Print
Email
The infrastructure and housing push in the Indian market has attracted several new players to enter the decorative paints sector. Even big corporate giants such as Grasim Industries and Pidilite Industries have announced their foray into the segment. The aggressive growth strategy adopted by these players, which also includes higher discounts and promotions for dealers, can impact the sector's profits.
Grasim Industries has announced an investment of INR 100 billion to capture a significant market share in the fast-growing decorative paints market in India. With the magnitude of the investment, it is likely that the firm will adopt an aggressive strategy to ramp up its presence and market share in the segment. The push from the firm is also expected to impact smaller players in the segment, while industry leaders such as Asian Paints are projected to remain unscathed.
Grasim has commenced the beta-testing of its painting service called Sparkle in selected regions of India. The service, available in Mumbai, Bangalore, and Pune, is currently available to only employees of Aditya Birla Group and their friends and families. With an investment of INR 100 billion, the firm is eyeing a second place in the fast-growing decorative paints market over the next few years.
To tap into the projected high growth in the decorative paints category, Asian Paints has also announced a capital expenditure of INR 80 billion to expand its production capacity. Currently, Asian Paints has a capacity of 1.75 billion liters, which, post-expansion, will increase to 2.63 billion liters.
In terms of distribution network, Asian Paints is leading the segment with nearly 80,000 distributors. Berger Paints and Kansai Nerolac, on the other hand, have a distribution network in the range of 31,000 to 35,000. Indigo Paints and Akzo Nobel have retail network of about 18,000 and 15,000 outlets respectively. Grasim Industries, with its Birla White cement channel, falls in second place with approximately 55,000 distributors in India.
Alongside Pidilite Industries and Grasim Industries, other players including JK Cement and Astral have also announced their foray into the decorative paints market in India in 2022. While JK Cement acquired a 60% stake in Acro Paints for INR 1.53 billion, Astral acquired a 51% stake in Gems Paints.
Amid the growing competition in the sector, spending on advertisement by these players is also expected to increase in H2 2023 and H1 2024. Nippon Paints and JSW Paints, for instance, are eyeing a spend of approximately 15% to 20% in terms of ad sales. Other players such as Grasim are also expected to invest significantly in advertising to capture market share across India.
Overall, the near-term outlook of the Indian decorative paint market remains robust. Driven by higher infrastructure and housing spending, the demand and consumption are projected to grow significantly over the next three to four years. The operating margins of decorative paint providers are also expected to improve owing to a 30% fall in crude prices, which is one of the key raw materials. However, aggressive sales push and ad spending might offset the gains. Although the aggressive growth strategy adopted by some players might impact sector profits, the broader outlook remains strong and upbeat.
