Waterproofing is about Rs 6,000 crore market despite which it has attracted many new players in last few years. Most of the leading paint manufacturers including Asian Paints, Berger Pants, Kansai Nerolac and AkzoNobel – all have introduced waterproofing products of their own. In fact, Asian Paints is the second largest waterproofing company with 23% market share, next only to market leader, Pidilite Industries. Berger Paints, another leading paint manufacturing company also enjoys 12% market share. Akzo Nobel, Kansai Nerolac and Astral Poly are recent entrants in the waterproofing/construction chemicals market. There are global players such as Fosroc, SIKA, BASF but these players largely operate in B2B markets.
Not a very high margin business
Though margins in waterproofing business is not mouth-watering it’s comparable to paint business. However, in projects and institutions business, margins are lower than paints. That may be the reason, initially, the new entrants from the paints industry into water proofing business focus on retail business and once they establish their business, they look towards project business just to spread the risk.
Waterproofing business in infancy stage
In India, waterproofing business is still in its infancy stage which is evident from the market size. In China water proofing is a USD22bn business whereas in India it’s not even $1 billion. Further, relative size of waterproofing vs paints in India is 1:10 whereas it’s 1:3 in developed markets. It should be noted that both paints and waterproofing are near-necessities which makes the waterproofing industry attractive future proposition.
Waterproofing is a logical extension for paint companies
For paint companies, waterproofing is the logical extension of their paint business which will help to promote paints and offer better value to consumers. Paint manufacturers who are also into waterproofing business have also introduced (1) putty with waterproofing properties, (2) Primer with waterproofing benefits, (3) crack fillers with waterproofing properties. Companies such as Asian Paints and Akzo Nobel offer waterproofing products to be used while painting houses. Paint companies have also launched basecoats with waterproofing abilities to be used before painting. Berger has introduced putty and primer with waterproofing properties.
Prescription route very popular
Most of the manufacturers push their waterproofing products through the prescription route, i.e. plumber channel. Further, the market leader, Pidilite (Dr. Fixit) has started Dr. Fixit academy, which certifies the participating plumbers. It gives them recognition in front of customers. Pidilite can leverage the influence of plumbers on customers to showcase its products. Other players offer warranty up to 10 years on their waterproofing products.
Manufacturers use different strategies
Different manufacturers use different strategies to sell their products. Asian Paints targets most of the sub-segments such as interior, bathroom, exterior and roof waterproofing. It has launched products for new construction as well as repairs. Asian Paints has also introduced differentiated products such as primer with waterproofing, putty/crack filling material with water-proofing properties.
Apart from acquiring Gujarat-based waterproofing product company, Perma Construction Aids Pvt Ltd (Perma), Kansai Nerolac has launched waterproofing products as part of its exterior paints portfolio. While the waterproofing products of other companies focus on water resistance, Akzo’s products focus on waterproofing and are considered technologically superior. Berger Paints is expanding its waterproofing busines both through organic and inorganic routes.
Pidilite, the market leader, is present in retail as well as B2B segments, though the latter has suffered, of late, due to slowdown in real estate sector. Pidilite has set a target to grow 2-4x GDP in the growth categories, which include brands such as Dr. Fixit, Roff and Nina Percept.
Industry gets most of the business from renovation
In case of waterproofing business, ratio of new projects business to renovation/repair business is 25:75. In other words, waterproofing players are not largely dependent upon real estate projects for their business and hence are not much affected by slowdown in real estate except for those who are mainly dependent on B2B business. However, too much dependence on retail business has its own share of risks – the main being seasonality of demand. Usually in case of individual homes waterproofing is done just before the onset of Monsoon. So, the period from April to June is crucial for the industry and most of the business, that is, B2C business, takes place during this period. People usually waterproof their house to protect their house during Monsoon from rains. If they fail to do so during this period, for whatever reason, they will postpone the same for next year and not to immediate post Monsoon period.
More and more players not necessarily mean more competition in the market. Presence of many players in the market also helps in the expansion of the market. Further, Indian waterproofing market is dominated by unorganised sector and players in that sector are feeling heat due to increased pressure on compliance issues and reducing price differential between organised and unorganised sector product. Its expected that in the coming years organised sector would be able to grab more and more share of unorganised sector market share. For many players in the organised that’s an added incentive to jump the fray.