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    India/Asia Pacific Reports

    COVID’s Impact on the Indian Paint Industry

    ...

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    Yogender Singh, India, Asia-Pacific Correspondent08.10.20
    COVID-19 has been the most disruptive force for the global paint and coating industry in recent memory.

    The Indian paint and coatings industry has seen demand nose-dive in the last four months in an unprecedented manner.

    Although production at most of the paint production units has resumed in a staggered manner, the continuing rising number of cases and falling demand has caused anxiety among the leading paint and coating producers.

    Industry overview

    The Indian paint and coatings industry, which was expected to reach $8 billion in the just concluded financial year 2019-20 (ending March 31, 2020), registered one of the worst performances in recent years.

    Recently announced financial results by the major Indian coatings companies for the period January-March 2020 have painted a grim future for the coming months.

    Considering the fact that only 10 days of lockdown was included in these results, paint producers are jittery about the performance of the first six months (April-September 2020) of the current financial year.

    The ongoing COVID-19 situation has made it very difficult for paint and coatings producers. On July 22, India had nearly 1.24 million cases of COVID-19. Currently, ranked third globally in the number of cases, India’s situation is deteriorating with each passing day. The uncertainty about COVID-19’s spread in India has made businesses and consumers anxious and unsure. There seems to be neither capacity nor appetite for consumption – and in the absence of demand, paint producers have little incentive to ramp up production to pre-COVID-19 levels.

    A study by researchers from the Massachusetts Institute of Technology (MIT) stated that the number of COVID-19 cases recorded per day in India may surge to 287,000 cases per day by early 2021 if a vaccine or treatment isn’t developed soon. India may record the highest number of fresh cases in the world by the end of winter in 2021, according to this study.

    According to Kamdhenu Paints director Saurabh Agarwal, the prospect for the industry is not going to be good for the current year. 

    “The pandemic and lockdown conditions enforced throughout the country has caused huge disruption in the whole production and supply chain of the domestic paint and coatings industry,” he said. “The paint industry is also facing a massive shortage of skilled and unskilled labor lockdown forced a large proportion of workforce to their hometowns.”

    COVID-19’s impact on the industry

    Strict shutdowns have harmed the paint and coatings industry and activities. On March 25, when India had reported only 500 cases, the country went into what was one of the strictest lockdowns in
    the world.
    This first set of curbs remained in place until April 14 and was extended four times, each time with gradual relaxations.

    The country had implemented one of the strictest lockdowns in the world; almost the entire country was shut down for more than 50 days between March 25 and May 17.

    Barring essential services, almost all other commercial and industrial activities were shut down during this period.

    All the paint producers in the country had to suspend manufacturing for more than 30 days. After that, partial production resumed at some of the manufacturing units in phases.

    However, to date, capacity utilization in the Indian paint and coatings industry has remained low.

    “Paint companies witnessed no sales in the month of April. Thus, we anticipate that the April-June quarter could see a de-growth of 15 percent,” said Mahesh S. Anand, president, Indian Paint Association (IPA). “While the paint industry witnessed a loss of revenues for about 35-40 days, manufacturing has resumed now, barring the plants that are in the containment zones. Pre-COVID-19 demand levels in the Indian paint industry may return around the October-November period.

    “Our factory in Sriperumbudur and all our 40 depots have started operations as they are not in containment zones,” added Ananad, who is also president of Decorative Division at Nippon Paints India. “Almost 80 percent of our trade is open with restricted timings as instructed by the government. Logistics are available across districts and states with due approvals. Except for the containment zones, the business has started but not with as much vigor as it was in pre-COVID-19 days.”

    Automotive industry to impact industrial coating segment

    Automotive paint producers have been badly impacted by the lockdown over the last few months.

    The Indian automotive industry registered nil sales in April and first half of May.

    Sales numbers have improved since then, but most automakers fear that the pandemic-induced economic contraction would worsen the situation in the Indian auto industry, which recorded an 18 percent decline in sales in the fiscal year ending March 31, 2020.

    Officials from the Society of Indian Automobile Manufacturers (SIAM) had warned in May that a two percent contraction in the Indian economy would mean up to a 45 percent slump in sales of cars, trucks and motorbikes.

    “We expect to see positive growth only in the next financial year and a return to old sales numbers much later, once workers are brought back, component makers get orders, transport system revives and sales staff close deals,” SIAM president Rajan Wadhera said.

    Performance of Indian paint producers in January-March Quarter

    India’s largest paint and coatings producer, Asian Paints reported net profit falling by 2.1 percent year-on-year to INR 4,619 million ($61.58 million) in the quarter ended March 2020.

    The company’s net sales during the period declined by 7.1 percent to INR 46,360 million ($618 million).

    “The loss of sales due to the lockdown in March impacted the decorative business segment in an otherwise strong quarter with double-digit volume growth in the first two months,” said Amit Syngle, managing director and CEO at Asian Paints. “Even with the loss of sales, the decorative business segment registered double-digit volume growth for the year. The industrial business segment under the automotive coatings and industrial coatings continue to be impacted by the downturn in the automotive industry and the overall slowdown in the economy. A complete shutdown of business in the last few days of March added to the pressure for these businesses. But profitability was well supported by benign raw material prices and cost optimization efforts.”

    India’s second largest paint company, Berger Paints, reported approximately a 6.5 percent fall in its consolidated net profit to INR 1,032 million ($13.76 million) for the fourth quarter ended March 31.
    The total revenue was down eight percent YoY to INR 13,548 million ($180.64 million) during the period.

    “The operations of the group were impacted in the month of March 2020 due to temporary shutdown of all manufacturing units and depots on account of the lockdown announced by the Government of India because of the COVID-19 pandemic,” the company said in a statement filed with the stock exchange. C
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