IMPACT ON BUDGET
• Market size of the Indian paint industry –Rs 5000crore.While the organize sector accounts for Rs 3500 Crore, the unorganized sector accounts for the balance of rs1500crore.
• In terms of volume, the unorganized sector accounts a major portion of supply.
• Decorative paints and industrial paints accounts for around 70% and 30%of the total demand respectively.
• In decorative paints, enamels accounts for the maximum share followed by wall finishes, primers and wood finishes.
• In industrial paints, while automotive paints accounts for around 30 to 35%.General engineering paints accounts for balance.
• While Asian paints is the market leader in decorative paints, Goodlass Nerolac is the market leader in the industrial paint.
• Raw materials accost account for around 50%of the total cost of production.
• Demand is seasonal. Most of the demand comes during the October to March period.
• Industry is working capital intensive.
• Technology, distribution network, product innovation, service, brand recall, and geographical reach are the key success factor.
Budget paints 2008-09
Given that the growth of the Indian paints industry to a large extent hinges on GDP growth, the performance of the paints industry last year was healthy on the back of a robust growth in the Indian GDP.
Demand especially for decorative paints was strong led by increased construction activity and in the industrial paints business, powder and protective coatings logged in healthy growth rates.
In the next five years, the industry is expected to grow at a CAGR of around 11% to 12% and paint companies are expected to clock strong growth rates backed by capacity additions undertaken by them.
Having said that, rising crude prices will have a major bearing on the operating margins going forward.
Budget measures
• Customs duty exemption to be withdrawn on naphtha for use in the manufacture of polymers in order to correct price distortions and revenue losses.
• Naphtha for use in the manufacture of polymers will be subjected to normal rate of 5%.
• Increased emphasis on Bharat Nirman and improving infrastructure.
Budget Impact
• Reduction in excise duty on small cars, two wheelers and three wheelers will benefit paint companies, as the prices of cars will decline thereby boosting volumes.
• Increased emphasis on bolstering infrastructure in the country is a positive for companies, as it will enhance the performance of powder and protective coatings.
Company Impact
• Reduction in excise duty on small cars, two wheelers and three wheelers will benefit Kansai Nerolac and Asian Paints given their strong presence in the automotive paints segment.
• Emphasis on improving infrastructure such as roads, capital goods and power will be beneficial to Asian Paints, which has been witnessing strong growth in its powder and protective coatings businesses.
• Reduction of duty on import of raw materials used in the paints industry. All raw materials imports to attract a common duty.
Budget 2005-06
Construction of residential complexes having more than twelve residential houses or apartments together with common areas and other appurtenances.
Exemption on tax deductible housing loan to continue. Under the rural development programme, 6 m additional houses to be constructed for the poor.Peak customs duty reduced from 20% to 15% The new income tax brackets, the change in exemption and deductions available to individuals and the increase in exemption for women. IT to generate around 7 m jobs till 2009.
Budget 2006-07
Peak rate of customs duty reduced from 15% to 12.5%. Basic inorganic chemicals reduced from 15% to 10%. Excise duty is being reduced from 24% to 16% on small motor vehicles. Duty to be reduced on major bulk plastics like PVC, LDPE and PP from 10% to 5%; on naphtha for plastics to nil; on styrene, EDC and VCM which are raw materials for plastics to 2%. Emphasis on the Bharat Nirman project and its timely completion.
Budget 2007-08
Hike in allocation for rural and urban housing infrastructure development. Reduction in custom duty on chemicals from 12.5% to 7.5%.Dividend distribution tax to be hiked from 12.5% to 15%.Additional education cess of 1% to fund secondary and higher education.
Key Positives
• Steady growth: The Indian paint industry has very low consumption levels as compared to the other developing economies. While the decorative segment is growing at 1% per annum, the industrial paint segment (led by powder and protective coatings) is also expected to record strong growth rates going forward.
• A mixed bag: A robust housing sector is likely to boost demand in the decorative segment. Long-term growth potential of the auto sector is also a big positive.
• Structural shift: Continuous fall in excise duty in the past has benefited organised players and the impending consolidation will add to the pricing power.
• Capex cycle booster: With investment cycle showing signs of momentum, industrial paint demand could grow at a much higher rate than the last five years.
Key Negatives
• Raw material worries: Since the paint sector is highly raw material intensive, rise in crude and petrochemical prices affects performance and the reliance is unlikely to reduce going forward.
• Monsoon blues: The performance of the decorative division also hinges on rainfall. In the last six years, the country has witnessed three years of poor rainfall, which has impacted paint demand.
• Market size of the Indian paint industry –Rs 5000crore.While the organize sector accounts for Rs 3500 Crore, the unorganized sector accounts for the balance of rs1500crore.
• In terms of volume, the unorganized sector accounts a major portion of supply.
• Decorative paints and industrial paints accounts for around 70% and 30%of the total demand respectively.
• In decorative paints, enamels accounts for the maximum share followed by wall finishes, primers and wood finishes.
• In industrial paints, while automotive paints accounts for around 30 to 35%.General engineering paints accounts for balance.
• While Asian paints is the market leader in decorative paints, Goodlass Nerolac is the market leader in the industrial paint.
• Raw materials accost account for around 50%of the total cost of production.
• Demand is seasonal. Most of the demand comes during the October to March period.
• Industry is working capital intensive.
• Technology, distribution network, product innovation, service, brand recall, and geographical reach are the key success factor.
Budget paints 2008-09
Given that the growth of the Indian paints industry to a large extent hinges on GDP growth, the performance of the paints industry last year was healthy on the back of a robust growth in the Indian GDP.
Demand especially for decorative paints was strong led by increased construction activity and in the industrial paints business, powder and protective coatings logged in healthy growth rates.
In the next five years, the industry is expected to grow at a CAGR of around 11% to 12% and paint companies are expected to clock strong growth rates backed by capacity additions undertaken by them.
Having said that, rising crude prices will have a major bearing on the operating margins going forward.
Budget measures
• Customs duty exemption to be withdrawn on naphtha for use in the manufacture of polymers in order to correct price distortions and revenue losses.
• Naphtha for use in the manufacture of polymers will be subjected to normal rate of 5%.
• Increased emphasis on Bharat Nirman and improving infrastructure.
Budget Impact
• Reduction in excise duty on small cars, two wheelers and three wheelers will benefit paint companies, as the prices of cars will decline thereby boosting volumes.
• Increased emphasis on bolstering infrastructure in the country is a positive for companies, as it will enhance the performance of powder and protective coatings.
Company Impact
• Reduction in excise duty on small cars, two wheelers and three wheelers will benefit Kansai Nerolac and Asian Paints given their strong presence in the automotive paints segment.
• Emphasis on improving infrastructure such as roads, capital goods and power will be beneficial to Asian Paints, which has been witnessing strong growth in its powder and protective coatings businesses.
• Reduction of duty on import of raw materials used in the paints industry. All raw materials imports to attract a common duty.
Budget 2005-06
Construction of residential complexes having more than twelve residential houses or apartments together with common areas and other appurtenances.
Exemption on tax deductible housing loan to continue. Under the rural development programme, 6 m additional houses to be constructed for the poor.Peak customs duty reduced from 20% to 15% The new income tax brackets, the change in exemption and deductions available to individuals and the increase in exemption for women. IT to generate around 7 m jobs till 2009.
Budget 2006-07
Peak rate of customs duty reduced from 15% to 12.5%. Basic inorganic chemicals reduced from 15% to 10%. Excise duty is being reduced from 24% to 16% on small motor vehicles. Duty to be reduced on major bulk plastics like PVC, LDPE and PP from 10% to 5%; on naphtha for plastics to nil; on styrene, EDC and VCM which are raw materials for plastics to 2%. Emphasis on the Bharat Nirman project and its timely completion.
Budget 2007-08
Hike in allocation for rural and urban housing infrastructure development. Reduction in custom duty on chemicals from 12.5% to 7.5%.Dividend distribution tax to be hiked from 12.5% to 15%.Additional education cess of 1% to fund secondary and higher education.
Key Positives
• Steady growth: The Indian paint industry has very low consumption levels as compared to the other developing economies. While the decorative segment is growing at 1% per annum, the industrial paint segment (led by powder and protective coatings) is also expected to record strong growth rates going forward.
• A mixed bag: A robust housing sector is likely to boost demand in the decorative segment. Long-term growth potential of the auto sector is also a big positive.
• Structural shift: Continuous fall in excise duty in the past has benefited organised players and the impending consolidation will add to the pricing power.
• Capex cycle booster: With investment cycle showing signs of momentum, industrial paint demand could grow at a much higher rate than the last five years.
Key Negatives
• Raw material worries: Since the paint sector is highly raw material intensive, rise in crude and petrochemical prices affects performance and the reliance is unlikely to reduce going forward.
• Monsoon blues: The performance of the decorative division also hinges on rainfall. In the last six years, the country has witnessed three years of poor rainfall, which has impacted paint demand.