Paint Sector Watch: Players Growing Faster Than Demand, Say Industry Insiders

The paint sector is experiencing some challenge as production and the number of players are growing faster than demand, according to Ashok Kumar Gupta, former managing director of Shalimar Paints Ltd. This observation comes amid the recent merger between JSW Paints Ltd. and Akzo Nobel. Abhijit Roy, chief executive officer and managing director of Berger Paints, echoed similar sentiments saying the industry is seeing consolidation.

"Demand is growing at 6-7% year-on-year, though it was growing at a much larger pace of 10-12% earlier. So, demand is growing. Only thing is production and players are growing much faster," Gupta said.

He pointed out that the entry of new players like Birla Opus and JSW has led to overcrowding and overcapacity issues.

Roy commented on the impact of the JSW and Akzo Nobel merger on their company. "The deal does not mean much for our company as both the companies have been in the market for years now—JSW for 6-7 years, Akzo Nobel for 70-80 years.

However, when there is a change in ownership, there can be a potential change in the style of functioning to some extent, he said. "Overall, the industry just gets consolidated into fewer players, that's it."

Regarding the potential for a pricing war, Roy noted, "The industry is very competitive, pricing is an issue which has been there on the table for a long time. Each company has its own pricing policy and they play according to that strategy."

He emphasised Berger Paints' approach, saying the firm has always maintained the stance of growing profitably. "We will not go down the path of playing the pricing game to gain market share. Our market share gain is coupled with profitability growth."

The merger between JSW Paints and Akzo Nobel was formalised through a Share Purchase Agreement signed on June 27. JSW Paints has entered into an SPA with Akzo Nobel's promoters, Imperial Chemical Industries Ltd. and Akzo Nobel Coatings International B.V., who hold 50.46% and 24.30% of the company's shares, respectively.

The share purchase pact is valued at Rs 9,403 crore. The agreement stipulates that these promoters will sell their entire shareholding to JSW Paints, subject to the terms and conditions outlined in the SPA.