Asian PPG Story
Following the economic liberalisation in 1991 and the gradual weakening of the license raj, a number of Indian and multinational car companies launched their operations in India. Since then, automotive component and automobile manufacturing growth has accelerated to meet growing domestic and export demands.
The automotive coatings market is currently bifurcated into OEMs and auto refinishes, and it is one of the fastest growing sub sectors in the Indian Industrial paint markets. The OEM market is the most predominant one, where the action has been remarkable in the last decade and half with almost all the major automobile companies setting up manufacturing operations in India. The refinishing paint system includes coating systems for passenger cars, commercial vehicles and two-wheeler markets. This market has been demanding exacting coatings for their end products. This has prompted the Indian paint manufacturers to join hands with international paint companies to provide quality coatings. The demand for automotive paints is closely correlated to the growth of the industry in particular and economy in general.
Being a strong player in the Industrial segment, Asian Paints Limited felt the need to combine state-of-art-technology with its nation-wide distribution network. Incidentally, PPG Industries, Inc. of USA, the largest producer and supplier of automotive coatings to major global car manufacturers, was also looking for a partner to venture into India.
Thus, a 50-50 joint venture took place between these two giants, leading to the creation of Asian PPG Industries Limited (Asian PPG). Incorporated on 19th February 1997, Asian PPG's strategy has been to offer better value through closely tailoring its offerings to customer requirements and providing superior service. A combination of expertise and skills garnered from the parent companies and learnings created from within has equipped Asian PPG with the wherewithal to create integrated solutions in addressing consumer needs.
Asian PPG is engaged in the business of manufacturing and marketing automotive and industrial paints. The synergy between the parents helped Asian PPG commence its operations for CED in the month of August 1997. The rest of OEM business was transferred from Asian Paints in October 1997.
In the first year of operation (year ended 31st March 1998), Asian PPG recorded a sale of Rs. 118.76 million. In the year 2009-10, the consolidated sale was Rs. 4903.94 million – CAGR of 36.3% since inception.
In refinishes, the business of Asian Paints was transferred to the company in August 1999. In the auto-refinish segment, Asian PPG's brands include 2K Nexa, Deltron GRS, Bilux, and Aspa. 2K Nexa and Deltron GRS are PPG Industries' international brands in high-end polyurethane paints.
In 2001-02, Asian PPG launched a new economy polyurethane system in the refinish market under the brand name of Bilux. The various ancillary products offered to refinish customers were brought under the 'Autobasic' umbrella brand to facilitate better recognition and communication.
In 2001-02, Asian PPG received an award for 'overall performance' from Hyundai Motor India Limited. In 2006-07, Bilux, Asian PPG's economy PU offering in the refinish market, saw yet another year of impressive growth making it the largest selling brand in its category.
Previously, the company depended on Asian Paints for its entire requirements, but with the acquisition of the Chennai-based Faaber Paints Private Limited (Faber Paints) in August 2006, it now produces paints in-house. With the commissioning of its new manufacturing facility in Chennai in March 2008, reliance on Asian Paints for manufacturing reduced further.
In March 2007, with the acquisition of the advanced refinish 2K business from ICI India Ltd. (ICI India), Asian PPG became the leader in the premium refinish segment.
Asian PPG is the second-largest player in industrial automotive paints and market leader in auto-refinish segment.
Established player, supported by strong clientele
Asian PPG is the second-largest player in the automotive OEM paint segment with a market share of 24% percent. Asian PPG is one of the largest suppliers of paints to the Indian venture of Hyundai Motor India, General Motors India and it is the sole supplier to New Holland Tractors India. Asian PPG is also the leading supplier of acrylic CED coating to leading two-wheeler companies: Hero Honda Motors Ltd., TVS Motor Company, and Bajaj Auto Ltd. In addition to Tata Motors Ltd., the company has other automotive players in its client list: Volkwagen India, Ford India Ltd., Mahindra & Mahindra Ltd., and Honda Motorcycles and Scooters India.
Asian PPG continues to maintain its strong presence in automotive OEM paint segment.
Market leadership in auto refinish segment
Asian PPG became the market leader in the premium segment of the auto refinish business, following the acquisition of advanced refinish 2K business from ICI India in March 2007. It also enjoys market dominance in the alkyds segment, supported by its numerous variants in the segment.
Asian PPG is an established player in polyurethane paints, which is the fastest-growing segment in the auto refinish business. These paints score over conventional paints on price and quality. They are competitively priced vis-à-vis nitro-cellulose paints; although in terms of finish, the two are comparable. Consumers have, therefore, begun to shift from conventional paints to polyurethane paints.
Asian PPG is market leader in auto refinish segment after the acquisition of advanced refinish 2K business from ICI India.
Strong support from parents
Asian PPG is an equal JV between Asian Paints - India’s largest producer of decorative paints and the US-based PPG Industries - a leading supplier of automotive and industrial paints. Asian PPG services the automotive and auto ancillary segments in India.
Asian PPG’s established market position arises from its strong brand equity, benefits derived from Asian Paints’ wide distribution network, and strong technological support from PPG Industries. The company uses PPG Industries’ technology in the automotive paints processes, including pre-treatment of chemicals, CED, and intermediate and top coatings. The company is able to avail of bulk discounts from its joint procurement deals with Asian Paints for raw materials, leading to economies of scale. It also derives managerial, logistical and business support from Asian Paints. In addition, Asian PPG has toll manufacturing agreements with Asian Paints, leading to optimisation of logistic costs, as it uses its parent’s multi-locational plants.
Asian PPG established a market position because of support from parents, and strong brand equity.
Acquisition of Advanced Refinish 2K business from ICI India Limited
On 16th March 2007, Asian PPG acquired the ‘Advanced Refinish 2K Business’ from ICI India Limited. This business, i.e. trading in PPG’s Autocolor advanced refinish paints, was acquired as a going concern on a slump sale basis for an aggregate consideration of Rs. 518.00 million (excluding stamp duty) subject to certain working capital adjustments.
Faaber Paints Private Limited
Faaber Paints Private Limited has become a wholly owned subsidiary of Asian PPG with the acquisition of its entire equity for a consideration of Rs. 40 million in August 2006. The unit has an annual capacity to manufacture 3000 KL of paints and 3000 KL of thinners. It also has a CED coating facility with an annual capacity to coat 4,32,000 sq. meter of surface area.