Tell us about how has the paint industry performed in terms of demand growth during H1 2009-10 and how is the industry expected to perform in H2 2009-10
The Rs 12,000 crore paint industry has witnessed 5% growth during the first half of the financial year 2009-10. This is in comparison to 14% to 15% growth the sector has been recording over the past two decades mainly triggered by increased real estate development, construction activity and growth in the industrial sector. This clearly shows that even during the recessionary period, the industry was not severely affected and has in fact one of the fastest turnarounds from the recessionary phase. With the economy showing distinct signs of revival and also pick up in demand from user industries like auto, steel, petrochemicals, power, the industry is expected to grow by 10% to 15% in H2 2009-10.
How has Shalimar Paints performed during H1 and how is the company expected to perform during the second half
Shalimar Paints has in the last three decades achieved an average growth of 16%. Since the period, the company is strong in industrial paints segment which includes corrosion protection, general industrial liquid paint, packaging form and marine coating and created niche market for itself.
Even during the recessionary period in 2008-09, we have been able to achieve a growth of over 8%. In the first half of 2009-10, while the net sales have shown a marginal increase of 3%, the profit before tax has increased by 56% due to better product mix. Of the Rs 12,000 crore paint market, 70% is the architectural coatings market and the remaining 30% comprises of the industrial sector. With the demand from real estate and construction apart from user industries coming back, we hope to grow by about 20% to 25% during H2 2009-10.
How will the company achieve its objective
We have recently launched a second research and development (R&D) centre in Nashik to enable the company to carry out R&D on new and innovative technologies for the coating industry and also introduce more environment friendly coatings, which are next generation coatings. They include, lead-free, chrome-free paints, fire-retardant coating, coil coating and energy saving coatings. The company has its first existing R&D unit based in Howrah. In order to meet the rising demand for paints from the South and West, we are planning to increase our dealer network by an additional 25% soon, from the current base of 5,000 dealers across India.
Tell us about the new corporate plans the company has charted out
The launch of our R&D in Nashik coincides with our plans we are charting out to hike production of our installed capacities by about 25% in our existing three manufacturing facilities based each in West Bengal, Nashik in Maharashtra and Delhi. Further, we are planning to set up fourth manufacturing facility in Gumudipoondi in Chennai with an annual capacity of 24,000 kl manufacturing both architectural and industrial coatings. The plant is expected to commence the commercial production in December 2010.
Amidst the economy revival, what are the major challenges Shalimar paints hopes to face
One of the major challenges will be to help facilitate the innovative product needs for JVs through new R&D facility in Nashik, that matches up with the global standards. Also, motivating demand from user industries for raw material is another challenge in a scenario where the US, Europe, Germany-based paint companies sees more business scope in Indian market. This is because, currently, India has 550 gm as per capita consumption (PCC) of paints, per annum. In comparison, China has 21 kg PCC and the US has 24 kg PCC of paints.
Is the company planning to enter into joint venture with any international firms
Yes, there are certain US, Europe-based huge paint manufacturing companies planning to foray into the Indian market due to weak demand witnessed in those countries for paints amidst recessionary trend. We are currently talking to them for entering into a JV with us in order to provide innovative technological product support.