Architectural coatings in Nepal and Bhutan

With a combined population of about 31 million (Nepal 30.2 million and Bhutan 800,000), Nepal and Bhutan are two of the least populated countries in the South Asia region, an area dominated by highly populated nations such as India, Pakistan and Bangladesh. Demand for architectural paint and coatings in both countries has surged by high single digits in recent years. In this feature, Polymers Paint Colour Journal presents an overview of the architectural paint and coatings industry in both countries.

Overview of paint & coating industry in Nepal and Bhutan

Estimated at USD 51 million, the architectural paint and coatings market in Nepal and Bhutan has registered steady growth rates over the last few years, despite the economic challenges faced by the Nepalese economy.

The grim economic situation in Nepal during the last two financial years has had an adverse impact on the architectural paint industry. However, Nepal’s real GDP growth accelerated to 3.9 percent in FY24, up from 2 percent in FY23. The services sector was the key driver, fuelled by a 30.7 percent surge in tourist arrivals, which boosted activity in downstream sub-sectors.

According to World Bank projections, Nepal’s real GDP growth is expected to accelerate to 5.1 percent in FY25 and 5.5 percent in FY26. Wholesale, retail, construction, and manufacturing sectors — which collectively account for over one-fifth of GDP — are poised to benefit from the loosening of monetary policy and the easing of regulatory requirements, including the relaxation of working capital requirements and the easing of loan classification and loan-loss provisioning for businesses that continue servicing loans despite closures due to unforeseen circumstances.

These measures are expected to stimulate demand for architectural coatings in the short and medium term. In fact, architectural coatings suppliers in the country are optimistic that future growth in the architectural segment will far outpace the growth seen in recent years.

Nepal

The significant upswing in construction activities over the last decade has provided a major boost to the consumption of architectural coating products in Nepal. The unfortunate 2015 earthquake triggered a construction revolution in the country. Additionally, the vast tourism opportunities have further fuelled a construction boom, driving demand for architectural paint products.

Table – Leading architectural paint producers in Nepal

Currently, 20 mid- and small-scale producers dominate the Nepalese architectural coatings industry. Neighbouring Indian companies have a strong manufacturing and trading presence in the country. India’s largest paint and coatings producer, Asian Paints, is one of the major manufacturers of architectural paint products and is making significant investments to increase its installed capacity in Nepal.

Existing architectural paint producers in Nepal can take comfort in the fact that the paint industry in the country is protected from cheaper imports due to duty safeguards and the substantial freight costs (as Nepal is a landlocked country) involved in the import of paints.

Asian Paints

Indian company Asian Paints operates one of the largest paint manufacturing units in Nepal, where it has been active since 1983. Asian Paints Nepal currently operates two manufacturing plants, located in Hetauda and Makwanpur.

In 2021, the company doubled its installed capacity to 100,000 metric tonnes per annum (MTPA). This enhanced production capacity has enabled it to achieve significant economies of scale and maintain its leading market position. Asian Paints Nepal produces a range of products, including cement primer, emulsion, distemper, knifing paste, solvent and primer undercoat, across 44 different brands registered under its parent company.

The company is in the process of setting up its third manufacturing plant in the Hetauda Industrial Area, with an investment of around Rs3 billion. This new plant is expected to commence operations in 2025.

Commenting on the state of the Nepalese paint and coatings industry, Amit Syngle, Managing Director of Asian Paints, stated during the company’s Investor Conference for Q1-FY25: “One of the areas which has been obviously troubling us in the Asian markets is Nepal, where the economic situation over the last 7–8 quarters has not been good. So overall, both top line and bottom line are affected there and that is something we are closely monitoring in terms of how the situation recovers.”

Berger Paints

Berger Jenson & Nicholson (Nepal) Pvt. Ltd. has been engaged in the manufacturing of decorative paints in Nepal through FDI from Berger Paints India Limited. The company has been producing architectural paint and coating products in the country since 2000.

In 2012, the Indian subsidiary of Japanese paint major Kansai, Kansai Nerolac, acquired a 68% stake in one of Nepal’s leading paint manufacturers, Nepal Shalimar. Kansai Nerolac paid INR 76 million for this acquisition. At the time of the acquisition in 2012, Nepal Shalimar held a market share of about 10% in Nepal.

Bhutan

Exhibiting similar trends to those of Nepal, Bhutan’s construction industry has grown steadily, driving demand for architectural paint and coating products to new highs. In 2023, Bhutan’s construction sector contributed USD 225 million (19 billion Bhutanese Ngultrum) to the GDP.

Currently estimated at USD 6 million, the architectural coatings market is expected to register growth rates in the high single digits or low double digits in the short and medium term.

By Yogi Malik