Grasim Has The Muscle To Take On Asian Paints. Now It Needs Customer Love

It is Aditya Birla Group's biggest consumer bet. The group's flagship Grasim Industries Ltd. entered the oligopolistic paints market with the launch of Birla Opus brand.

At stake is the industry pecking order: the challenger, Birla Opus, plans to unsettle Asian Paints Ltd., the largest player with more than half the share of the market. The Aditya Birla Group company also launched decorative paints, a market that is expected to grow to around Rs 1 lakh crore by financial year 2029 from over Rs 69,000 crore now. Grasim is banking on its distribution network, digitisation, and war chest—Rs 10,000 crore at the outset—to muscle into the segment.

The company is looking at around 5-6% revenue market share in FY26, its first full year of operations, and targets to increase it to double digits with a revenue of Rs 10,000 crore and operational profitability by FY29.

The question, however, is whether it will dent Asian Paints? The answer to that lies in the approach it is taking to build the business. 

Birla Opus is betting on the reducing painting cycle from the current seven-odd years, part-painting of homes and a frequent churn in the rental market. It is also banking on the business-to-business segment or demand from developers, given the growth in home sales. Housing pre-sales are expected to cross Rs 1 lakh crore in FY24 from Rs 75,000 crore in the previous fiscal.

A network of 150 depots and free tinting machines, digitally connected to a central hub, will lower inventory costs for dealers. But the success will also depend on how effectively it provides credit to dealerships.

The most likely result is that Birla Opus quickly captures the mass and premium segment but does not dent the luxury segment in the initial years.

Adding 40% of the industry capacity and a franchise-based dealership backed by finance across 6,000 towns would certainly dent the second, third and fourth players. Birla's capacity is more than the combined output of the next three players after Asian Paints. And it expects the current capacity to help it reach a revenue of Rs 16,000 crore.

Profitability will depend on pricing. But if Grasim's paints business achieves the same margin profile as the industry leader, it could soon see re-rating of its valuation multiple.

Yet, Asian Paints is a darling of consumers, who swear by its quality after decades of use. And the company has a loyal community of painters who do not recommend anything else but Asian Paints.

Birla Opus has checked all boxes when it comes to distribution, supply chain, and outreach to painters and contractors. The real test will be if that is enough to change perception among consumers.