The existing economic conditions have proven to be favourable for the real estate and construction sectors in India. Lower interest rates and higher disposable income amongst people have led to a strong recovery in demand for real estate properties. Developers are focusing on completing projects and are also launching new ones. Since people were forced to stay at home amidst the Covid-19 pandemic, many felt an urge to renovate or decorate their houses/apartments. Also, automobile manufacturers have been receiving an influx of demand for two-wheelers, passenger cars, etc.
All these factors have ultimately provided a major boost for the paint industry. The companies that offer paints and coatings are witnessing increased sales volumes. We have also seen a surge in their stock prices in recent weeks. Let us take a look at some of the top listed companies that fall under the paint industry.
Asian Paints Limited was founded in 1942 and is based in Mumbai. The company manufactures, sells, and distributes paints and coatings for decorative and industrial use in India. It offers wall finishes, metal finishes, and wood finishes for interior and exterior surfaces. It provides a wide range of mechanised tools, waterproofing products, adhesives, bath fittings, wardrobes, wall coverings, and surface disinfectants. They also offer color consultancy, home painting, décor, interior design, and sanitization services.
The company manufactures essential components such as varnishes, enamels, and lacquers (used for glossy finishes), organic composite solvents, and thinners. It has also ventured into modular kitchens and kitchen components, including wire baskets, cabinets, appliances, and accessories. The company offers its products under the Asian Paints, Apco Coatings, Asian Paints Berger, Causeway Paints, SCIB Paints, Taubmans, and Kadisco Asian Paints brands. They operate in 19 countries and have 26 paint manufacturing facilities around the world. It has a wide distribution network consisting of more than 70,000 dealers.
Asian Paints reported a 62% year-on-year (YoY) jump in consolidated net profit to Rs 1,265.35 crore for the quarter ended December (Q3). Its revenue from operations rose 25.43% YoY to Rs 6,886.39 crore during the same period. The company’s domestic decorative business delivered more than 30% volume growth, led by premium and luxury portfolios. Asian Paints’ international business also recorded double-digit volume growth, led by Asia and the Middle East. With the revival of economic activities, the company has been receiving more demand for its range of paints and coatings from automobile manufacturers, real estate developers, etc.
Over the last 5 years, the company’s revenue has grown at a CAGR of 6.18%, whereas the industry average stood at 6.68%. Asian Paints has been able to secure a market share of 63.38%. It has continued to show dominance in the market by focusing on research & development and launching innovative products.
The share price of Asian Paints has surged more than 56% since the beginning of the current financial year.
Berger Paints India
Berger Paints India Limited was founded in 1923 and is based in Kolkata. The company manufactures and sells paint products for home, professional, and industrial users in India. It offers a wide range of interior and exterior wall coatings. They also provide waterproofing solutions, construction chemicals, flooring compounds, adhesives, and protective & anti-corrosive coatings. It has 16 manufacturing facilities located across India, Nepal, Poland, and Russia. With a distribution network of more than 25,000 dealers, Berger Paints has been able to provide tailor-made services to individual and corporate clients. The company is a subsidiary of U.K. Paints India Private Limited.
Amidst the Covid-19 pandemic, Berger Paints reported an impressive 13.55% YoY increase in consolidated net profit to Rs 221.05 crore for the quarter ended September (Q2). The company will post its Q3 results soon. Industry experts have estimated that its revenue and sales will show significant growth.
Over the last 5 years, the company’s revenue has grown at a yearly rate of 8.1%, whereas the industry average stood at 6.68%. It has been showing a consistent jump in revenues and profits during the same period. Berger Paints has been able to secure a market share of 19.83%.
Since April 2020, the share price of Berger Paints India has increased by more than 54%!
Kansai Nerolac Paints
Kansai Nerolac Paints Limited was founded in 1920 and is headquartered in Mumbai. The company manufactures and sells paints, varnishes, enamels, and lacquers in India. It offers interior and exterior decorative wall paints, wood coatings, metal enamel paints, and ancillary paints. The company was formerly known as Goodlass Nerolac Paints Ltd and changed its name to Kansai Nerolac Paints Ltd in April 2006. It is a subsidiary of Kansai Paint Co., Ltd- a Japan-based chemical company.
Kansai Nerolac Paints reported an 11.56% YoY decline in consolidated net profit to Rs 167.96 crore for the quarter ended September (Q2). As India came out of lockdowns, the company saw a very slow recovery in demand for its products. The sales volumes of Kansai’s industrial paints segment, which contributes more than 40% of its overall revenues, had declined. The company is yet to post its Q3 results.
Over the last 5 years, the company’s revenue has grown at a yearly rate of 6.81%, whereas the industry average stood at 6.68%. Kansai Nerolac has been able to secure a market share of 16.35%.
The shares of Kansai Nerolac Paints has surged by more than 57% since April 2020.
Akzo Nobel India
Akzo Nobel India Limited manufactures and sells paints and coatings in India and internationally. The Gurugram-based company offers marine coatings, protective coatings, industrial coatings, automotive, and specialty coatings. It produces paints, varnishes, enamels, and lacquers for interior and exterior use. The company’s products are widely used for oil and gas, power, infrastructure, and wind energy projects. They also cater to the architecture & construction, offshore supply, transport vessels, and fishing sectors.
Akzo Nobel has also ventured into the roofing and domestic appliance sectors. Its products are primarily offered under the Dulux, Sikkens, and Interpon brands. The company was formerly known as ICI India Limited and changed its name to Akzo Nobel India Ltd in February 2010. It is a subsidiary of Akzo Nobel N.V.- a Dutch multinational company that creates paints and performance coatings for industries and consumers worldwide.
Amidst the impact of the Covid-19 pandemic, Akzo Nobel reported a 35% YoY increase in consolidated net profit to Rs 66.28 crore for the quarter ended December (Q3). However, its revenue from operations was down 4.25% to Rs 606.86 crore during the same period. The company continues to face severe challenges with respect to demand. It is yet to post Q3 results.
Akzo Nobel’s revenues and profits have been showing a sharp decline since the previous financial year. Over the last 5 years, the company’s revenue has grown at a yearly rate of 0.82%, whereas the industry average stood at 3.41%. They have been able to secure a market share of 6.12% in the Specialty Chemicals sector.
Since April 2020, the share price of Akzo Nobel India has increased by 10% so far.
The paint industry is currently booming in India. These companies have been able to meet the requirements of individual homeowners through well-defined distribution networks. They have catered to the rising demand from the real estate and automobile sectors. They have also invested heavily in research & development activities and advertisements. The technological advancements in this industry have heavily contributed to their overall growth. Recently, paint companies reported that there had been a rise in the cost of essential raw materials. The price of crude oil (which is a primary raw material for paints) has been increasing. Thus, several companies are planning to hike the prices of their paint and coating products in Q4.
At the same time, we can see an increase in competition in this particular industry. Indigo Paints has emerged as a top competitor by reporting strong growth over the years. The company’s shares will get listed on the stock markets on February 2. Meanwhile, Grasim Industries has announced its plans to enter the decorative paints business, which is a Rs 40,000 crore industry in India. It would invest Rs 5,000 crore in the next three years and is eyeing the second position in the sector (in terms of market share). After the announcement, we saw Grasim’s shares rise as much as 11% (intraday) on Jan 25. On worries about increased competition, the stocks of major paint firms fell between 3% and 6% on the same day. Grasim’s entry is expected to cause excessive price-led competition in the paint industry.
Will the listed firms mentioned above be able to face these challenges in the years to come? Will end-consumers be affected due to a further rise in the prices of paints? Let us wait and watch.