Birla's big paints bet rattles Asian Paints' India reign

Asian Paints' market share fell to 52% from 59% in the 12 months ending March 31, Elara Securities data shows, raising the pressure on the industry leader to spend more on marketing and discounts to retain its crown.

Bengaluru: Asian Paints, has lost more market share than analysts expected to rival Grasim Industries in the year since billionaire Kumar Mangalam Birla's ambitious paints venture was launched, according to Elara Securities data shared exclusively with Reuters.

Asian Paints' market share fell to 52 per cent from 59 per cent in the 12 months ending March 31, Elara Securities data shows, raising the pressure on the industry leader to spend more on marketing and discounts to retain its crown.

Birla Opus' market share reached 6.8 per cent in the latest quarter.

"Whenever a new entrant comes, its strategies are aggressive. But this time, the scale is much bigger," said Geojit Financial Services analyst Antu Thomas, who had expected Grasim to gain only 1 per cent-2 per cent in market share from Asian Paints.

Birla Opus, which is the paints arm of the Aditya Birla Group company Grasim, has borrowed heavily from Asian Paints' playbook to gain ground in the $9.5 billion sector that also features Berger Paints, Kansai Nerolac, Indigo Paints and Akzo Nobel India.

After its February 2024 launch with an investment of 100 billion rupees ($1.18 billion), it expanded the paint sector's capacity at a pace never seen before, analysts said.

It offered deep discounts to lure paint dealers, hired mid-level managers from Asian Paints, and set up factories near its entrenched rival's units, according to Reuters interviews with paint dealers and former Asian Paints employees.

"Asian Paints formed 70 per cent of my annual paints sales in 2023. In 2024, the share was 30 per cent," said Sunny Rahman, a paint dealer in the eastern city of Kolkata, who switched brands to take advantage of lower prices.

The moves have hurt Asian Paints, which reported a larger-than-expected 45 per cent drop in fourth-quarter profit last week and warned that demand conditions were at their worst in decades.

"In a market which is already slow, the intensity of competitive action has been much more," Asian Paints CEO Amit Syngle said on the post-earnings conference call. "I think it is a double-whammy."

Intensifying battle

Asian Paints did not respond to requests seeking further comment.

Birla Opus CEO Rakshit Hargave told Reuters his company had no plans to slow down.

"Our objective is to gain market share, and I think, in the plan that we have, we have built in for the fact that we will do so," Hargave said. He denied the location of Birla Opus factories was decided based on proximity to Asian Paints' units and said Birla Opus was hiring across the sector.

Industry watchers expect the market share battle to intensify further this year, with analysts at ICICI Securities flagging "downside risks" to Asian Paints' outlook calling for EBITDA margin (operating profitability) of 18 per cent-20 per cent.

"The way forward for Asian Paints is not to take steep discounts. It will do well by introducing more products with differential value," Thomas said. ($1 = 84.8530 Indian rupees)