Abstract:
Paint India Enterprises (PIE) (fictitious name) is a third-generation business that evolved from Grand Iron and Steel Works Pvt. Ltd., originally an iron foundry established in 1954. PIE operates in the competitive Indian paint industry, which has significantly grown over the years due to urbanisation, rising disposable incomes, and government initiatives. The market, valued at INR 700 billion, is expected to grow at a 10-12% CAGR, reaching INR 2,640 billion by 2033. However, increased competition, price cuts, and shifting consumer preferences present challenges for PIE, a firm founded by Mr Vijay after the closure of Perfect Electric Works due to environmental regulations. Despite competing with major players like Asian Paints and Berger, PIE established itself in the North Indian market through strong retailer relationships and competitive pricing. Between 1997 and 2012, PIE experienced rapid growth, achieving a CAGR of 21% and reaching INR 72 million in revenue. Strategic expansions, including two new manufacturing facilities, further fuelled growth, leading to a market share of 7% in North India by 2020. However, COVID-19 severely impacted PIE, causing a revenue decline from INR 290 million in 2020 to INR 67 million in 2021 (Exhibit 3). Despite cost-cutting measures, including closing its Amritsar plant, revenue stagnated at INR 73 million in 2023, with gross margins at just 5%. Mr. Vijay faces several dilemmas regarding PIE's future:
• Financial struggles: Low margins and stiff competition threaten sustainability.
• Regulatory changes: Policies like GST, demonetisation, and environmental laws have disrupted operations.
• Market shifts: Digital transformation and evolving consumer preferences demand innovation.
• Succession planning: At 71, Mr Vijay must decide whether to pass leadership to his sons, neither of whom are directly involved in PIE.
As the New Year approaches, Mr Vijay contemplates whether PIE should have gone public earlier, how to sustain the business, and who will lead it into the future.
