Grasim hits record high, Asian Paints, Berger, Kansai Nerolac a mixed bag as Aditya Birla firm inaugurates first paint plant

Grasim paints business, Grasim share price, Asian paints share price: Grasim Industries shares registered a record high while a bunch of paint company stocks staged mixed moves on Thursday as the Aditya Birla group company inaugurated its first three paint plants in the country, located in Panipat in Haryana, Ludhiana in Punjab and Cheyyar in Tamil Nadu. The stock of Grasim Industries, which first announced a strategic foray into paints in 2021 and unveiled the name of its paints brand Birla Opus last year, gained by as much as Rs 52.6, or 2.4 per cent, to an all-time high of Rs 2,245 apiece on BSE before settling barely in the green at Rs 2,201 apiece. 

While Asian Paints rose 0.6 per cent, stocks such as Berger Paints (down 0.1 per cent), Kansai Nerolac (down 0.1 per cent), Akzo Nobel (down 1.1 per cent) and Indigo Paints (down 2.6 per cent) closed below the flatline. Sirca Paints shares rose 1.2 per per cent. 

Aditya Birla group flagship Grasim Industries aims to take gross revenue from the new decorative paints brand to Rs 10,000 crore within three years of full-scale operations. Its aggressive entry into the paints business is set to intensify competition in an industry dominated by players such as Asian Paints and Berger Paints. 

Describing the launch of Birla Opus as a "defining moment" for the group, Aditya Birla Group Chairman Kumar Mangalam Birla said: “The Aditya Birla Group’s deep insight into the building materials ecosystem, honed over the years, offers us a unique vantage point. Birla Opus, therefore, is poised to transform the paint industry with a 40 per cent addition to current capacity."

"No paint company globally has ever launched in one shot—factories, operations, products, and services, at the scale that we are about to undertake," Birla said.

Grasim, which plans to offer a range of high-quality products in the decorative paints segment, will extend its footprint in the business with plants spread across Haryana, Punjab, Tamil Nadu, Karnataka, Maharashtra and West Bengal. The company plans a total capacity of 1,332 million litres per annum (MLPA) in the new business, according to a statement. 

"The paint industry is in flux with market leaders being challenged by deep-pocketed rivals," market expert Ajay Bagga told Zeebiz.com. 

Many analysts view Grasim's entry into paints positively for the paints space as it will aid competition. 

"Grasim's entry is very good for the segment. The paint industry will find innovative ways to scale up business," AK Prabhakar, Head of Research at IDBI Capital Markets, told Zeebiz.com.

Prabhakar likes Asian Paints, Akzo Nobel and Indigo Paints from the paint space.

"Valuations are high for incumbents. Challengers will bring down industry margins and valuations. Consumers, both household and industrial, will benefit, with lower prices and more choice," added Bagga. 

The Aditya Birla group flagship has already spent 60 per cent of its planned capital expenditure of Rs 10,000 crore for the paint business, and endeavors to become a profitable No 2 player in the segment in the coming years, according to Jefferies.

The brokerage has maintained a 'buy' rating on Grasim with a target price of Rs 2,291 per share, which implies a further 2.1 per cent upside in the stock from its latest peak. 

Read more on how Jefferies views Grasim’s paints foray

The company is expected to launch two more plants by March this year, and another three over the next one year, Zee Business reported.

Grasim has already onboarded dealers from the northern and southern regions of the country and lined up 1.5 times dealer margins offered by Asian Paints, according to Zee Business research. 

In the run-up to Grasim’s entry in the business, rival paint makers have doled out higher incentives to dealers, according to the research. 

The country’s decorative paints industry is estimated to be worth Rs 80,000 crore.

While Asian Paints enjoys a market share of about 60 per cent in the domestic paints industry, Berger Paints is next with 20 per cent, followed by Kansai Nerolac and Akzo Nobel, with 15 per cent and 5.0 per cent, respectively. 

According to Zee Business research, market leader Asian Paints has about 70,000-75,000 paint dealerships spread across the country, followed by Berger Paints (30,000-35,000), Kansai Nerolac (30,000-32,000), Akzo Nobel (15,000-18,000) and Indigo Paints (16,000-17,000). 

Catch the latest stock market updates here. For all other news related to business, politics, tech and auto, visit Zeebiz.com.