In recent weeks, two key events have given an interesting picture of the paint industry. Firstly, Reliance is selling its 4.9% stake in Asian Paints. Of course, it has grown 20-fold in the last 17 years, so some profit booking was always on the cards. Secondly, JSW Paints buying out Akzo Nobel India is another pointer to the fact that consolidation in paints sector is happening through inorganic acquisitions. However, both hint at a big underlying shift in the paints industry. 

In the last few years, 3 major business houses in India have entered the paints segment. For a long time, the big-4 in India; Asian Paints, Berger Paints, Akzo Nobel, and Kansai Nerolac dominated a chunk of the market. Now, there is a big churn expected as 3 big conglomerates; Aditya Birla group, JSW Group, and the Pidilite Group have also forayed into the paints segment. While for Birla and JSW, the paints business is a logical sort of extension to their construction and infrastructure business; it is extension of the waterproofing solutions business for the Pidilite group. For all three entrants, there is a huge captive market edge. 

The Indian paints industry, as per recent estimates, is around ₹76,000 crore in terms of total revenues. Out of that, the unorganized segment is around ₹16,000 crore, while the organized segment is around ₹60,000 crore. The expectation is that the 3 new entrants viz. Birla, JSW, and Pidilite will take away a bigger share of the unorganized segment. But, the impact is already being felt by big guns in paints industry, if you look at the quarterly results of Asian Paints. The pressure of competition is impacting the price of paints, and discounts are now a part of the rulebook to gather market share. That has hit margins for existing players in a big way. That is the worry! 

For now, the only clarity is that the unorganized segment will see further depletion of market share. Much of the gains for the new entrants will come from the unorganized segment. Asian Paints and others have spent a lot of time and energy on positioning paints as a branded product. One trend we do foresee is that paints may eventually become an adjunct to a larger function like construction, infrastructure, home maintenance etc. It remains to be seen if Asian Paints and others can still keep their loyal market shares. In this volatile market; leaders emerge and also vanish in a short span of time. This trend could apply to the paints industry also!