The prices of paints largely depend on the price of raw material. There are around 300 odd recycleables required for the making of paints. The major raw-products are titanium dioxide, phthalic anhydride and peutarithrithol. These constitute around 50 percent to total expense. Titanium dioxide only contributes 30 percent to the price. The other raw materials like linseed, castor, soyabean oils, etc. add up to the complete raw material expense of 70 percent of total cost. So, the prices of paints are incredibly much dependent on raw materials and any fluctuations in the price of raw materials will consume the margin of the business.
Nearly 30% of the 300 recycleables are petroleum founded derivatives. So, any modification in crude oil prices will lead to change in the costs of recycleables. From last 2-3 years, there were lot of fluctuations in crude oil prices due to which margins of the color companies got struck. The pressure even more increased because of recession and now there after reduction in consumption.
Cyclical nature of attractive paints
The demand of ornamental paints is usually cyclical in characteristics i.e. it does increase for a period, then simply decreases and after certain time frame it again increases so showing cyclical pattern. It happens because persons generally have their residences white-wash during festive months. Also, once houses get painted, then it requires a white wash after 4-5 years.
The demand is definitely influenced by monsoon likewise. When there is a good monsoon, then there is an upsurge in agricultural and professional output. It has a positive effect on disposable income with persons and hence a good demand. If the monsoon is not good, then the demand will get damaged especially in decorative paints segment.
The majority of paints produced in India contain a big amount of business lead, mercury and chromium. These factors are extremely hazardous in nature and may pose a threat to health of humans. Now the policies have become very strict and so companies are required to develop newer manufacturing processes so as to produce paints with a minimal volume of VOC (volatile organic compound) and little aromatic content. Also, the content of lead, chromium and mercury should be very less therefore making the paint eco safe.
Import plans – The import guidelines plays a very significant role in identifying the prices of paints because around 30% of the recycleables has to be imported from overseas countries. So, any transformation in import tax regime will have a direct effect on the costing.
Exchange rate – Because the major raw materials are imported, any motion in rupee-dollar prices is very critical and hence need to be closely looked. For instance, whenever rupee depreciates against dollar, the buyer must shelve out additional money.
Supply chain – The paint industry requires a lot of working capital as the manufacturer must buy 300 raw materials and from different suppliers. So, the company that includes a very robust vendor and distribution network will generally benefit from it.
Technology advancements – the paint industry is highly technology intensive due to which small players find it very difficult to purchase newer technologies and thus succumb to competition from overseas companies. Huge players have tied up with foreign companies and they are still dominant in the market.
In India, the per capita intake of paints is very low as compared with other developed countries. Therefore, there is a lot of growth potential for paint companies. The key areas where Indian Color Businesses can leverage their progress potential are:
Around 70% of the full total population of India resides in rural areas and the rural sector contributes just 10-15% of the full total consumption of paints. Therefore, there is a big growth probable in rural industry. In rural areas, there are various households who’ve disposable income but distribution network is not set up. Also, in this season, improvement in agriculture and allied sectors, coupled with good monsoon has upgraded the demands. Also, the various government schemes have improved the wages of rural persons. the sector can increase its income from rural market by introducing low cost paints and coatings. Also, the companies must increase advertising budget for rural areas coupled with developing distribution network.
In India, quick industrialization is taking place as a result of liberal policies and enormous foreign expense in India. India is now an commercial hub for automobiles, customer durables and different other sectors. With the rapid development, demand of Industrial coatings will continue increasing.
At present, the talk about of commercial paints is 35-40% which has a potential to touch 50% in couple of years. Also, because of large investments in steel, vitality, refinery sectors, the revenue of high performance coatings and coil coatings is usually increasing.
Real estate sector
India is usually registering a constant GDP expansion of around 7.5% to 9% after there was a slowdown in overall economy two years back. Now the real estate sector is definitely booming with large investments in housing sector and development sector. There is a rapid increase in sales of ornamental paints and architecture paints and it’ll continue in future. As well, the customer choice in buying paints can be moving towards drinking water paints due to environmental issues.
South Parts of asia and Developed economies
Indian paints employ a good marketplace in USA, UK and European countries. With the recessionary steps considered and the revival of global economy, the exports will revive and can steadily move around in upward direction.
Also, the various other avenues of development are developing economies like Nepal, Bangladesh, Sri Lanka, Pakistan, Bhutan , Mynmmar and Arabian countries like UAE, Egypt, etc.
India as a paint manufacturing hub
The Indian paint industry saw a substantial change in reduction of excise duties, custom tasks which led to reduction in the prices of recycleables. Also, there is a restriction on raising the capability of plant that was removed afterwards by the government. Now, since India offers low-cost labor and different other tax rewards (sponsored by center and states for inclusive progress) , it has a deep potential to become major manufacturing hub of ornamental and industrial paints.
The significant Indian players have previously started taking guidelines in this direction. The sector experienced a whole lot of capacity expansion, joint ventures with international companies, foreign acquisitions and investments in technology within the last decade. Thus, India has become a very viable alternative for establishment of paint manufacturing plants.