INTRODUCTION OF THE INDIAN PAINT INDUSTRY

PAINT INDUSTRY: YESTERDAY TODAY TOMORROW Just imagine the world without color; like life without air. Paint a well known subject to mankind for coloring, decorating, identification and signaling from thousand of years. Man knows about colors since 200 B.C. during the same period world famous AJANTA CAVES were painted. In India, way back in 1902 the first Indian Paint industry started manufacturing paints near Calcutta, namely SHALIMAR PAINTS. In last 100 years paint industry is equally dominant by more than 20-25 organized sector and over 2500 small scale units scattered all over India. Presently, Rs.6000 crores Indian Paint Industry producing at 6.50 lac tones of paint & other allied coating material per/annum. Approx. 40% of total output is contributed by SMALL SCALE SECTOR to PROTECT AND DECORATE the national assets. The Indian Paint Market is widely perceived as one of huge potential and partly owes its continued growth to rising personal wealth and innovation on the part of its leading paint companies. While the Organized sector is responsible for a majority of the market, the contribution from the small scale remains appreciable at about 40% of the market. Recent growth estimated from the paint industry have been placed at 8 to 10% per/annum.

Industry is planning to launch a major awareness campaign in a bid to enhance the per capita consumption of paint in the country. The paint industry is growing at a rate of 12% per annum: the per capita consumption is measly 650700 gms as against 8.8 kgs in Malaysia, 2.9 kgs in Thailand, 1.55 kgs in China, 26.8 kgs in Singapore and 19 kgs in Germany and 31 kg in USA. India has measly 0.6 % share in the world paint market; this is because of non-level playing field for Indian companies in the areas of high cost of credit, high power cost, poor labor laws, high freight cost and red tapism. PAINTS Paint consumption in India is highest is highest for decorative paints, which account for 70% of paint sales in India. The Rs.30,000 million organized sector paint industry has a relatively small numbers of players. The top five players [Asian Paints, Berger Paints, Goodlass Nerolac, Jenson & Nicholson (J&N)] account for close to 80% of total sales. The Indian Paint Industry has come a long way from the days when paints were considered a luxury item. Today the awareness level on preventing corrosion through paints is relatively high, a development that should be a huge boost to the paint industry. US$ 925.0 million (2000-01) worth Indian Paint Industry, offers profitable scope for revenue streams to manufacturers of both decorative & industrial paints. Factors that have been given emphasis include the low per capita consumption of paints (1.0 kilogram), growth in construction sector (It is being offered industry status) & growth in the auto/white goods market respectively spurring demand for decorative & industrial paints. The industry has also witnessed increased activity in the industrial variety of plants with the entry of MNCs in auto, consumer durables etc. which has been gaining steadily over decorative paints in the last one decade.

Following are the major players in the Indian Paint Industry: ASIAN PAINTS INDIA LTD (APIL) BERGER PAINTS ICI PAINTS GOODLASS NEROLAC PAINTS LIMITED (GNPL) SNOWCEM INDIA LTD JENSON & NICHOLSON

TYPES OF PAINTS
THE INDIAN PAINT INDUSTRY AT A CROSSROAD This industry has traditionally been divided into two separate segments: The Organized sector and the Unorganized sector. The former consists of the major manufacturers numbering around 12 to 14, while the unorganized sector is said to consist of nearly 2500 small-scale units (SSU). Paints can be of the following types: 1) Powder Paint E.g. Dry distempers, cement paints, industrial powder coatings. 2) Paste Paints E.g. Stiff white paints or Safeda, Oil Paints, Oil bound washable distempers, Acrylic distempers. 3) Liquid Paints 1. Water Based Paints: e.g. Plastic emulsion paints. 2. Solvent Based Paints: e.g. Air-drying synthetic enamels, stowing synthetic enamels, lacquers, and varnishes. 3. High Solid Paints: mostly for industrial applications. 4. Solvent Less Coating for Industrial Application: e.g. Unsaturated Polyesters, Solvent less Epoxy systems.

APPLICATIONS OF PAINTS IN DIFFERENT FIELDS 1. ARCHITECTURAL & DECORATIVE PAINT SEGMENT:

Also called bazaar paints, and ignorantly called by someone as DECORATIVE paints perhaps because they are used for decorative purpose, are generally sold through paint dealer for common house hold application, building, steel structures, bridges, factories etc for use in non corrosive environments. Unlike in the developed countries where Industrial Paints contribute a major share in their total paint market, it is the Architectural or Decorative Paint that contributes between 65 and 70 % of the total Indian Paint Market. The 1 billion populations will require housing and the Governments Policy towards housing development to provide the Indian Decorative Paint segment opportunities for growth. Demand for decorative paints will be pushed not only by new construction but also by refurbishment of existing buildings. Residential and commercial construction is expected to record growth rates of around 8% over the next few years. Building maintenance and concrete restoration industry will also get a boost as more and more owners realize the need for better maintenance.

Decorative Paints

Within the decorative paints segment, there exists considerable scope for new products and for enhancing performance of several of the existing products. From the generalized applications of todays products, The Indian Paint Industry could move to products for specialized applications and create altogether new markets. In the emerging business era with imports becoming easier and large international companies willing to dump goods at

cheaper prices, creating niche markets will act as insurance. Product development and investing in technology should become priority Areas. Interior Decorative Paints: Paints for interior use holds close to 50% of the market for Decorative Paints. Traditionally water based emulsion paints have found use on interior walls and ceilings. There exists scope for product innovations in paints for interior use. Multi-colored decorative paints for walls are one of the many new products that can enhance the general aesthetics and create new markets. Low odor and antibacterial paints is another product with immense promise. Water based transparent and pigmented wood coatings for domestic and commercial furniture, doors & windows, etc is another use. We could also have medium duty commercial floor coatings competing with marble, granite and other types of floor coverings. Floor coatings can be formulated to provide designs, textures, etc unlike other types of floor materials. The Exterior Paint It is the exterior of buildings and civil structures that is undergoing farreaching changes. The traditional cement paint has competition from other products, perhaps for the first time in India. Possibility of a rapid expansion in the paints for Exterior cannot be ruled out. It is also likely that the current five-year life guarantees will increase to 10 year and even 15 year and more life guarantees. Emulsion-based paints for exteriors with 10 or 15 years plus performance with guarantees are norms in many countries. Water and Solvent based Anticarbonation coating is another product that has the ability to become a sought-after product for exterior concrete surfaces. Anti-carbonation coatings provide stain,

fungus and mold free surfaces and have low dirt pick up characteristics to ensure high levels of aesthetics. Anti-carbonation coatings are specifically designed to stop or slow down the ingress of atmospheric carbon dioxide thereby protecting the reinforcements from early corrosion. Cement paints itself could undergo modification to improve its performance attributes, and still remain as a single-pack dry powder that requires only on-site mixing with water prior to application. The modified cement paint would not only make it more durable than its present form but also give it a competitive edge against emulsion-based exterior paints. A new niche could become available in between the existing type of cement paint and emulsion paints for exterior.

2. INDUSTRIAL PAINTS:
The industrial paint segment will also grow at a faster rate, especially due to its low base and the fast growth rates in the major user industries like automotive and consumer durables. The major users of industrial paints are the transport segment consisting of Railways passenger and goods carriers, Commercial vehicles, Passenger Cars and Two-wheelers and the several Off-The Road Vehicles used in construction. Indian Railways have one the largest consumers of paints and would continue to dominate because of their sheer volumes. The Passenger cars, two-wheelers and the Commercial Vehicle segments where the Indian Paint Industry has been witness to technology changes can be compared to the best in the world. The common man in India is more aware of the aesthetic part of paints rather than its protective properties, and so far it is the decorative segment that has been aware of. But with the industrial and infrastructural development taking shape, things are changing. The use of industrial paints especially for maintenance is extremely low in the country. The developments of roads, bridges, power plants, development of ports, refineries and natural gas installations etc would enhance the use of protective paints. And it is here that the future of the Indian Paint Industry. A principle concern for the Indian Paint Manufacturer is a lack of the value of coatings by executives and managers responsible for protecting corporate and government assets. With many such agencies, coatings and corrosion controls do not have a high level influential internal advocate. Coatings are perceived as nonglamorous and non technology. The Indian Paint Industry therefore must increase the awareness of the criticality of protective coatings.

3. Powder and Coil Coatings:

The use of powder coatings is most often directly dependent on the fortunes of the consumer durable appliance and the white goods sectors. Conversion in these industries from liquid paints to powder has been slow, which has not provided the impetus to the growth of the Indian Powder Coatings. The automobiles ancillary industry is another prospective area for Powder Coatings, which in turn is dependent on the performance of the automotive industry.

4. Infrastructure & Industrial Maintenance Coatings:

It is solid directly to the industrial manufactures of various equipments, appliances, cycles etc. these are generally stoving type but fast air drying paints may also be used in the cases, where stoving facility is not available. This is one area of immense potential for the Indian Paint Industry, not only to carve out a niche business area but also for technology inputs. The vast countryside and its varying climate, urban and industrial centers provide one of the biggest challenges for the use of paints and coatings for protective purposes with a primary objective to enhance the service life of the structures from reinforced concrete are the targets for high-performance protective coatings. The Indian Paint Industry could collectively review existing practices, which although may serve many situations but is not necessarily the best available coating products, systems and practices. The Paint Industry is best suited to redraw and reset performance specifications that would guarantee surface protection to the users. Each specification could provide alternatives to its expected life span to first maintenance, which would allow users to choose the system that best suits him.

Naturally specifications would be separate for different substrates like for steel, galvanized steel and for vertical and horizontal concrete including specifications for reinforcements used in concrete etc. Separate specifications would be required for industrial and commercial floors as well as for vehicle parking decks, basements etc. Heavy duty chemical & corrosion resistant coatings & Linings that compromise the products in this segment find application at off-shore oil platforms, refineries, petrochemical plants, chemical & fertilizer plants, storage tanks, in the paper, dyes & dye intermediates, pharmaceutical intermediate manufacturing industries, etc. They are used for structural protection as well as linings & membranes on metal, concrete for verticals as well s horizontal structures. Although this segment is currently not a significant contributor to the industrys revenues, it is a segment that cannot be overlooked. If the Indian Paint Industry is to garner a position of the huge loss due to corrosion, this segment can become a significant revenue contributor. It is estimated that the worldwide market for Heavy-duty Chemical & Corrosion Resistant Coatings is 1.5 billion US$ annually, and despite this large expenditure the worlds assets remain underprotected. Many countries are known spend 4% of their GDP in annual maintenance for corrosion and corrosion control.

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5. Industrial OEM & Automotive:

The stowing paints for the original painting of cars, trucks, light commercial vehicles, scooters, and motorcycles are sold directly to the automotive manufactures. They are not sold in market since their application is only possible in the factory set up. Increased paint transfer efficiency, high solids, better finish, improved curing, lower energy usage are some of the challenges faced by the manufacturers of Industrial finishes. The transport sector is another that can do with better performing paints as well as improved applications procedures. The Indian automotive coatings can said to have standards. However within the automotive coatings segment several innovations are still possible. Paints with heat resistant properties for ancillaries, interior plastics are some that could be considered. Automotive refinish coatings are still the traditional nitrocellulose types. Although international manufacturers have come in with their internationally established 2K systems, these are still in their infancy. The commercial vehicles, off-road vehicles, railways, defense vehicles all could do with technology and innovate products and it is here that The Indian Paint Industry has one of its biggest challenges.

6. Marine Paints
For the application on ships, submarines, dockyards, offshore drilling rigs/platforms etc.

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7. Aircraft Paints:
Special paints are used to meet the very exacting and specialized requirement in the Aircraft.

8. Defense Paints:
The defense industry has its own norms and specialized requirement like camouflage and special paint are required which can be applied under prevailing conditions.

9. Specialty Paints:
A vast variety of the specialized paints for use in nuclear plants, rockets/satellite with very heat resistance, electrode position paints.

10.

Paint For Railway:

INDIAN RAILWAYS-THE LARGEST SINGLE CONSUMER FOR PAINTS: The Indian Railways is one of the largest consumers of paints and coatings in the country. The Indian Railways have its own captive manufacturing, repair and refurbishment establishments for passenger coaches, freight and tanks wagons and locomotives and also use large quantities of paints for their buildings, workshops and other establishments. Indian Railways have always relied on their own specifications for paints drawn from the Indian Standards. Unfortunately,

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these specifications have remained without major updating for many years and can at best be considered as outdated and not in line with modern international standards. For the Indian Railways it is an opportunity to not only lead the paint users in the country in using the highest quality paints and coatings similar tothose used internationally but also to innovate into using coatings with Low Volatile Organic Components. To the Indian Paint Industry, it becomes a collective challenge with the Indian Railways in re-designing specifications for paints and coatings and help in modernizing national assets.

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PAINT RAW MATERIAL

Paint is a mixture of four elements: solvent, binder, pigment and additives. Solvent gives the paint a liquid flow while the binder binds it to the surfaces. Pigments impart color and opacity to the paint and the additives give it special resistance properties. Paint production involves mixing of various raw materials in a balanced proportion. Based on the predetermine formula, pigments, extenders, resins and additives are grouped together in a dispersion or grinding mill. The ground mixture is then dispersed in a medium, which could be approximately 70% of the production cost. Three hundred different types of raw material are used in paint manufactures and about 50 to 60 % of the inputs are petroleum based. The most critical input in paint manufacture are titanium dioxide (TiO2), phthalic anhydride (PAN) and pentareythritol (Penta). There are other raw material such as castor, linseed and soyabean oils and turpentine. The Industry imports around 30% of the raw material requirement. INPUTS The major inputs are Titanium dioxide (rutile and anatase grade), phthallic anhydride, organic pigments, pentaerythritol and resins.

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The major manufacturers of the important raw material and the status of their availability are below: Titanium dioxide: This is the most and account for the 50% of raw material cost. It is available in two grades: Rutile and Anatase. Rutile grade titanium dioxide, the more expensive of the two, is used in high value decorative paints and industrial paints. In India, Kerala Minerals & Metals Ltd. manufactures rutile grade titanium dioxide while three producers viz Travancore Titanium Products Ltd. and Kilburn Chemicals Ltd. Manufacture anatase grade titanium dioxide while the quality of Indian rutile grade is good. It is not the case for anatase grade. A large portion of Titanium dioxide is met from imports. Phthalic Anhydride: This is available in large quantity in India. There are alkost seven producers with a total capacity of over 280000 tones. I G Petro and Thirumali Chemicals are the major players accounting for nearly 80% of the capacity.

Organic Pigments: The pigments consist of white or colored particles, usually in the form of

powder, which gives paint its color and opacity. Though the quantities used are small, their prices are very high. The major manufacturers are Sudarshan Chemicals, Color Chem and Clariant.

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Pentaerythritol: It is used for the manufacture of synthetic resins. Availability of the Penta

is not a problem as there are quite a few players including Asian Paint, which manufacture the product.

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TRENDS
The trend is seen in the India. The share of small-scale industry is continuously coming down with reduction of excise duty. Earlier, the excise duty used to be more than 40 %. Now, this has come down to 16%. Now we are able to effectively compete with small-scale units. So, the industry is consolidating continuously since liberalization. TINTING MACHINE CONCEPT IN INDIAN PAINT INDUSTRY The tinting machine concept in India has picked up in the last three to four years and the machine numbers at the dealers counter has been increasing continuously. This in fact has revolutionized the paint selling. Under this concept the tinting machine, which can be manual or computerized operated, are kept at the dealers counters. The computer attached to the machine is loaded with visualizing package, though which the customer can see various color schemes and select the shades liked and same tinted instantly. From the companys point of view it has reduced the product launch time, as you are now offering economy of scale, and develop shades by using various proportions of colorants, Which can be tinted with the machines. Handling of stock has become easier and so is the forecast with the reduction in number of SKUs. There are about 5400 machine already placed and the trend will further pick up.

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While Jenson and Nicholson was the first company to go for this concept, others have overtaken. Like Asian has over 2000 machine, Goodless over 1400 and Jenson is having around 375. Goodless has gone one step ahead by launching a new concept known as Magic Eye whereby a spectrometer is attached to the computer and it can pick up shade from a sample of any substrate like fabric, panel, shade chip, or old paint chip. With this any shade of customers choice can be made at the shops having this facility. Paint companies have started the concept of providing help to the consumers through help lines. The concept was test launched by Goodlass at Ludhiana in Punjab and subsequently promoted aggressively by Asian Paint. We now have Help Line/Home solutions from Asian, paint Line from Goodlass and Home dcor from Berger. The consumer gets the benefit of right applicator: advisory service of the company and work to his satisfaction. This will further culminate as full-fledged supply &Apply concept at a later stage. Mega Mills offering a complete range of building material, including paints have started coming in India now with first such store started at Gurgoan, in an area measuring 33000 sq.ft. Which a restaurant as well the name Arcus. Understandably they are in process of setting up a similar store in Mulund at Mumbai measuring 55000 sq.ft.

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GLOBAL SCENARIO
The total output of the world paints and coating-manufacturing industry was valued at $54 billion in 1996. The industry supported some 12,250 active firms. This industry is forecast to expand 4 per cent annually to nearly 26 million tones by the year 2005. The valued would be $77 billion. Tonnage gains in the industrial coatings segment will be constrained by a shift in trend towards higher solid coatings ( such as powder coatings), which often weigh less per kilo than solvent-borne coatings, and generally require fewer, thinner coats. On the other hand, the architectural segment is seeing a continuing shift towards water-based stronger tonnage gains. These trends are evident around the world but have had the most impact in more nature markets. Most of the development world has already affected such a switch to waterbased formulations for most architectural applications. The development world is also experiencing this trend- India included. The world paints and coatings industry is becoming increasingly dominated by a small group of highly focused, globally positioned firms. For many of these companies (e.g. Sherwin Williams, Kansai Paint, Nippon Paint, and Asian Paints) coatings represent the primary line of business. In other cases (e.g. Akzo Nobel, ICI, BASF, Hoechst, Dupont & Courtalds), the firms strong position has arisen from involvement in various upstream petrochemical activities, including production of many of basic raw material uses in coatings production. The most rapid gains in paints and coatings production will be registered in the development regions of Latin America and Asia-Pacific. Although the Asia-

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Pacific rejoin holds excellent long-term prospects as a market for paint and coatings, regional Production has been lower, primarily due to the financial crisis that has hit this region. However, India was not severely affected by the crisis. The wave of currency devaluations and a sharp rise in interest rates will seriously dampen spending in key paints sectors such as construction and durables in the short term. Particularly in Indonesia, South Korea and Thailand India, in an earlier budget, has announced a new housing policy, which should in a boom for the construction sector, which will boost demand for architectural coatings. A very interesting trend is emerging in the architectural coatings segment. We are experiencing a shift from solvent-based coatings to water-based coatings. Water based coatings now account for most of household paint demand in development countries and are gaining ground in developing countries too. During the 1990s, the drive has spread to the industrial coatings have necessitated intense product reformulation efforts, leading to a number of alternative technologies Meeting environmental regulations another challenge for paint companies in the development world. Even companies in development regions must be prepared in this area, as paint products are soon adopting global standards, hence all paint companies will have to comply with environmental regulation Global trends towards free trade will have an impact on product mix, since exports goods must meet the environmental codes of the establishment of more environmental regulations for member nations. Global production of paints and coatings can be divided into two broad sectors architectural paints and industrial coatings. In 1996, architectural paints accounted for 58 per cent of the total output, with industrial coatings accounting

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for the remainder. However, the industrial coatings segment is slightly larger in value(dollar) terms because industrial coatings tend to cost significantly more than architectural products. In 1998, the worlds top ten paint and coating suppliers accounted for nearly 42 per cent of the market. The next ten producers accounted for an additional 13 per cent of sales, which gives the top 20 firms a collective market share of over 50 per cent. The most basic division in the market is between architectural coatings and the industrial coatings. Akzo Nobel, the worlds top player, has a strong presence in both segments (60:40 in favor of the industrial coatings). Sherwin Williams, ICI, Total, Asian paints, and Benjamin Moore for primarily on architectural paints whereas PPG, Kansai Paint, Courtaulds, Nippon Paint and RPM focus heavily on the industrial segment. BASF, Dupont, Lily Industrial and DAI Nippon focus entirely on industrial coatings. Globally industrial paints are the major segment, accounting for around 70 per cent of the market. Global trade is overall sparse, due to relatively simple technology, and especially the need to maintain higher inventory at the dealer level and high transportation costs. Per capita consumptions is 26 kg. in the US, 4 kg. in the Philippines and 16 kg. in Taiwan.

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WORLD PAINT INDUSTRY PLAYERS

Ranking by volume and value for top Asia-Pacific companies: Company Nippon Kansai Asian Paints DNT
Orica Wattyl

Country Japan Japan India Japan

Coating sales Rank $ million

1900

volume 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Korea Chem.
Chugoku Marine

1775 774.54 600 Australia 434.79 Australia 335.63 South Korea 312

Berger DIC Rock

Yung Chi

Japan India Japan Japan

Japan

DPI
Shinto Paint

310 264 254.43 224.79 Taiwan 220.5 South Korea 190

171.89

Tophe

Japan

142.87

Coatings worlds global ranking of the top manufactures of paints, coatings, adhesives and sealants

No.
1. 2. 3. 4.

Rank Company
Akzo Nobel Henkel ICI Sherwin-Williams

Country
Netherlands Germany UK USA

Coating Sales
$ 6.974 billion $ 6.236 billion $ 5.817 billion $ 5.728 billion

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5. 6. 7. 8 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32.

PPG Dupont BASF Valspar RPM Sigma 3M Nippon Paint Kansai Paint H.B. Fuller Sika Masco COMEX Rohm and Haas Jotun AB. Wilh. Becker Benjamin Moore DAW Hempel Asian Paints DNT Tikkurila Brillux Forbo Orica Barloworld Arch Kelly-Moore

USA USA Germany USA USA Netherlands USA Japan Japan USA Switzerland USA Mexico USA Norway Sewedn USA Germany Denmark India Japan Finland Germany Switzerland Australia South Africa USA USA

$ 5.566 billion $ 3.78 billion $ 2.714 billion $ 2.713 billion $ 2.556 billion $ 2.215 billion $ 2.00 billion $ 1.9 billion $ 1.775 billion $ 1.512 billion $ 1.29 billion $ 1.264 billion $ 1.22 billion $ 1.158 billion $ 1.042 billion $1.008 billion $ 1.00 billion $ 952.7 million $ 814.4 million $ 774.54 million $ 600 million $ 569.76 million $ 530 million $ 505.54 million $ 434.79 million $ 404 million $ 358 million $ 345 million

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33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50.

Wattyl KCC Chugoku Marine Paint Helios Dyrup Dunn-Edwards Yasar Berger Sico DIC National Paints Flugger Rock Paint CIN Yung Chi Altana Ameron Renner

Australia South Korea Japan Slovenia Denmark USA Turkey India Canada Japan Jordan Denmark Japan Portugal Taiwan Germany USA Brazil

$ 335.63 million $ 312 million $ 310 million $ 285.9 million $ 280.96 million $ 280 million $ 275 million $ 264 million $ 257.78 million $ 254.43 million $ 234.93 million $ 228.64 million $ 224.79 million $ 221.7 million $ 220.5 million $ 218 million $ 210 million $ 209 million

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ASIAN PAINT INDUSTRY COUNCIL Formed in 1995, The Asian Paint industry council (APIC) was organized to provide a forum for trade associations representing the paint and coatings industry to meet and communicate on broad matters affecting industry development in asia. APIC meets annually, with a discussion agenda covering regulatory and environmental mattress, technical and scientific presentations, and business-related forecasts and economic analysis. The secretariat (provisional) for APIC is the japan paint manufactures participate at IPPIC meetings; one representing the Indian sub-continene, and one representing southeast asia. Currently APIC has representatives form the following associations: China National Coatings Industrial Association Indian Paint Association Indonesian Paint Manufactures Association Japan Paint Manufactures Association Korea Paint & Printing Ind Cooperative Malaysian Paint Manufactures Association Philippine Association of Paint Manufactures, Inc. Singapore Paint Manufactures Association Taiwan Paint Industry Association The Fderation of Thai Industries Ministry of Industry (Vietnam)

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INTERNATIONAL ISSUE
Raw material should be levied a lower duty. The united states has been dumping certain variety of paints in India and the association is planning to take up the issue with the commerce ministry soon. Recently, a large quantity of architectural paints was dumped in India fro the US. This has affected all local manufactures and as such the government should increase import duty on paints and the anti-dumping mechanism should be modified to address such issues without waiting for damage to the local industry to happen. The IPA has been collecting data and would soon furnish it with the commerce ministry for action. Cost of many imported products did not even cover the cost of some basic raw materials. The easy availability of raw materials, a trained and skilled wordforce, a technically qualitied managerial cadre bas and low production costs have made Indian an attractive sourcing destination for global MNCs. Many overseas companies are also undertaking collaborative research with local companies and instutions.

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How important are exports for the Indian paint industry?

In any country where industrial development starts, paint industry is the first one to start locally. The transportation cost is high. Paint is a build item. Except for specialty industrial coating., nobody wants to import paint. Even within the country, a big company should have multiple bases to reduce transportation cost. In house paint, globally you will always find a strong local player. He may be a leader in that country. But he does not exist outside that country. Along with your ablity to formulate paint, your ability to distribute the product is also important. This is not the case in industrial coating.

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SSI paint industries will survive WTO onslaught

Despite the devastating effects of liberalization, and the future threat of WTO, the much-touted death of the decorative paint industry in the SSI sector will not happen. In the annual VSKD nadir memorial workshop organized in Chennai under the auspices of the Indian paint association, chairman DG Rajan (southern region) said that the small industries would have to address foreseeable problems and opportunities if they wished to live long in the next millennium. Even though the paint industry was having a growth rate of 10 percent, this did not seem to rub off into southern India. While differential sales taxes in the southern states prove a hindrance to growth in some states, small companies would have to lood at becoming contract manufacturers for larger players or enter into strategic alliances with technology savvy companies in order to survive. However subrmanian felt that small companies in the decorative segment had a strong brand presence in regional markets wit the advantages of lowered overheads and better prices. It would be impossible for any MNC or large company to weed them out. According to statistics, SSIs contributed to per cent of the paint industry turnover, the remaining coming from national level players. With the small- scale having good presence in primers, distempers, exterior paints, thinners, all perceived as growth areas, they had good future, according to Subramanian. The rural markets offered very high opportunities with 83 percent of the population having success to only 20 percent sale. The manufacturer who cashed

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in the rural markets big or small would have the competitive advantage. The future growth areas would be in distempers, emulsions, wood finishes and economy enamels.
While quality enamels will witness a growth of 8 to 9 percent, economy brands will witness higher growth. Industrial paints will have even better growth, 12 to 13 percent in volume and 15 to 16 percent in value.

POST WTO PERIOD:

Apprehension exists some that the withdrawal of restrictions will encourage large-scale imports of decorative paints into India. Such a seenatio is unlikely to take place quickly. First of all, current duty structure foes not encourage imports of finished paints and still remain competitive. Even should the current duty structure get reduced, a likely situation over the next few years, the distribution and the operational logistics would continue to be a hindrance for imported product. Add to that the necessity of brand building especially for decorative paint, its cost and time requirements, and you have a situation that does not encourage large-scale imports of decorative paints, for the next few years al least. On the other hand, international manufacturers could taste the India market by selective introduction of niche products of by selective introduction of the DIYDo it yourself concept. Aerosols for instance could be one of the product groups and could include handy products for home repairs, wood finishes, zinc-aluminum spray for metal protection. Etc. aerosols could also expand the existing retail distribution set up by including convenience shops, shopping malls, and furniture and home furnishing retailers, etc. decorative protective coatings or functional coating are another set of products with potential.

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FUTURE OF PAINT INDUSTRY IN INDIA

In fact it is quite bright with the awareness level now improving and customer now getting more, involved in purchase process. The industry, as is happening worldwide is likely to consolidate. This will amount to a limited number of players in the field. The foreign companies will wither get into joint venture with Indian companies or will takeover the existing ones to take benefit of the established network. Today distribution network, brand image of the existing players and the customization of the products are the biggest entry barriers. The industry is likely to register year on year growth of 7 to 8% in next 4 to 5 years. The growth in the industrial will be guided by the overall industrial growth, increase in automobile industry and in while goods sector. On the decorative front it will be guided by the availability of funds in the hand of the consumers with rise in income, increase in agricultural income and improvements in the construction industry. This then is the background in which we operate at the present moment. Where do we go from here? What does the future hold n store for our industry? Will, I for one is thoroughly confident that the paint industry has indeed a very bright future ahead. We have the capability, the wherewithal and the dedication to achieve a quick take-off to a higher tangent of performance. Given the right policy framework, I have no doubts that the paint industry will be going great guns in the near future and add significantly to the overall well being of our economy. I am sure that the plan of action and the modus operandi for the coming years would throw new lights and open up new vistas of prosperity and growth for the paint industry in India.

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INDUSTRY ANALYSIS
Analysis of any industry will help to know the position and attractiveness of any particular industry. By making industry analysis, we come to know that what is the structure of the industry, growth rate, market size, customer group, any possibility of backward or forward integration, what are the entry and exit barrier, what is the technological aspect that it is changing or stable, product characteristic, it there any possibility of scale economy or learning and experience effect to the industry, capacity utilization position i.e. having utilized full capacity have an competitive advantage to the competitor and to know the profitability of the industry all this shall include the industry analysis.

INDUSTRY BACKGROUND
Paint business in India has been growing at a responsible pace of 9 to 10%, in the past five years, though there has been some down witnessed in the last two years. Till the year 1999-2000, paint industry was the third fastest growing industry in India, next to the Lubricant oil and automobiles. If we go back to the period 94-95 and 95-96, the growth rates were real high at 26 and 24 % respectively, triggered by the industrial growth and rationalization of excise duty. The slow down is not very different than the overall industrial growth. Hence keep the hope that it will continue to grow as economy grows. If we compare this growth with China there CAGR for the past five years has been 7.5% to 8%. In a way our growth has been better. The current consumption rate of 650 to 700 grams per person is low as compared to developed countries where the consumption rate is 31 kg/person in

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USA and 1300 grams in Sri Lanka. This however should be viewed in the context that over 50% of the population in India does not consume paint as it is having low income. Moreover the consumption is mostly in urban or semi-urban areas as the home in most of Indian villages are made of bricks and mud with no plaster. The situation is however changing fast with improves agricultural income in hands of the farmers with continues good monsoon records in India. The industry can do much better if the government correctly understands its status. The primary function of paint is to protect and the secondary one is to provide artistic value. It is not a luxury asset of the country. As per the estimate of the experts at corrosion institute at Karaikudi, India loses over Rs. 2000 crore annually on account of corrosion- a wealth, which can be served by increasing awareness about the protective aspect of paint and making it more affordable by rationalization of excise and taxes. Currently the excise on paints is on MRP at the rate 16% rationalized for cost.

CURRENT OPERATING ENVIRONMENT

For the industrial business most of the companies have foreign tie-up or separate joint ventures. Like Birlas, Nerolac has automated coating technology from Kansai paints of Japan and Du Pont. Asian Paint has a joint venture of PPG for the success in this segment the Asses to latest technology provides a definite edge over the others. Besides these the associations of collaborators with the OE customers parent companies also matter. In the case of decorative business the technology is generally indigenous except in the case of Goodlass Nerolac. Where they have assessed to Kansai technology for the decorative products, being their holding companies.

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With the growth rates deeming the competition among the major players have been intense and rather cutthroat. Even though the prices have been dropped quite frequently to boost sales in the market. The market growth in the past three to four years is lead by the growth in the exterior emulsion products, which has encouraged the companies to launch new products at a different points meant for elite top of the line customer and down the line. Some of the products, which got launched where Apex exterior emulsion and Ace in economy by Asian Paints. This segment is likely to grow at a similar pace in the next 3 to 4 years as well. Exterior products which include lower end cement paints as well, accounts for 12% of total paint volume.

INDUSTRY STRUCTURE
In the Indian Paint Market, one important factor is the presence of the unorganized sector as a substantial force. Paint business in India can be divided into organized and unorganized. In the organized sector there are six dominating companies who enjoy a majority of the market share and this business account for 72% of the total paint business estimated of 6000 Crores. In the organized sector the split between decorative and industrial business is in the ratio of 76:24 %, unlike advance countries where it is other way round, which means the industrial business dominates. While in the decorative business Asian Paints is the clear market leader, Goodlass Nerolac leads in the industrial sites. On overall basis Asian Paints is the market leader followed by the . Other major players are Berger, ICI, Shalimar and Jenson & Nicholson. Historically Shalimar paints was the first entrants, way back in 1902. The paint industry is highly fragmented. Both the large organized sector and the small unorganized units make paint.

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The Indian paint industry is dominated by the organized sector (60% market share). There are around 25 large and medium companies in the organized sector having a capacity of 36000TPA about 2200 units in the unorganized sector having a total capacity of 24000 TPS share the balance 40%. The products of the paint industry can be classified as: 1. Decorative/Architectural finishes 2. Industrial finishes Decorative paints form 70% of the market and include lime stones coatings, acrylic and oil-bound distempers, enamels, cement paints, super acrylic and plastic emulsions (Apcolite). They are used in household painting, architectural and other display purpose. This segment is price sensitive, sale of these paints is seasonal with over 50% of sales taking place during the SeptemberDecember festival seasons. Industrial paints comprising 30% of the paint market include automotive paints, high performance coatings, coil coatings and powder coatings. This segment is relatively priced inelastic, but is susceptible to end user business cycles. Industrial paints business is technologically intensive, most Indian companies have tied up or are tying up with international majors to have access to the latest technology as it is not available locally. A tier up with global paint manufacturers also enables the domestic company to supply to local customers of

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its partners (E.g. Goodlass Nerolac is the major supplier to Maruti Suzuki because of Kansai, its Japanese collaborator and Suzuki relations). The paint industry is the raw material intensive, with over 300 inputs (50% are petro based derivative) going into the manufacturing process. Key raw materials that go into paint manufacture are pigments (Titanium dioxide), solvents (Orthoxylene), binders, additives and white cement/urea all of which together account for 55% of the total cost.

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There are six large companies and over a 1000 small, some of them in the tiny sector, that are players in the decorative paints market. Most decorative paints are sold through trade channels. Contractors and painters apply almost all the decorative paints sold in the country, the do it yourself market is extremely small. As there are large number of manufacturers and several 1000 retailers marketing decorative paints, reliable information on the size of this market is not available. We estimate that the market for decorative paints would have been around Rs. 46000 million in 2000-01. The total coatings market would probably have around 61000 million. The average annual growth rate has been around 8 to 10 %, the market grew at over 15% in the previous year, 1999-00. Six major companies share approx 55% of this market and over a 1000 other units share the rest.

MARKET SIZE
The Indian Paint Industry is about 100 years old industry. The first company was established in 1902 of Shalimar Paints after that the market size of the paint industry is getting bigger and bigger. The market size of the Indian Paint Industry is about 6 lac tones per annum, which consist of 250000 TPA by unorganized sector of nearby 2500 small-scale units and 360000 TPA by organized sector.
Market size by volume(TPA)

Unorganized sector 70%

Organized sector 30%

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The organized sector account for 70% of the total paint volume as compared to 30% by the unorganized sector. The market size of the Indian Paint Industry is getting bigger and bigger year by years. The overall growth in economy lead to the more income to the middle class consumer has resulted into higher demand of decorative and automotive paint. The big market size will attract new competitor will lead to increase in the competition as also global players also interested in the Indian Paint Market as it shows good growth. The organized are acquiring the small-scale company to expand their market share in rural areas because the rural market has been dominated by the unorganized sector and now a day this market has good potential for further growth. The top six company account for 80% of the organized sector production in terms of sales value. The six companies may include: 1. Asian Paint 2. Berger 3. Goodlass Nerolac 4. ICI 5. J & N 6. Shalimar Paints The total business of Indian Paint industry is about 6000 crore out of 4000 crore is account by the organized sector. The market size is probably 1000000 TPA by 2003 which indicates the market of the paint is getting big and big.

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MARKET SHARE OF THE MAJOR PLAYERS The paint industry was divided into two consumer segments: Industrial (such as automotive) and Decorative (such as Housing). The organized sector was divided as follows: ESTIMATED PAINT COMPANY DECORATIVE INDUSTRIAL OVERALL ASIAN PAINTS 38% 14%-16% 32.50% GOODLASS NEROLAC 7.80% 40% 17.50% BERGER PAINTS *14% 14% 14% ICI INDIA LTD 8%-9% 12% 10.50% JENSON & NICHOLSON *6.9% 6.90% 6.90% GROWTH RATE 8%-9% 18% 11% TOTAL (Rs.) 15033MM 6442MM 21476MM REVENUES Rs. 6980MM Rs. 3750MM Rs. 3007MM Rs. 2254MM Rs. 1482MM

Since these companies strive to match their product sales to the market (i.e. 70%: 30%) They maintain similar market share in each segment.
OVERALL GROWTH RATE PERSENTAGE 40.00% 30.00% 20.00% 10.00% 0.00% GOODLA SS NEROLAC ASIAN PAINTS BERGER PAINTS

ICI INDIA LTD

COMPANY

JENSON AND NICOLAS ON

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Market Growth Rate: Over the years, Indian Paint Industry has good growth rate. The overall demand for the paint is getting higher and higher. The paint business in India has been growing at a rate of 8 to 10% per annum, in the last five years; though there has been some slow down witness in the last two years till the year 1999-00, Paint Industry was the third fastest growing in India, next to lubricant oil and automobiles. In the period, 94-95 and 95-96 the growth rate was real high at 26% & 24%respectively, triggered by the industrial growth and rationalization of the excise duty. Te slow down is not very different than the over all industrial growth, hence keep the hope alive that, it will continue to grow as the economy improve. If we compare this growth with China, their CAGR for past five years has been between 7.5 to 8% in the way our growth has been better. The paint sector grew at a slower rate of 6.5% in FY03 due to general slowdown in the economy and subdued demand in western region, which were affected by communal riots. While the decorative paint demand grew at 7%, industrial paint volumes increased by 6.5%. The fastest growing segments in the sector are the exteriors (20%) and powder coatings (12%). Demand in FY03 was aided by a 6% growth in farm output, which is one of the key drivers. In the industrial paint segment, automotive paint demand was higher in FY03 on the back of a number of new model launches and overall recovery in automobile demand. Key automotive paint manufacturers like Goodlass Nerolac and Asian-PPG posted impressive performance in the same period.

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PER CAPITA CONSUMPTION

The per capita consumption refers to the average consumption of the paint by one person in the country put of the total population. The current per capita consumption of paint in India is 650-700 grams as compared to the developed and not so developed countries consumption rate of 31kg per person in USA to 1300 grams in Sri Lanka. The low per capita consumption should be viewed in the context that over 50% of the population in India dose not consume paint as it is having low income. More over the consumption is mostly in urban and semi urban area as dwelling in the most Indian village are made of bricks and mud with no plaster. The situation changes fast due to improved agriculture income in the hands of farmer with continuous good monsoon recorded in India. The reason for low per capita consumption for paint is that govt. has imposed high excise duty on the final product as they consider the paint as a luxury item. Another reason for the low per capita consumption is the wrong kind of promotion by the company as it is not sufficiently stressed that more than beautification, paint provides protection against corrosion. The current estimated of loss caused by corrosion is Rs. 3000 crore per annum. The use of paint is more economic way of controlling the corrosion and reducing the loss. This is hardly realized by the general public, which tends to view with indifference the industrys fiscal burdens.

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CUSTOMER The customer are to be classified as that most of the demand of the paint is coming from the urban and semi urban area where the customers have to spend on paint the home. Nowadays, customers are involving their self in painting process of the home. This is because that the new trend of the tinting machine which help to have perfect matching of shade to the customer requirement. The advertisement of Asian Paint Mera wala Cream has involved the customer in the painting process. The customers are purchasing the paint on the basis of the brand and availability of different shade. In decorative segment, Asian Paint is the market leader with maximum market share. The 83% of the consumers are in rural area, which account for the 20% of the sales value of the paint industry. On the basis of the different customer group, companies have product range for each income group of the customer. Asian Paint Utsav Economy class Asian Paint ROYALE Premium class The purchasing behavior o the consumers has also affected by the Pinter DEGREE OF VERTICAL INTEGRATION The vertical integration refers to that backward ir forward integration in the industry. The backward integration refers that production of the raw material by

41

the company and vertical integration refers that company itself in the process of the distribution of the final product.

As far as Paint Industry is concern the backward and forward integration is possible. In Paint Industry most of the raw material are imported and of petroleum nature. The industry is facing the problem of theee shortage of the raw material, which resulted into backward integration for the production of raw material. EASE OF ENTRY/EXIST The entry into industry has certain barrier, which result into not an easy entry in to the industry. The following are: High working capital intensive: The industry has been characterized by high working capital in the production of raw material and finished products. The company ahs to maintain high stock of the raw material because of that 50 to 60 % are of petroleum nature and are to be imported. So it require High working capital which is an entry barrier for a new company. Distribution Channel The development of distribution channel will require extensive effort from the part of the company. Company has to build new distribution channel which require huge amount of time and management of the inter mediatories. Brand

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The brand in paint industry has effect in paint industry. The brand development will require much more time and promotion effort to build brand. So it would not be easy for new entrance to enter into the industry, which is mostly dominated by brand of the company. Tinting Machine The new trend of the tinting machine has caused one more entry barrier in the paint industry. The tinting machine helps to have perfect shade of the color, which is required by the customer. To make available tinting machine thought the distribution. Technological Factor Technological factor has consideration for the industrial paint manufacturers. The industrial paint companies have to have advance technology for the competitive advantage, which may be an entry barrier into the paint industry. TECNOLOGY AND INNOVATION Certain industry may be that is facing problem of changing technology day by day. As far as Paint Industry is concern, in decorative segment it is not facing the problem of changing technology apart from the Tinting Machine in distribution network. The change in decorative segment is very low in the production process. In industrial paint the technology changes fast as compared to the decorative segment and company need to have latest technology in the age of competition to have competitive advantage over the competitor. Most of the

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company is having foreign collaboration to have latest technologies, which helps for the best quality product with the minimum cost.

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COMPANY

ASIAN PAINTS

GOODLAS NEROLAC

COLLABORATIONS PPG INDUSTRIES, US NIPPON PAINTS, JAPAN BV, NETHERLAND KANSAI PAINT, JAPAN E 1 DUPONT, US VALSPAR CO-OPERATIONS, US AMERON COATINGS, US HERBERTS, GERMANY ORICA AUSTRALIA PVT LTD, AUSTRALIA DU PONT PERFOMANCE COATINGS, GERMANY NIPPON PAINTS, JAPAN BECKER INDUSTRIFARG AB. SWEDEN TENDOUR NV, NETHERLANDS CHOGOKU MARINE PAINTS, JAPAN TIKKURILA OY, FINLAND

AREAS OF COLLABORATONS ELECTRO DEPOSITION TECHNOLOGY AUTO & POWER COATING MARINE & HIGH PERFORMANCE COATINGS AUTO & INDUSTRIAL COATING AUTO COATING POWER COATING HIGH PERFORMANCE COATINGS AOTU COATINGS HEAVY DUTY COATINGS AUTO COATINGS AUTO COATINGS COIL COATINGS POWDER COATINGS BIO-FRIENDLY MARINE PAINTS INSTACOLOR SCHEME

BERGER PAINTS JENSON & NICHOLSON

SCALE ECONOMIES In the paint industry scale economies have not competitive advantages on the competitor. The scale economies have moderate effect because all company has virtually equal manufacturing cost. LEARNING AND EXPERIENCE EFFECT Some of the industry has certain learning or experience effect, which may help the company to produce products with high quality and low cost. This is because that after having certain years of experience in the industry company has expertise which helps to produce at low cost. As far as paint industry is concern, in industrial paint have certain learning and experience effect because of that it require latest technology and relation to the related industry players. In decorative segment it does not have any learning and experience effect so that it would be easy for the new players to enter into the Decorative segment of the paint industry.

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CAPACITY UTILIZATON The capacity utilization level in the paint industry is low, at around 55 to 60 %, as paint capacity are generally designed to meet the peak demand requirements during festival season. Besides capacity utilization is also affected by factors such as product mix variety, batch size, batch proc4ssing time and down time between bacthes. Capacity utilization will not help to produce product at low cost upto certain extent. IS THE INDUSTRY WORKING TO CAPACITY? It must break the myth to capacity in the paint industry. No body in the industry has ever been constrained by the capacity except in the rare cases. There is always capacities available in this industry. If not in your company, may be in some other units where you can get the paint process. Constrains exceed only in the firm of your ability to sell. NEW PRODUCT INTRODUCTION By the introduction of Tinting machine, the new product introduction time has reduced from 6 months to 1 month. INDUSTRIAL PROFITABILITY As far as industrial portability is concerned in the industry paint segment the profitability will be less, as company has to approach to the professional buyers like Goodlas Nerolac supplying the paint of the industrial major in the automobile

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i.e. Maruti & Tata Motors. In the decorative segment, the profitability will be more as compared to the industrial paints. OPPORTUNITY: India, the worlds fifth largest economy in term of purchasing power, is emerging as an attractive market for global investor in the paint industry. Low per capita consumption of paint of 0.6 k.g. Against the world average of 15 k.g. Offers lucrative scope for stable revenue stream to manufactures of both decorative and industrial paints. Improvement in cement off takes in urban area and increasing housing loan disbursement figures, both in retail and institutional, segments indicate immense opportunities in paint industry. The countrys historical GDP growth trajectory of 3% per annum has clearly shifted to 6%. In all likelihood, the country will move to 7-8% growth path in near future. This should lead to further expansion of the market for all consumer products. The standard of living of the rural population is gradually improving. The advertisement in the multiple television channels has increased the brand consciousness of this class of consumer. This has opened up opportunities for branded and moderately priced quality paints.

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 The house hold construction industry is expected to grow almost at 8% in the next 5 years considering the shortage of housing and government trust on encouraging housing activities. This should favorably impact demand for decorative paints. At present the per capita use of paint in India is less than a little while in the develop countries the per capita use is estimated to be over 20 liters. Therefore, the growth opportunity for the paint industry is immense. In case of industrial paints, more than 50% of demand comes from industrial sector followed by 15-20% from consumer durables. With the entry of MNCs in both these sector, the emphasis on paint quality has increased. Beside, the industrial business will grow faster due to the lower base and fast growth in major use industry like consumer durable and automobiles. Increasing influence demand of rural and semi urban consumers would ensure a reasonable demand for paint. The changing life styles indicated an increase in demand for luxury paint in the mid price segment.

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 THREATS: The competition in the paint industry has always been severe. The opening up of the economy, does not pose any serious threats to decorative paints trade. The threats associated with the paints industry are similar to those impacting other industrial that are mature and well established. Political un certainties, social unrest, nature disasters and transport strikes etc. disrupt the business and also adversely effect the demand. The cost of retaining the customer is increasing day by day with increased expectations regarding the availability of choice and service. In the present competitive environment, the paint companies are spending large sums to install tinting systems retail outlets so that the customer may be provided with the widest choice of Increase demand for higher skills and knowledge is increasing employee related costs at am accelerated pace. The recent Increase in petroleum product prices has increased the cost of input materials, fuels and transportation. The advertising media, especially T.V. channel are multiplying and the viewer ship is getting fragmented. This has substantially increased the cost of advertisement to reach the same viewer ship. Environmental concerns are now very important and the paint industry and the paint industry have to address these and cope. Investments in the pollution abatement are significant and especially so when facilities have to be expanded or newly established.

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PEST ANALYSIS
The pest analysis refers to four main factors: POLITICAL ECONOMICAL SOCIAL TECHNOLOGICAL

The analysis will focus towards the industry that how the political stability, rules and regulation, and the legal system of the country affecting the overall industry. The economic condition, liberalization, policy toward foreign investment, and growth rate of the economy as a whole also help to analyze the overall industry attractiveness and potential for the growth. The social aspects like people are more involved in the painting process, trend of nuclear family; low interest rate of housing loan, increase of urbanization and change in thinking of the people all this is helpful for the industry consideration, also the change in technology, production process, distribution channel and more use of tinting machine that help for better shading of color.

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POLITICAL ENVIRONMENT
The analysis of the political and legal environment will consider the following aspect: Largest Democracy. Taxation policy i.e. reduction in excise duty and custom duty on raw material and final products. Fair amount of political stability. Era of coalition governments. Political consensus on economic reforms and higher target of growth of the economy. Sound legal system a factor contributing large foreign direct investment. Growth in the early nineties was constrained by high excise duties. After the rationalization of the excise duty structure in 1992 and consequent pick up in industrial growth, the paints segment began posting increasing growth. The organized sector has grown at a CAGR of about 10% of over the last five years, though the growth for the financial year under consideration was estimated at about 5% on account of the deceleration in the rate of growth in the paint industry consequent to the recession in the economy as a whole.

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 Taxation policy: Duty structure for Raw Materials Used in the Paint Industry

PRODUCT Titanium dioxide Phthalic anhydride Pigments Orthoxylene Paraxylene Pentaerythritol

EXCISE % 1999-00 16 16 16 16 16 16

EXCISE % 2000-01 16 16 16 16 16 16

EXCISE % 2002-02 16 16 16 16 16 16

CUSTOM BASIC % 1999-00 40 40 40 40 40 40

CUSTOM BASIC % 2000-01 35 35 35 15 5 35

CUSTOM BASIC % 2002-02 35 35 35 15 5 35

Raw materials account for nearly 70% of the production cost of paints. The industry is critically dependent on imported titanium dioxide. Lowering of excise duty over the past few years has resulted in major gains for the organized sector in terms of market share. The Indian Paint Market is skewed in favor of decorative paints. In developed countries, industrial paints account for the bulk of the paint market. Fortunes of the paint industry are directly linked to growth of enduser industries such as the automobile, construction and white goods industry. Inflation continues to be high; the overall growth in GDP and the Governments continued efforts to tackle economic issues provides the desired confidence to the The Indian Market Opportunity.

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INDUSTRYS DEMANDS FROM THE UNION BUDGET 2003-04 The Indian Paint Associations has asked for a reduction in customs duty on raw materials from the current level of 35%. Titanium dioxide is critical for paint manufacturing and import of the same should be brought under fast-track clearance. BUDGET MEASURES Interest rates for all administered interest rates have been lowered by 50 basis points. Peak customs has been slashed from 35% to 30%. The finance minister expects the housing industry to grow at 35% in the next fiscal. Besides, he has initiated some measures to rationalize stamp duty and modify the land ceiling act. Corporate are now exempt from paying dividend tax. BUDGET IMPACT One of the big positives for the paint industry is the reduction in customs duty. Titanium dioxide prices, which account for ^0% of raw material cost for paint companies, will fall significantly. Operating margins as a result, might increase notably thus enabling the companies to post better profits. However lowering of customs duty will also results in higher imports in the coming years.

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Housing demand might increase in the coming fiscal as a result of lower interest rate. This will benefit paint companies in a large way. As their prospects are closely linked with housing demand.

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INDUSTRY RESPONSE Presently the basic customs duty on raw materials is levied at the highest rate of 35%. This has an adverse effect on the cost structure of paint production given the fact that the import basket forms 60% of the total consumption. Further the import duty on finished paints is also 35%. This is not justified as both finished goods and raw materials attract the same import duty. Hence the import duty on all organic and inorganic chemicals should be brought substantially below the duty of finished products. The construction industry generates numerous employment opportunities, particularly labor workforce. The Finance Minister has taken steps in the last 2 budgets particularly by raising the exemption limit on interest on housing loans. The Finance Minister should further increase this limit as it will not only help the housing industry but will also help the paint industry. WHAT CAN GOVERNMENT DO TO PROMOTE THIS INDUSTRY Government must continue to encourage investment in housing sector through tax concessions. The excise tariff should be brought in line with essential goods understanding the value of paint from asset protection point of view. There should be a legislation to paint the exterior of all the building once in 3 or 5 years so that the urban India wears a new modern look. Some of these measures will not only support the industry, but also have recurring losses.

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ECONOMICAL ENVIRONMENT
The Economy
The Indian Economy is the midst of a sea change over the last few year when we set about to restructure it. The results are finally showing up in the way in which our policy makers intend them. GDP growth is expected to touch 7%. Foreign Exchange reserves will cross US $ 25 billion. Inflation, hope fully will be contained below 8% industry. After a long reversionary spell, is already growing at 8%. Indeed the economy is poised for a take-off. The country experienced economic slow down during the financial year 2002 and GDP growth slipped to around 6% from the growth rate of 6.4% for the previous year. While the monsoon was consider as normal for the thirteenth successive year, the agriculture production suffered due to unfavorable distribution of rainfall over time and regions. The food grains production is estimated to have declined to 199 mn tons from the record production of 209 mn tons in 1999-2000. The sustained growth of service sector, better performance of mining industry and a growth of around 20% in exports prevented the otherwise likely steep decline in GDP growth. The inflation based on wholesale price index was higher at 6.5% as compared to 3.5% in 1999-2000. The rupee depreciated by 6.9%. A devastating earthquake struck large parts of the Gujarat in January 2002. Many villagers and towns in the district of Katch, Saurashatra region and part of north Gujarat suffered total or partial destruction. A few thousand lives were lost and some estimates place the value of properties destroyed at over Rs. 200000 mn.

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These parts of Gujarat may take years to recover and attain normally. This tragic disaster has cause a severe setback to the economy of the state as the cost of relief and reconstruction is enormous. In these adverse economic conditions, the paints market was subdued and the demand for paints is estimated to have grown at around 8% to 9%. Although the economic score board is quite impressive, there is no scope for any complacency or the stage is not yet ripe for throwing caution to the winds. For one, inflationary pressures can erode the competitive edge. Secondly, the export surge needs to be mainted. So that the trade balance is mainted. Thus while the performance of the economy initially is definitely a cause for optimism, efforts must continue in the coming years to ensure that growing is sustained. The paint Perspective: The Question that arises at this is, what about the paint Industry? In the rapidly changing economic scenario how our own industry is fairing? The demand for paints is dependent on the general economic conditions such as goods overall economic growth, agricultural growth, the performance of related industries likes steel, cement and construction. In advance economics, the growth rate of Indian coating market mimics the GDP growth rate. In developing countries like India, increasing urbanizing and the increase of standard housing are major drivers of growth. Therefore the growth of the coating industry is 1.5 to 2 times the rate of growth of GDP. Nearly, 70% of paints are health of construction industry is important.

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As the market develops, customers are demanding products superior to the traditional low cost coating, branded products and greater choice. This has led to a huge increase in demand for economy finishes. At the same time, opportunities have increased for sophisticated and niches comparable to the best available anywhere in the world. Within all categories, customers demand greater choice in shade and effect. The rapid increase in the market for good quality exterior finished is a part of this overall trend. Consideration of immediate past of the Indian paint industry: Towards the late eighties and early nineties the duty rates on paints were progressive increased, to rapid decline in the industrys performance for four successive years. During 1989-90 to 1992-93 the duty rate was increase in steps from 26.25% to 40.25%. Corresponding the percentage growth record over respective previous years was :(-) 6.20, 0.25, (-) 5.91and 0.67. Added to this was the bane of over increasing raw material costs. An inevitable decline in the demand for paint followed leading to the industry being forced to cut capacity utilization from 69% to 55% over the period. Growth was virtually stagnant and in fact there was negative growth also on some occasions. This is the picture of the immediate past. Things, however, started to change for the better about a few years ago with the introduction of the policy of liberalization. Although the paint industry has not been yet been given the full benefits of the Chellish committee recommendation on tax reforms, the industry has nevertheless responded admirably to the small reduction in the duty rates affecting in the last few budgets. Thus, while the effecting duty rate went down from 40.25% to 35% during 1993-94, a drop of about almost the entire reduction in revenue collection due to lower rates. Similarly, in 1994-95, when the rate has

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been reduced from 30% to 35%, i.e. a little over 14%, we expect the industry to grow by about the same proportion. We are certain that Government will not lose duty collection because of this rate cut, rather the collection may actually be more. Firstly, the paint industry has the potential to grow and elevate itself to an aggressive growth path if it has the support of a reasonable duty structure. We pointed out that the paint industrys growth was fastest during 70s when the rate was 15%. If a similar rate is reintroduced, as was also the recommendation, as the idle capacity of about 45% would then be straightway energize. The resultant additional production would more than offset revenue losses.

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SOCIAL ENVIRONMENT
Making home is the important matter for Indian common man. It has also connected the belief and value for the decoration of the home. So, socially paint is highly connected with people because time to time they decorate their home with paints in the occasion like Diwali, Marriage. The Diwali is the most occasions when the paint is used. The most of the demand of the decorative paint is in the Diwali and Marriage Season. So, socially paint is highly connected to the consumer. In the different occasion Indian uses different color. Every color has its socially acceptance. The increase in the middle class also helps to boost the demand of the paint. For different need of the different consumer for this company introducing more color in cars, bikes, e.g. LML introduce the Freedom with 15 colors. The following are the characteristics of the Indian social environment: Large middle class Increase the awareness regarding paint as the protection not luxury. Major changes in life style. Major increase in urbanization. Both parent working Nuclear families Leisure activities Environment Consideration

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Every society has responsibility to so operate that it leaves a healthy and clean environment for posterity and the Paint Industry is committed towards its obligations in this respect. Research and Development is being directed more and more towards water based and water thinnable products with lower consumption of petroleum solvent, thus serving a dual purpose of providing environment ally friendly products and also conserving scarce petroleum based solvents. There is need to encourage this and Government should consider giving substantial benefits for expenditure on this account and additional benefits by reducing levies on sales of such paints. Indian paints Association is also Co-operating effectively with the Bureau of Indian standards in the matter of Standards for Eco-friendly paints.

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TECHNOLOGICAL ENVIRONMENT
The technological environment refer to the how the change in the technology will affect the working of the industry. In the paint industry technological development. In production process is not much but in distribution channel connection and making of shades is the main change in the technology. In the Decorative paint segment, technology has not impact in the production process. But in the connection of the leader technology help to have efficient operation of the business. The development of the tinting machine is revolution in the filed of technological development. The tinting machine helps to have perfect shade as per the customer requirement. The introduction of tinting machine helps to reduce to introduction period of the new product. Before this introduction of new product will require about six months compare to one month nowadays. Distribution reach of Paint Majors
Asian Paints Goodlass Nerolac Berger Paints Size of Dealer Network 14,000 11,500 12,000 No. Of Tinting Machine 2,800 2,000 1,500

Distribution Reach Of Paint Major

15000 size of dealer 10000 network 5000 0
Asian paints Goodlass Berger Paints Nerolac

14000

11500

12000

company

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No. of Tinting Machines 3000 no. of tinting 2000 machine 1000 0 2800 2000 1500

Asian paintsGoodlass Nerolac company

Berger Paints

In the industrial paint segment, technological collaboration helps to have good business. In this segment technology factor comes in to the mind. The manufacturing of the industrial paint will require efficient and reliable technology that will help to produce high quality paint, which can be used for the industrial purpose. The present company that is manufacturing industrial paint having collaboration with the foreign firm with regards to the technological aspects.

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CRITICAL SUCCESS FACTORS IN THE INDUSTRY

Brand image, market research, distribution range of products and tinting machine are critical for the success of any industry. All the companies have been vying for bringing in improvements in this area. Most of the companies have increased their advertising budgets in the last financial year and have thus spent heavily on promoting the brands. Roughly Rs. 100 crores have been spent last year with maximum share of Asian 40% followed by Goodlass Nerolac 23%. The two companies Berger and ICI have been also active this year. Goodlass, Nerolac nad Asian paints are the two companies, which have invested heavily in building up connectivity across their factories and branches with the implementation of SAP R3 ERP operating system. This has brought in total transparency in system and improved service to the customers remarkably. Both the companies are also looking at have implemented advanced IT solution for handling distribution. 1. Cost and Price Drivers :The paint industry costs and price are driven by raw material costs which constitute about 57% of the cost of the sales, and government levies which constitute 38% of the cost of the paints. There are more than 300 inputs going into the manufacture of the paint and about 70% of them are based on the petroleum. The petroleum prices, therefore, are one of the important cost drivers. The price drivers include the extent of the concentration in the paint industry which is very high. This lead to very low margins at each level with the final retailers making as little as 4-5%.

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2. Working Capital Management:The industry has high raw material content: the no. of products is also large with varying pack sizes. Sales in the decorative paints segment are seasonal with more than half the sales coming in the September November festival Season. A debtor level also tends to be high in this industry. 3. Distribution Channel:Distribution Channel is one of the critical success factors for the success in the paint industry. Marketing of the decorative paint require extensive dealer networks; especially in the urban and semi urban markets. 4. Plant Location:The nearness the plant location to the market and raw material supply may have success factor for any industry. Plant location helps service distribution network and bulk consumers. 5. Technology:This is particularly important in the industrial paints segment. Foreign collaboration is important for the players in this segment. 6. Brand Image: The brand image of the company may have success factor for the any company. Development of the brand requires extensive promotion, good quality

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product, well service to the customer all this help to build the brand image. In the paint industry brand image has great effect to the customer mind. In the decorative segment the Asian paints is the market leader with maximum market share and their product are sold on the brand image with good quality product, service, broad product line and innovative way of marketing. 7. TINTING MACHINE The tinting machines are becoming the critical success factor for the paint industry that is the decorative paint segment. Tinting machine help to have perfect shade as per the customer requirements. By the innovation of the tinting machine the new product introduction time has been reduced form 6 month to the 1 month. 8. PRODUCT RANGE: The availability of the different product for the different customer may be the critical success factor for the industry. Company has to offer variety of the shade and pack sizes for the convenience to the customer. Wide range of the product may lead to selection to the customer. Company offering different product to the different customer group e.g. Asian paint offering Utsav for the lower income group and Royale for the premium customer group.

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FIVE FORCE ANALYSIS

1. THREAT OF NEW ENTRY
Barrier to entry: 1. Brand preference and customer loyalty: Buyers are often attached to established brand. High brand loyalty means that potential entrance must omit to build a network of distribution and dealer and require spending largely on advertising and sales promotion to overcome customer loyalty. In paint industry, branding has crucial role for success of the company. The paint generally, purchases on the basis of brand image of company and distribution network. Establishing brand and customer loyalty an be slow and costly process which lead to entry barrier in to the paint industry. 2. Distribution: Potential entrants may face the barrier of gaining adequate access to the customers. Wholesalers and retailer may be redundant to take on the product that lacks buyer recognition. A network of retail dealer may have to be set up from scratch. Retailers have to be convinced by offerening higher margin and allowances for advertising and promotion.

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In paint industry, the channel of distribution that is availability and access of product is essential. For new entrance to develop channel-required time and cost which lead to barrier for new entrances. 3. Capital requirement: The larger the requirement of capital investment in form of fixed capital and working capital need to enter market successfully, the more entry barrier for potential entrants. In paint industry the working capital requirement is large in form of stock of various paints i.e. decorative and industrial paint, shade and colors. The company has to maintain large stock, which may require efficient maintenance of working capital. The capital requirement in timing machine is much that also led to entry barrier. 4. Technology: Successfully entry may require technological capability, which is not readily available to new entrance. It would be difficult for new entrance to have advance technology that may cost big investment. In paint industry technology will require in the form of production and mixing different paint. It also requires the availability of timing machine through the distribution networks.

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5. Regulatory policy: Govt. agency can limit the entry by requiring license and permits. The effect on environment is crucial factor for paint industry because the 50% of raw material are petroleum and other chemical requires for the production of the paints.

2. BARGAINING POWER OF SUPPLIER

Bargaining power of the supplier has little or no power whenever the item. They provided are available on open market with ample capacity. Bargaining power will be higher in case of row possibility for paint manufacture going for backward Integration. Here, bargaining power of supply will be higher because the 60 70% is the cost of raw material of the finish paints. The price increase constrained with the presence of the unorganized sector for the decorative segments. Sophisticated buyers of the industrial paints also limit the bargaining power of the supplier. It is therefore that margin is better in the decorative segments.

3. BARGAINING POWER OF CUSTOMER

Bargaining power of customers will be high when buyers are large and purchase a sizable percentage of industry's output. 1. Switching cost:

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The switching cost refers to cost of switching to another brand. In paint industry the switching cost will be less because of the production is of stranded in nature.

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2. Purchase of large volume: Generally, if the buyer purchases a large volume of products, then he has grater power over the seller. In paint industry, the railway is the big customer and the purchasing on the large scale, which result in to high bargaining power in the foam of specialized paint manufacture as per the requirement. In decorative paint, paint requirement for painting the house will be large enough that will lead to higher bargaining power to the customers. In the industrial paints, e.g. Maruti and TATA buying paints on the large sale from Goodness, Narolac on the large volume at that time they have higher bargaining power. 3. Fraction of buyers cost or the purchase: The cost of purchase will be higher in decorative and industrial paint, which results into more prices sensitive. 4. Standard production: In paint industry, a paints are more or less undifferentiated because chances of change in color, quality is very less. All the organized sector company having network of tinting machine for making shades will lead to no differentiation of the product. In a paint industry, the bargaining power of customer is high due to availability of wide choice that is in decorative and industrial paint, there are many organized company that is Asian paints, Nerolac, ICI, Berger and J&N and over 2200 unorganized company.

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4. COMPETITIVE PRESSURES FROM SUBSTITUTE PRODUCTS: Firm in an industry are quit often in close competition with firms in another industry because their respective products are good substitute. In paint industry there is competitive pressure from substitute products especially in decorative segment. In decorative segment, the substitute of paint is Chuno (lime stone) which is close substitute on the basis of colour and other product like Pinditine, which is used to get any colour in Chuno. In industrial paint, it has no other substitute product.

5. INTENSITY OF RIVALRY AMONG EXISTING COMPETITORS:

Rivalry occurs because one or more competitor feels a pressure or less the opportunity to improve position. The intensity of rivalry among competing sellers is the function of how vigorously they employ such tactics as lower prices. Expanded customer service, longer warranties. Special promotion and new product introduction. The rivalry among competitors is high in Indian Paint Industry. The major players Asian Paints, Nerolac, ICI, Berger and J&N and over 2200 unorganized company will lead to rivalry among the competitors. 1) High exit barrier In the Paint Industry, the exit barrier especially for organized sector will be high because of established Brand, Distribution Network and high investment in fixed and working capital lead to higher exist barrier. The higher exit barrier will lead to will to higher rivalry among the competitors for acquiring the market share.

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2.) Competitive Weapon of Price Cut: In Paint Industry, Demand is depend in Decorative segment is on housing sector and good monsoon. Industrial paint demand depends on automobiles, Engineering and Consumer Durable. There will be high rivalry among competitors on Diwali and Marriage Season. 3.) Low Switching Cost: The switching cost to the customer in the paint will be very low. The product is offered by competitor may be of same quality and shade. 4.) Low Product Differentiation: The rivalry among the competitors will be high because of the product is standard or undifferentiated. 5.) High Fixed Cost: The fixed cost in paint industry is high in the form of distribution channel, Brand building, tinting machine and working capital which lead to higher rivalry among the present competitors.

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MAJOR PLAYERS
ASIAN PAINT In 1942 four partners got together to manufacturer paint in a garage in Bombay. The company was named Asian oil and Paint Company; a name picked at random from a telephone directory. Up against giant International paint companies, Asian Paint hit on the innovative marketing strategy of reaching consumers in the remotest corners of the country with its small, conveniently size packs. During the 1950s the company grow from being family managed, smalltime paint manufacture to professional managed organization competing with the best companies in the world. By 1967, through innovative R&D and ambitious grass roots marketing, forming strong relationship with thousand of paint dealer in the small town all over India, the company jolted its multinational competitors by emerging as Indias no. 1-paint companies. Asian paint India ltd took this root to be no.1 in the paint industry in India. When 4 Gujarati friends started Asian paints way back in 1942. In tin shade at Bhandup, all major paints companies from England and Europe were already operating in Indian market. ICI, brindle, codeless Nerolac, Johnson and Nicholson and Shalimar paints, were common names for paint users. No one gave the young Asian paints. Any chance against these giants. But founder of Asian paints under the leadership of champakbhai choksi. Undaunted by the challenges they had in front of them. Champakbhai realized that the foreign paints giants would only look at the urban market for their paints. However, he reasoned, India leaves in a villages. Hence he decided to concentrate on the rural market with an affordably

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price lime wash, which he name sufeda with proper customer orientation and concentration only on decorative paint segment. Asian paint grew strategy, with a rural customer in mind; they even introduce what is perhaps the worlds smallest paint pack. The company still sales oil paint in 250 ml.packing for a specific purpose, to paint the horn of livestock and to paint the swastika shine on their believes on festival occasion. By concentrating on the result and reinforcing with proper customer orientation, the company which has late started, was the first to cross, the Rs. 500 corer turnover in Indian paint industry and then marched on to become the no 1 paint company with Rs.1200 cores plus company with godless Nerolac in the second place with a turnover of only Rs. 650 corer. Asian paint is Indias largest paint company and ranks among the top 10 decorating coatings companies in the world today, with a turnover of Rs. 20.67 billions, (USD 435 millions) The October 2003 issue of forbers global magazine USA ranked Asian paints among the 200 test small companies in the world for 2003 and presented best under a billion award, to the company. One of the countries lading business magazines business today in the Feb. 2002, ranked Asian paints as the ninth best employer in India. A survey carried out by Economic Times in January 2000, ranked Asian paint as the Fourth most admire company across industries in India. Among its various other achievements, Asian paint is the only company in India to have won the prestigious Economic Times- Harvard business schools association of India award on to separate occasions, once in a category of Mini- giants and the other in private sector giants.

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Asian paint manufactures a wide range of paints for decorative and industrials use. Vertical integration has seen it diversified into specialty products such as ophthalmic and anhydride and penpacrythritol. Not only does Asian paints offer customers a wide range of decorative and industrial paints, it even custom creates products to meet specific requirements. To keep abreast of world technology and to protect its competitive edge. Asian paint has from time to time entered into technology alliances with world leaders in the paint industry. It has a 50 -50 joint venture Pittsburgh paints and glass industry of USA, the world leder in automotive coatings, to meet the increasing demand of Indian automotive industry. It has also drawn on the worlds latest technology for its manufacturing capabilities in areas like powder coatings and high-tech resins thus ensuring that its product quality lives up to exacting international standards, even in the most sophisticated product categories. The company places strong emphasis on its own in-house R&D, creating new opportunities by effectively harnessing indigenous creativity. The Asian Paints Research & Development Center in Mumbai has acquired the reputation of being one of the finest in South Asia. With its team of over 125 qualified scientists, it has been responsible for pioneering a number of new products and creating new categories of paints. The R&D team has developed the entire decorative range of the company.

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The company boasts of state-of-the-art manufacturing plants at Bhandup in the state of Maharashtra; at Ankleshwar in the state of Gujarat; at patancheru in the state of Andhra Pradesh; and at kasna in the state of Uttar Pradesh. All the companys plants have been certified for ISO 9001 the quality accreditation. All the companys plants have also received the ISO 14001 certificate for Environment Management Standard. The Phthalic Anhydride plant has been certified for ISO 9002 and ISO 14001 whereas the Penta plant has been certified for ISO 14001. The Penta plant will shortly receive its ISO 9002 certification. In June 2003, Asian Paints plant in Patancheru was conferred The Golden Peacock award by the World Environment Foundation and the award for Excellence in Environment Management by the Government of Andhra Pradesh. Asian Paints was one of the first companies in India to extensively computerize its operation. In addition to computerized manufacturing, computers are used widely in the areas of distribution, inventory control and sophisticated MIS to derive benefits of faster market analysis for better decision making. It is a continuously evolving company deriving its cutting edge from the use of innovative IT solution. All the locations of the company are integrated through the ERP solution.

International Operation
Asian Paints operates in 23 countries across the world. It has manufacturing facilities in each of these countries and is the largest paint company in nine overseas markets. It is also Indias largest exporter of paints, exporting to over 15 markets in the Asia-Pacific region, the Middle East and Africa. In 12 markets it

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operates through its subsidiary. Berger international Limited and in Egypt through SCIB Chemical SAE.

Asia: Bangladesh, China, Malaysia, Myanmar, Nepal, Philippines, Singapore, Sri Lanka and Thailand. Africa: Egypt &Mauritius Caribbean Islands Barbados, Jamaica, Trinidad & Tobago Europe: Malta Middle East: Bahrain, Dubai and Oman South Pacific: Australia, Fiji, Solomon Island, Tonga and Vanuatu

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STRATEGY
For the next thirty years they maintained their position as market leader througha following pronged strategy1. Excellent marketing 2. Intensive distribution 3. Leadership in information technology, and 4. Recruitment of young management professionals.

Growth strategies: One of the fastest growing segments in the paint industry is exteriors. Asian Paints has become the market leader in this segment within five years of launch. Outpacing Showcem. This segment contributed almost 10% of sales in FY02 and is growing at a healthy rate of 30% per annum. Besides, the gradual reduction in excise and customs duty has forced many unorganized players to shut shop. This would benefits organized players in the future with a greater share in the overall pie. Another positive for the company is that new products introduced in the last three years contribute around 10% to turnover. Indicating strength of its product portfolio. Asian Paints has been on an acquisition trail. After having acquired capacities in the international markets like Sri Lanka and Australia. It acquired the power coatings business of Howcoplast in the current fiscal for a consideration of Rs. 160 million (apart from current assets.) Another potential high growth area.Going forward, inorganic growth will play a key role in the companys

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expansion plans. Its venture unto automotive paint segment has performed well in the last two years with customers including Hyundai, Ford and GM. Asian Paints (AP) is an out-an-out Indian firm in the paint industry manufactures and markets a wide spectrum of decorative as well as industrial paints. The SWOT analysis of Asian Paints indicates: 1. Strengths: Market leaders with 35% market share in the organized sector, the closest competitor dose not have even half of APs share: Comprehensive nation wide coverage of the market urban, semiurban and rural areas. They have quite a number of brands, covering all segments and filling all gaps. For example, they have brands in different price slots like Utsav for rural lower-end markets and Apcolite for high endmarkets. APs logo Gattu an impish boy with the paint tin and brush, is most popular and easily recognized. Widest product range in terms of products, shades, pack sizes 40 different decorative, some in 150 shades, 8 different pack sizes. Over 90% accuracy in forecasting, 100 fastest SKUs monitored dayto-day, far superior to competitors. Unlike its competitors who concentrate only in urban areas, AP is for everywhere, it has a countrywide distribution.

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 A network of 13,000 dealers spread all over the country. The nearest company has less than 8,000. For this, they have large network of regional offices and company depots and sales personnel to service the nationwide dealer network. Strong in inventory control. APs average inventory level is 28 days sales again, 51 days for the industry. AP has 45% edge in inventory carrying costs. The pricing strategy is oriented to middle/lower end consumers: High quality MR and MIS. AP is quite strong in production- marketing coordination. Their policy of offering tailor-made products to suit customer need has resulted in an ever-growing product range. In-house production no outsourcing, high reliability in suppliers, superior in quality assurance. Leader in profit and operating margins, ROI of AP is 40% while ROI of the rest of the industry is 22%. Net worth of Rs. 204 crores against Rs. 58 crores of Goodlass, Nerolac and Rs. 41 crores of Berger. High caliber human resource employs maximum number of MBAs as a proportion to total number of employees. Corporate reputation has been a major strength for AP. The image is that of a successful and well-managed company. They have won many accolades and awards. For example, 1995 Corporate Excellence Award from HBSA and ET, IDBI study rated AP as one of Indias most excellent companies, another study rated AP among top 5 paint manufactures in the world. They have an enviable track record in breaking the position of MNCs in the Indian paint industry.

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2. WEAKNESSES: In industrial paints. AP has only a 14% market share. It is far behind the leader Good lass, Nerolac, which has a market share of 43%. Since this is going to be the major growth segment in the future, a lag in this segment will end up as a major weakness. Widening product mix puts strain on production distribution, accounting and administration; Innovation in development new products is adequate. AP has a major weakness on the technology front in industrial paints. Most paint firms have technology tie-ups with manufacturers abroad. For example, Good lass Nerolac has a tie-up with Kansai Paints, which has provided the company with Cathodic Electro Deposition (CED) technology. Since Kansai is the supplier to Suzuki, Japan, Goodlass with its Kansai connection finds it easy to tap Maruti in India. Ap has nor been able to make nay significant advances either with Maruti or the auto segments in general. Berger has a technical tie up with Herbets. Germany, for automotive paints, Valspar Corp, USA for heavy-duty coatings and Teodur NV, Holland for powder coatings: Ever expanding product mix throws some strain on inventory management: Rural bias of logo Gattu. This is likely to contradict the new positioning for the premium brands meant for urban markets:

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 Seasonal demand and hence in off seasons it can lead to cash flow problems. Mr. Champaklal Choksey leadership all through the past over the years is getting somewhat shaky. 3. OPPORTUNITIES: Ap has always enchased on opportunities that have come its way. It has maintained a product profile keeping the market trends in picture. It shifted to predominance in industrial paints than industrial paints than in decorative paints as was eve dent from the production figures of 1995-96. The automobile industry accounted for 50% of the industrial paint market.

4. THREATS: Domination of few foreign companies. Since both Goodlass Nerolac(43%) and Bergers (14%) have a higher market share than APs (14%), it is possible that in the future, they may capture the entire industrial paint market. Competitors have gone in for hi-tech with instant colour spot mixing. For example, J&Ns instant colour offers 626 shades. Automated paint blending in retail points already there. ICIs Touch colour and Bergers colour Bank are indicative of this. Competition is catching up fast, hi-tech facilities gives abundant choices.

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GOODLASS NELORAC: September 2, 1920, the whole world was experiencing the aftermath of the

World War and the destruction it left behind. In such conditions was born at Lower Parel, Bombay- the Gahagan Paint and Varnish Co. Ltd. In November 1930, three British companies. Goodlass wall, Cookson Lead and Antimony Co. and Locke Lancaster and Walkers Parker merged to form Goodlass Wall and Lead Industries Group Ltd. Which subsequently became lead industries Group Ltd. (LIG). In April 1933, LIG acquired the entire share capital of Gahagan. With this, expertise in paint technology became available to the Indian company, which by then had become Goodlass Wall(India) Ltd. In 1946, this company became Goodlass Wall Pvt. Ltd. A decade later, in 1957, the company came to be known as Goodlass Nerolac Paints (Pvt.) Ltd. And in course of time, went public, with the passage of time, the Tata Group of companies, primarily through what is now the Forbes Gokak Group, acquired a part of the foreign share holdings in Goodlass Nerolac Paints, thus making the company a part of the prestigious Tata organization. In the early 1960s the competition in the paint industry was growing. The urban markets had saturated and paint companies saw potential in the upcountry markets. Goodlass was a popular paint company, but there was one problem. The five-syllable name of Goodlass Nerolac would not roll easily on the tongue of the upcountry dweller. Interpub the adsvertising agency used by then,

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suggested to Mr. Denis Ridley the then Sales Manager that a symbol should be associated with the companys name.

Full 18 months were spent on discussing as to what the symbol should be like and if it was needed it in the first place. In the year 1970, GOODY the smiling tiger was born. His distinctive and colored personality was just what a paint company needed. Coincidently it was the time when the tiger replaced the lion as the national animal. Project tiger started by the worldwide fund had also increased the public interest in this animal. Goody during his growing years kept changing. His weight fluctuated, sometimes his cars disappeared behind well fed cheeks, his chin flattened and sharpened alternatively. But looking back, perhaps these are the signs of healthy growth in any tiger cub. Goody has matured now. While posing formally he always has a paintbrush in his paw. He keeps changing his position to keep cramped muscles away but his basic feature are the same. GOODLAAS NEROLAC STRATEGY: Your company is committed to creating value addition to customers by way of continuous up gradation of technology resulting in reduction in paint consumption per vehicle. Increasing the utility and life span of paints, reducing energy consumption and in manufacturing of environmental friendly paints. Latest technology, application knowledge, technical sales service and knowledge on

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Entire paint systems are key factors in Auto Paint Market. With collaboration from world leaders across various continents and with wealth of experience over the years in running various auto lines, your company is well equipped to maintain and consolidate its position of strength. Your company is proud to be the first company to introduce latest environmental friendly Lead free electrode position Paint in India. MARKETING STRATEGY: Some of the strategy adopted by Goodlass Nerolac is special and unique in the paint business in India. Following are the different marketing strategy: 1. Product Portfolio and Logistics supports: Company enjoys a vast network of 50 depots and 8000 dealers spread across the length and breadth of the country. The company has followed an integrated approach toward the need of the customer in automotive sector and offers a variety of products range. It is only one in the industry that is able to supply pretreatment chemicals, the entire range of primers and coats. It is also only company in the paints industry with a pigment-manufacturing unit. 2. Innovation: The company has launched an eco-friendly paint called All Scapes. Its USP is that it is the first water based paint that can be applied on any surface and it comes in three finishes. 3. Growth strategy:

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What has helped company in the past is the fact that the company earned 50% of its sales from institutional clients. This includes sales to MUI, M&M, Bajaj and other automobile companies. Beside this, it also caters to many consumer durable goods companies. This gives GNPL, an advantage in many ways:

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(a)

Since most of the sales are assured and can be predicated, the

company has found it self in a comfortable position to determine finished goods inventory management. (b) The initial strategy of Nerolac to concentrate on industrial

paints has paid of since a large no. Of automobiles and while goods manufactures have of late entered in India.

4. Better Financial Management: The company enjoys strong position with regards to working capital management. The working capital cycle is 53 days as against the other companies, which has an average cycle of 87 days. The old saying about hastening receipts and delaying payment is being well adhered to by Good lass Nerolac. While it received its payments in 41 days. It paid its creditors in 105 days. This performance has been improving over the years and given the facts that working capital management is a critical success factor in this industry, this has turn out to be a definite competitive edge. 5. Niche Strategy: Market Development through derived demand (initially through Maruti connection) (a) Till the seventies the market for industrial paints had remained sluggish. Automobiles markers such as Hindustan Motors and Premier Automobiles were not willing to accept better quality. Things took turn for the

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better with the entry of Maruti in the early Eighties. Maruti in collaboration with Suzuki set stringent standards that Indian companies were not geared to meet on their own. Goodlass Nerolac was the first to seize this opportunity. It entered into collaboration with Kansa Paints of Japan. With one masterstroke it was able to control the entire Maruti business because Kansi was the single biggest supplier to Suzuki in Japan. (b) Maruti upgraded the Indian paint industry from a starving industry to electro deposition (ED) primers. As Maruti jumped to the top of the passenger car market Goodlass grow with it. (C) As Goodlass was the only company that had access to ED technology, it came to be viewed as the technology leader in the industrial paint segment. When Bajaj Auto, TELCO, etc. switched to this technology, Goodlass found it easy to seize the market opportunity. Uniqueness of its Strategy: Goodlass emphasized on the fact that it offered a complete technological package. It had everything from pre-treatment chemicals, primers, intermediate coats and topcoats. The company also built up posses of technical support executives. This way Goodlass Nerolac become the pioneer in the industrials paints business by taking care of all kinds of painting jobs of a client. The Difference: Industrial Paints had never been treated as a separate activity that requires different organizational focus. As a result, the business was treated as apart of the

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trade and clubbed with the same sales team. By the time Asian paints and other players realized what was happening, the stakes had already been divided and Goodlass had taken the lead. Goodlass Nerolac and Asian Paints dominate the Indian automotive paint segment. Some of the key clients of Goodlass include Maruti Suzuki, Telco, Mitsubishi Laneer, Honda, Bajaj Auto, Ford, Hero Honda, Mahindra, Toyata, TVS Suzuki, Volvo and Whirlpool. Asian Paints, on the other hand, is the key supplier to Hyundai, Daewoo, General Motors (GM), Bajaj Auto and Hero Honda. Nerolac signs Amitabh Bachan to endorse Suraksha and Mohanlal to endorse Excel brand

Perhaps for the first time in the history of the Indian Paint Industry, a film star is endorsing a brand. The Rs. 700- crore paint major Goodlass Nerolac has roped in the popular hero of Malayalam cinema. Mohanlal, to promote its acrylie exterior paint Excel and Mega Film Star Amitabh Bachan also for the promotion of the exterior paint Suraksha. Considering its flagship brnad of Excel already enjoys a 35 per cent share in Kerala. Gettting the local superstar to stand for the brand in the state was a strategy to cash in on the popularity of the star to build further equity for the brand. Mohanlal will also endorse other brnads from Nerolacs portfolio in the future. Explains Mr. Anuj Jain, Head Marketing, Goodlass Nerolac Paints. The synergy between our brand and Mohanlal is the fact that both are long lasting. Mohanlal has been aaround for almost 20 years and so had Excel. It is an

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experiment of sorts and currently we have restricted the campaign to Kerala and Tamil Nadu where the star is better known. Considering Mohanlal is also featuring in Ram Gopal Vermas new flick Company, his launch into mainstream Hindi cinema should propel him as a national brand ambassador in the future. Besides, Excel also enjoys the highest penetration levels of nearly 80 per cent in Kerala where the demand for premium paints is high. Apart from its NRI clientele, its uncertain weather conditions also generates demand for quality exterior paints, according to the company. Allocating a marketing budget to the tune of Rs. 20 crore, the company has its advertising account resting with two agencies Ulka Interface and Ambience DArey. It generally uses its mascot (the yellow and balck striped tiger, Goody) to generate goodwill for the Nerolac brand. However, now the company intends moving away from the mother brand of Nerolac and replace it by highlighting its sub brand such as Excel. Suraksha and Allscapes, today we wanr to create standalone brands in the exterior segment. Besides, like its competitor and the industry leader. Asian Paint, Nerolac has also introduced a help line number to assist customers in choosing the right brand co lour. In addition, it was also set up spectrophotometers by the name of Magic Eye a futuristic devise which creates the right shade recipe which customers demand with a memory facility to repeat the shade in demand. However this facility is restricted to select outlets. In 1999, the Japan- based Kansai Paints company Ltd took over the entire stake of Tata Forbes Group in the joint venture company. Thus Goodlass Nerolac

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Paints Ltd became a wholly-owned subsidiary of Kansai Paints. Currently, Nerolac has a 60 per cent value share in the automotative segment and a 15 per cent value share in the decorative segment.

BERGER PAINTS INDIA LTD

BPII, was incorporated in 1923 as hadfields (India) Limited. The companys name was changed to Berger Paints (India) Limited in 1983 to indentify itself with the parent company in U.K. In November 1988, in a management buyout deal, Mr. Vijay Malya took over the ownership of nineteen Berger, Jenson and Nocholson group of companies situated in Africa, Asia and Middle East. BPIL, then became a UB group company. The ownership of the company changed hands when Mr. Vijay Malya sold his stake in the company to Mr. K.S. Dhingra. A leading player in the industry, Berger paints boasts of a market share of 15 per cent. It is predominately engaged in the decorative paints segment, which is responsible for two third of its sales. While Berger market spread over the east, west, and south of India. It has a strong hold in the eastern and Southern market. BPIL has three manufacturing facilities with capacity of 11,200 TPA at Howrah, west Bengal, 17,000 TPA at Vallabh Vidyanagar, Gujarat and 18,000 tpa capacity at Pondicherry near Madras. The company enjoys the benefits of tehnical tieups with Herberts, Germay for automotive coatings. Berger paints has already entered into strategic Partnership with Nippon Paint Company of Japan for manufacturing automobile paints. It has technical tie-ups with Orica Austrlia Pvt. Ltd. For heavy duty anticorrosive industrial coatings. Berger Paints propose to expand its operation through acquisition. Both internally and strategic partnership, mostly with foreign firms.

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ICI INDIA LTD

ICI India was the subsidiary of the $ 15BN British multinational company ICI Plc. [Exhibit 8.] Brunner Mond & Co. one of the four companies that combined to form ICI in UK in 1926, opened a trading office to sell alkalis and dyes in Calcutta. In 1923, Brunner Mond & Co. (India) was incorporated and the companys name was subsequently changed to Imperial Chemical Industies (India) Ltd.. In 1929, during its 70 years in India, ICI had created six subsidiary companies in businesses such as research, chlorine, caustic soda, paints, rubber chemicals, explosives, polyurethane, nitrocellulose and surfactants. In the 1984, all ICI companies consolidated in one of the larget mergers in Indian Corporate history. By 1997, as a part of a restructuring exercise ICI had exited or was planning to exit from several non-core business. The 1996 sales break up was as follows: Paints 43% explosive 28%, Rubber chemicals 17% Pharmaceuticals 8% and other products 4%. ICI (India) ranked No. 4 in the paint business, after Asian Paints, Goodlass Nerolac Paints and Berger Paints. Unlike the other paint companies ICI (India) was a diversified unit and paint constituted 43% of its net slaes. ICI (India)s turnover in 1996-97 was $180 million and paint amounted to $77.4 million. ICI identified paints as a thrust area and was aggressively moving to improve their position. They invested $11 million in a new decorative paints plant near Bombay and were constructing a $16.7 million plant for industrial paint near Chandigarh in North India. ICIs chairman Mr. Charles Miller-smith said that he would like ICI to become the Indian Paint Industry leader by 2005. Later he announced that ICI (India) would go on an offensive with a target of achieving

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ten-old growth in 10 years. The 10X plan, as it was call envisaged a strategy based on acquisitions, take- over and alliances.

SNOWCEM INDIA
Snowcem is the pioneer in India, in the manufacture of cent specialties, surface coatings, concrete waterproofers and hardners used in the building and construction industries. Showcem is the larget player in cement paints with a 25% market share and has built very string brands is the segment. The companys two main products Showcem and sandtex Mat (Plastic-emulsions paint) dominate the premium segment and are estimated to have market share 33% and 65% percent respectively.

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CONCLUSION

Indian paint industry looking solid in the terms of growth rate and future prospect of the Industry. The industrial paints are slated to growth at an annual rate of 10 to 12% per annum for the next few years. The industrial paint manufactures would benefit from the burst in the passenger car sales. The twowheeler industry has also registered a good show in the current year. The commercial vehicles segment, a star performer last year with 33 per cent growth, is expected to average a growth of only 15 per cent this year. However, the raising titanium dioxide prices and the negligible growth in agriculture this year, will play spoilsport. Considering the past trend, the paint industry is expected to show at least twice the growth of Indian GDP in the ensuing years. The reduction of excise duties from a high of 40 percent to 16 percent in the last five years, has made the numerous small-scale units unviable, as they no longer have a price advantage over the organized sector. This has helped the organized paint industry a lot. The industry is in a consolidation phase and only those Indian paint companies with a strong technical alliance, better distribution network and an ability to compete in the global markets would emerge victorious in the paint war.

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BIBLIOGRAPHY
For the preparation of the report following source has used: Websites: Indiainfoline.com Asainpaint.com J&N.com BOOKS: Strategic Management Product Management In India MAGAZINES: Business Today Saket Industrial Digest Publication News Paper: The Times Of India The Economics Times

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