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India's paint and coatings sector emerging quickly from global recession.

THE INDIAN paint and coating industry is currently passing through a significant transitional phase--being forced to shift its production from solvent-based to water-based products. The high crude oil prices in 2008 so increased the cost of raw materials that despite the fall in prices from last summer, many paint manufacturers have had little option but to move away from oil-based coatings.

"The architectural coatings that contribute 60-65% of the total paint consumption in India has more or less converted into water-based coating," said Jagdish Vohra, chairman and managing director of Mumbai-based HEM Paints, who added: "The sale of water-based enamels will also pick up soon."

Rural consumers have not yet been educated about the advantages of water-based paints, however. "They think that because it is made of water it will get washed away", said Virendra Kumar Singhal, president of the Indian Paint Association (IPA) and managing director of Lucknow-based Surface Paints.

So, large Indian coatings companies are trying to spread awareness about water-based paints through marketing campaigns and seminars for painters, architects and big contractors. Vohra told the Asia Pacific Coatings Journal that this is a positive development for environmental reasons and because it protects the industry from future oil price rises.

As far as current the health of the US$3.2 billion Indian paint industry is concerned, it has shown a remarkable improvement since a slump of late 2008 and Singhal describes the situation as good, claiming this Indian industry looks poised to emerge from the recession. Based on informal discussions with raw material suppliers Singhal said in April 2009 the demand for paint products was expected to reach at the same levels seen a year ago, however he did not have any figures to support his estimate. If this is confirmed, it may not seem a significant achievement but it is important given the October-December quarter of 2008 demand reduced by around 35%. During the same period, declared net profits of the biggest manufacturer, Asian Paints dropped by 54% and that of third largest, Berger Paints by 35%, (considering the domestic Indian market and India-manufactured exports to neighbouring countries including Bangladesh, Nepal, Bhutan and Sri Lanka).

There was also a wide fluctuation in prices secured for selling finished major oil-based paint products in the last financial year. At one point, the rise in sale prices compared to March 2008 had reached 60%, but by April 2009, it had moderated to just a 15% increase said Singhal. The factors responsible for apparent drift back to normal trading conditions are many, but a key reason according to Vohra is that, "the Indians consume only 1.2 kg per capita of paint and [the bulk of] the Indian economy is [still] village and farm based, which has not experienced any recession or setback."

Also, demand for architectural paints remains dominated by the need to repaint old houses, therefore the impact of slowdown in the new real estate sector has been limited.

There was however sluggish growth in the overall Indian industrial sector, with production actually dipping in February by 1.2% compared with the previous month, which did affect the sale of general industrial paints and coatings, although there are signs that the key automobile sector is also emerging from recession. According to the data released by the Society of Indian Automobile Manufactures, in financial year April 2008-March 2009, automobile sales grew by only 0.7% with negative growth in the latter half, however the industry body expects growth in 2009-10 to be around 5%.

As the industry emerges from recession, multinationals and other paint majors are putting in extra efforts in their sales strategy. In a country where paints have traditionally being sold in hardware stores, US-based Sherwin-Williams Paints has opened its own stores and started with four of them in Bangalore, allowing the company to showcase its product range. Meanwhile, the Indian subsidiary of Norway's Jotun, which has a manufacturing plant in Pune making 50 million litres of wet paint and 10,000 tonnes of powder coatings annually, has also adopted direct marketing. Earlier this year, it struck a deal with the Lifestyle International retail chain to display its paints at Lifestyle's 21 Indian outlets.

Japan's Kansai Nerolac Paints has no networking problem as is relies on Nerolac's old dealers, and in February started selling an exterior emulsion in India 'Nerolac Suraksha PLUS', designed for application on walls in dry or moderately humid climatic conditions.

Meanwhile, for the 2,500 small scale production units in the Indian paint industry that cater to 35% of the country's coatings market, some public funding might be on their way from the government. For small industries in every sector the central government has a Small Industry Cluster Development Programme (SICDP), which arranges counselling regarding energy saving and new production techniques. The IPA is discussing with the central government industry ministry recognising small paint manufacturers in Lucknow and Kanpur in the northern state of Uttar Pradesh as one cluster eligible for funding. Singhal said this may take three to four years to complete.
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Author:Verma, Raghavendra
Publication:International News
Geographic Code:9INDI
Date:Apr 1, 2009
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