Big Shake-Up in the Indian Paint Industry in the Cards

India is one of the most dynamic paint and coatings market globally. Characterized by the emergence of new big-sized players, acquisitions of smaller companies by bigger producers, and greenfield and brownfield expansions by existing producers, the Indian paint and coating industry is undergoing rapid transformation.

Increasing competition in the Indian market has led Dutch paint producer AkzoNobel to plan a partial or full exit from the country. Coatings World analyzes the changing dynamics of the Indian paint and coating industry and AkzoNobel India’s plan to exit the country.

The Indian Paint Industry

The nearly $ 10 billion Indian paint and coating industry is undergoing a transformation and rearrangement phase. Entry of three large-scale producers - Birla, JSW, and Pidilite Industries - in the last few years, scaling up of operations by mid-sized producers, and transformation of a number of small-scale producers into mid-sized producers is expected to change the composition and pecking order of the Indian industry in the short and medium term.

Dominated by four large producers - Asia Paints, Berger Paints, Kansai Nerolac, and AkzoNobel India - for long, the industry is expected to be split at the top among eight large producers in the next two to three years.

Sales revenue of the top four paint and coatings producers during the financial year 2023-24 (1st April 2023- 31st March 2024) are mentioned in the table below.

AkzoNobel India on the Block

In a deal that would mark the country's largest-ever takeover transaction in the paint and coating industry, the Indian subsidiary of Dutch paint producer AkzoNobel is planning to sell its operations in the country. The company has hired Citigroup to manage this transaction.

With one of the most profitable businesses in India, the company’s management in the Netherlands conducted a strategic review of its South Asia businesses in early 2024. Initially, the company planned to partner with a larger peer in the country in the face of rising competition.

“AkzoNobel’s management is weighing the future course and conducting a reassessment,” Rajiv Rajgopal, AkzoNobel India’s chairman and managing director, stated in a press briefing at that time. “We are running a strategic review across various businesses. We are looking at what exactly are the sort of things that we really want to do. The idea is how we can move this company into a winning position given the competitive intensity in the market. And so they're going to look at all options."

Two of the largest business conglomerates in India - Aditya Birla Group and Adani Group - were initially interested in acquiring the company’s Indian operations, but could not finalize their discussions, leading to a shift in potential bidders.

Now, three leading domestic paint producers - Indigo Paints, JSW, and Pidilite Industries - are negotiating with AkzoNobel for a deal with an estimated bid value of $2.1-2.5 billion. If completed, it could be the largest acquisition in the Indian paint industry.

Pidilite Industries has proposed a share swap deal, while others have suggested an all-cash transaction. According to industry stakeholders, Pidilite, Indigo Paints, and JSW Paints are interested in a 74.76% stake in AkzoNobel India.

AkzoNobel India’s established brand Dulux in the decorative segment is the key attraction for the potential acquirers. The company has about a 5-6% share of the Indian paints and coating market and 15-17% of the premium segment.

In November 2024, AkzoNobel India’s management decided to sell some of its immovable properties in India. The company stated in a stock exchange filing, "The board has approved a proposal of monetization by way of sale of company’s immovable property/ies, which is/are having a very limited use/non-productive use for business operations of the company. As and when the company is about to reach a finality on sale of such immovable property/ies by signing the definitive agreement/s, appropriate disclosures to the stock exchanges would be made."

AkzoNobel India

Operating in India under various names since 1954, AkzoNobel India is the fourth-largest paint and coating producer in India. Present both in architectural and industrial segments, AkzoNobel India operates five strategically located plants in the North, Central, Western, and Southern parts of the country.

The company’s Dulux brand in the architectural segment is one of the most recognized brands in the Indian architectural coating industry. In the industrial segment, the company has reputed global brands such as Interpon, International, and Sikkens. The industrial segment contributes to a little more than one-third of sales for AkzoNobel India.

Over the years, it has expanded footprint into adjacent categories of waterproofing, wood care, putty and adhesives. It has strengthened its distribution footprint and reach into the under-served districts of India and tier-3 and 4 cities.

AkzoNobel India has been among the leading investors in capacity and capability expansions in the India paint and coating industry. In the latest expansion in September 2024, the company started commercial production of powder coatings from its Gwalior plant, with an installed production capacity of 5,200 tons per annum, which can be expanded in future.

Cut-Throat Competition and Declining Margins

Demand conditions for the paint industry have been tough during the last two years. In 2024, a severe heat wave and general elections, followed by an extended monsoon, led to muted growth. The entry of three large-sized producers has also added to the competitive intensity, leading to pricing pressure.

A key executive from Berger, India’s second largest paint and coating producer, told CW on the condition of anonymity as he is not allowed to make a press comment on the state of competitors, “The increasing competition, particularly in the architectural segment, which is the mainstay of AkzoNobel India, declining margins, entry of new players including JSW Paints, Grasim Industries, and others, has disrupted the market. These entrants have aggressively expanded capacity, dealer networks, and their distribution networks. These are some of the factors which has forced AkzoNobel India to plan for an exit.”

A few months back, Asian Paints CEO Amit Syngle, India’s largest paint maker, had hinted about the potential acquisition of AkzoNobel's India assets. Syngle had said that in a large industry with some smaller players, there is bound to be some consolidation.