Corporate giants foray into paints biz to cash in on growing demand

According to Indian Paints Association, the paints and coating sector in the country is expected to touch Rs one trillion in next five years, from Rs 62,000 cr currently

Large companies, such as JSW group, Aditya Birla flagship Grasim, and now Pidilite Industries, have announced their foray into the paints market, attracted by the growing demand and the high margins on offer in the business.

The paints and coating sector in the country is expected to touch Rs 1 trillion in five years, according to the Indian Paints Association, and the current size of the industry stands at Rs 62,000 crore.

The association has said the sector has been consistently achieving a double-digit compound annual growth rate for the past few years.

The first large player to announce its entry into the sector was JSW Paints in 2019.  It is part of one of India’s largest conglomerates, the $22-billion JSW group, which has interests in steel, energy, infrastructure, cement and now paint.

Grasim came next. Its subsidiary, UltraTech Cement, is India’s largest cement producer, while another, Aditya Birla Capital, is a leading diversified financial services player.

The January-March quarter saw Pidilite Industries enter into the paints business with its brand Haisha. The latest entrant is present in coatings, stainers, premium distempers, wood finishes, and adhesives. 

Pidilite Industries Managing Director Bharat Puri told Business Standard the company had always been part of the paints business and waterproofing and paints had an overlap.

“We had demand from our dealers, asking for us to give the full range of products because they did not want to buy the remaining products from competitors. We have recently only completed the range of products we are offering and testing those in a few geographies,” said Puri.

JSW Paints has increased its revenue to Rs 1,000 crore and expects its decorative paints revenue to touch Rs 5,000 crore by FY26.

Grasim announced its entry in paints in 2021 and it had then said it would add size, scale, and diversity to its existing business. In giving its October-December results, the company said its overall capex of Rs 505 crore was on acquiring land parcels for the paints business. It had planned an investment of Rs 5,000 crore over the next three years.

It intends to be the second-largest player — after Asian Paints — in the business.

“The capex is also progressing on expected lines with investments of more than Rs 1,800 crore to date. The commercial launch is on schedule in Q4FY24,” Pavan Jain, chief financial officer, told investors after the Q3 results.

Asian Paints holds the lion’s share in the market. Berger Paints and Kansai Nerolac have second and third positions, respectively.

“Demand for paints is very strong and it is a high-growth sector that can accommodate more players. Margins and RoE (return on equity) are also better in the paints business,” said Sachin Bobade, vice-president at brokerage firm Dolat Capital.

While competition has intensified in the segment, so has the fight for market share.

JSW Paints had alleged before the Competition Commission of India (CCI) in 2019 immediately after the launch of its decorative paints business, Asian Paints had targeted dealers/ distributors/ retailers partnering it.

JSW said Asian Paints directed them to stop dealing with JSW and threatened stopping supplies to these dealers. It supposedly asked dealers to remove displays of JSW Paints’ products from their retail shelves and threatened to withdraw discretionary discounts.

However, in 2022, the CCI dismissed the plea. JSW Paints has approached the National Company Law Appellate Tribunal against the CCI order.