On an average, home improvement contributes around 2-3 per cent to Asian Paints’ top line every quarter, with the rest coming from its paints business. The company remains the leader in decorative paints, which is the retail end of the paints market. Decorative paints, including both organised and unorganised, constitute 80 per cent of the total market, with industrial paints making up the rest. Asian Paints has around 55 per cent share of the organised decorative market. The latter (organised) is 70 per cent of the decorative market, while the unorganised segment is 30 per cent, said experts.
“A slash in the goods and services tax (GST) in July 2018 by 10 per cent to 18 per cent (from 28 per cent earlier) has also supported growth of Asian Paints in the decorative segment,” Abneesh Roy, senior vice president, research, institutional equities, Edelweiss, said. “We expect strong decorative volumes to sustain in the coming quarters on the back of improving demand and a shift from the unorganised to the organised market,” Roy said.
In recent quarters, competition from players such as Berger, Kansai Nerolac and Nippon Paints has also grown as the organised market gets stronger, said experts. Recently, Asian Paints had admitted that Nippon Paints had become aggressive in Tamil Nadu, forcing the firm to defend market share with attractive pricing and trade promotions. It is doing the same, said experts, in other parts of the country too, especially, in the east and the north, where players such as Berger have a strong presence.
Innovative store formats such as ‘Color Ideas’ and ‘AP Homes’ are also additional growth levers for the company besides capacity augmentation, analysts said.
“Asian Paints is looking to double its manufacturing capacity over the next few years from one million kilo litres per annum now. This will give a push to its decorative paints volume,” said Dhaval Dama, research analyst at Equirus. The company is also adding 3,000 dealers per annum to consolidate its hold in trade channels, said experts. Asian Paints, for the uninitiated, has the largest network of dealers in the decorative market at around 65,000.
This has allowed the firm to improve reach of its products and implement distribution and marketing strategies quickly.