PPG Asian Paints 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 PPG Asian Paints Private Limited (PPG Asian Paints). Incorporated on 19th February 1997, PPG Asian Paints'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 PPG Asian Paints with the wherewithal to create integrated solutions in addressing consumer needs.
PPG Asian Paints is engaged in the business of manufacturing and marketing automotive and industrial paints. The synergy between the parents helped PPG Asian Paints 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), PPG Asian Paints 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, PPG Asian Paints'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, PPG Asian Paints 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, PPG Asian Paints received an award for 'overall performance' from Hyundai Motor India Limited. In 2006-07, Bilux, PPG Asian Paints'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), PPG Asian Paints became the leader in the premium refinish segment.
PPG Asian Paints is the second-largest player in industrial automotive paints and market leader in auto-refinish segment.
Established player, supported by strong clientele
PPG Asian Paints is the second-largest player in the automotive OEM paint segment with a market share of 24% percent. PPG Asian Paints 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. PPG Asian Paints 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.
PPG Asian Paints continues to maintain its strong presence in automotive OEM paint segment.
Market leadership in auto refinish segment
PPG Asian Paints 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.
PPG Asian Paints 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.
PPG Asian Paints is market leader in auto refinish segment after the acquisition of advanced refinish 2K business from ICI India.
Strong support from parents
PPG Asian Paints 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. PPG Asian Paints services the automotive and auto ancillary segments in India.
PPG Asian Paints’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, PPG Asian Paints has toll manufacturing agreements with Asian Paints, leading to optimisation of logistic costs, as it uses its parent’s multi-locational plants.
PPG Asian Paints 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, PPG Asian Paints 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 PPG Asian Paints 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.