Amid increasing competition in the Rs 62,000 crore market, India's second-largest paintmaker, Berger Paints Ltd., has allocated Rs 2,500 crore over the next five years to enhance its market presence and counter the challenge posed by new players, spearheaded by the Aditya Birla Group. Earlier this year, the company inaugurated a state-of-the-art, fully automated manufacturing facility in the Sandila industrial estate near Lucknow, which required an investment of Rs 1,100 crore.
According to Abhijit Roy, the CEO and Managing Director of Berger Paints, the company has already increased its production capacity by 45-50%, reaching approximately 95,000 metric tonnes per month. He mentioned to ICCBizNews that they will not require any additional expenditure this year.
However, based on the growth in sales, Roy believes that an investment of around Rs 2,500 crore will be necessary in the next five years. He explained that they plan to allocate Rs 800 crore each in the coming year and the subsequent year, with the remaining balance spread across the remaining three years.
To defend its position in India's Rs 62,000-crore paints sector, which is experiencing rapid urbanization, Berger Paints, headquartered in Kolkata, is preparing itself. While other companies such as JSW Paints Pvt., JK Cement Ltd., and Astral Ltd. have entered the market, the most formidable challenge comes from Grasim Industries Ltd., a firm under the Aditya Birla Group, aiming to secure the second position.
With a capital expenditure of Rs 10,000 crore, the conglomerate involved in various industries from cement to clothing announced its entry into the paints business last year. They plan to commence production in the fourth quarter of FY24.
However, Abhijit Roy from Berger Paints remains relatively unconcerned. He believes that his company possesses its own advantages to effectively counter the challenge posed by the Birlas.
"In the past, we have witnessed the entry of several global paint manufacturers such as Sherwin Williams Co., Hempel, or Jotun, who aimed to capitalize on growth opportunities in India but were unsuccessful," Roy stated. "Despite possessing the right technology, skilled workforce, and significant financial resources, they could not succeed."
"Now, domestic conglomerates are entering the scene, assuming that they will easily establish a prominent position in the paint industry," Roy remarked. "Nonetheless, we have our own strengths, so it is not a significant concern for us."
The organized market in India is dominated by the country's top five paint companies: Asian Paints, Berger, Kansai Nerolac, Akzo Nobel, and Indigo Paints, collectively holding nearly 92% market share. Berger Paints holds the second position with a market share of 19.5%. Additionally, Berger Paints boasts a robust distribution network consisting of 25,000 dealers and retailers.
Abhijit Roy acknowledged the possibility of slower revenue growth following the entry of the Birlas but did not dismiss it entirely. He stated, "Over the last two decades, we have maintained a compound annual growth rate (CAGR) of 14%... Perhaps, the entry of new players may impact our revenue growth by 2-3%." However, Roy expressed confidence that Berger Paints can improve certain aspects, such as expanding its distribution reach, to achieve reasonable growth.
According to the Indian Paint Association, the paint industry in India is projected to reach Rs 1-lakh crore within five years. Roy mentioned that the demand for decorative paints will be driven by rapid urbanization, while the government's substantial investment in infrastructure will fuel industrial consumption.
Roy emphasized that demand in the paint industry is influenced by two key factors: GDP growth and seasonal variations in weather conditions and festive seasons.
According to Roy, "In the case of a slightly delayed Diwali, as is the situation this year, we anticipate an increase in consumption as people have sufficient time to paint their homes before the festive season."
He further mentioned that the April-June quarter was negatively impacted by untimely rains. "April witnessed strong demand for exterior paints, but it slowed down in May. However, we observed a rebound in June."
Berger Paints is optimistic about achieving double-digit growth in both value and volume during FY24. The company expects improved profitability due to a decline in raw material prices. Roy stated, "If the current situation persists, our operating profit growth is anticipated to exceed the growth in revenue."
