SPMM Assignment on Paint Industry Industry: Paint Industry in India An Overview The paint industry worldwide is classified into 2 segment viz. decorative and industrial segment in India constitutes nearly 70% of the market whereas the scenario is just the reverse in the developed countries. Decorative Segment is dominated by the unorganised sector which now accounts for 70% of the total paint production as against 75% three to four ago. The unorganised sector has an advantage over the organised sector since it is fully exempted from the 20% excise duty and other government levies. Major Players in the Indian Paint Sector Dulux India: Dulux is an internationally available brand of paint. It is produced by AkzoNobel (formerly Imperial Chemical Industries). AkzoNobel India manufactures and markets paints, specialty chemicals and starch. With an employee strength of about 900, AkzoNobel India's manufacturing sites, business and sales offices and distribution network span the length and breadth of the country. Berger Paints: Established in 17th December, 1923, the company then known as Hadfiled's (India) Limited; was a small paint company based in Kolkata having its only manufacturing facility at Howrah, West Bengal to produce ready mixed stiff paints, varnishes and distempers. From a production capacity of 150 tonnes and sales turnover of around Rs. 25 lakhs in 1947, the company has come a long way to become at one point of time; a part of the worldwide BERGER group in 1983 and thereby acquiring its present name Berger Paints India Limited. With seven manufacturing facilities in India and more than 85 depots, several regional & area offices, besides four facilities overseas. It has a workforce of over 2500 employees and a countrywide distribution network of 15000 plus dealers. Nerolac: Kansai Nerolac has been a cherished name in millions of households across the length and breadth of India. The company manufactures a diversified range of products for every surface. It is the second largest coating company in India and the market leader in automotive and powder coating. Nerolac paints as it is known popularly is an established brand in decorative paints. Asian Paints: Asian Paints is India’s largest paint company and Asia’s third largest paint company, with a turnover of Rs 77.06 billion. It is one of the largest paint corporation that operates in 17 countries and has 23 paint manufacturing facilities in the world servicing consumers in over 65 countries. Besides Asian Paints, the group operates around the world through its subsidiaries Berger International Limited, Apco Coatings, SCIB Paints and Taubmans. Industry Outlook: The paint industry has been doing well for the past couple of years. In spite of global economic slowdown the industry is performing well. The Indian paint market has the potential to grow over the decade at 15-20% per annum as the current per capita consumption is much lower as compared to other developing economies. The per capita consumption of paints in India is 1.25 kg against 51.7 kg in Qatar, 38 kg in Singapore or 25.8 kg in the U.S. Even China has a per capita consumption of 2.5 kg and Sri Lanka 3.5 kg. Product category:1. Decorative paints 2. Interior wall paints, Exterior wall paints 3. Wood surface paints, Metals surface paints 4. Industrial coatings, Protective coatings 5. Floor coatings, Road markings 6. Automotive: Body coatings, Plastic coatings 7. Ancillaries etc Brands: Ace & Apex Apcolite, Apex Ultima, Asian Paints, Colour Next, Premium Gloss, Enamel, Royale Play, Touchwood, Tractor Emulsion and Utsav. Raw materials identified: Resins, Orthoxylene, Monomers, and Pigments. Raw Materials used in Manufacture of coating Solvents: - Solvent themselves. constitutes 60% of paint. Asian paints produce the solvent Orthoxylene: - Asian paints consumed 26555 Tonnes of Orthoxylene; the average amount spent per tonne is Rs.54140.Reliance industries Ltd., is the only producers of Orthoxylene. Capacity: 420000 Tonnes per year. The above table shows the production capacity of Reliance Industry which is good enough to meet Asian paints needs and the Cost benefit that Asian Paints could have if a strategic partnership with Reliance Industries is made. Specifications of Raw Materials: Orthoxylene is a colorless liquid, with a characteristic odour. Xylene is used as a solvent and in the printing, rubber, and leather industries. Xylene is used as a feedstock in the production of terephthalic acid, which is a monomer used in the production of polymers. It is also used as a cleaning agent for steel and for silicon wafers and chips, a pesticide, a thinner for paint, and in paints and varnishes. It may be substituted for toluene to thin lacquers where slower drying is desired. It is found in small amounts in airplane fuel and gasoline. Chemical and Mechanical Properties: Term Appearance Purity % Color(Hazen platinum-colalt color No) Standard Transparent liquid without mechanical impurity 99.5 min 20 860-870 Density(20),kg/m3 distillation range initial boiling point final boiling point 5Max 137Min 143Max Acyl washing colorimetric Color of Acid layer is not darker than 1000ml, containing 0.5g Potassium dichromate standard solution Total sulfur content mg/kg ≤ 3 Evaporation residue mg/100ml ≤ Steel test 5 Non-corrosive Item of Analysis Standard acidity (as H+)/(mmol/100g) alkalinity (as OH-)/(mmol/100g) ≤0.025 ≤0.025 ≥99.0% ≤0.1% ≤10 ≤19.0% passes test ≤0.001% ≤0.006% assay benzene color,Pt-Co ethyl benzene 'readily carbonizable substances residue upon evaporation sulfur compounds thiophene and its homologue ≤0.0001% toluene water ≤0.1% ≤0.03% Packaging: load. Packaging is done my Drums packing and also supplied through tanker Financial Stability Sales turnover grew at a CAGR of 19% in the last decade which shows a huge growth in business done by the company. The dip in the growth rate was minimal in 08-09 (recession period) displaying robustness and strength in core business of the company. Total assets of the company accumulate to 2, 84,719 Crs and currently the Debt: Equity ratio stands at 0.44 which shows the financial strength of the company. Past Performance and Reputation Reliance Industries Limited (RIL) is an Indian conglomerate company headquartered in Mumbai, India. The company operates through three business segments: petrochemicals, refining, and oil and gas. RIL is the largest publicly traded company in India by market capitalization and second-largest public corporation in India when ranked by revenue. The company is listed on Fortune Global 500 and Forbes Global 2000. In September 2008 Reliance Industries was the only Indian firm featured in the Forbes's list of world's 100 most respected companies. Quality RIL has a very good quality control system, they have won many awards for their quality control practices; a few awards are Institute of Engineers' 'Safety Innovation Award' for the year 2010, "Distinguished" award at the "24thAnnual National Convention on Quality Concepts" (NCQC - 2010) and so on. Most manufacturing divisions have been certified to ISO14001:2004 certification of Environmental Management Systems and OHSAS18001:2007 certification of Safety Management Systems Resins:Asian paints produce synthetic resins where as they partially buy the resins like Acrylics, Alkyds, Epoxies and Polyesters. Among the above suppliers the least selling price per tonne of resins is Rs. 1, 42,556(Cibatul Ltd.,), whereas the amount spend per tonne of resin by Asian paints is only Rs.67, 347. This indicates either Asian paints partially produce the Resins or/and they have a good procurement strategy for Resins. Among the given leat of suppliers, Atul ltd has the highest Production capacity. Specifications of Raw Materials: Paint includes either synthetic or natural resins such as cement, alkyds, acrylics, vinylacrylics, vinyl acetate/ethylene (VAE), polyurethanes, polyesters, melamine resins, epoxy, or oils. Acrylics and Melamine resins are largely used in paints Chemical and Mechanical Properties of Acrylics resins: 1. Thermosetting acrylic resin 2. High hardness, good overall performance 3. Used in Car Paint\Furniture Paint Characteristics 1. Functional Group number is 6 with high hardness and good abrasion resistance. 2. Excellent anti-yellowing and fast reaction speed. 3. This product isn’t the main part of the UV curing coating; it has to be mixed with other resin according to a certain proportion. It aims at improving the hardness and abrasion resistance of the film in a large scale. At the same time improving the curing speed. Product category: Thermosetting acrylic resin Product characteristics: High gloss hardness performance High Good overall for gloss polyester furniture paint and flooring Usage: Employed paint; Automotive paint, and motorcycle paint; Technical index: Appearance: Color (Pt-Co): Sold content (%): Viscosity s, 25°C (Gardner): Acid value (mgKOH/g) Hydroxy value (Supply) (mgKOH/g) Solvent: Water white Or light yellow transparent liquid ≤45 65±1 50-80 ≤10 85.8±3.3 Xylene, Butyl Acetate Packaging: It is done using large drums, bags and super sacks. Melamine Resins: Melamine is a good chemicals widely used in resin, plastic, paint, paper, textile, leather, electrical, pharmaceutical and other industries. The main Uses of the Melamine are the following aspects: Decorative panel, paint: Molding powder: Paper: Fabric finishing agents, leather tanning Run agent, glazing agent and waterproof agent, rubber adhesive, flame accelerant, efficient cement water reducer, steel diluted agent. Chemical and Mechanical Properties of Acrylics resins: Grade: 99.8 Appearance: White powder MELAMINE 99.8% Physical Properties: Density: 1.573 Melting point: 354°C Water-soluble: 3 g/L (20°C) Test Purity wt. %,≥ Moisture wt. % ≤ Ash wt. % ≤ kaolin turbidity degree ≤ PH Value Specification 99.8 0.1 0.03 20 7.5-9.5 Coloruity (PT-Co)through degree ≤ 20 Appearance White Powder Packaging: It is done by bags and sacks. Production Capacity: Production capacity of Atul Ltd is 18850 tonnes per year which is appx 75% of what is required by Asian Paints. Financial stability: Sales turnover grew at a CAGR of 11% in the last 5 years shows a considerable growth by the company compared to industry standards. Recession of 08-09 had literally no effect in the sales or the profitability of the company which shows the strength the company has in its sector. The company has net current assets of 385 crs and debt to equity ratio of 0.4 which is decent enough when compared to its peers. We feel the company is financially strong to handle turbulances in the economy. Past Performance and Reputation: Atul Limited is a member of the Lalbhai Group, one of the oldest business houses in India. Today, Atul is one of India's largest integrated chemical companies, with a turnover of Rs1, 500 crore. The Company is rated among the top five global producers in several niche chemicals; it serves a number of industries in India, as well as around the world, in the fields of aerospace, automobiles, agriculture, construction, fragrance and flavours, and paper and textiles. It utilises world-class technology and R&D facilities and has consistently contributed to the progress and development of the country by developing resources and capabilities in key industrial segments. Has received 2007 Rajiv Gandhi Memorial National Award for Excellence in Indian Industries and 2005 Rajiv Ratna National Best Pollution Control Gold Award in Chemical Division. This speaks of the reputation the company holds in the chemical industry in India. Quality: Plants are ISO 9000 and ISO 14000 certification. They have adopted good manufacturing practices like Zero Discharge Concept, Adoption of Clean Development Mechanism, Change of Technology - Replacement of Mercury by Membrane Cells Pigments:There are many Pigments producer in India but most of them do not have the production capacity as required by Asian Paints. Given below is the table having list of all the Pigment manufacturers. Production Capacity Only Micro Inks Ltd has the production capacity which can meet the requirement of Asian Paints. Micro Ink is only utilizing 10.2% of its capacity. Specifications of Raw Materials: Organic pigment used in paint 1. Organic pigment 2. Pigment yellow 75 3. Organic pigment for paint Chemical and Mechanical Properties: Itern Name Index NO. Main Properties Physical Data Density Oil Absorption Light Fastness Heat Resistance Water Resistance Fastness Properties Oil Resistance Acid Resistance Alkali Resistance Alcohol Resistance Sheetfed heatset Offset Inks Coldset Metal deco UV NC Water base Liquid Inks PVB PA Pub Gravure HR-highly recommended R-Recommended LS-Limit suitability HR R pigment YELLOW RX C.I.P.Y.75 Good Flow 1.3-1.5 40-70 3 160 5 5 4-5 4 4 R R HR LS HR Packaging: It is done by bags and sacks. Financial Stability The company has grown with a CAGR of 10% in the last 6 years which is relatively a strong performance in the sector. There is a drop in the current assets of the company which is due to heavy investments in expansion of the firm. Thanks to strong internal accruals over the past few years, the debt-equity ratio progressively declined to a low of 0.3 times at the end of '07. However, since Micro Ink is heavily dependent on export revenues, the rising rupee has impacted its bottom-line. The company does look financially stable and a good supplier to tie up with for the longer term. Past performance and reputation Micro Inks is Rs 1,200-crore Company and manufactures various kinds of inks, pigments, intermediates and enamels. It is the largest integrated player in the segment and sells the complete range of inks and intermediates in India and over 70 countries. Initially promoted by the Bilakhia group, Micro Inks was acquired by Germany-based Huber group two years ago. While the Huber group holds over 70% in Micro Inks, the original promoter has now just over 4% equity in the company. Quality Micro Inks ltd is certified with Quality management system ISO 9001:2008 and Environmental management system ISO 14001:2004.Their quality culture is based on deep insights and rigid internal discipline Meghmani Organics Ltd. is another big producer of pigments of pigments. Production Capacity Its production capacity is 24420 tonnes per year which is only 10% of the total requirement of Asian Paints. Financial stability In the last year 2011, the company has made a considerable growth in the top line but a big dip in the bottom line numbers. Probably the competition in pigment supplier is eating up into the margins of this firm. May be a temporary dip as the company seems to be fundamentally strong and has good reputation in the market. Past Performance and Reputation Meghmani Organics Limited is a leading manufacturer of pigment and pesticide products in the country and is the recipient of several prestigious awards in recognition of its outstanding business performance. Sound fundamentals, outstanding export performance, strong presence in the domestic market and a focused management team has seen Meghmani Organics Limited grow at a compounded annual growth rate (CAGR) of 17% and profits 10% over the past 3 years. Quality ISO 9001-2000 certified for the achievement of quality assurance in production, purchasing, marketing and distribution. Consistently won awards for milestones done in export, quality standards should be very good to have a high export volume. Monomers:- Main producers of Monomers are Gujarat state fertilizers & chemicals Ltd., and Jubilant Life Sciences Ltd, Asian paints require monomers in excess of 35000 tonnes .If we see the above table Gujarat state fertilizers & chemicals Ltd do not have the capacity to meet this requirement also their selling price is Rs. 122164 which is higher than the present sourcing price of monomers of Asian paint (Rs.109765.) From the Asian paints point of view they are spending the highest price per tonne on monomers compared to all other raw materials also there are only 2 main suppliers of monomers , which put monomers has a bottleneck item for the Asian paints. The monomer suppliers like Jubilant Life Sciences Ltd. who have very high capacity but not producing (may be because of lesser need and demand) can be strategically used by Asian paints to fulfil their monomers requirement. This gives them the supply quantity they need also strategic partnership and high volume sale will bring down the price. In a way it will help Asian paints to move monomers from bottleneck item to leverage item. Some trend analysis of Gujarat State Fertilizers & Chemicals ltd Production Capacity Gujarat state fertilizers & chemicals Ltd do not have the capacity to meet this requirement. Specifications of Raw Materials: Chemical and Mechanical Properties: 1. Low viscosity liquid monomer 2. Offers fast cure response 3. Low volatility during free radical polymerization Chemical Name: Characteristic: Molecular Weight: Appearance: Trimethylolpropane Triacrylate Low Volatility, Low Viscosity, Fast Curing, Weather Ability, Chemical&Water Resistance, Abrasion Resistance, Heat Resistance 296.3 Clear liquid CAS No. 15625-89-5 Color (APHA): ≤60 Viscosity(cps, 80-120 25°C): Moisture (%): ≤0.2 Acid Value ≤0.5 (mgKOH/g): Inhibitor(ppm): ≤400 Application: Coating, inks, adhesives, etc. Packaging: Packed in heavy bags, plastic sheets and bags. Financial Stability The company CAGR of the last 5 years is around 8% which is well below the industry average. The top line had been hit hard in the recession years taking almost a 30% hit on the sales which show that the company is vulnerable to downturns in the economy. The current assets of the company stands tall at 2355 crs and debt to equity ratio is 0.14 which shows that the company is in a strong position financially. Being a government run firm makes it a safe supplier to collaborate with for long term business. Past Performance and Reputation The company based out of Vadodara in the state of Gujarat manufactures fertilizers, plastics, nylons, fibres, industrial gases and varied chemicals including urea, ammonia, ammonium sulfate, sulfuric acid, phosphoric acid & diammonium phosphate. The core business of the companies is fertilizers. The chemical business forms a small yet significant portion of the top line of the firm. It’s a sizable government firm in the market since 1967. Faces stiff competition from fertilizer giants like Chambal, Coromandel etc. Quality Many of its products being ISO 9001 certified, GSFCmaintains best quality, superior packaging conforming to the strictest international standards. They have dedicated customer service centre for industrial and agricultural customers. Some trend analysis of Jubilant Life Sciences ltd Production Capacity The monomer suppliers like Jubilant Life Sciences Ltd. who have very high capacity but not producing (may be because of lesser need and demand) can be strategically used by Asian paints to fulfil their monomers requirement. This gives them the supply quantity they need also strategic partnership and high volume sale will bring down the price Financial Stability The top line of the company has grown at a relatively slow pace of CAGR 6% in the last 5 years. The company has shown no or negative growth the last 2-3 years which indicates a stagnation point in the growth of this company. The debt equity ratio stands at 1:1 due to heavy investments done into R&D services in the recent years. Financially the company seems to be stretched and one needs to be a little careful in doing business with it. Past Performance and Reputation Jubilant Life Sciences Limited, an integrated pharmaceutical and life sciences company, is the largest Custom Research and Manufacturing Services (CRAMS) player and a leading Drug Discovery and Development Solution (DDDS) provider out of India. Recently it has been ranked at No. 6 position amongst the Top 10 Global contract manufacturing & services outsourcing players of the pharmaceutical industry. The Company provides Life Science Products and Services across the value chain, serving its customers globally with its ground presence in India, North America, Europe and China. The Company is well recognised as a ‘Partner of Choice’ by leading life sciences companies worldwide. Quality The company allocates resources to proactively adopt and implement manufacturing processes to increase its adherence to environmental quality standards and enhance to international safety levels. The company is following ISO 14001 & OHSAS 18001 system for effective Environment, Health and Safety management.