Berger Paints Faces 1.5% Growth Dip From Birla Opus Entry, Says CEO

Berger Paints Ltd. has lost 1.5% growth to the new competitor— Birla Opus— in the July-September period, according to its chief executive officer Abhijit Roy. Although the impact has been less significant than what the company had anticipated, this is perhaps the first time that a paint manufacturer has publicly quantified the implications of Aditya Birla Group's foray on their growth.

"As far as the Birlas are concerned, they have installed a large number of machines, and it has made persistent efforts on consumers and dealers," Roy told investors in a post-earnings conference call. "We have lost about 1.5% of our growth, as compared to 2.5-3% loss that I had estimated."

Grasim Industries Ltd., controlled by billionaire Kumar Mangalam Birla, debuted in the decorative paints business in February with the Birla Opus brand. The flagship company of the Aditya Birla Group has set a bold target of achieving revenues of Rs 10,000 crore within three years of operation. It is also eyeing high single-digit market share in paints in FY25.

"Although the competition has gone up, we believe the impact isn't so high that it will be disruptive for the industry," Roy said. "This is healthy competition that will keep us on our toes and help us improve."

Roy is confident that this loss will be recouped through growth in other areas. For instance, it has laid out a plan to ramp up penetration in under-served urban markets, where it has a share of just 10%.

The company has appointed a separate on-ground sales team to focus exclusively on growing its share in key markets such as Bangalore, Pune, Hyderabad, Chennai, and Mumbai, currently dominated by Asian Paints. The key markets' size is estimated to be worth Rs 15,000 crore, and Berger Paints aims to increase its share to 15% within three years.

"Consumers are well aware of our brands in these metro markets but availability is an issue," Roy said. "One needs to have distributors, contractors and build equation with builders to succeed in these markets. Now we've a separate team, we'll also have our own and franchise stores...some of these changes have been initiated already and we should see positive results partly in Q3 and further in Q4."

The country's second largest paint maker took price hikes of 2.3% during the quarter. Its operating margins or Ebitda margins dipped 150 basis points over the previous year to 15.6% due to higher investments in manpower and advertising spends. Roy expects to maintain Ebitda margins in the range of 15-17%.

Asian Paints dominates half of India's paint market, with Berger Paints trailing at a 20% market share in FY24. Kansai Nerolac holds 15%, while the exiting Akzo Nobel, known for its Dulux brand, commands a 7% market share. Grasim's entry, along with JSW and Pidilite, further adds to the competitive landscape, driving the projected growth of the decorative paint and coatings industry to an estimated Rs 1 lakh crore by 2028. Unlike Grasim, Pidilite's entry hasn't adversely impacted Berger's paint business, Roy said.