Asian Paints To Birla Opus: Fight For Market Share Amidst Pricing Pressure And Muted Volume Growth

Contrary to expectations, the market share erosion was primarily from sector leaders and not the smaller companies, as envisaged.

While share of decorative paint revenues is not disclosed separately by companies, a mere look at their revenue profile at the end of second quarter reveals that Asian Paints has been hit the most by increased competition from Birla Opus and JSW Paints in the decorative segment.

The top nine companies, including the two challengers, saw their revenues flat on a year-to-year basis, fall in operating profit or Ebitda by 22%, not to mention margins dip on an average of 300–400 basis points, and a hard hit on their profitability.

Revenue numbers of Birla Opus will be available only after all six plants are operational. Until then, sales will be adjusted to capital works-in-progress. The company has so far invested Rs 8,500 crore and has envisaged an investment of up to Rs 10,000 crore in paints capex.

The revenue market share of Asian Paints, which is around 53% among the top nine paints companies, can come down to around 50% at the end of the current fiscal if Grasim achieves high single digit market share at the end of fiscal 2025, ending the year as the fourth largest player in the sector by revenue.

Paint dealers have placed tinting machines of the new players as the second or third machine and in some situation replaced competition. That is replacing volumes of existing players at the retail level. The collective impact is seen in the operating profit and profit after tax of existing players. An additional 2% dealer margin, 5% lower pricing than competition, and additional 10% higher volume at a time of urban slowdown has ensured that brand recall of Birla is helping in up-trading of paints at the mass market product segment.

Grasim in its recent analyst call stated that at any given time, none of its dealers is holding more than a certain couple of weeks or three weeks of stock. So it is very confident that more than 65%, 70% of stock is already sold out.

The newer players are also playing the volume card offering higher volumes while keep pricing highly competitive along with trade incentives.