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Industrial Analysis

 

Structure

 

The Indian paint industry comprises three sectors: tiny, small scale and organised. Innumerable tiny units exist, occupying just a room or two and no meaningful data of the value of their production is available.

 

The small units consist of three different groups:

 

a.Units producing cheaper paints with limited technical knowledge.

 

b.Units set up mainly by technocrats producing industrial paints for special uses . (This group is doing well because they cater to specific and limited demands unsuitable for large scale production.)

 

c.Units which work in close liaison with large units and supplement their production. This upgrades their technical skill and frees them from marketing problems. This is also beneficial to large units as it frees their production capacity for high technology products.

 

Production in the small scale sector increased form 10,000 tonnes per annum in 1950, to 84,000 tonnes in 1979 and to 200,000 tonnes (approximately) in 1991. The share of this sector has consistently risen from 25% in 1950 to around 50% in 1991.

 

 

Segmentation

 

Surprisingly, the Rs.3,600 crore paint industry has no public sector manufacturing unit and complete ownership is vested in the hands of the private sector. This maybe indicative of the fact that in the past, the government perceived paints to be a luxury product and taxed the industry heavily, thereby relegaing this industry to a non-core status.

 

The classification of the paints industry can be made either product-wise or sector-wise. In the sector-wise segmentation, this industry can be classified into the organized and unorganized sectors. Product-wise, paints are broadly catergorized into

 

1.decorative paints

2. industrial paints

 

In contrast to global trends, wherein industrial paints with a share of nearly 60 per cent take prime importance, the domestic industry is dominated by decorative paints with an imposing share of nearly 70 per cent of the paints market. a major portion of demand for decorative paints is from fresh coats on existing wall finishes. Thus, the fortune of this segment are closely linked to the construction activity in the country. In terms of volume, though the industrial paints segment has made significant gains, it still trails behind decorative paints.

 

 

Coming to the sector-wise classification, while the organized sector with nearly 24 players controls 55 per cent of the market for paints, the unorganized sector comprising 2000 plus small scale units accounts for the balance 45 per cent making it a force to reckon with. As sophisticated technology is not a prime requisite for manufacturing decorative paints, the industry is flooded with a number of small players catering to the lower-end of the market by supplying low value unbranded products in small quantities. In the decorative paints segment, while both the sectors have a share of nearly 50 per cent each, the share of the unorganized sector in industrial paints is limited to roughly 35 per cent. This is because technology is the overriding factor in this segment and industrial paints require constant upgradation and servicing.

 

The sluggish volume growth in the past was due to high excise duties levied on paints manufactured by organized sector players, making their products unaffordable. This was the period during which the unorganized sector flourished because of a substantial price difference between paints manufactured by the unorganized and organized palyers.

 

In contrast to the decorative paint business, tapping the industrial paint segment is not by brand-building or establishing a distribution network but through getting the right foreign partner (for technology) and captive customers. While decorative paint manufacturers need to offer variety and have a wide reach to stay ahead of competition, industrial paint producers need to be competitive in terms of technology and service.

 

 

 

 

 

 

On the basis of price, decorative paints can be broadly classified into:

 

Premium

Medium

Popular

Product Description

Super-acrylic Emulsions, Premium Enamels

Plastic Emulsions, High-quality acrylic distempers

Low-quality acrylic distempers, oil-bound distempers, lacquer, enamels, varnishes

Price Range(per litre)

Rs. 250-400

Rs. 150-200

Rs. 40-100

Target Segment

Up-market buyers

High income group & Upper middle class

Middle class & Rural market

Key Purchasing Factors

Quality, Surfaces, Influencers,

Dealers push

Quality, Surfaces, Shades,

Dealers push

Costs,

Availability

Estimated Growth

> 15 %

> 20 %

10 - 15 %

Leading Brands (Manufacturer)

Royale(Asian Paints), Velvet Touch(ICI), Luxol Silk(Berger), Hossain Collection(Shalimar)

Apcolite(Asian Paints), Nerolac

(Goodlas Nerolac), Dulux(ICI), Luxol(Berger)

Gattu, Tractor (Asian Paints), Bision(Berger), Maxilite(ICI), Jensolin(J & N)

 

With highly price-sensitive decorative paint segment, enamels account for a large share followed by distempers, cement paints and acrylic emulsions, in that order. Distempers, the low value products which account for nearly a fifth of decorative paint sales have been the traditional forte of small players.

 

Among paint majors, Asian Paints produces all types of paints excepting cement paints, Berger Paints, ICI and Jenson & Nicholson (J&N) manufacture synthetic enamels and emulsions while Goodlass Nerolac makes synthetic enamels. In the organized sector, Snowcem (India) specializes in cement paints. One of the notable features of this industry is that each major player has a speciality product in its protfolio of decorative paints.

 

In the premium category of acrylic emulsions, the contenders are Duette, Dulux Weathershield and Dulux Velvet Touch (ICI), Royale (Asian Paints) and Luxol Silk (Berger Paints). The various brands vying for the top honors in the middle segment are Dulux (ICI), Apcolite (Asian Paints), Superlac (Shalimar Paints), Rangoli, Vinyl and Luxol (Berger Paints). Now players are eyeing the price-driven popular (mass) segment in which Asian Paints has already met with considerable success with low-priced brands like Utsav and Tractor. ICI’s Farco, Supercote and Maxilite; Goodlass Nerolac’s Goody, Berger Paints Butterfly and Shalimar Paints’ Diamond are the other low-priced brands fighting it out.

 

On the other hand, industrial paints comprise automotive paints general industrial paints, high performance coating, marine paints and coil coatings. Automotive paints constitutes a large share of industrial paints market which require high quality standards, supplier reliability and ability to offer complete coating systems. They are used for giving high quality finish to automobiles. High performance coatings are applied in plants for fertilizers, petrochemicals, offshore oil and atomic energy installations where anticorrosion is very important. Powder coatings (water-based) are free of solvent and are used in consumer goods like washing machines, refrigerators etc. Marine paints are used for painting ships and vessels to make them water resistant and corrosion free.

 

Classification of Industrial Paints :

 

Automotive/OEM paints :

This segment estimated at Rs. 300 crore is dominated by Goodlass Nerolac with 50% market share and followed by Asian Paints with 10% market share. This segment was in a recession over the last couple of years as the user industries themselves were badly hit.

 

High performance coatings :

High performance coatings are used in the fertiliser, petrochemicals, atomic energy installations and similar large scale industries where it is very important to reduce corrosion led losses. Here, different players have found their niches and are dominant in them viz. Asian Paints in fertiliser plants, Goodlass Nerolac in Nuclear Power installations etc.

 

Marine Paints :

Marine Paints are a of a similar kind of high performance paints used in ocean liners and vessels. This market is very uncertain in terms of demand levels and expected realisations. Shalimar Paints and Bombay Paints have dominated this segment. However, there is severe competition from the International paint manufacturers in this segment.

 

Coil Coatings :

Coil Coatings are used in speciality parts manufacturing of Industrial products. This segment is dominated by ICI and Asian Paints.

 

 

Powder Coating :

Powder Coating are paints with which solvents are not used. Goodlass Nerolac, Jenson & Nicholson & Hardcastle & Waud are main players in this segment. The products are used by manufacturers of white goods & other Industrial Products.

 

 

Architectural Coatings

 

The technology progress in this has not been as spectacular and rapid as in the industrial segment. This segment is equally dominated by large and small scale units catering to diverse needs of urban elite and rural masses alike. The 250 million litres plus size of this segment, out of the estimated 290 million litres (per annum) total paint market, speaks volumes of its dominance. Nonetheless, the focus has clearly shifted from decorative to protective value with equal emphasis on aesthetics, durability and user friendliness in a given cost - performance matrix. The conventional oil bound distempers are being challenged by more durable acrylic distempers and the traditional flat wall finishes are being replaced by the easily washable silk \ satin wall finishes. High durability exterior emulsion paints - both textured and untextured as well as polyurethane coatings have found a firm foothold in the exterior paint market on the strength of performance, where the inexpensive cement paint ruled the roost for a long.

 

The transition was possible through the development of better quality binders, particularly the high performance, specifically designed all - acrylic and vinyl acetate copolymers emulsions. The increase in the market share of water based paints is a pointer to the change in customer preference as well as the upgradation in the quality for the purpose of protection to houses. The introduction of a large exotic shade range, including the availability of shades through the tinting system, is only the increased customer demand for such products.

 

The solvent based architectural coatings have been relatively few technological changes with exception of lustre finishes and polyurethane coatings. Powder coatings have still not made sizeable inroads into the architectural segment. market introduction of environment friendly waterborne enamels and gloss emulsion paints is eagerly awaited and should become a reality before long.

 

 

Protective coatings

Increased availability of crude oil and gas from inland and offshore fields during the last decade led to the establishment of new refining capacities, petrochemical projects and fertilizer units. Underwater and surface pipelines have been laid to carry oil, gas and petroleum products to destinations hundreds of kilometres away and large storage tanks have been installed to hold various downstream products. Offshore and inland oil exploration and oil processing facilities have been considerably augmented in the recent past.

 

The phenomenal growth of petrochemical sector demanded a new generation high build, high performance protective coatings employing newer chemistries.

 

The ship building industry, which had been sick for a long time, has been a welcome revival in the recent past thanks to the increased requirement of ONGC and shipping companies due to favourable environment. This has triggered the growth of products for ship building and ship repair, such as anti corrosive and anti fouling coatings, most of which are indigenously available. Even rail coach factories after a long period of technological stagnation have now started using high performance system.

 

Power generation and transmission segments have also witnessed a switchover to high performance coatings. Nuclear power plants have started using medium and high build indigenous epoxy coating, meeting stringent international while estimates of annual loss due to corrosion, ranging from 5000 to 12000 crores of rupees, are being aired by experts, insufficient attention is being paid to quick change over to new technologies focusing on performance rather than composition, specifications and unit costs.

 

 

Industrial coatings

 

No other segment of the paint industry has benefited from the expansion of middle class consumer base and upgradation of technology through imports, as immensely as the industrial coating segment. Thus during the last decade, we have witnessed the commissioning of several Indo-Japanese ventures in the field of passenger cars, light commercial vehicles, two wheelers, auto ancillaries, etc., which have completely changed the technical scenerio, the market dynamics and the consumer taste. Many consumer durables such as washing machines, air conditioners, refrigerators, air coolers, cooking ranges, etc., involving high technologies and the latest features were introduced in the market to target the 300 million strong middle class, earning per capita over Rupees 30,000 per annum. All these products were designed with a functional superiority in performance and an improved finish for aesthetics and protection.

 

The new emphasis on quality, performance and competitiveness necessitated recourse to a system approach. For the first time the paint consumers and paint suppliers alike started speaking in terms of a complete system and total responsibility. Thus, unlike in the past, pre-treatment, undercoats and topcoats etc. were not seen as individual items of consumption, but custom designed ingredients of a specific, total finishing system.

 

The bicycle industry due to the new found focus on exports has witnessed the introduction of novelty finishes such as metallic, pearlescent, web finishes, crackle finishes etc. The two wheeler industry has also embraced the new technology of electrodeposition, new candy finishes. The appliance industry is changing over to powder coatings and high solid coatings as means of improving protection against mechanical damages and corrosion.

 

The consumer’s overall expectation of a useful life of products has gone up considerably. Even the somewhat traditional segments such as heavy vehicles, farm equipment’s, fans and fixtures etc., have started improving appearance and protection through the adoption of new technologies.

 

The industrial segment has not only to concentrate on the protection of its products but also on the protection to people and environment. Thus, there is a slow but steady trend towards safer and environment friendly coatings, having reduced contents of solvents and hazardous materials. while we are far behind the developed nations in many areas such as total water based systems, radiation cured systems or very high solids coatings system, the overall progress in the industrial coating segment us very heart warming, considering the relatively small base of the segment. Technology changes are now on the anvil to ensure beautification and protection, in tune with the ever increasing demands of the consumers and the environment.

 

The recent liberalization policy has attracted the attention of many global giants such as General Motors, General Electric, Westinghouse, Volvo, Fiat-Iveco, Toyota, etc., to the indian market. Soon we shall witness another spate of collaborations and joint ventures involving buy-back or export arrangements. The development of an enlarging internal market, coupled with excellent possibilities of exports, with help from the world class collaborators, will provide the much needed shot in the arm for the industrial OEM segment. The present gloomy phase of recession is bound to blow over and we can look forward to interesting new challenges in the field of industrial coatings.

 

 

 

Automotive Refinishes

 

 

The population of vehicles - two wheelers, passenger and commercial vehicles - has increased many folds in the last decade. The requirement of auto refinishes for repairing and refurbishing these vehicles must have gone up considerably. Unfortunately, reliable data is not available as the segment still remains an unorganized one. Repairs and repainting is largely done in road side, open-air and ill equipped garages. In sharp contrast to the technology scenario in auto OEM, where sweeping changes have taken place as discussed earlier, the refinishing segment has sadly remained static and primitive. As long as the repainting is carried out in open garages-without the use of well ventilated spray booths, the introduction and acceptance of high quality refinishing systems will remain an elusive dream.

 

The potential of the refinishing segment for the introduction of new technology towards enhancing the aesthetic appeal and protection against weathering \ corrosion is indeed tremendous. If we fail to tap this potential, not only will we miss excellent business opportunities but the gullible customer will remain deprived of high quality options in refinishing choice. The current technology gap in this segment between us and the advanced countries is extremely large. The pathetic technological stagnancy in the segment defies logic and reason. It is hoped that the enterprising paint manufacturers will be quick to discover the hidden opportunities behind this stagnancy.

 

 

Classification of Architectural coatings :

 

Interior architectural coatings can be classified either on the basis of their functional properties or composition. Let us now understand the functional properties of interior architectural coatings.

 

 

1.Primer : The first coat to be applied on the surface is a primer coat. Its functions are to provide adhesion of the total coating system to the surface and to assist in the protection of the substance.

 

2.Piller or Putty : This is applied in thicker coats to fill any unevenness in the surface. It is subsequently flattened down to give a perfectly smooth surface to receive subsequent coats.

 

3.Top coats : These are the final coats, also called the finishing coats. They provide decoration and also contribute to the protective value of the paint system. They vary considerably in colour, sheen and basic formulation.

 

 

Various types of interior coatings :

 

 

1.White wash : This is the cheapest coating available. Washability and abrasion resistance of the product is very poor. However, still it is a popular coating especially in factory painting and also in the rural sector due to its low cost.

 

2.Dry distempers : A dry distemper is an intimate mixture of pigments and a small amount of suitable binder like glue. The main advantage with this type of powder paints is substantial saving in packing materials. The chief limitations are poor washability and durability.

 

3.Washable distempers : The product is supplied in the form of thick paste and is sold on weight basis. Two types of product are presently available in the market. Oil bound distempers are based on an in-house emulsion of a drying oil or its modified versions. The second type is known as acrylic distempers. These are based on the synthetic emulsions. Both the products have limited washability.

 

4.Acrylic emulsion paints : This is supposed to be the best interior finish available. The binder is a synthetic emulsion based on various acrylic monomers. This gives very good covering capacity, washability and durability. This is the costliest of interior finishes in the market and is mainly for the affluent class of consumers.

 

5.Flat oil paints and lusture finishers : This is a solvent based coatings. These are based on superior quality alkyds. Flat oil paints give a mat finish with very low reflectance. Lusture finishes give excellent washability.

 

6.Glossy finishes : Normally 3 different qualities are available from manufacturers under different brand names and the simple terminology adopted to identify them is first, second and third quality enamels. The cost, covering capacity and durability are in a descending order mentioned above. These finishes are applied for doors, windows, grills etc.

 

7. Wood finishes : Various types of wood finishes or polishes are available from simplest shellac polishes to melamine finishes. These finishes are available either with full gloss or mat. The only limitation with this system is that it is a two pack system and must be handled only by skilled people.

 

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