PROFILING PAINT INDUSTRY : STUDY OF ASIAN PAINTS & GOODLASS NEROLAC

Submitted to
U.P.Techinical University, Lucknow

Submitted By
Abhishek Srivastav MBA[2003] Dewan Institute of Management Studies, Meerut

CONTENTS
CHAPTERS TOPICS

Chapter-1

Chapters-2

Chapters-3

Chapters-4

Chapter-5 Chapter-6

Acknowledgement Executive Summary Introduction OF THE INDUSTRY Introduction Overview of The Paint Industry Segmentation Foreign Collaboration Demand and Supply Scenario Major Players and Their Shares STATEMENT OF THE PROBLEM Why This Study Questions Unanswered (Some recent Facts about the industry) METHODOLOGY Objectives of the Research Types of Research Data Analysis Method (Porters Model) ANALYSIS AND DISCUSSION Company Profile Good lass Paint Marketing Strategies- Good lass Nerolac Marketing Strategies Asian Paint Emerging Trend and Opportunities SWOT Analysis Questionnaire Limitations CONCLUSION BIBLIOGRAPHY

AKCKNOWLEDGEMENT
I am thankful to Mr. Sudhir Sharma of Dewan Institute of Management Studies, Meerut For having shaped my understanding towards the project thought his rich and varied teaching , professional help and encouragement .It was only with the help of his expert guidance that this project was duly completed.

ABHISHEK SRIVASTAV

EXECUTIVE SUMMARY
The Indian paint industry worth Rs. 49bn has consolidated over the past four years with the organized sector taking away share from the unorganized segment .The paint market is expected to grow at 8-10% p.a over the next few years .The growth could be higher of industrial activity picks up as the industrial paint segment is gaining more importance. Asian paints offers the best exposure being the market leader and an innovative marketing company. Paints can broadly be classified as decorative and industrial on the basis of the end use . The Indian market is dominated by the decorative segment , which comprises almost 705 of consumption as compared to developed countries where the industrial segment is more dominant. The ratio in Indian is also likely to shift more towards industrial segment , especially with growth in the auto and white goods industry. The unorganized sector has historically been dominant due to the high excise structure .Over the last five years , the excise rates have come down drastically from40% to 18% resulting in erosion of the unorganized sectors share. The paint industry is characterized by low fixed asset intensity (as

essentially it is a mixing process ) but high working capital intensity (as the number of shades is large and there is seasonally in demand) . The main investment s are in brand building and distribution infrastructure. New trends are emerging in technology and marketing Introduction of tinting machines at the dealer/ retailer level will bring down working capital costs .Also new technology is being used for increasing the utility and life span of paints . Indian industry will have to keep pace with global technological changes to maintain their competitiveness. Already , a few alliance have been entered into and the number is likely to increase in the future .Asian paints followed by is the market leader in the industry Nerolac and ICI respectively Goodlass

.However , APL is primarily present in decorative segment . The outlook for the industry is positive especially given the good prospect for automotive and white goods industry . Moreover , housing is government incentives. The supply situations remain a cause for concern and will keep prices under check . The Key to success will be innovative marketing . Thus, we prefer Asian paints within the sector , which has a proven track , record in innovation and in indomitable in the decorative segment.

INTODUCTION

INTRODUCTION
Paint is defined as the group of emulsions , consisting of pigments suspended in a liquid medium , for use as decorative or protective coatings . Today, contemporary paints and coating consists of countless of hundred of thousands to fulfill the varied requirements of hundreds of thousands of applications .Paint ranges from the broad group of environmentally sound latex paints that many consumers use to decorate and protect their homes and the translucent coating that line the interior of food homes and the translucent coating that line the interior of food containers, to the chemically complex , multi-component finishes that automobile manufacturers apply on the assembly line. Paint made its earliest appearance about 30,000 yeara ago . Cave dwellers used crude paints to leave behind the graphic representations of their lives that even today decorate the walls of their ancient rock dwellings. The utility of paints has evolved from a decorative use to a surface protection use . Also ,know as surface caoatings , paints can be classified on the basis of end use, solvent system and solid content.

End use classification :Under this heading , paints can be classified as decorative / architectural paints and industrial paints .As the names suggest, decorative paints are mainly used for household and construction purposes while industrial paints are used as coating for industrial productions . Main types of decorative paints are enamels , acrylic emulsions, distempers and exteriors and post a message primary types of industrial paints are marine paints , anti corrosive metal coatings , ect . Solvent based classification :This includes paints , which use petro products or water as the main solvent. Water based paints are gaining popularity due to their environment friendliness. Solid content: can be classified as liquid or solid (powder) paints .Powder coating find application mainly in the white goods industry . The decorative segment dominates the market in India with a 70% share with the rest accounted for by industrial paints . This is compared to the developed countries where the share is the reverse with the industrial segments the major one . With increased industrialization segments the major one . With increased industrialization the ratio in India is also likely to change in the favour of industrials and both segments are likely to be equal partners by the end of five years.

Decorative Paints Segment Enamels Wall Finishes Primers Wood Finishes Total

Market Size (Rs mn) 8600 4730 2150 430 15910

INDIAN PAIN INDUSTRIES SECTOR REPORT

Products Industrial Paints Segment Auto CRP Powder Coil Others Total Market Size (Rs mn) 4386 1075 860 94.6 731 7147

OVERVIEW OF PAINT INDUSTRY

The Indian paint industry is a Rs 49 Billion sector

 The demand for paints is relatively price elastic but is linked to the industrial and economical growth. The per capita consumption of paints in India is very low at 0.5 kg per annum if compared with 4kg in the South East Asian nations and 22 kgs in developed countries . The global average per capita consumption is 15 kg. In Indian the organized sector control 70 percent of the total market with the remaining 30 percent being in the hands of nearly 2000 small scale units. In Indian the industrial paint segment account for 30percent of the paint market while the decorative paint segment accounts for 70 per cent of paints sold in Indian . In most developed countries , the ration of decorative paints vis--vis industrial paints is around 50:50. All the industry major have a vast dealership network and are required to maintain high inventory levels. Most of the paint leaders have technical tie-ups with global paint leaders.

Sector comments Paint is a mixture of four element solvents, binders, pigments and additives . Solvents give the paint a liquid

flow while the binder binds it to the surface. Pigments impart colour and opacity to the paint and the additives give it special resistance properties. Sector trends The recession in the construction and automobile sector had throw in shades of gray across the Industry spectrum , but the revival in these sectors is cause for cheer for the paint industry as well. The balance sheets of the industry major are now painted with bright colors. Sector specifics On product lines, paints can be differentiated into decorative or architectural paints and industrial paints. While the former caters to the housing sector , the automotive segment is a major consumer of the latter .Decorative paints can future be classified into premium, medium and distemper segments .Premium decorative paints are acrylic emulsions used mostly in the metros .The medium range consists of enamels , popular in smaller cities and towns . Distempers are economy products demanded in the suburban and rural markets .Nearly 20perr cent of all decorative paints sold in India are distempers and it is here that the unorganized sector has dominance. Industrial paints include powder coatings , high performance coating and automotive and marine paints .But two thirds of the industrial paints produced in the country are automotive paints.

Market profile The leaders in the organised paint industry are Asian Paints (India) Ltd.(APIL) Goodlass Nerolac Paints Ltd. (GNPL), Berger Paints , Jenson & Nicholson Ltd.(J&N) and ICI (India )Ltd. Asian paint is the industry leader with and overall market share of 33 per cent in the organised paints market .It has the largest distribution network among the players and its aggressive marketing has earned it strong brand equity .The Berger Group and ICI share the second slot in the industry with market shares of 17 per cent each .GNPL has a market share of 15 percent in the organised sector. The market can be further spilt into decorative paints and industrial paints .The demand for decorative paints is highly price sensitive and also cyclical . Monsoon is a slack season while the peak business period is Diwali festival time, when most people repaint their houses. The industrial paints segment, on the other hand, is a high volume-low margin business .In the decorative segment, it is the distribution network that counts while in the industrial segment the deciding factor are technological superiority and tie-up with automobile manufactures for assured business. APIL dominates the decorative segment with a 33 per cent market share. The company has more than 15,000 retail

outlets and its brands Tractor, Apcolite, Utsav, Apex and Ace are entrenched in the marker. GNPL the number two in the decorative segment, with a 15 per cent market share too, has now increased its distribution network to 10,700 outlets to compete with APIL effectively. Berger and ICI have 9 per cent and 8per cent shares respectively in this segment followed by J&N and Shalimar with 1 and 6 per cent shares. The share of industrial paints in the total paint consumption of the nation is very low compared to global standards .It accounts for 30 per cent of the paint market with 70 per cent of paints sold in India for decorative purposes. In most developed countries, the ratio of decorative paints vis--vis industrial paints is around 50:50. But with the decorative segment bottoming out, companies are increasingly focusing on industrial paints .The future for industrial paints is bring .In the next few yeas, Its share would go up to 50 per cent, in line with the global trend. GNPAL dominates the industrial paints segment with 43 per cent market share .It has a lions share of 70 per cent in the OEM passenger car segment, 40 per cent share of two wheeler OEM market and 20 per cent of commercial vehicle OEM market .It supplies 70 per cent of the paint requirement of Maruti, India s largest passenger car manufacturer, besides supply to other customers like

Telco, Toyota, Hindustan Motors, Hero Honda, TVSSuzuki, Mahindra & Mahindra, Ashok Leyland, Ford India, Pal Peugeot and Bajaj Auto .GNPL also controls 20 per cent of the consumer durables segment with client like whirlpool and Godrej Ge. The company is also venturing into new area like painting of plastic, coli coating and cans. APIL the leader in decorative paints ranks a poor second after Goodlass Nerolac in the industrial segment with a 15 per cent market share. But with its joint venture Asian PPG Industries the company is aggressively targeting the automobile sector .It has now emerged as a 100 per cent OEM supplier to Daewoo ,Hyundai , Ford and General Motors and is all set to ride on the automobile boom .Berger and ICI are the other players in the sector with 10 per cent and 9 per cent shares respectively .Shalimar too , has an 8 per cent share . Price sensitivity factors Various factors that have influenced the pricing of paints are summarized below: The industry is raw material intensive. Of the 300 odd raw materials, nearly half of them are imported petroleum products. Thus, any deficit in global oil reserves affects the bottomline of the players. The major raw material titanium dioxide, pathalic anhydride and peutarithrithol constitute 50 per cent of the

total cost. Besides, this there are other raw materials such as castor, linseed and soybean oils, turpentine .The raw materials cost sums up to a whopping 70 per cent .Any increase in the prices of these raw materials could adversely affect paint prices. Most of the paint major have to import neatly 30 per cent of their raw material requirement thus change in import policies can affect the industry.

SEGMENTATION
Paints Products Products

The products of the paint industry can be classified indo two major segments decorative (architectural) paints and industrial paints. Decorative paints: The decorative paints segment can be classified into interior paints and exterior of cement paints .80% of the decorative paints account for interior paints, which consists of premium. Medium and economy categories .The premium category consists of plastic emulsions, the medium priced category consists of synthetic enamels and the economy category consists of distempers. The products under the decorative finishes can be limestone coating, primers, distempers, cement paints, matt/ luster finishes, enamels, emulsions (first quality), and premium emulsions. Consumption of paints is skewed towards decorative paints that account for 70 % of paints sold in India. This is in a sharp contrast to the trend in developed countries, where the ratio is skewed towards the industrial segment. This segment is marked by the presence of a large number of players from the organized as well as unorganized sector. Competition is high and margins tend to be low in this segment. Products of this segment are relatively price sensitive.

 Demand for decorative paints is seasonal with bulk of sales taking place during the festival seasons from September to December. Besides sales remains slack during the monsoon months from June to August. Entry barriers in term of technological and funds requirements are relatively lower in the paints sector. However decorative paints are marketing savvy products and backed by large advertisement campaigns and dealership networks. These server as high cost entry barriers for new companies in this business .The huge investment required in setting up a vast marketing and dealership network to advertise and develop a brand over a period of time can only be afforded by companies in the organized sector .It is for this reason that smaller companies and small scale sector units are slowly losing market shares to the organized sector. (See Appendix Illustration 1) Industrial Paints: Industrial pains comprising 30% of the market include automotive paints , high performance coating , coil coatings .The automotive segment is further bifurcated into OEMs and auto refinishes .The automotive and general industrial coating occupy top slot in terms of production(See Appendix Illustration 2)

FOREIGN COLLABOTION

The industrial paints segment due specialized technology and high capital expenditure attracts fewer players. Most Indian companies have tied up with of are in the process of tying up with international paint majors to have access to the latest technology. A tie up with a global paint manufacturer also enables the domestic company to supply to local customers of its partner. For example, Good lass Nerolac is a major supplier to maruti Suzuki because of Kansi, its Japanese collaborator and Suzuki rotations .It is for the same reason that Asian Paints (tie up with PPG Industries, USA) is a major supplier of paints to Opel Astra.

DEMAND AND SUPPLY SCENARIO

Paint demand is intrinsically related to economic development .The demand for decorative paints in India mainly arises from tow segments viz. Construction of new

building ect.

retails

demand

for

refurbishment

like

automobiles, consumer durables, shipping engineering, The demand for paints has grown at 10% for the last five years. After a sluggish growth in late 80s and early 90s, industry grew at a rapid pace of more than 12% from 1992-1996. High excise duties and lackluster industrial growth resulted in low growth of 2- 4 % during 1987-92. After 1992, the industry picked up aided by improving economic conditions and rationalization of excise structure. Almost the entire growth can be attributed to volume increase as price realization has increased at less than 5% p.a. over the last two years., demand has slowed down due to the economic slowdown. According to Indian Paints Association, demand will rise from the current 0.6mn tones per annum to almost 1mn tpa by 2003. Demand for decorative paints will be led by the household construction industry which is expected to grow at almost 8% over the next five years considering the extreme shortage of housing and the governments thrust on encouraging housing activity. The centers of housing activity are also likely to shift more towards rural areas. The industrial segment will grow faster due to the lower base and fast growth in major user industries like consumer durables and automobiles.

The paint industry is not capital; intensive. However, it has high entry barriers in the form of distribution network and product branding. Thus, fresh capacity is likely to come from existing players only. In fact, low capital costs encourage manufacturers to increase capacity to cater to seasonal peaks (especially in decorative paints) rather than incur inventory-carrying costs, during lean periods.

MAJOR PLAYERS AND THEIR SHARES

The major players existing in industry are:

1. 2. 3. 4. 5. 6.

Asian paints. Goodlass Nerolac paints. Berger paints. ICI paints. Jenson and Nicholson paints. Shalimar paints.

The leader in the high volume medium and mass segments of decorative paints, Asian paints has been consolidating its market leadership over the past few years and now has the biggest slices of 33% of the market of decorative paints where as Goodlass Nerolac paints has the highest market share in the industrial paint segment. (See Appendix Illustration 3-4)

STATEMENT OF THE PROBLEM

WHY THIS STUDY

To get a general overview of the Indian paint industry. To identify the major players.

 To a ascertain the reasons for the industry not picking up. Question Unanswered (Some recent Facts about the industry). Overall industry growth rate declined to 9%-10% in the current year from 12%. The industry received a major setback in the fourth quarter due to the recent earthquake in Gujarat. Though Asian Paints, Goodlass Nerolac and Berger combined reported a 15% growth in sales in the first half of the current year, growth wanted in the second half, notably in the fourth quarter. The construction activity was subdued in the current year due to a less than average monsoon and natural calamities in some of the key Eastern and Southern states. As a result the decorative paint demand also declined. The Gujarat earthquake in the fourth quarter was more pressing for paints companies. Industrial paint demand in the current year dropped due to a 7% decline in passenger car sales and a fall in commercial vehicle volumes in the current year. One of the key factors was the lower agricultural output, which affected the purchasing power of the consumer, notably in the semi-urban and the rural markets. Despite interest rates

cuts and increase in depreciation rates, automobile demand did not show any sharp uptrend in the fourth quarter also. Rutile titanium dioxide prices moved up from USS 1,800 per tonne last year to more than US$ 1,950 per tonne, an increase of more than 11%. Since this account for almost 50% of the raw material costs of paint companies, margins were strained. Apart from this, prices of other raw material like mineral spind and tarriyl also by 20% and 18% respectively. Paint companies resorted to an increase in prices during the current year, though not commensurate with the rise in input costs. Operating margins declined in the current year due to a rise in both raw materials was sharp for the industrial paint segment, as these companies could not pass on the rise in costs to their customers, primarily the auto companies (as these companies were also witnessing declining sales). Exterior paint segment continued to grow at a fast rate compared with other segments. The segment is estimated to be growing at CAGR of 15% per annum. New productions from almost all the major paint companies in the exterior segment performed well in the current year.

METHODOLOGY

OBJECTIVES OF THE RESEARCH

 To get the general overview of the Indian paint industry. To study emerging rends and opportunities in the paint industry. To study the demand- supply scenario the industry. To identify the major players in the Indian paint industry. To study the marketing strategies of Asian paints and Goodlass Nerolac paints. To ascertain the marketing segmentation criteria. To study the foreign / technical collaborations (if any) of major players. To carry on the SWOT Analysis of industry after studying the companies strategies. To study the market shares and major players in the industry.

TYPES OF RESEARCH

The research study under consideration is exploratory type. The reason for selecting this type of research is the underlying definition of exploratory research. Basically, there are two broad kinds of researches. Exploratory research: This seeks to discover new relationship. Conclusive research: It is design to help executive choose among various possible courses of action. As research design applicable to exploratory studies are different from objectives firmly in mind while designing the research. Which searching for hypotheses, exploratory designs are appropriate; when hypotheses have been established and are to be tested, conclusive designs are needed. It should be noted, however, that the research process tends to become circular over a period of time. Exploratory research may define hypotheses, which are then tested by conclusive research; but a by-product of the conclusive research may be a suggestion of a new opportunity or a new difficulty. Other characteristics of exploratory research are flexibility and ingenuity which characterize the investigation. As we proceed with the investigation must be on the alert to recognize new ideas. As they can then swing the research in

the new direction until they have exhausted it or have found a better idea. Thus, they may be constantly changing the focus of investigation as new possibilities come to attention. It should be added here that formal design is the researcher is the key factor. However, three lines of attack may aid in finding hypotheses of value(1) study of secondary sources of information ; (2) survey of individuals who are apt to have ideas on the general subject ; and (3) analysis of selected cases. The reason for selecting this mode of research for the topic is that its is probably the quickest and most economical way for research to find possible hypothesis and to take advantage of the work of to others and utilize their own earlier efforts . Most large companies that have maintained marketing research programs over a number of years have accumulated signification libraries of research organizations furnishing continuing data . Trade association and sales analysis , are other fruitful sources . There is now a large volume of basic research reported in professional and trade journals and in government documents that may stimulate hypotheses . These sources are often maintained in company libraries ; and they are otherwise available in public libraries , as are more general books , newspapers and government documents .In a relatively short time researcher can scan a large volume of published and unpublished ideas and data.

And this study aims to collect and present the happening, reasons for these happenings, and other significant thing in the paints industry and their interrationships with each other. Sample Size Inspite of many players existing in this industry I have taken a sample of two i.e. Asian Paints and Goodlass Nerolac as Asian Paints is the market leader in decorative paint segment and Goodlass Nerolac paint is the market leader in the industrial paint segment.. Sources of information/ Data The various steps I took in colleting the elevate data on the marketing strategies of the Two paint companies:-

Asian Paints Limited

Goodlass Nerolac Paints Limited The data that I have collected is strictly secondary data hunted on the internet . I searched www.google.com www.indiainfoline.com and various sites . These sites could only give me an overview of the paint industry and the company profiles. The inability to collect data relevant to the marketing strategies prompted me to interview some senior officers in the different companies who personally wanted that they should not be named because of some strategic reasons. Still interviews were in depth and unstructured and aimed to grab out as much from the interviewer as possible about the strategic plans of their long-term strategies. Officials were kind enough to help me out search the data and get hold of the relevant data pertaining to the marketing strategies of the two paint industries. Information / Data Analysis method The above discussion gives a brief introduction to the paints industry. In order to understand it in greater depth , use is made of Porters Industry structure Model .The model has been reproduced on the next page:

PROTERS MODEL

Environmenta l factors

Threat of Substitutes

Suppliers Power

Threat of Substituter

Customers Power

Barriers to Entry

SUPPLIERS POWER The bargaining power of each of the players in the industry relative to the suppliers is low. The reasons for this are manifold .For instance, the most important raw material,

titanium dioxide, as already mentioned, is always in short supply both locally and globally. For other raw materials too, the players are forced to import in bulk due to local shortages. High import content means that the input costs depend on global prices, where the industry players can only be price takes. Moreover, it also exposes the industry player to exchange rate fluctuations .These are the factors that result in the erosion of the industrys bargaining power in relation to the suppliers. CUSTOMERS POWER Again, the bargaining power of the customer is high .In decorative paints the customers are widely spread geographically. Reach and distribution strength are of paramount importance. Moreover, in addition to availability, the consumers choice depends on several other factors such as the range of shade, the intensity of the marketing efforts etc. In industrial paints, the customers are generally captive, with each customer having at the most two of three suppliers, and quit often only one supply. But in this case, the customers arte quit demanding . In addition to the tight specifications regarding quality , technology is an important factor . In both the cases, inventory holding involves a lot of cost for the industry. In the case of decorative paints, a large inventory has to be help to ensure timely availability of wide variety of shades. On the other hand, in industrial paints the manufacturer needs to hold sufficient inventories to ensured

timely supply of paints to the end user .for whom lack of supply typical means production problems. BARRIESTS TO ENTRY In the decorative paints segment, the barriers to entry are low primarily due to the fact that sophisticated technology is not prime requisite. The segment is flooded with players in the unorganized sector who cater mainly to the local low3er end marker. However, it is difficult for small and new players to achieve a significant national presence due to the requirement of a wide distribution network. However, the cost advantage of the smaller players is slowly being nullified by the downward movement of excise duties on the organized sector. In the industrial paints segment the entry barriers are reasonably high due to the fact that this segment requires sophisticated technology. THREAT OF SUBSTITUTES The paints industry does not face any real threat of substitutes, as one cannot foresee a situation where paints will not be required. Technologies for using polner based construction materials (which can be imparted suitable colour during the manufacturing process itself and hence do not need paint for building houses have tried out, but these failed to become popular. ENVIIRONMENT The external environment has a significant effect on the industry. The chief reason for this is that the demand for the

industrial paints segment is a derived demand. It depends on the user industries such as automobiles; white goods etc. though with a time lag .The past yes has seen a drop in demand for automobiles and hence the industrial paints manufacturers expected a dip in sales this years. Environment concerns too can have an effect on the fortunes of this industry. For instance the concern about toxic fumes being emitted from paints that use petroleum products as solvents, has led to the invention of water-based paints. These are still not very popular in India, though Goodlass Nerolac has launched a range of water-based paints recently (the Alls capes range. Government regulations affect this industry as much as they affect any other industry. Being import intensive, import duties being raised of lowered can cause trends changes in the cost structure of the players .The recent trends of import and excise duties have been largely favorable to the industry. COMPETITION WITHIN THE INDUSTRY The industry is characterized by intense completion. Roughly 50 per cent of the volume comes from the unorganized sector, mainly due t the low entry barriers and the history of high excise duties. The number of players in the unorganized sector is greater than 2000 making them a force to reckon with. Within the organized sectors itself, the decorative paints segment is with ness to intense competition due to the fact that a large part of the customers perceives very little

differentiation between brands. The primary determinate of success in such a scenario is the distribution strength. In the industrial paints segment , the competition is based more on the technology that goes into the products .Also because of this fact, the unorganized sector is smaller in this segment .

ANALSIS & DISCUSSION

Players compete with each other to gain captive end users for their products, as in the case with most industrial products.

GOODLASS NEROLAC PAINTS LTD. COMPANY PROFILE

BACKGROUND GNPL was established in 1920, by Tata stable in collaboration with Goodlass of UK, apart of the Cooksons group. The Tatas had a 40% stake in the Company; through group company Forbes Gokak Ltd. In 1983, the Company entered into a technical cum financial collaboration with Kansai Paints , Japan , Kansai who currently has a stake of 40% is the other major shareholder .Manufacturing activities began with the establishment of a paints unit at Parel in 1920. In 1971 another plant was established pigments, one of the major ingredients ion paints manufacture pigments, one of the major ingredients in paints manufacture pigments, one of the major ingredients in paint manufacture. In FY92, the company made a right issue, for par funding its new Kanpur plant, which was commissioned in August 93 .Last year Kansai bought over the stake of Tatas , thus making GNPL its subsidiary. GNPL , The Indian arm of Jap[[an based Kansai paints , is one of the leading players in the Indian paints market with presence in decorative paints as well as industrial paints , coatings , varnishes , enamels etc. it is the domestic leader in

industrial paints and has virtually half of the auto paints marker. Paints sector can be segment as decorative paints and industrial paints. While both are characterized by low capital costs and high working capital, industrial paints require special technology. Capacities are normally set up close to markets, so as to be able to offer a multitude of shades and colors to customers. Brand building and dealer network act as effective entry barriers. Demand is seasonal in nature low during monsoon, high during festive seasons. Domestic pains sector, dominated by decorative paints (70%) , is expected to undergo a structural shift towards industrial paints , as cross-border tie-ups in industrial are becoming order of the day. Most organized sector players are established with well- entrenched distribution network and established brands. Threat of global competition is minimal .The under developer industrial paints market holds maximum growth potential albeit on a lower base .In future the industry will witness brand competition, product innovations and superior distribution networks. GNPL management has been focused on paints business in the lat three decades .GNP has a network of 10700 dealers &550 computerized color-dispensing machines. With multi location manufacturing facilities helping it to have a very wide geographic reach, it has an enviable leadership in Automotive OEM.

GNPLs prospects are inextricable linked to those of the user sectors in automobiles and other industrial sectors .The two subsidiary companies primarily manufacture paints & enamels for parent company on contract basis .GNPL has set a target for to achieve a sales turnover of Rs 12bn and a market share of 25% 2002-03

SALES BREAKUP

Period ended No. of months Sales value (Rs mn) Inorganic pigments Organic pigments Paints , varnishes , enamels & oils Others Sales volume (unit) Inorganic pigments (Ton) Organic pigments (Ton) Paints, Varnishes, enamels & oil (Ton) Unit realistion (Rs/ unit) Inorganic pigments (Ton ) Organic pigments (Ton Paints, varnishes , enamels & oils (Ton)

03/98 12 72.5 141.6 4,615.2 60.8 786.0 517.0 52,057. 0 92,239 273,888 88,657

03/99 12 42.6 104.8 5,235.4 75.0 426.0 505.0 55,002. 0 100,000 207,525 95,186

03/00 12 6,211.4

03/01 12 6,744.4 91.5

64,933. 0 95,659

73,448. 0 91,825

ASIAN PAINTS COMPANY PROFILE

BACKGROUND Champaklal H Choksey, Chimanlal Choksi, SC Dani and A Vakil set up APIL, in 1942 as a partnership firm .In 1945, it was converted into a private limited company, under the name

of Asian Oil and Paint Co Pvt. Ltd. In 1965, the name was change to Asian Paints (India) Pvt. Ltd. In 1973, it was converted into a public limited company. APILs first plant came up in Bhandup in 1957 .It has three other plants located at Ankeleshwar (1981), Patancheru (1985) and Kasna (1990) .All the plants have captive resin manufacturing faculties and are capable of producing the entire range of paints. APIL also manufactures a key raw material Phthalic Anhydride, at its Ankleshwar plant, 30 % of which is costively consumed. Earlier APIL used to also manufacture another raw material, vinyl pyridine latex, which was later hived off onto a separate company, under the name of Apcotex Lattices Ltd. Capacity expansions have come in a phased manner. Productivity at the Bhandup plant has been lackluster. Through a AVS scheme introduced in 1993, APIL was able to cut back workforce. Investment in information technology, especially in the areas of production and distribution logistics has helped APIL improve its operating efficiency .In FY96 APILs ailing subsidiary Pentasia Chemicals Ltd. was merged with APIL. Locations APIL has 4paints manufacturing plants .The oldest plant is at Bhandup in Mumabi .The other plants are at Ankleshwar in Gujarat , Patancheru in Andhra Pradesh and Kasna in Uttar Pradesh .The Phthalic anhydride plant is located at

Ankleshwar in Gujarat. Penta plant (result of PCL merger) is located at Cuddalore in Tamil Nadu .The installed Capacity of each manufacturing facilities are: Manufacturing facilities Bhandaup, Mumbai Ankleshwar Patancheru Andhra Pradesh Kasna ,Uttar Pradesh Total Installed capacity (TAP) 20,000 50,000 50,000 42,700 162,700

APIL ,Indias largest Paints Company , is the market leader in decorative paints .It has remained focused on core business and has consistently improved operating efficiencies .The company has registered a net profile of Rs 1064mn in Fy01 as compared to Rs 973 mn in the previous year. Paints sector can be segmented application wise , as decorative paints and industrial paints . While both are characterized by low capital costs and high working capital intensive, ht latter requires special technology. Capacities are normally set up close to markets, so as to be able to offer multitude of shades and colors to customers. Brand building and dealer network act as effective entry barriers. Demand is seasonal in nature low during monsoon, high during festivals. Domestic paints sector , dominated by decorative paints (70%) is expected to undergo a structural shift towards industrial paints , as cross border tie-ups in industrial paints

are becoming order of the day. Most organized sector players are established with well-entrenched distribution network and established brands. Threat of global competition in is minimal. The underdeveloped industrial paints market hold maximum growth potential, albeit competition, product innovations and a fight for superior distribution network. Focussed on decorative paints segment, APIL is set gain the maximum amongst the peer members from the uptrend in the housing sector .The company is restructuring its operations into three SBUs and has set target to be amongst the top ten decorative manufactures in the world by 2003. APIL is investing heavily in dealer tinting machine Colour World and IT technologies to keep ahead of competition .APIL has set target of Gross sales of Rs21bn by 2003and earning growth of above 20% . It also has set a vision to be among the top five paint companies worldwide by 2005.On export front , the company is looking out for alliances/ takeover in the emerging markets of Asia. SALES BREAKUP Period ended No . of months Sales values (Rs mn) Formaldehyde Miscellaneous Penta erythritol Phathalic anhydride Paints , varnishes , enamels& oils 03/98 12 0.4 165.4 280.1 618.6 9,111.9 03/99 12 0.2 125.7 251.1 485.7 10,339.9 03/00 12 121.0 22237 695.2 12,212.2 03/01 12 145.7 216.7 792.0 13,7396

Sodium formate Others Sales volume (unit) Formaldehyde(Ton Miscellaneous(Ton) Penta erythritol(Ton) Phathalic

14.3 31.0 3,146.0 2,829.0 17,376.0

14.1 237. 10.0 2,573.0 2,831.0 16,688.0 131,2840

15.0 79.2 2,518.0 2,867.0 19,060.0 162,110. 0

20.7 21.3 2,712.0 2,839.0 20,195.0 181,271.0

anhydride(Ton) Paints , varnishes , 116,9420 enamels & oils (Ton) Sodiumformate(Ton) 971.0 Unit realization (Rs/unit) Formaldehyde (Ton) 12,194 Miscellaneous (Ton) 52,587 Penta erythritol 99,011 (Ton) Phthalic (Ton) Paints, anhydride 35,600 varnishes, 77,918

1,414.0

1,156.0

1,366.0

15,100 48,848 88,691 29,104 78,760 9,984

48,052 77,664 36,476 75,333 13,018

53,706 76,335 39,218 75,779 15,169

enamels&oils (Ton) Sodium format 14,727 (Ton)

MARKETING STRATEGIES GOODLASS NEROLAC

Goodlass Nerolac joins the instant shades band The Rs 480 crore Goodlass Nerolac became the last of the big pain major to jump into the instant shades market with the launch of Nerolac colour scape, an integrated colour matching system designed to be a one-stop colour shop. Colour Scape were launched across India by April of year 1998 , initiated by Jenson & Nicholsons Instacolor in the late 1996 , followed by Berger Paints colour Bank and ICIs Colour solutions , tinting machines have become the marketing stunt for all paint majors. Nerolacs move foloes soon after Asian Paints launched Color world . Asian Paints launched Colour world earlier in January in the same year .Nerolac Colour Scape was launched by establishing what the company calls in the Nerolac Colour Club , an interactive platform aimed at benefiting both the

dealers and the company as soon as the dealer opts to set a Colour Scape shop, he will become a member of the Nerolac Colour Club. Colour Scape costs the dealer Rs 5.95 lacs , compared with Asian Paints Colour World which costs 6.5 lakh and Jenson and Nicholson s Rs 8 lakh. Dealers have the benefit to avail it through several installment schemes with a down payment of minimum of Rs 1 lakh. The company was aware that such projects had proved expensive for companies like J&N, and will restrain its marketing efforts to potentially viable market. Hence, it did not set itself an installation target. Though initial responses from the dealers in Mumbai were encouraging, they did not offer it indiscriminately to every dealer who opted for it, and instead strategically placed these kind of shops in accordance with the location and the quantam of sales of the particular dealer. Both these aspects , in addition with some other minor aspects like the potential of the location , even if the sales at that point of time were not up to the mark, were given their due importance. Colour Scape , however , is nor just a colour dispensing machine , it has several added features by which the company expects to change the way paints are sold in this county. While the customer will have access to over 1.05 shades and can see how their rooms will look with the help of a visualiser system , the dealer will be able to tip them on the variety of

paints , This can prove to be a major marketing strategy for the Nerolac paints , considering the fact that Paints purchase is more of purchases which comes under the category of emotional purchases and customers are not very particular about the color and the type . So , this kind of strategy at the point of purchase convinces the customer to become a consumer by enabling him to see exactly what his dram home will look like after the painting . The number two paint manufacture Gooldlass Nerolac Paints (GNPL) has not seen the semblance of a bull in the last two years .Even when the Sensex has risen 25 per cent since May 1999 ,GNPL has emained range bound between Rs 140 and Rs 160 .In terms of discounting the scrip trades at a priceearning ratio of 10.1 against Asian paints 17.1. The bullishness for GNPL stems from the fact hat its major presence is in industrial paints , especially automotive paints, and it hopes the they will bring good times to it. The growth of the paints industry is directly linked to the GDP and the industrial paints segment is linked to the automobile sector .The industrial paints segment account for 30 per cent of the Rs 2700 crore organized market. Industrial paints are technologically intensive but GNPL is well positioned due to its Japanese technical collaborators Kansai and Nihon Tokushu Toryo. Kansai also hold a 36 per cent stake in stake in GNPL while Forbes Gokak, a Tata company has a 30 Per cent stake.

The company has three manufacturing facilities at parel in Mumbai , Kanpur in Uttar Pradesh and Lote Parshuram is Maharashtra .GNPL manufactures paints , varnishes and synthetic enamels and pigments .The company has been conscious enough to maintain a strong product profile through regular brand launches . Its brand are Nerolac, Excel, Llscapes and Pearl .It spends nearly Rs9-10crore a year on advertising and sales promotion and this has helped it to expand its presence in the decorative segment also, besides being a leader in the industrial segment. GNPL is the number one player in industrial paints with a 43 per cent share , far ahead of Asian Paints at 15-17 per cent and ICI with 9 per cent .It account for 90 per cent of Marutis requirement which in turn contributes 8-10 per cent to the GNPL turnover .Maruti sales have risen 17.2 per cent for quarter April June 1999 and in June itself .They were up 27 per cent over previous month .Apart from automobiles the white good industrial paints . This industry is also expected to do well with the economy. GNPL has also signed agreements with Mitsubishi Honda and Telco Indica .With the entry of new players , GNPL s positions will be consolidated .GNPL has also enter into a strategic tie-up with Dupont o US for the OEM segment to cater to the Us car manufacturers in India .This should give GNPL an added advantage to combat Asian Paints PPG(50:50) in the industrial paints segment .

Despite being a late entrant in the decorative segment, GNPL: has become the number two player in three years. Nearly 50 per cent of sales comes from decorative and the company has been an aggressive advertiser. Paints demand from the housing sector will also o\improve with the economy. Though the paint industry is raw material and working capital intensive ,GNPL is strongly positioned with neatly Rs 40 crore plus in the form of investments and cash .Besides an expanded capacity and a strong domestic network coupled with a recovery in demand entails a good future .GNPL was not able to appreciate in this bull run while Asian Paints drastically rebounded to Rs 363 from Rs 197 in may 1999! Second rung paint stock should see a bull run led by Goodlass Nerolac . Goodlass Nerolac , now a subsidiary of Kansa Paint of Japan is going for a brand consolidation strategy and reduce the number of brand to 6-7 from its portfolio of 17 . Senior company officials say the brands that would be retained are Alscapes .Nerolac ,Excell , suraksha , Cloudscapes and Goodygold . The company is also planning an aggressive foray into the rural market with its brand Good- Gold .This will be a relatively cheaper and afforded brand as compared to the other brand . Rural market in India has a hug potential which is yet to be tapped , company officials said.

Goodllass Nerolac is also looking also growing through the acquisition route, but the exact plans cannot be ascertained due to obvious reasons. We have kept our doors open for that possibility, was the only reply that came from the senior official that was visited. Goodlass Nerolac, has, as already stated, three manufacturing units in the Western region of the country and one each in the North and south. And, to enhance their presence in the eastern region, the company will be concentrating on indirect distribution channel. Goodlass Nerolac, Which is the leading player in industrial paints, has decided to increase, its focus on the decorative paints segment as well, where it trails Asian Paints. In the decorative paints segment, it has a share of 14 per cent and plans to increase it to percent. Currently the company ranks second in the decorative paints. In order to grow in the decorative market the company in under taking other initiative like increasing its advertisement budget from Rs 12 crores to Rs 18 crores.

MATKETING STRATEGIES ASINA PAINTS

COLOUR ME RIGHT Colour World launched by Asian Paints is the first initiative in supposedly meeting local colour tastes in India! The Rs 883 core Asian Paints finally seems to be responding to the challenge posed by Jensen & Nicholsons mix-n-match instacolor aggression in decorative paints ,as it launched the concept of Colour World .The initiative includes a wide spectrum of an entirely new palette of 1,150 shades developed by the company s R& D and much more . Asian Paints , of course , call this more a logical progression its Merawale initiative of almost a decade ago , which it claims accurately gave its its customer interface, something, something Asian Paints prides itself on . And much more include and entirely new concept-or so the company claims in paints retailing. The retailing concept is the culmination of an extensive tow year consumer research programme (see box) by the company , with the explicit purpose of fine tuning its customer service orientation . Clearly the thrust of this concept is to provide the

customer with all the tools required to optimize the selection process . Thus , the paraphernalia that this entails include an interactive touch screen compute , specially designed display panels ,state of the art tinter shaker equipment and merchandising units . if a consumer wants a shade between two defined shades , the company is willing to mix it for her to her satisfaction at the dealer end .To consolidate this exercise at the retailing level , the company will provide dealer support Ex-panded , that means the company is willing to provide software and industries . A general manager marketing at Asian Paints ,says , An investment of about Rs 5-to Rs6 lakh is required per outlet in order to ensure that dealers are sufficiently equipped to create & consumer friendly environment .For that lies at the crore of this marketing concept. Question is , why initiative now ? The economy is in a full the decorative paints industry is growing at the rate of a mere five to six per cent , and an expansion of colour range is nothing new by now . Competitors have done it already. An official explains that this investment now is with a longterm perspective . We would to increase our franchise in our existent network . with the launch of Colour World , which is targeted at the middle and upper income segment in the paint market , we are placing ourselves in an enviable position , having covered every segment in the decorative paints market . About talks of the new shades that have been

specifically developed , he says that these shades will be extender to all premium brands in the company s basket , at the same prices . We are confident that the new initiative will result in higher sales for the company. Further on this , between 1991-92 and 1996-97 , Asian Paints gained two to- three per cent share in the decorative paints market . Now , expected share increase is one per cent per annum for the net few years . Again , with this initiative , the company expects to strengthen its position on Calcutta and Delhi which are a among its relatively weak markets; it has a stronghold on the western region- Maharashtra, Rajasthan and Madhy Pradesh and most of the south .In eight moths , the company plans to refurbish 500 outlets across the country . Advertising spend for the next couple of years, will remain at Rs 20 crore per annum, but the thrust will be the new concept. The company plans to refurbish 500 outlets across the country. Colour World in crating an attractive shop ambience aims to draw this very consumer in .In numbers .Eventually the concept is aimed at making the Asian Paints outlet s One stop colour Shops expanding its sway in the desorative pains segment . The evolution of Asian Paints consumer orientation from the Merawala stage (over the last decade) to Colour World is a

transition from a rational route to dream shades for your home .In the course and consumer preference have become better defined .Their Merawale concept was tailored according to consumer research findings that revealed that the consumer was becoming more aware and was willing to pay more for some value addition . At this point in the time , they realised that the shade card was the most effective tool of communication between the company and the customer. The same concept has been refined now . At every outlet , next to the touch screen will be a massive shade board with the 1,150 shades. Coming from Asian Paints the initiative is bound to be notice .,What says competition? Jensen & Nicholson , says , The fact that the new colorants from Asian Paints will be produced indigineously could make for a quality that is second best .Then , give that margins on paint are fairly low, it could be unrealistic to expect dealers to plough sizeable investments into refurbishing their outlets. Prices , after all , would remain the same. These observations await validation .In the meantime ,Asian Paints has already started moving on its new initiative in Kerala and Baroda , which are substantial paint consuming markets. S for the long term the company intends fully to ser the ball roll.

Asian Paints has also devise new Web based marketing strategy to commerce business to business (B2B) transactions on the Net in one year. And so the company is optimistic that as cyberlaws take shape in India , the company will be able to sell paints on the Net. As cyberlaws emerge and customer confidence in the security of Internet dealing improves , we expect the B2B transaction to happen on the Net .The day is not far when customer are drawn to our website , browse the features , benefits and prices of our product and place orders which are supplied through the nearest dealer .The opportunity to cut cost factory forward is immense, Business Standard. The view in the company is that e-commerce will first impact the B2B transactions .In a year we expect interactions with banks , insurers and large industrial customers to be through the Net .Customer and supplier orders, services in the nature of information and account management will be processed through the Net, and official adds . The company is tight lipped about the cost of the new structure . It is very difficult to arrive at a specific number as the expenditure will be on as ongoing basis . AT the same time . Web-drive selling will also bring down inventors

considerably not only at our end but also with suppliers of raw materials and vendor , Vice president (international and program office ) of the company , said. Asian Paints is already using its website for hiring talent and dealing with vendors though in limited way , they are certain that the Internet will make fundamental change in the way they do business. Asian Paints (India ) Ltd (APL) the undisputed market leader of the Rs4,900 crore India paints industry is one of the performing companies in the domestic manufacturing sector .Emerging from the shadow of an economic slowdown , Asian Paints recorded a 24 per cent volume growth in 2000 , double the overall industry growth rate of 12 per cent .?Apart from its growing dominance in India , the paint major has chalked out an aggressive strategy for the overseas marker . Mauritius and the Middle East , and is also looking at acquisitions in Bangladesh.

INDUSTRY DYNAMICS With the organize sector steadily gaining market share from unorganized players the marker has become extremely competitive .The organized paint sector which account for around 65 per cent of the total market is expected to grow at a rate of about 12-14 per cent .It has been observed that the paint industry growth rate is double that then of the Gross Domestic Product (GDP) growth for the year. In this picture , there are two companies , which dominate the decorative and industrial segment respectively by some margin over the other .Heading the decorative sector is Asian Paints with more than a 40 per cent .In the industrial segment , Goodlass with 19 per cent .In the industry segment, Goodlass Nerolac is the market leader with a 40 per cent share compared to Asian Paints ` 16 per cent. Over the past few years, a number of policies cum structural change have change the dynamic of the paint industry .The primary reason is the rationalization of the excise duty structure , which has come down to 16 per cent by end 1999 for 40 per cent in 1999 .This ginal increase in price and continuing cost efficacies in sourcing and plant yield will

enable us maintain margin for the entire years .We are very confident of maintaining our margin as well ad holding the price line. He adds. COMPETITIVE ADVANTAGE Asian Paints is one of the few integrated paint companies the country .Apart from pains , it also manufactures phthalic anhydride (PAN) the two raw key material for paints. Over the year the company has build a strong brand equity .The official mascot the little boy Gattu ,created by well known artist RK Laxman , holding a drip. This has not only helped the company significant improve volume offtake but also to concentrate on the manufacturing of three basic colours .With the help of these machines and the basis colours ,dealers can offer over thousand shades with the dealers .This in turn improves the operational efficient by considerably reducing the inventory company. Another focus area for APL is the rural market .With per capita paint consumption at 200 gm , which is much less than 5 kg for developed countries , there exists a huge untapped market . The potential to upgrade the exterior segment from cement paints to exterior emulsions. FINANCIALS Asian Paints continue its impressive performance in the second quarter ended September 2000 by registering a topic holding cost of the

growth of 272.65 crore in the corresponding period last year .Despite a substantial increase in the cost of raw martial during this fiscal the company was able to maintain its operations profile margins to well above 16 per cent . During the quarter , net profile have also leapfrogged by over 27 per cent to RS 23.86 crore in the previous year .It has also been able to maintain its profit margins at around 9 pre cent , well above the industry average of 17 per cent. It enjoy a healthy return on capital employed (ROCE) of over 35 per cent .AT the same time . it return on net worth (RONW) of about 29 per cent is much more than any of its competitors .The company has been consistently notching positive economic value added (EVA)- the difference between the return on capital and the opportunity cost of capital. Asian Paint after its international acquisition spree last year , is now focusing more on the domestic market by planning to set up another manufacturing unit , its fifth in India .A final decision on the project will be taken in the forthcoming months . They are yet to decide on the location .But .it will not be anywhere close to their existing four units.

AT the same time , their objective will also be to drive the existing assets to the maximum. About funding the proposed expansion , it would bethought internal accruals, while the company may also look at raising debt. At present the company has four manufacturing units : Bhandup in Mumbai ,Kasna and Patancheru , both in up , and at Ankalshwar in Gujarat .Its Kasna plant , which has resumed operations last week. Analysts point out that Asian Pains could looked at setting the new plant in south India as is does not have presence there , despite the recent construction boom .In eastern India ,its competitors Berger Paints , Shalimar Paints and Jenses & Nicholson already have strong presence .In fact the company is looking at setting up the new plant in a rural or a backward area in order to reap the benefits of the tax sops available , analysts added . Asian Pains would also not why away from acquisitions , they are planning such a move but currently cannot talk on specifics on this topic . Acquisitions and mergers are like marriages whereby both patties have to mutually agree on certain terms and conditions. It is understood that Asian Paint had been negotiation with both Shalimar Paints and J& N for a possible acquisition.

Meanwhile ,Asian PPG ,Asian Paint `s joint venture with the PPG Industries of US for industrial paints , is planning to set up its own plant near pune. Asian Paints has transferred its industrial paints unit to the venture and the company had said it look at setting up its own unit when operations gather momentum.

EMERGING TRENDS AND OPPORTUNITIES

Technology The introduction of tinting machine has significantly changed marketing technology .These machines each costing approximately Rs60 mn are installed at dealer outlets and enable the customer to choose between any of several hundred shades .These are then generated by mixing dyes with the base paint and delivered almost instantly .The two major implications of this machine are: Differentiation on Colour range is reduce: Prior to this technology , a major competitive avenge of a company was the range of colors it offered . For instance , Asian Paints offered almost 150 shades in its synthetic enamel range , unmatched in the industry . This now stand change as almost 2000 shades can be created in seven minutes through these machines. Simplified logistics management : With the machine generating shades instantly ,dealers can now stock only the base material and thus save almost 20-25% in the working capital cycle.

Expansion of Product Profile: The lowering of excise has opened the high volume but low value marker in the semi urban and rural area , which is currently dominated by the unorganized sector. Increased Thrust on Brand Creation And Distribution The increased share of organized sector implies that brand awareness will be a thrust area .Also strong brand are emerging as the most important entry barrier .The opening up of rural markets has also necessitated the expansion of distribution reach.

Dealer Network Asian Paints Goodlass Berger ICI Industry Consolidation

Nos. 14500 7000 5500 4500

The small scale industry is expected to witness a shake out as the share of organized sector increases . Also outsourcing requirements are likely to be reduced as new capacities go onstream in the organized sector .

New Segment Opening Up

With increased industrialization , new segment like auto refinishing market arte likely to expand rapidly .Already companies like ICI have launched specialized brands for this segment . Outlook The industry is expected to grow for the newt five years driven by increasing industrialization and increasing disposable incomes. The per capita consumption is low 0.55 kg. Per annum , as compared to around 4 kg in SE Asian economies and more than n 20 kg in the developed countries .This outlines the untapped potential . The emerging trends in technology and marketing imply that the industry is likely to consolidate over the next few years with the marginal players being wipes out and industry leaders gaining market share .Thus , critical success factors will shift from manufacturing to marketing and distribution. Large international players are likely to either enter India of enhance their presence in India in view of the growing market. Thus joint ventures and strategic alliances will be the order of the day .Indian companies will also need to tie up with international major to have access to the latest technology.

SWOT - ANALYSIS
Strengths: 1. A major change in the consumption pattern within the decorative segment is the preference for water based paints . In India the most widely used paints , till recently , were the solvent based paint even when water based paints are more eco-friendly and easy to use .The government regarded water based paints as a luxury item and consequently taxes on input as well the finished products were kept high thus making them unaffordable to the middle class .While the western would was moving away from solvent based paints for environment reasons ,India was India was in a way primitive the use of these paints .But with duties rationalised and cost and price coming down the most preferred ones are for decorative purposes. 2. Industrial paints ate growing at a much heallthiesr5 rate then decorative segment .The main reason could be the entry of worlds major in the Indian automobile sector .Till recently the only foreign players on the Indian passenger car market was the Japanese giant , Suzuki Motors .However , today there are at least six global cat major operating in India. Korean major , Daewoo ; French car manufactures , Peugeot ; the German auto giant ; Mercedes and Opel and the American Ford , are

here to stay having set up base despite some initial wrangles over export obligation .And , this setting up of bases necessarily implicates towards their needs for industrial paint which they will be procuring from domestic marker , because otherwise it will be that much costlier for them to export it from anywhere else. 3. The way companies operation have also under gone a drastic change more choice for the customer .The shade card game started by Asian Paints some eight years ago with its slogan Mera Wala green, is now being played by mostly all major players. 4. While the customer gets a wide choice and better service the company benefits in two ways .One as stock has to be maintained only in one colour (the base colour , white ) the company saves inventory carrying costs .Second , as the missing is done only on orders the company does not take the risk of stocking pre-mixed colour shads with the dealer which might not get sold at all .All this means financial saving .Also the tends to the most preferred shade can be determined by the company and the production can be carried on accordingly. Weaknesses: A. people would love to have colorful walls , but definitely not dusty floors and oily odorous .Sadly the former is not possible without the latter and it is the paint industry which stand to suffer.

B. It may seem implausible , yet it is true .The inconvenience of painting alone is not the cause for a slowdown in the paints industry .But it certainly adds on to the following socioeconomic factors : 1.Imbalanced consumption pattern- The per capita consumption of pains in India is low 0.32 kg as against 25 kg in the US. Further , the imbalance in consumption takes two forms. First the ratio of pains consumed for decorative and industrial purpose in India is 70 :30 Elsewhere the ratio is diametrically the opposite , s it should be .Thus due to neglect of industrial protective use of paints , India looses over Rs. 4,000 crore on account of corrosion .(Industrial paint are made using red oxide, aluminum , zinc chrome ,bitumen etc. They posses properties like water and electricity resistance and rust prevention and hence are widely used of protection of steel concrete and wood ) Then there is also rural urban imbalance .Paint being dubbed a luxury continue to be increasingly sole in the metropolitan cities and big towns .though pain companies have start to reach out to village a vast rural marker still remains untapped . 2. Primitive technology- The making of paint primarily involve the blending of 300 different item in

various proportions .In most varieties of pains the technology level is not very high .The capital cost per tonne is Fairly low at Rs. 12 crore for 25,000 tonnes . This has enables 2,000 small unit to set up manufacturing facilities and peck away at 50 % of total Indian pains market ,the other 50% is accounted for by 24 units in the organised sector . 3. High cost structure The paints industry is raw material intensive .Nearly 70% of the raw materials are perto base (white spirit, xylene, toluene , butanol etc. ) Another major raw material titanium dioxide , has to be imported in large q2uantities .To top it all is the nearly 36% excise levy (a 6% rise in the latest budget ).The irony is that the government account for nearly 40% of the total paints sold in the country .So industry source argue that every increase in excise means a corresponding higher government outlay on paints. The excise structure reflects the luxury image of paints. 4. Other factors. These include the monsoons and the growth in the housing sector .In fact , monsoons have a dual effect on the industry .On the one hand there is vary little painting work done during the monsoon s. But at the same time, a Good monsoon increases the purchasing power of the framers paving the way for higher sales .

Opportunities: 1. Unlike the decorative paints segment which is expected to grow at a slow rate of 3-4% the demand for industrial paints is rising at an average rate of 10% .Industrial paints have fairly high value addition d require a level of technology which cannot be easily matched by the small sector ,The market leader seem to have taken congnisance of this fact. For instance ,.Asian paints has tie up with Devoe Marine Coating of Us for marine painting .It has also tie up with Nippon paints of Japan for a coil coating and powdered coating .Like wise ,Goodlass Nerolac has allied with Kansai Paint for Sophisticated automotive sector paints s. 2. Stagnant demand combined with intense competition has taken its toll on some small units .A similar shake up is expected in the organized sector too .Hence , he rfitter unit would be better off eyeing takeover targets for expansion rather than going for fresh capacities . 3. India has been a continuous importer of titanium dioxide in spits of enormous reserves of the raw material , ilmenite. Deposits of ilmenite found along the coasts of Kerala ,Tamil Nadu and orissa , are estimated to be around 160 million tones or 12 % of World resources ,.The quality is also reported to be of a higher grade .Thus sooner or later world leaders of titanium dioxide

technology (like Du Pont ) will find it viable to enter into joint ventures with Indian companies .That should reduce cost and selling price and lead to higher sales and profits. 4. Finally , there is immense scope for product innovation liked , in March 1991 ,MRK introduced Vapocure, an industrial process for product abroad is paint s-cement .It is made by adding ceramic compounds to the basic paint material and gives a better Finish to building exteriors. Blend all this with economic stability (leading to control over inflation ) and good monsoons over the next two year (implying overall higher purchasing power ) and the paint industry can rightly dream of tomorrow many shades brighter than today.

Threats: When it comes to technology , the paints industry presents a strange case .The manufacturing process of the final product is so primitive that every that every Tom ,Dick and Harry has mastered its! And , even the technology for only Tom ,Dick knows the major raw material Titanium dioxide(Ti02) and harry! In other words, manufacture of Ti02 is a closely guarded secret of only a handful of players worldwide .The include Du point(USA) ,British Titanium Products Ishihare (Japan) and Kronos (Australia ).Ti01 forms the base whit , for all

paints .It comes in two varieties rutile (used for exteriors ) and antase (preferred for paints used in interiors ) In India there are two unit both in the public sector manufacturing titanium dioxide Kerala Minerals and metals (KMML) and Tavancore Titanium products (TTPL) .Domestic production however is stagnating around16,500 tonne against capacity of 37,000 tonne ,Further ,the quality too leaves a lot to be desire .Hence , imports of Ti02 continue at an increasing rate . Nearly 70% of Ti02 produced /imported in India goes to the pains industry .Major paint manufactures have tried to go in for backward integration into some of the raw material (phthalic anhydride , co-polymers for plastic emulsions etc.) But all effort to make a foray of Ti02 have not met the success. World rather than pass on technology to other i.e. whopping 25 parties hold licensed /letter of intent for Ti02 but none have so far materialize . So as import bill of companies remain on the upbeat , thanks to the huge import billing for Ti02 , the margins continue to take a beating.

LIMITATIONS
The various limitations faced during the marking of the project Companies official were not very co operative in giving out information regarding the marking strategies as well as their immediate M&A plans of their firms. Exact information regarding the marketing strategies specific to past 3 year was not readily available , although general information was available .So even after strong efforts , there maybe certain instances of some missing links in the study , which is regretted. Time and distance constraints were always there which may have affected the report.

CONCLUSION

CONCLUSION Investor , interested in any form of investing, should carefully look at the structure of the paint industry. It has a large unorganized sector , which constitute approximately 40% of the total production of paints .The organised sector comprises of handful of large units. The categorization is important because of the differential in excise duties faced by these two sectors .The differential , however , has narrowing since 1993 and the excise duties between the organized sector is now at 18% (from the highest of 40.25% ). With the narrowing of he differential in excise duties between the organised and unorganised sector, the market share of the organised sector is expected to grow in the future .The small sector will probable start contact manufacturing for the large units or may develop niche markets based on location. The industry can further be divided into two broad segment decorative (architectural ) paints and industrial paints .The decorative segment is the dominant segment, in terms of sheer volume ,in contrast to the developed economies where industrial paints normally have half the market .The decorative paints market can be further be subsumed into emulsions , synthetic enamels , distemper and cement paints. The essence of the small sector is in the easier to evaluate lower-end products such as distempers and cement paints

whereas the middle range enamels and the premium range emulsions are the terrain of the large players. The industrial paints segment comprises of the industrial coating the automotive coating segment .The main growth for the industrial paints market has been the high growth in automotive coating , with the entry of the auto majors (multinationals) resulting in a literal boom in this sector. There are more than 300 input going into the manufacturing process of paints of which 70% are petroleum based .The raw material are Pigments.

BIBLIOGRAPHY

www.google.com

Business Today

A&M

Questionnaire
Q.1 Name the paints you buy? a) Asian Paints b) GoodlassNerolac c) Others Q.2 Place form you buy this paint? a) Market b) Supermarket d) Others c) wholesaler

Q.3 Can your name the leading brand of paints? a) Asian paints C) Others Q.4 Who influence you to buy particular Paints? a) Neighbor b) Ad c) Newspaper & Magazine d) Others Q.5 Please Grade the brandusyou know as per the following characteristics ? (1) Poor 2) Fair 3) good 4) Very Good b)Goodlass Nerolac

Brand Asian Paint Goodlass Nerolac Others

Availabity Brand Pricing Packaging Quality image

Q.6 Assign suitable ranking ( 0-not at all important ;5 most important ) To each of the following service you receive from the supplier based on their importance. Attributes Provision of credit Delivery in small lots Product variety Delivery time Delivered supply Product quality Margins Pricing Others(Please specify) Rank

Q.7 Will you trade in paint brand in the future? Definitely Probably Not sure Probably Definitely not not

Q.8 Name:________________________ Q.9 Occupation :___________________ Q.10 Address:_____________________ ______________________ ______________________ _______________________