
Yojna (aims at providing fiscal
incentive to the people) is a boost
for housing sector, creating demand
for decorative paints.
✓ The Indian real estate market is
expected to touch ~USD 250 Bn by
2020.
• Increased industrialization under “Make in
India” and expected traction in automobile
sector would propel the industrial paint
segment
• Automobile segment generates over 45%
of the demand of industrial paint, and
growth in automobile sector is expected to
be ~5% YoY. The sector would remain one
of the biggest consumer of industrial
paints and provide sustainable business
opportunities.
Key Drivers
“High competition in the
organized market with small
unorganized players catching
up fast in terms of technology
and quality of paint, leaving
little room for suppliers to
bargain in the market”

7. Paint Industry in India – Bright or Tight?
A Whitepaper
©2017 Concept International Business Consulting Pvt. Ltd.
7
CONCLUSION
In India, rapid urbanization and industrialization would lay the path for new and existing players in
the paint market.
• Urban Population would nearly double in the coming decade, which will directly impact
the demand for decorative paints.
• Rapid Industrialization is putting India on the fore fronts of transforming economy;
With the increased inflow of capital from foreign and domestic investments in order to
develop infrastructure and business facilities, the paint industry would surely reap the
benefits out of it.
• Paint is a highly raw material intensive industry, and employs over 900 different raw
material and their grades. Thus, companies look to invest constantly in R&D to address
factors such as performance, cost reduction, new application and shades development.
It will also be very critical for Indian companies to curb their manufacturing cost
(which is higher by 20%) than their foreign counterparts to remain competitive.
• There is a significant market opportunity for the new entrants who are planning to
strategize for India entry, but technology can be a key differentiating factor to beat
the existing competition.

8. Paint Industry in India – Bright or Tight?
A Whitepaper
©2017 Concept International Business Consulting Pvt. Ltd.
8
Authors
About CIBC
CIBC is one of the fastest growing India entry business consulting firm with presence in Mumbai and Gurgaon. It is a cross-
border strategy consulting firm helping foreign companies to set-up their operations in India and thus, has been
instrumental in bringing significant foreign investments in India. It's service offerings encompasses market due diligence,
strategy consulting, implementation and incubation support for new entrant in the Indian market
For more information, please refer: http://www.consultcibc.com/