The Indian paint sector is on the verge of witnessing intensified competition with the entry of new players into the market. Notably, Grasim, Astral, Pidilite, and JK Cement are among the companies that have entered the paint sector and strengthened their offerings in FY23, said domestic brokerage firm ICICI Securities.
The brokerage has advised investors to stay "underweight" in paint stocks. It has assigned a "Reduce" rating to major paint companies, including Asian Paints, Berger Paints, Kansai Nerolac, Indigo Paints, and Akzo Nobel, due to the intensifying competition in the sector.
Progress and plans of new entrants
Grasim: With an impressive overall capital expenditure of ₹25.9 billion by March 2023, Grasim has made significant headway in the paints segment. Construction progress remains on track across all six production units, with a target to commercially launch paints in Q4 FY24.
Grasim leverages the strength of Aditya Birla Group brand equity, extensive national distribution networks, and unique product offerings to maintain a competitive edge, said the brokerage firm.
JK Cement: It has acquired a 60% stake in Acro Paints and rebranded it as JKMaxx Paints. It has already introduced the products in North and Central India. It has a production capacity of 60,000 KL in decorative paints and 6,700 KL in construction chemicals, according to ICICI Securities.
Pidilite: The company is already present in Dr. Fixit waterproofing coatings, strainers, distempers and wood finishes. It has entered decorative paints under ‘Haisha’ brand. The company has indicated that it has introduced decorative paints to complete the product portfolio on requests from the dealers.
It plans to gauge the response over the next few months before making further investments, utilizing existing manufacturing units and distribution channels in Andhra Pradesh, Telangana, and Odisha, the brokerage stated.
Astral: It aims to relaunch its brand in FY24 following backend investments in FY23. It envisions significant revenue growth in its paint business as well as tank, faucet, and sanitary ware segments, targeting revenues of ₹15 billion within the next five years.
Astral has invested in SAP in Gem Paints and plans to rebrand its paints in FY24, leveraging its existing paint depots and three manufacturing units, said ICICI securities.
Q4 performance of existing players
Kansai Nerolac Paints achieved remarkable growth in its consolidated net profit, experiencing a five-fold increase to ₹96.24 crore during Q4. The company's revenue from operations surged by 12.81% to ₹1,733.59 crore.
Asian Paints, another key player in the industry, demonstrated a significant rise in its consolidated net profit, reaching ₹1,258 crore in Q4, indicating a growth of 43.97% YoY. Furthermore, its revenues jumped 10.91% to ₹8,750.85 crore compared to the same period in the previous year.
Indigo Paints showcased a healthy 40% YoY rise in its consolidated net profit, amounting to ₹49 crore. The revenue from operations during the same quarter witnessed a growth of 13% YoY, reaching ₹325 crore.
Akzo Nobel reported a strong performance in Q4, with its net profit growing by 27.7% YoY to ₹95.4 crore. The company's revenue from operations also exhibited growth, rising by 9.72% to ₹951.4 crore during the quarter.
However, Berger Paints faced a setback in Q4, experiencing a decline of 15.60% YoY in its consolidated net profit, reaching ₹186 crore. This decline was primarily attributed to a loss resulting from a fire incident at its Goa plant. However, the company's revenue from operations showed growth, increasing by 11.7% to ₹2,443.63 crore during the quarter.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
