Paint Industry – India February 2015
Executive Summary
Market
The paint industry in India was estimated to be valued at around INR x bn and is expected to attain a CAGR of about xx% to reach INR y bn by 2018 In 2013, decorative paints accounted for about aa% of the overall market The overall decorative paint segment is price sensitive, whereas the industrial paint segment is heavily technology oriented
Challenges
Drivers Drivers & Challenges
Trends
– Growth in Real-estate Construction – Growth in Automotive Industry – Increase in Disposable Income – Increased Government Expenditure on Infrastructure – Growth in Industrial Sector – Low Penetration Color experimentation Customer participation with value added services Environment friendly paint
– Increase in input prices – Stringent environmental regulations
New trademarks and patents flood the sector Increasing demand for emulsions Small size packs Major Players
Competition
Company A
Company B
Company C
Company D
Company E
Company F
PAINT INDUSTRY IN INDIA 2015. PPT
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•Macro Economic Indicators •Introduction •Market Overview •Import-Export
•Drivers & Challenges •Trends
•Competition •Strategic Recommendations
•Appendix PAINT INDUSTRY IN INDIA 2015. PPT
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Economic Indicators (-/-) GDP at Factor Cost: Quarterly INR tn c4 b4 a4
15 14 d1 c1 13 b1
c3 b3 a3
d2 c2 b2 a2
12 a1 11 Q1
Q2 2010-11
2011-12
Q3 2013-14
2012-13
Q4
Inflation Rate: Monthly
% 2.0
p
1.5
s q
1.0
t r
0.5 0.0
Jun 2013 - Jul 2013
Jul 2013 - Aug 2013
Aug 2013 - Sep 2013
Sep 2013 - Oct 2013
PAINT INDUSTRY IN INDIA 2015. PPT
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Indian paints industry has been successful in registering double digit growth figures Paints Industry India – Overview • The Indian paints market is poised to grow at a steady CAGR of about xx% during 2013 – 18, wherein the decorative paints segment will continue to dominate the overall market Currently, about x% of the overall market is dominated by the decorative paints segment, wherein the demand for such paints mainly arises from household paintings, architectural and other display purposes – The demand curve reaches its peak during the festive season in India
The remaining market comprises mainly of the industrial paints, wherein the demand comes mostly from automotive engineering and consumer durable segments
• The overall decorative paint segment is price sensitive, whereas the industrial paint segment is heavily technology oriented
Paints Industry India – Segmentation (2013)
Paints Industry India – Market Size INR bn
600 500 400
a6
X
a1
a2
a3
XX
a5 a4
YY
X
300 200 Y
100 0 2013
2014e
2015e
2016e
2017e
2018e PAINT INDUSTRY IN INDIA 2015. PPT
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Paint Industry – Supply Chain Major Inputs
•X
Major Products
End User
Decorative Products: XX • XX • XX • XX • XX
•X
Industrial Products: XX
• XX • XX • XX • XX
•X
PAINT INDUSTRY IN INDIA 2015. PPT
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Sales and distribution channels that organizations have established towards maximizing revenues X
Modern Retail Format
Dealers
• XX • XX • XX • XX • XX • XX
• XX • XX • XX • XX • XX • XX
XX
PAINT INDUSTRY IN INDIA 2015. PPT
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Indian Paint Industry – Exports & Imports Paints Industry India – Imports 2010 - 2011
E D C
2011 - 2012
2012 - 2013
a4
b4
a3
b3
2013 - 2014
HS Code
Total Import – Last 4 years (INR bn)
c4 c3
XX
XX
c2
XX
XX
XX
XX
HS Code
Total Export– Last 4 years (INR bn)
XX
XX
XX
XX
XX
XX
B
a2
A
a1
b1
c1
HS Code XX
HS Code XX
HS Code XX
b2
0%
Paints Industry India – Exports 2010 - 2011
E D C B A
2011 - 2012
2012 - 2013
a4 a3
b4 b3
a2
b2
2013 - 2014
c4 c3 c2
a1
b1
c1
HS Code XX
HS Code XX
HS Code XX
0%
PAINT INDUSTRY IN INDIA 2015. PPT
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Boom in Indian real estate sector, specifically housing, has been a key driver for growth of decorative paint Growth in Real - estate Construction
Impact
• XX • XX • XX • XX • XX • XX • XX
Real - estate Market – Size & Growth
Real - estate Market – Segregation
INR tn a6
C
Real-estate
X
a5 a4
Residential
Commercial
B a1
• XX • XX • XX
• XX • XX • XX
a2
a3
A
0 2013 PAINT INDUSTRY IN INDIA 2015. PPT
2014e
2015e
2016e
2017e
2018e 9
Increased spending by government on infrastructure provides a fillip to paint sector Increased Government Expenditure on Infrastructure
Impact
• Post 2014 general elections, there has been a solid stabilization political scenario, which in turn has initiated the roll out of an array of infrastructural projects across the country • With more Government spending on infrastructure and higher manufacturing activities, paint industry is expected to be uplifted Growth in infrastructure activities would refer to more demand for industrial paints
• Furthermore, the decision of encouraging the adoption of public private partnership based models for the ongoing projects is expected to drive faster completion of the projects
Government Investment – Infrastructure Sector INR tn XX
D x
• • • • • • • • •
y
C B A
XX XX XX XX XX XX XX XX XX
0.0 2013-2014
2014-2015 PAINT INDUSTRY IN INDIA 2015. PPT
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Environmental regulations pose as a deterrent to this market
SAMPLE
Stringent Environmental Regulations
Impact
• There are certain environmental regulations that govern the paint sector in India • In India, there are some agencies that conduct standard and quality checks regularly to determine whether standards are being met by the players or not Some such environmental agencies include the Ministry of Environment and Forests, Central Pollution Control Board, National Referral Centre on Lead Poisoning, and other state government agencies – Various companies in this segment need to comply with the set standards in order to remain in business and be competitive
National Referral Centre for Lead Poisoning in India (NRCLPI) •X
Concerns
Bureau of Indian Standards (BIS) •X Department of Industrial Promotion and Policy (DIPP) •X
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Colour is the most expressive option of personalizing one’s home and giving it an individualized touch
SAMPLE
Colour experimentation • Consumers look to develop a unique identity and have shown interest in experimenting with colours This is forcing paint companies to look at new colors and different finishes
• Recent trends show that conservative paints make way for unique preferences
Exclusivity drives color preferences
Emulsion paints for interiors are being preferred more than distempers For exteriors, emulsion based coatings are preferred against conventional cement based coatings
• With continuous lookout for superior quality as well as diversified products, consumers are switching to marginally higher priced emulsions with higher durability and wider range of colors • Geography, fashion and home architecture primarily determines color preferences in India XX
• AA • AA • AA
XX
• BB • BB • BB
XX
• CC • CC • CC
PAINT INDUSTRY IN INDIA 2015. PPT
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In a bid to garner high revenues, players are turning towards water based paints
SAMPLE
Increasing demand for emulsions • Major players are seen to shift their focus towards emulsions with a view to expand operating margins in the future • Demand for emulsions continue to outnumber enamels and distempers as water based paint is not only a high growth category but also generates higher margins compared to solvent based paints
X
X
Emulsions to overpower enamels and primers
X
X
X
X
XX
PAINT INDUSTRY IN INDIA 2015. PPT
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Porter’s Five Forces Analysis
SAMPLE Impact XX Threat of New Entrants •X
Impact XX
Bargaining Power of Suppliers •X
Impact XX
Competitive Rivalry
Impact XX
Bargaining Power of Buyers •X
•X
Impact XX Threat of Substitutes •X
PAINT INDUSTRY IN INDIA 2015. PPT
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Competitive Benchmarking (-/-)
SAMPLE
Public Trading Comparables (FY 2014)
Company A
Company B
Company C
Market Capitalization (INR mn)
XX
XX
XX
Share Price (INR)
XX
XX
XX
EV/EBITDA (x)
XX
XX
XX
EV/Revenue (x)
XX
XX
XX
PE Ratio
XX
XX
XX
Note: Top 3 Public companies based on the revenue; Market Capitalization and Share Price is as on 27/10/2014; PE Ratio is as on 5/11/2014
PAINT INDUSTRY IN INDIA 2015. PPT
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Competitive Benchmarking (-/-)
SAMPLE
Key Ratios of Top 3 Companies – Operational Basis (FY 2014) (1/4) Gross Margin
%
a1
D
Operating Margin
Net Margin
b1 c1
C B
a2
A
a3
b2
b3
c2
c3
0 Company A
Company B
Company C
• XX • XX • XX
• XX
PAINT INDUSTRY IN INDIA 2015. PPT
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Public: Domestic Company – Company A (1/5) Company Information Corporate Address
XX
Tel No.
XX
Fax No.
XX
Website
XX
Year of Incorporation
XX
Ticker Symbol
XX
Stock Exchange
XX
SAMPLE
Offices and Centres – India
Gurgaon
Products and Services
Head Office
Category
Products/Services
XX
XX
Key People
XX
XX
Name
Designation
XX
XX
XX
XX
XX
XX
PAINT INDUSTRY IN INDIA 2015. PPT
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Public: Domestic Company – Company A (2/5)
SAMPLE
Financial Snapshot Total Income
INR bn 30
20 10
Net Profit/Loss
INR bn
1.5
2.2
2.0
1.8
Key Ratios
3
2 13.1
22.7
26.1
25.0
0
1 0
2011
2012
2013
2014
Financial Summary • The company earned a net profit of INR 1.5 bn in FY 2014, as compared to net profit of INR 2.2 bn in FY 2013 • The company reported total income of INR 26.1 bn in FY 2014, as compared to INR 25 bn in FY 2013 • The company earned an operating margin of 6.01% in FY 2014, a decrease of 0.10 percentage points over FY 2013
Particulars
y-o-y change (2014-13)
2014
2013
2012
-0.10
6.01%
6.11%
6.43%
9.42%
-2.99
5.75%
8.74%
8.89%
13.49%
-3.37
7.79%
11.15%
10.85%
16.79%
-2.08
17.72%
19.80%
14.00%
16.18%
3.83
16.66%
12.83%
9.56%
10.59%
20.46
61.92%
41.45%
15.35%
13.55%
1.07
7.70%
6.63%
6.61%
8.01%
-3.75
29.43%
33.18%
39.32%
78.84%
0.37
93.46%
93.10%
92.60%
88.66%
0.28
25.23%
24.96%
25.48%
29.90%
-0.34
0.02%
0.36%
0.15%
0.07%
2011
Profitability Ratios Operating Margin Net Margin Profit Before Tax Margin Return on Equity Return on Capital Employed Return on Working Capital Return on Assets Return on Fixed Assets
Cost Ratios Operating costs (% of Sales) Administration costs (% of Sales) Interest costs (% of Sales)
Liquidity Ratios Current Ratio Cash Ratio
-7.50%
1.23
1.33
2.39
3.42
-31.02%
0.64
0.93
1.58
2.70
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
1269.1%
261.50
19.10
48.63
154.13
Leverage Ratios Debt to Equity Ratio Debt to Capital Ratio Interest Coverage Ratio
Key Financial Performance Indicators Indicators Market Capitalization (INR mn) Total Enterprise Value (INR mn) EPS (INR)* PE Ratio (Absolute)*
Value (27/10/2014) 63,106.2 56,598.2 36.55 35.15
Efficiency Ratios Fixed Asset Turnover Asset Turnover Current Asset Turnover Working Capital Turnover Capital Employed Turnover
-6.33%
4.50
4.81
5.31
6.95
22.60%
1.18
0.96
0.89
0.71
19.05%
1.78
1.49
1.21
0.85
57.73%
9.47
6.01
2.07
1.19
41.37%
2.83
2.00
1.37
1.00
Improved
*: Data corresponds to 05/11/2014 PAINT INDUSTRY IN INDIA 2015. PPT
Decline
18
Public: Domestic Company – Company A (3/5)
SAMPLE
Key Business Segments Coatings
Key Geographic Segments
Others
India
Outside India
100%
100% 50%
98%
96%
96%
96%
50%
100%
97%
96%
98%
0%
2%
4%
4%
4%
0%
0%
3%
4%
2%
2011
2012
2013
2014
2011
2012
2013
2014
Business Highlights (1/2) Description
News
Overview
• XX • XX • XX • XX • XX
PAINT INDUSTRY IN INDIA 2015. PPT
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Public: Domestic Company – Company A (4/5)
SAMPLE
Business Highlights (2/2) Description
News
Product Portfolio
• XX
Prior Investors
• XX
Current and Pending Subsidiaries/ Investments
• XX
PAINT INDUSTRY IN INDIA 2015. PPT
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Public: Domestic Company – Company A (5/5)
SAMPLE • XX
• XX
S
W
Strength
Weakness
O
T
Opportunity
Threat
• XX
• XX
PAINT INDUSTRY IN INDIA 2015. PPT
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Private: Domestic Company – Company B(1/5) Company Information
Corporate Address
XX
Tel No.
XX
Fax No.
XX
Website
XX
Year of Incorporation
XX
SAMPLE
Offices and Centres – India
Mumbai
Products and Services
Head Office
Category
Products/Services
XX
XX
Key People
XX
XX
Name
Designation
XX
XX
XX
XX
XX
XX
PAINT INDUSTRY IN INDIA 2015. PPT
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Private: Domestic Company – Company B (2/5) Shareholders of the Company Name Jotun AS
SAMPLE Ownership Structure
No. of Shares held
Foreign Holdings
136,181,668
Jotun Powder Coatings AS Total
6,860,000 143,041,668
100.00%
Note: Shareholding pattern as on AGM dated 29th Sep 2013 PAINT INDUSTRY IN INDIA 2015. PPT
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Private: Domestic Company – Company B (3/5)
SAMPLE
Financial Snapshot Total Income
INR mn 4,000 2,000
Key Ratios
-238.4 2,572.6
-410.2
Net Profit/Loss -461.9
INR mn
-526.6
0
-200 3,053.7
2,929.4
2,964.0
0
-400 -600
2011
2012
2013
2014
Financial Summary
Particulars
y-o-y change (2013-12)
2013
2012
2011
2010
-0.05
-10.03%
-9.99%
-5.46%
-1.21%
-2.00
-17.77%
-15.77%
-13.43%
-9.27%
-2.68
-8.33%
-5.65%
-5.19%
-1.00%
Profitability Ratios Operating Margin Net Margin Profit Before Tax Margin Return on Equity Return on Capital Employed Return on Working Capital Return on Assets Return on Fixed Assets
7.96
-47.79%
-55.75%
-86.95%
-27.04%
-0.46
-12.22%
-11.75%
-7.68%
-1.78%
5.14
-26.10%
-31.24%
-60.47%
-5.55%
-0.19
-9.20%
-9.00%
-5.47%
-1.27%
4.70
-36.49%
-41.20%
-23.25%
-4.34%
-0.23
110.21%
110.44%
105.48% 101.22%
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
20.02%
1.93
1.61
1.14
1.48
13.87%
0.37
0.32
0.03
0.15
-39.67%
1.21
2.00
3.60
0.99
-17.96%
0.55
0.67
0.78
0.50
N.A.
N.A.
N.A.
N.A.
N.A.
-9.41%
3.58
3.95
4.25
3.57
4.45%
0.90
0.86
1.00
1.04
8.84%
1.23
1.13
1.33
1.49
-14.57%
2.56
2.99
11.04
4.57
-21.83%
2.64
3.38
6.46
2.91
Cost Ratios
• The company incurred a net profit of negative INR 526.6 mn in FY 2014, as compared to net profit of negative INR 461.9 mn in FY 2013 • The company reported total income of INR 2964 mn in FY 2014, as compared to INR 2929.4 mn in FY 2013 • The company earned an operating margin of negative 10.03% in FY 2014, a decrease of 0.05 percentage points over FY 2013 • The company reported debt to equity ratio of 1.21 in FY 2014, as compared to 2 in FY 2013
Operating costs (% of Sales) Administration costs (% of Sales) Interest costs (% of Sales)
Liquidity Ratios Current Ratio Cash Ratio
Leverage Ratios Debt to Equity Ratio Debt to Capital Ratio Interest Coverage Ratio
Efficiency Ratios Fixed Asset Turnover Asset Turnover Current Asset Turnover Working Capital Turnover Capital Employed Turnover
Improved
PAINT INDUSTRY IN INDIA 2015. PPT
Decline
24
Private: Domestic Company – Company B (4/5)
SAMPLE
Business Highlights Description
News
Overview
XX
Extended Product Segments
XX
PAINT INDUSTRY IN INDIA 2015. PPT
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Private: Domestic Company – Company B (5/5)
SAMPLE
XX
XX
S
W
Strength
Weakness
O
T
Opportunity
Threat
XX
XX
PAINT INDUSTRY IN INDIA 2015. PPT
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