Quantitative Techniques II Assignment

A detailed analysis on Indian Paint Industry-

“ A PLETHORA OF COLOURS”

SUBMITTED TO- SUBMITTED BY-

1. Harsh Katyan- 21202286
Prof. R.N. Subudhi 2. Rina Niroula- 21202345
3. Akash Pandey- 21202010
KIIT school of management 4. Abhishek Pratap Singh- 21202296
5. Rishabh- 21202059
KIIT University 6. G Vasu- 21202322
7. Avik- 21202332
8. Vedant Mishra- 21202336
 Contents

Particulars Page No.

Acknowledgment 2

Objectives 3

About paint industry in India 4-7

a. Paint industry in FY2020

b. Financial aspect of pain industry over the last decade

About correlation 8

Methodology 9

Data Analysis 10

Observation / Findings 11-13

Future of Paint Industry 14-16

Conclusion 17

Bibliography 18

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Acknowledgement

We would like to take this opportunity to thank

each and every source of inspiration and help which
led us in successful completion of this project.

We would like to thank Prof. Rabi N. Subudhi

Sir, our Quantitative Technique II Professor for
allowing us to do the project activity and also
providing us with all support and guidance
throughout the project and which helped us
complete the project duly.

We would heartily like to thank our team members

for putting in all efforts as a team and contributing
their part at best for the successful completion of
the project.

2
 OBJECTIVES

The purpose of this study is to see if there is a link between sales and several other financial
factors that may influence sales in the Indian paint industry. We will use three independent
variables in this study: Total Expenditure from the previous Financial Year, Total Asset and
Total Liabilities from the previous Financial Year, and Working Capital from the previous
Financial Year, which is current asset minus current liability. The dependent variable, which
is the previous financial year's sales, will next be analyzed to see if there is a correlation
between these factors.

The Indian paint industry has been around for almost a century. It began in 1902 in Kolkata.
Until World War II, the paint business was dominated by tiny manufacturers and two
unfamiliar organizations. Imports were halted following the battle, prompting neighborhood
business visionaries to open assembling offices. Unknown corporations continued to rule
the market.

Initially, the market was dominated by British paint companies such as Jenson and
Nicholson, ICI, Goodlass Walls (known as Goodlass Nerolac), British Paints (known as
Berger Paints), and Blundell as well as Eomite.

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In India's paint and coatings sector, there are currently twelve pieces in the coordinated area
and over 2,000 in the sloppy area. There are two major markets in India's paint business.
mechanical and lovely paints portions While assurance paints are used, mechanical paints
are also used against rust and consumption on steel structures, vehicles, white goods, and
machinery.

Important resources, such as structures, are protected with decorative paints. Outside in the
fresh air the lovely interior divider paints, lacquer and supplementary materials, and wood
wrapping section. The modern section was then summarized by car, powder, and defensive
coatings. The enlivening segment dominated the Indian market, measuring for almost 75
percent of the whole industry, equated to the mechanical section, that accounted for little
more than 25% of the offer. This considerable difference in pie pieces was exacerbated by a
lack of specialized competence and the involvement of coordinated as well as careless
players.

The Indian enrichment business accounts for around 77 percent of all out transactions. The
mechanical sector accounts for 50-70 percent of activity in far-flung countries. The paint,
stains, coatings, and polishes industries are among world's most well-functioning industries.
In recent years, the neighborhood has seen tremendous growth. In 2019, the Wholesale
Value point for paints and stains stayed at 112.7, the uppermost level in the last five years.
The paint industry in India was estimated to be worth more than INR 57 trillion in
2019. Even though being the world's second-major industry, India's paint industry has a face
value of around INR 18 trillion, compared to an ingress value of around INR 39 trillion.

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 Paint Industry in the last financial year 2021-22
In the years 2020 and 2021, the Indian paint industry historically grew by two digits. The
world of paint and coating industry is poised to grow at a healthy rate in the medium to long
term.

The industrial paint category creates a 25% balance in the paint market and covers a wide
range of segments such as automotive, marine, packaging, powder, protective and other
general industrial holes.

The Big Four Painting Industries - Asian Paints, Berger Paints, Kansai Nerolac, and Akzo
Nobel India - make up more than 65% of the paint and coating market and 75% of the
decorative paint market. The industrial sector is very diverse, with the four companies
making up 51% of the total market.

All four major players were able to surpass the pre-COVID sales season (April-September
2019) between April-September 2021. However, it would be too early to say that the Indian
industry is out of control of the fall of COVID-19, a major part of the total demand for
months. six years ago (April-September 2021) due to rising demand for 2020. and the first
three months of this year.

The entry of Grasim Industries and the JSW Group and showing interest in expansion by
two existing medium producers (Indigo Paints and Shalimar Paints) is expected to transform
the power of the Indian paint and coating industry by the end of 2023.

Grasim Industries Ltd, one of the largest commercial companies in the country, announced
its entry into the paint industry in January 2021. Grasim will invest USD 666 million (INR
50 billion) over the next three years with the aim of becoming the second largest. a player in
the paint industry.

5
 Financial Aspects of Indian Paint Industry

Existing economic conditions seem to favor the real estate sector in India. Low
interest rates and high incomes among the people have led to a steady decline in demand for
real estate. Engineers are focused on completing projects and also introducing new ones. As
people are forced to stay home during the Covid-19 epidemic, many feel the urge to
renovate or decorate their houses / apartments. Also, car manufacturers have been
experiencing the demand for two-wheel drive, passenger cars, etc. All of these factors have
ultimately given a great impetus to the paint industry. Companies that supply paint and
coatings are seeing an increase in sales volumes. We have also seen an increase in stock
prices in recent weeks. Let’s take a look at some of the top listed companies that fall under
the paint industry.
Asian Paints
Asian Paints reported a 62% annual increase (YoY) in combined profit to Rs 1,265.35
crore for the quarter ended December (Q3). Operating revenue increased by 25.43% YoY to
Rs 6,886.39 crore over the same period. The home decoration company business has
brought volume growth of more than 30%, led by advanced portfolio and luxury. The
international business Asian Paints also recorded a two-digit volume growth, led by Asia
and the Middle East. With the revitalization of economic activities, the company has been
finding more and more demand for its range of paint and coats from car manufacturers, real
estate developers, etc. Over the past 5 years, the company's revenue has grown at the CAGR
of 6.18%, while the industry average stands at 6.68%. Asian Paints managed to gain a
market share of 63.38%. It continues to demonstrate market dominance by focusing on
research and development and innovation. The price of shares in Asian Paints has risen
more than 56% since the beginning of the current financial year.
Berger Paints India
During the Covid-19 epidemic, Berger Paints reported a 13.55% YoY increase in
combined profits to Rs 221.05 crore for the quarter ended September (Q2). The company
will post its Q3 results soon. Industry experts have estimated that revenue and sales will
reflect significant growth. Over the past 5 years, the company's revenue has grown at an
annual rate of 8.1%, while the industry average stands at 6.68%. It has shown a steady
increase in revenue and profit at the same time. Berger Paints managed to gain a market
share of 19.83%. Since April 2020, the share price of Berger Paints India has increased by
more than 54%.
Kansai Nerolac Paints
Kansai Nerolac Paints reported a decrease of 11.56% YoY on combined profits to Rs
167.96 crore for the quarter ended September (Q2). The retail price of part of Kansai
industrial paint, which provides more than 40% of total revenue, has declined. The company
will still submit its Q3 results. Over the past 5 years, the company's revenue has grown at an
annual rate of 6.81%, while the industry average stands at 6.68%. Kansai Nerolac managed
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to gain a market share of 16.35%. Shares of Kansai Nerolac Paints have risen more than
57% since April 2020.

Akzo Nobel India

During the impact of the Covid-19 epidemic, Akzo Nobel reported a 35% YoY
increase in combined profits to Rs 66.28 crore for the quarter ending December (Q3).
However, operating income decreased by 4.25% to Rs 606.86 crore over the same period.
The company continues to face serious challenges in terms of requirements. Will post Q3
results. Akzo Nobel's revenue and profits have shown a sharp decline since last financial
year. Over the past 5 years, the company's revenue has grown at an annual rate of 0.82%,
while the industry average stands at 3.41%. They managed to acquire a market share of
6.12% in the Special Chemicals sector. Since April 2020, the stock price of Akzo Nobel
India has increased by 10% to date.

The paint industry is currently booming in India. These companies have been able to
meet the needs of individual homeowners through well-defined distribution networks. They
have met a growing demand from the real estate industry. They also invest heavily in
research and development and marketing. Technological advancement in the industry has
contributed greatly to its overall growth. Recently, paint companies reported an increase in
the cost of essential materials. The price of crude oil (the original asset of paint) is rising.
Therefore, a few companies are planning to increase the prices of their paint and adhesive
products in Q4. At the same time, we can see an increase in competition in this particular
industry. Indigo Paints has emerged as a top competitor by reporting strong growth over the
years. The company's shares will be listed on the stock market on February 2. Meanwhile,
Grasim Industries has announced its plans to enter the decorative paint business, a Rs
40,000 crore factory in India. It will invest Rs 5,000 crore over the next three years and look
for second place in the sector (according to market share). Following the announcement, we
saw Grasim stocks rise to 11% (intraday) on Jan 25. Regarding concerns about growing
competition, shares of major paint firms fell between 3% and 6% on the same day. Grasim's
entry is expected to provoke intense price-competition in the paint industry.

7
 Correlation-coefficient

Relationship is a measure of how many moving elements are about one another.
Attributes vary between 1.0 and 1.0. Determined number is significantly more
significant than 1.0 or not - 1.0 suggests an error in the ratio. Relationships of
1.0 shows a positive negative relationship, while a 1.0 relationship indicates a positive
relationship. The correlation of 0.0 does not indicate a direct correlation between the
development of two items.
There are several types of Correlation coefficients, yet the best known is the Pearson
(r) relationship. This creates the force and bearing of a direct relationship between two
objects. It cannot grasp the indirect relationship between the two objects and cannot
distinguish between the needy and the independent.
A rating of 1.0 accuracy methods is a good correlation between these two factors.
With a good extension of one variable, there is moreover a good expansion of the next
variable. A 1.0 rating is a negative relationship between two items. This indicates that
the characteristics go in the opposite direction — in the positive growth of one
variable, there is a decrease in the next variable. In the event that the Relationship
between the two items is 0, there is no direct Relationship between them. Relationship
strength varies in degree to correlation coefficient.
Correlation Coefficient Equation

To calculate Pearson's relationship, one has to determine the combination of the 2

variables mentioned. Next, calculate the standard deviation of each variant. The correlation
coefficient is determined by dividing the covariance by the product of the standard deviation
of 2 variables.

There, r = Pearson coefficient Cov (x, y) = covariance of variables x and y SD of x =

standard deviation of x
SD of y = standard deviation of y .

8
 Research Methodology

Data collection

Data assembly is well-defined as the method of gathering, calculating, and

evaluating precise understanding of study using average authenticated
techniques. Therefore, a researcher can assess their hypothesis based on
gathered data.

Key data can be accumulated in plentiful ways. Nevertheless, the most public
methods are interviews, experiments, self-administered surveys, and field
observation. Initial data accumulation is expensive and time consuming
compared to secondary data accumulation.

In comparison to primary data that is collected firstly, secondary data is

qualitative and quantitative that already exists and was earlier collected by a
different organization, person, or institution for a different objective.

The data collected by us for our project is based on secondary data which was
collected from the financial statements of different paint companies and
from sources that provide the financials of different companies.

Research design

Pearson’s Coefficient of Correlation(r)

After the collection of data, Pearson’s Coefficient of Correlation(r) was used to
find the correlation between the sets of data (sales, total assets/liabilities,
working capital) to establish a relationship between the two sets.
A correlation of:

-1.0 Perfect negative correlation

1.0 Perfect positive correlation
0.0 No linear relationship

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Company Sales Total Total Assets Total Curren Curren Workin
(Rs Cr.) Expenditur (Rs Cr.) liabilities t Asset t g
e (Rs Cr.) (Rs Cr.) (Rs Liabilit Capital
Cr.) y (Rs (Rs Cr.)
Cr.)
Kansai Nerolac
Paints Ltd. 5,279 4,617 4,883 4,883 2,488 917 1,571

Akzo Nobel
India Ltd. - 2,661 2,366 2,325 2,325 1,550 947 603
Dulux Paint
Shalimar
Paints Ltd. 343 381 536 536 193 236 (43)

ASIAN
PAINTS 20,211 16,829 16,154 16,154 7,580 4,380 3,200

BERGER
PAINTS 6,365 5,495 4,905 4,905 2,586 1,706 880
Agsar Paint 0.099 0.024 0.723 0.723 0.156 0.124 0.032

Indigo Paints
624 553 421 421 211 185 26
Sirca Paints
45 38 209 209 156 24 132

Data Analysis

Correlation between sales and total expenditure: 0.9999

Correlation between sales and total asset/liabilities: 0.9989
Correlation between sales and working capital: 0.9682

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Exhibit
Graph 1

Correlation between sales and total expenditure

25,000

20,000

15,000

10,000

5,000

0 1 2 3 4 5 6 7 8 9
(5,000)

Sales(Rs Cr.) Total Expenditure(Rs Cr.)

Graph 2

25,000
Correlation between sales and total assets & liabilities

20,000

15,000

10,000

5,000

-
0 1 2 3 4 5 6 7 8 9
Sales(Rs Cr.) Total Assets(Rs Cr.) Total liabilities(Rs Cr.)
(5,000)

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Graph 3

Correlation between sales and working capital

25,000

20,000

15,000

10,000

5,000

0 1 2 3 4 5 6 7 8 9
(5,000)

Sales(Rs Cr.) Working Capital (Rs Cr.)

12
 Findings

1. From the calculated correlation coefficient value(r) we can see there’s a

strong positive correlation (0.99) between sales and total expenditure and we
can conclude that a higher amount of expenditure of a company in return gives
higher sales. (Refer Graph 1 in Exhibit).
2. The second correlation coefficient value(r) also depicts that there is a strong
positive correlation (0.99) between sales and total asset/liabilities and we can
see that a company having larger assets/liabilities has more amount of sales and
so they are positively related. (Refer Graph 2 in Exhibit)
3. The third correlation coefficient value(r) shows that there is a strong positive
relationship (0.96), slightly lesser than the above two values, between sales and
working capital of a company, as a larger working capital means more
manufacturing and production which in turn fulfills more demand and hence
more sales. (Refer Graph 3 in Exhibit)
4.A company has a positive working capital when its current assets is more than
its current liabilities. Enough working capital makes sure that a company can
cover its short-term liabilities. This shows that the company is doing well
financially. When the company has good financial strength, the company can
have more total expenditure which would lead to better sales.

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 Future of Paint Industry
Paint industry in India is growing at high rates these days and expected to reach next levels.
As the demands for paints is increasing due to urbanization, manufacturers aim at offering
high-quality products in the markets. This will lead to high growth in upcoming years that
will improve the economy to a large extent. Industry experts say that the growth can reach
up to 43% compared to previous year. On the other hand, they also face some challenges
that affect their revenues to a large extent.
The Indian paint industry has two main categories of market-paint industry and decoration.
Although industrial paints are used to protect against corrosion and corrosion in metal
structures, automobiles, white furniture and electrical appliances, decorative paints are used
to protect important materials such as buildings.
The Indian jewelry business has about 77% of its total sales. Overseas 50-70% of business
comes from the industrial sector. The home paint industry is estimated at $ 500 billion and
the decorative paint industry makes up about 75% of this market. The decorative paint
market covers many categories depending on the nature of the area such as exterior wall
paint, interior wall paint, wood, enamel and related products such as primers, putty, etc.
Trends may also change in India, but at a slower pace, favoring industrial paint. Individual
consumption of paint in India by 700 grams compared to 19 kg in the U.S. and 2.7 kg and
5.8 kg in other developing countries such as China and Brazil. Because consumption is
related to purchasing, the low number of Indians is not surprising.

The Indian paint industry has only two main markets compared to other industries. They
include industrial paints and decorative paints that contribute more to India’s economy. On
the other hand, the decorative paint industry is now leading because it has a share of 77%
approximately in total sales. In fact, the exterior and interior emulsions that come under
decorative paints category witnessed high growth rates. Similarly, auto finishes and powder
coatings which fall under industrial paints category have shown a huge growth. However,
the trends are likely to shift in India at a slower pace.

Most paint industries have a nationwide presence that sells products in various locations
across India. At the same time, the unorganized companies are regional that have facilities
in and around their location. The distribution system followed by paint companies primarily
aims at increasing sales in the markets. With liberalization, they expect a high growth in the
markets that will improve the economy to a large extent. There are some painting firms that
want to utilize latest innovations in the production for enhancing high productivity levels.
Moreover, they aim at fulfilling the expectations of suppliers in the markets while selling
their products.

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Within the decorative component, the ratio of exterior paint is 21%, interior emulsions 11%,
distempers 30%, solvent-based paint for its 36% coating and wood finish 2%.
Paint and coatings take up a large portion of the market and are estimated to be the largest
consumer industry growing rapidly. Architectural and decorative clothing involves the
extensive use of pigs in their production. Therefore, the increase in construction activities
and infrastructure in the Asia-Pacific serves as a major driver of the dye and pigment
market. In addition, public-private partnerships (PPP) projects have also been expanded in
the domestic construction sector.

In India, the infrastructure industry has become one of the government's main focus areas.
In the state budget, the construction sector is allocated USD 61.92 billion. The government
intends to boost the construction of buildings in the country, which has decided to come up
with a one-window facility, for immediate approval for construction projects. All of the
above, are expected to drive the global market at the time of forecasting.

This has led to manifold expansion of the industry in the economic space. The paint and
pigment industries have only few major players such as Asian Paints, Berger, ICI, Shalimar,
etc. Most companies offer a wide range of products for decorative paint industry as well as
industry paints. However, some of them working on cutting operational costs to increase
their profits significantly. A recent survey says that the growth rates may increase in future
markets owing to various factors. Not only that m the paint and pigment industries will
provide more jobs in the future with high salaries. This will enable suppliers to sell high-
quality products to customers in the markets.

Which leads to the further progression of this industry as it leads towards the Digitalization;
While digitalization may, upon initial reflection, be associated with smartphones, voice-
driven home-monitoring and search devices, and advanced Internet-based purchasing
systems, in reality, it has begun to pervade all aspects of all activities across all industries.
The paint and coatings sector is no exception. While only a few companies have created
digitalization strategies and established business groups focused on digitalization, most are
addressing digitalization to some degree—to enhance the customer experience (both
consumer and B2B), improve manufacturing processes, and/or introduce new business
models, including new ways of working that previously were not possible.

15
There are "digital themes" that will have a significant impact on the chemical and
development industries, including the paint and textile industry. The first of these themes
includes digital business enterprise, with Industrial Internet of Things (IIoT), automation,
analytics, and practical intelligence enhancing efficiency and productivity, as well as taking
on key operations, including R&D, manufacturing, and supply. chain, to the next level. ”

The second involves "molecular transcendence" and "opportunities to introduce new digital-
enabled offerings, create business models focused on outcomes, and improve customer
engagement." Lastly, the interoperability, flexibility, and connectivity of the new ecosystem
involves greater collaboration and data sharing through a value chain.

Consumers today now turn to digital communication first when looking for a product or
service. “Consumer engagement in digitalization and e-commerce in the paint industry is
stronger than ever and will only grow,” asserts Jonathan Sullivan, digital business executive
and global director of Digital Experience & Commerce with PPG. “Although most
consumers are not ready to buy paint online yet, a lot of research on the paint project took
place online during the inspiration phase. Digital marketing and the use of advanced online
tools for color and product selection continue to play an important role in the architecture
industry.

There is a comprehensive set of tools and technologies used to achieve digital production
within the paint and painting industry. Automated technology, data analytics and
collaborative systems, practical skills and Augmented reality — the list goes on and on.

16
 Conclusion

We are thankful to our Prof. of Quantitative Techniques, Prof. R.N. Subudhi, for
giving us this opportunity to do a research on this wonderful topic which helped us in
gaining a lot of knowledge about the Indian Paint Industry.

By doing this research work, we got to know about the top players in the Indian Paint
market and their Market share along with their performances in the last Fiscal year.
We also used the Correlation coefficient method which helped us in knowing about
the relationship between the sales and expenditure, sales and total asset/liabilities
sales and working capital of a company.

We would also want to take this opportunity to thank each and every one who by any
means helped us in completing this project.

Thank You

17
 Bibliography

1. https://www.moneycontrol.com
2. https://simconblog.wordpress.com/2015/11/15/paint-industry-analysis/
3. https://www.equitymaster.com/research-it/sector-info/paint/Paints-
Sector-Analysis- Report.asp
4. https://www.slideshare.net/sagarkeshri/the-indian-paint-industry
5. https://www.visitbest.in/top-10-paint-companies-in-india/
6. https://www.statista.com/statistics/914573/india-paints-industry-market-
share-by- company/#:~:text=In%202019%2C%20the%20trade
%20value,worth%20approximate ly%2039%20trillion%20rupees.
7. https://indiancompanies.in/top-10-best-paint-company-in-india/
8. https://www.thehindubusinessline.com/economy/sept-results-a-splash-
of-colour-for- major-paint-companies/article33419381.ece
9. https://www.slideshare.net/yugal812/presentation-on-industrial-analysis-
of-paint- industry#:~:text=%EF%82%9E%20The%20market%20for
%20paints,turnover%20of
%20Rs%2096.32%20billion.
10. https://www.investopedia.com/

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