Shalimar Paints Its Future With A New Strategy

Updated: Aug 30 2003, 05:30am hrs
What is common to the Rashtrapati Bhavan and Parliament House in New Delhi, the Howrah Bridge in Kolkata and the Royal Palace in Nepal. All these landmark buildings owe their colour to Shalimar Paints. The century-old Rs 160 crore Shalimar Paints Ltd is charting out an aggressive roadmap for growth after lying low for years. With a new professional core management team at its helm, Shalimar is putting in place plans to corner a bigger pie of the Rs 5,500 crore paint market in India.

SL Agarwal, Managing Director, Shalimar Paints
Focus on a stronger supply chain management, production programmed according to market demand, wider array of products and strategic location of manufacturing plants in all four corners of the country are all aimed at taking the competition heads-on and meeting a projected growth of 30 per cent on a year-on-year basis.

Shalimar Paints managing director, Mr SL Agarwal says that Shalimar has now found a new focus as it is fully equipped to make the worlds best quality paints. He points out three positive things that have emerged in the paint industry of late.

Quality of the product, prompt and efficient service standards and relationship with customers. These three clear factors have come up as success points in the paint industry in the last five years and that is where we are trying to perfect ourselves. These factors are actually the result of globalisation, Mr Agarwal says.

The Road Ahead
The organised paint industry is growing at 15-17 per cent annually. Shalimar hopes that if this impressive run continues, the company will be able to climb up two notches (Shalimar is currently ranked fifth with a marketshare of 4.5 per cent) and become the third largest paint maker in the country in the next 3-4 years. This would largely come from the decorative segment and growth in rural and semi-urban markets. According to Mr Agarwal, the growth will be powered by Shalimars strong investment in R&D and a growing awareness, especially in the semi-urban and rural markets, that painting houses once in five years saves on cost in repair. We estimate our growth to be faster than industrys growth in the next 3-4 years. The decorative paints market will be a major growth area for us, says Mr Agarwal.

Shalimar is also banking on a spurt in its road-marking paints business as the countrys expressway and highway projects are on. Shalimar claims that it is the sole maker of road marking paints in the organised sector and its product is superior to the ones manufactured by the small scale industries since the marker dries remarkably fast, a critical requirement for painting on roads. Shalimar claims that its hot melting road paints technology dries the paint in record five minutes whereas the products made by competition takes at least 15 minutes to dry.

The company is also mulling the idea of a re-entry into automotive paints and is currently in talks with major auto-makers in the country. According to Mr Agarwal, the automotive paints market in India is estimated at Rs 700 crore. Shalimar had made a foray into manufacturing automotive paints in the late 1970s and early 80s when it was the sole paint supplier for Rover cars sold in India. It also had a unique tie-up with auto maker Standard Herald at the time.

Were catering to almost all the paint sectors now except the automotive paints. Earlier, when we had a tie-up with Rover, we were in the original finish segment. This time we wish to cater to both the original finish as well as the re-finished market with our automotive paints, Mr Agarwal said. However, the automotive paint business currently offers a stiff competition with the presence of several multinationals like Kansai of Japan which has a technical collaboration with paint maker Goodlass Nerolac and PPG of USA with a joint-venture with domestic paint giant, Asian Paints. Kolkata-based Berger Paints has also made a foray into the sector recently.

To put Shalimar Paints on a more sound footing, the company has been eyeing acquisitions of new plants across the country. Shalimar has recently acquired American Paints plant at Sikandrabad in UP. American Paints, which was originally set up in technical collaboration with Sherwin Williams of USA, the worlds largest architectural coating manufacturing company, will give Shalimar higher capacities. With an installed capacity of 400 kilo litre (KL) a month, Shalimar is planning to rev up production in the plant to 1,000 KL a month by end-2003. Shalimars other two manufacturing facilities are located in Nashik and Howrah.

With manufacturing plants now located in North, East and Western part of the country, Shalimar is eyeing southern India to set up a plant which will provide a strategic advantage.

We are looking for a facility in the south which we may either acquire or set up a greenfield project on our own, Mr Agarwal says. According to Mr Agarwal, a greenfield project will require an investment of about Rs 20 crore that will be funded by the companys own resources.

New Products
In an effort to offer a wider choice to customers, Shalimar has begun a colour tinting service called Color Space which gives customers a wider choice of colour shades. The service is actually a new generation machine that uses computerised support to mix and match imported colourants with high quality bases. Shalimar is currently importing the colourants from Degussa Coatings of Australia, with which it has a technical tie-up.

The company has also embarked upon a new initiative to organise painters meet in rural areas in an effort to drive sales. The Painters meet is organised to advise the common man which we do through our dealers. We call 70-80 dealers at a place and conduct a workshop telling them how regular painting of buildings helps in saving costs on repair. This is a continuous practice but of late we are going more to the villages with these workshops, Mr Agarwal says.

Future Plans
Shalimar is also readying the pitch to shift its headquarters to Mumbai from Kolkata. According to Mr Agarwal, the shift will help Shalimar in establishing better business contacts. As of now, Shalimar has a strong presence in both industrial and decorative paints businesses. The company, however, believes that the decorative paints business will be a key driver for its growth in the future. Of its total production of 38,000 KL a month, the company currently produces 65 per cent decorative paints in which it has a marketshare of six per cent.

Despite maintaining low key for years, Shalimar has been quite a familiar when it comes to advertising. In the current fiscal, the company has raised its adspend to Rs 3.5 crore, from Rs two crore earlier. Shalimars TV commercial was nominated as one of the best five TV commercials produced during 2001 at the Calcutta Ad Club Awards Nite.

Shalimar has also launched a slew of new products to intensify its presence in the market. These include Shaktimaan an water thinnable acrylic emulsion coating for exterior walls; Roadcoat its retroreflective road marking paint; Magic Acrylic Wall Putty for smooth surface preparation and Heart Brand gold size putty for glass panels and window panes. The company hopes to intensify its production.

Shalimar Paints began its journey in 1902 when two British entrepreneurs AN Turner and AC Wright set up Shalimar Paints Colour & Varnish Ltd on the banks of river Hooghly, located close to the Botanical Gardens in Howrah. In 1928, Pinchin Johnson & Associates of UK bought control from the British entrepreneurs and made it a part of their marine division called the Rod Hand Composition Co and Shalimar was elevated to a multinational status. In 1963, management control of Shalimar again changed hands and this time Turner Morisson & Co stepped in. The company was named Shalimar Paints Ltd.

In 1964, International Paints acquired Rod Hand Composition Co and Shalimar became a part of the behemoth Courtalds Group of US with a 40 per cent holding while another 20 per cent was held by the Mehtas of Jardine Henderson.

In 1972 Shalimar went to the Indian public for the first time and foreign capital was limited to 60 per cent. During 1985-90, Courtaulds equity shares was sold to Mr SS Jhunjhunwala of Hong Kongs Delta Nominees and OP Jindal of the Jindal Group acquired 20 per cent in Shalimar buying it out from the Mehtas of Jardine Henderson. Currently, the Jindals and Jhunjhunwalas hold 31.5 per cent each in the company while FIs hold 16.5 per cent. The rest belongs to the public.

The countrys oldest paint company has traversed a long journey. With a number five position in the organised sector it has also made a mark for itself. It, however, needs to be seen how it achieves a 30 per cent growth it is aiming at. Also how it makes a comeback in the auto segment and achieves a dominant role in the decorative segment.