Growth Drivers of Paint Industry

1. Urbanization and family nuclearization: A high rate of urbanization—34.9% in 2020 compared to

25.6% in 1990—indicates a demand for housing. Also, by 2030, 40% of Indians are anticipated to live
in metropolitan regions. Demand for housing was driven by nuclear families. A rise in mortgages is
another sign of industry demand for real estate. Rising real estate demand merely translated into
rising paint demand.

2. Growing demand from rural residents: Over time, rural residents have become more aware of the
need for paint in homes. The actors in the paint sector are also paying attention to rural regions'
demands. Products including emulsions, putty, and distempers have seen an increase in demand
that is developing more quickly.

3. Shortening of the painting cycle: Painting is often done during the holiday and wedding seasons.
Indicators of growing income levels include new building and home purchases. Increasing income
levels also make it possible to repaint. From 7-8 years in 2010, the time between re-painting cycles
has been cut to 4.5 years in 2019.

4. Government Initiatives: The government's housing for all/affordable housing initiatives have
assisted the need for new painting and will continue to aid the demand for repainting. Pradhan Plans
like the Mantri Awas Yojana and the Smart City Mission concentrate on building affordable homes
for a sizable middle-class and lower-income population.

5. Innovation in distribution channels by the companies: Market participants are concentrating on

strengthening network to delve deeper into markets throughout India. Distribution facilities and
distributors are multiplying. By strengthening their supply chain networks, the enterprises are able
to shorten lead times.

6. Innovation, improvement, and expansion in the premium product segment: Technological

development has produced value-added and environmentally friendly items that are replacing
traditional goods, such as solvent-based paints with water-based paints. Rising income levels and the
aesthetically conscious nature of consumers in Tier 1, Tier 2, and metro areas drive up demand for
high-end goods. There have been several paint firms that have introduced products with health-
related advantages, including APNT's Royale Health Shield (anti-bacterial) and Royale Atmos (anti-
pollution, air-purifying), BRGR's Silk Breathe Easy (anti-bacterial, anti-pollution), and KNPL's
Impressions Environment Clean (anti-bacterial, fungal resistant).
PESTEL Analysis

An effective approach for assessing the external factors that may have an impact on the operations
of a new paint firm in India is a PESTLE study. Below is a synopsis of each of the elements:

1. Politics: A sizable democracy, a degree of political stability, a strong legal system, and a
decrease in excise and custom duties on raw materials and finished goods define India's
political and legal environment. The market is predicted to increase at a CAGR of 11–12%,
with the paints category experiencing rising growth. The price of titanium dioxide has
decreased as a result of the customs tax cut, allowing businesses to report higher profits. The
government should continue to stimulate investment in the housing sector through tax
breaks and legislation requiring exterior painting of all structures once every three to five
years as the demand for housing is anticipated to rise in the upcoming fiscal year. These
actions will not only help the sector, but also result in ongoing losses.

2. Economic: The Indian paints sector has a market size of Rs 170 billion and is fragmented. In
2009, the industry grew by 179% to 18% in value terms, but 9% in volume terms, the lowest
in the last five years. The growth in topline for the top three players was not as strong as in
the past, but is expected to grow at 1 5 times to 2 times GDP growth rate in the next five
years. The demand for paints is dependent on general economic conditions, such as overall
economic growth, agricultural growth, and the performance of related industries. In India,
the growth rate of the coating industry is 15 to 2 times the rate of GDP, and 70% of paints are
used in construction. Customers are demanding products superior to the traditional low-cost
coating, branded products, and greater choice, leading to an increase in demand for
economy finishes.

3. Social: The most important details in this text are that making home is an important matter
for Indian common man, and that the decorative paint is highly connected to the consumer.
This is due to the characteristics of the Indian social environment, such as a large middle
class, major changes in life style, both parent working, nuclear families, and leisure activities.
Additionally, the Paint Industry is committed towards its obligations in this respect, and
Research and Development is being directed towards water-based products with lower
consumption of petroleum solvent. Government should consider giving substantial benefits
 for expenditure on this account and reducing levies on sales of such paints. Indian paints
Association is also co-operating effectively with the Bureau of Indian standards in the matter
of Standards for Eco-friendly paints.

4. Technological: The term "technological environment" describes how a shift in technology will
impact how an industry operates. Although there has been some technological advancement
in the paint industry, the key advancements have been in the linkage of the distribution
channels and the creation of shades. Technology has undergone a revolution with the
development of tinting machines. The introduction of a tinting machine shortens the time
needed to introduce a new product. In comparison to today, the introduction of a new
product would have taken around six months in the past. The effects of industry-related
technological breakthroughs are referred to as technological factors. The paint sector is
becoming increasingly mechanized, which might boost productivity and save costs. New
technologies are also being developed to produce new kinds of paints with distinctive
qualities, which can set apart new paint businesses from their rivals.

5. Legal: While discussing legal aspects, we're talking about how rules and regulations affect
the market. Environmental protection, safety, and labelling laws and regulations apply to the
paint sector in India. Apart from that, existing paint brands may be protected by intellectual
property regulations. The industry will be well affected by the laws present in the country
and being formulated, such as, Pollution control Law, Environmental Law, Health and Safety
Law and Anti-Discrimination Law.

6. Environmental: When we talk about environmental variables, we mean how they affect the
industry. New paint businesses will need to be aware of environmental restrictions and
endeavour to produce environmentally friendly products because the paint sector has the
potential to be a substantial source of pollution. Paint industry being a one which is fully
reliant on chemicals, need to opt for green and sustainable procedures, starting from their
raw materials to resources to the by-products released into the atmosphere.

In conclusion, the influence of political, economic, sociocultural, technical, legal, and environmental
aspects on the industry should be taken into account in a PESTLE study of a new paint firm in India.
The new paint business may create plans that take advantage of chances and reduce dangers by
comprehending these external aspects.
SWOT ANALYSIS OF PAINT INDUSTRY

Strengths 
a) The value of brand reputation in putting up obstacles to entry
b) Strong technology backup

Weaknesses
a) Lack of raw materials
b) Large working capital requirements
c) Real estate in a depression stage.

Opportunities
a) Fiscal incentives offered by the government
b) Shift from the commodity market segment to FMCG
c) Increase in household disposable income.

Threats
a) The emergence of foreign firms as lone actors
b) The progress of Nano-technology might render the Paint industry helpless, due to their
dependency on digitization and the overall much better output.
PORTER’S FIVE FORCES MODEL

Threat of new potential competitors and market entrants: A few number of businesses
dominate the Indian paint market, making it difficult for anyone just joining the sector to compete.
Though large businesses benefit from economies of scale, they have trouble competing locally due to
the high working capital requirements. Large players have a strong sense of brand identity, high-
quality products, and effective marketing strategies.

Supplier negotiating power: The Indian paint industry is a raw material-intensive sector, with
more than 300 products used in the production of the finished goods. There are numerous
categories of raw materials, including pigments, additives, solvents, binders, etc. There is a global
supply shortfall of titanium dioxide, one of the essential pigments required in the manufacture of
paint. The provider of this material therefore has strong negotiating position.

Consumer bargaining power: The major consumers in this industry are households and industrial
users. Builders who buy in bulk and homeowners who paint their homes are the buyers for housing
necessities. Because they have more options, customers are more price sensitive and make their
decisions on quality, pricing, and distinctive elements like weather protection and environmentally
friendly coatings. Industrial businesses have significant revenue but poor profit margins, and their
customers are well-informed about what they require. Customers are therefore effective at price
comparison. The top industrial paint suppliers, however, have their knowledge working in their
favour, which reduces the buying power.

Threat of substitutes: There are very few alternatives available. The traditional paint alternative in
rural areas is lime wash. Wallpaper is one alternate choice for adorning walls that is currently
available. Low buyer substitution tendency. The cost-performance ratio for decorative walls is very
great.

Existing Rivalry: The top Indian paint industry firms have generated almost 80% of the organised
market. Nonetheless, given the market's present growth pace, there is a lot of potential for all the
industry's players to prosper. Although it will take some time for the market to become saturated, at
least one may continue to meet client needs while maintaining a healthy profit margin. Competition
may also result from the existence of the unorganised sector.

Other Factors which affect the paint industry

1. Commodities inflation, the cost of bending crude oil, and the cost of titanium dioxide all
have an impact on the final product's pricing.
2. Automobile industry demand: Variations in the demand for industrial paints are caused by
changes in the demand for automobiles.
3. Danger elements in the paint industry: Prices are impacted by a slowing GDP and rising
crude oil prices. The influence of the season on demand is also present; a prolonged
monsoon season reduces demand for paint.