The Indian paint industry is heading towards a spell of disruption amidst competition and rising raw material costs. Because of the changes in cost dynamics, especially with the increase in crude prices — Brent at around $90 a barrel now — the incumbents including Asian Paints and Berger Paints have already increased the product prices multiple times.
It is at this point of time that Grasim Industries is preparing for the launch of its paint business in the second half of this year. The Aditya Birla Group company targets to invest ₹5,000 crore in the paint business by the end of 2023. Grasim is trying to derive synergy from the group's chemicals manufacturing. It also wants to tap its existing cement and industrial customers to grow the paint portfolio. Kumar Mangalam Birla, chairman, Aditya Birla Group sees paint business as the new growth engine for the group.
JSW Paints, which entered the market just before Covid-19 pandemic, is also gaining ground. Sajjan Jindal promoted JSW Paints had grown about 120% in the first half of FY22. Driven by economic recovery, the paint maker reported monthly sales of over ₹100 crore in October for the first time, thanks to three-fold growth of decorative paints business with the completion of its national roll-out. It targets to achieve ₹1,000 crore revenue in FY22. The group’s flagship business JSW Steel had approved ₹750 crore strategic investment in JSW Paints in 3-4 tranches between FY 2021-22 to FY 2024-25.
While Birla eyes the second position in the pecking order, the largest player in the industry Asian Paints is hiking prices and improving margins. The company management recently said it took a cumulative price hike of around 22% compared to 25% raw material inflation in April-December 2021.
In the December quarter, the company’s gross margins improved by 200 basis points (bps) sequentially to 36.8%, although it was down by 830bps year-on-year. But the net profit dropped 18% over the previous year to ₹1,015 crore during the quarter. Billionaire Mukesh Ambani’s Reliance Industries owns 4.9 per cent stake in Asian Paints, which is valued at ₹3 lakh crore in the stock market. For Reliance, paint is a natural extension of its petroleum and petrochemicals business. The Ambani-led conglomerate bought the stake in 2008.
JSW group is in the steel and cement business, which connects them to paints. Sajjan Jindal’s son Parth Jindal heads the business. JSW Paints supplies industrial paints to the customers of JSW Steel and JSW Cement. It is also ramping up its retail presence with Colourvista Senses retail stores across the country.
Going forward, demand growth will be the focus of the paint industry, which faced one of the worst commodity inflations in recent times. The prices of titanium dioxide and tinplate increased exponentially, while shipping charges went through the roof. The companies have also been struggling with supply chain issues.