Despite a slowing economy, paint companies are so optimistic about prospects in the Indian market that they are set to increase their capacities 50-70% in the coming years. Divyendu Pundhir, MD of Akzo Refinish Division, says the company is looking to increase its capacity 1.75 times by the end of 2014.
“We’re looking at hiking capacity of our units in Hyderabad, Mysore, Gwalior, Mumbai and Bangalore.” Similarly, Nerolac and Berger are going in for capacity addition, reports said. Berger Paints had announced that it is setting up a 3.20 lakh tonne plant at Hindupur in Andhra Pradesh, which will more than double its existing capacity of 2.50 lakh tonne.
The first phase of the Berger expansion will be complete by the first quarter of the next fiscal and will add 80,000 tonne to its existing capacity. On its part, Nerolac is confident that two new plants would help it to attain the target of tripling its revenue to Rs7,200 crore by the end of the next fiscal (Rs2,731 crore at FY12-end).
The paint companies’ aggressive approach comes on the back of AC Nielsen estimates that the Indian paint market will reach Rs49,545 crore by 2016-17. Going ahead, the per-capita consumption, now at 2.75 kg, is expected to grow to 4 kg by 2016.
But that may be later than sooner. The paint industry’s usual 12-15% growth rate is expected to plummet to 6-9% this fiscal. “Going ahead, the (January-March) quarter will likely continue to remain tough. We expect a growth of only 5-8% in the coming two quarters,” said HM Bharuka, MD, Kansai Nerolac Paints.
Yet, the slowdown does not seem to bother paint players. In order to boost growth, they, like FMCG companies, are looking at premiumisation. For, premium paints command higher margins.
KBS Anand, MD of Asian Paints, said the biggest growth driver for paints is going to be the large middle class in the country and their high propensity to spend.