Infra, housing push drives new players into paints sector
Pidilite Industries, best known for its Fevicol brand of adhesives, has joined a growing list of players who’ve stepped into the Rs 65,000-crore domestic paints market in recent months.
Last week, Pidilite launched Haisha Paints, taking on rivals Asian Paints, Berger, Kansai Nerolac and Akzo Nobel in the process. The four account for 65% of the domestic paints market in India, according to analysts tracking the sector. And Pidilite will have to put all hands on deck to compete with these players, say experts.
The Fevicol-maker has made a decent start, taking the name “Haisha” from a popular Fevicol ad campaign of the 1990s titled, “Dum laga ke haisha” (pull it with force).
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In the past one year, players such as JK Cement, Astral Pipes and online B2B platform Infra. Market have all forayed into the domestic paints market to capitalise on growth momentum in the sector.
“There is a huge infrastructure, housing and home improvement push happening in the country,” says Deven Choksey, managing director (MD) of Mumbai-based brokerage KR Choksey Holdings.
“Most of the new entrants operate in the building materials space. Paints is an adjacency that allows them to drive synergies and leverage a common distribution network,” he says.
While Grasim Industries, part of the Aditya Birla group, said recently that it will double its investment outlay in paints to Rs 10,000 crore and begin production in the fourth quarter of FY24, JSW group has indicated that it would double its revenue from paints to Rs 2,000 crore and add more distribution points and manufacturing units.
Anuj Sethi, senior director at Crisil Ratings, says that the decorative paints market will see a revenue growth of 11-12% in FY24, driven by increasing renovation activity and the preference for branded products over unbranded goods.
While FY23 saw decorative paints grow at around 18% on the back of higher price realisation by companies, the annual rate of growth in paints before that was in the region of 10%, Sethi said.
“On the other hand, 8-9% revenue growth in industrial paints will be supported by higher government spend on infrastructure and steady demand from the automotive segment,” Sethi added.
Decorative paints account for 75% of the domestic paints market while industrial paints constitutes the balance 25% of the market, say experts.
Pidilite MD Bharat Puri said in an earnings call last week that the company would use the strength of its existing sales force to market its paint products across the country.
“In large parts of India, the deepest sales force across home improvement is with Pidilite. So, there will be no separate sales force for paints. We will use the existing strength of Pidilite in distribution and marketing of paints,” he said.
In a report on the paints sector last month, brokerage Jefferies said the entry of newer players would cloud the medium-term outlook for a company like Asian Paints.
“In the paints industry in India, brand and distribution are the two key factors. Given its presence in white cement and putty, Grasim plans to leverage the brand recall and distribution network of these products in paints,” Jefferies said.
The report noted that Grasim’s Birla White brand (which is into white cement and putty) has a dealer count of 54,000, of which 70% also sell paints. These 38,000 retail touchpoints make Birla White’s distribution the third-largest in the Indian paints industry, behind Asian Paints and Berger. These retail points could be leveraged by Grasim in its paints foray.
Amit Syngle, MD & CEO of Asian Paints, said in an earnings call last week that he was not worried about new players shaking up the market.
“For companies such as Pidilite, their entry into paints is more a range completion exercise. We don’t see a disruption because of the entry of new players to our business. We are well-entrenched in the market. If at all there is a shift, it would be from unorganised to organised, which is good for the overall market,” Syngle said.