Asian Paints’ Brush With Competition

HAR GHAR KUCH KEHTA HAI (every house has a story) is an iconic jingle that has epitomised Asian Paints’ brand positioning as a company whose colours don’t just coat walls but capture memories, dreams, and aspirations, and in doing so makes it an indelible part of Indian households.

But just as colours fade over time, so does the invincibility of market leaders. With over 50% share in the home decor paints sector, Asian Paints is facing competitive intensity not just in urban but also rural households. From the quiet village of Bhavapur in Uttar Pradesh’s Amethi constituency, Indrajeet Yadav, a mechanical engineer-turned-entrepreneur, is one of the new contenders looking to disrupt the dominance of this paint giant.

Yadav’s story began at the National Handmade Paper Institute in Jaipur, where he learned the art of turning cow dung into Khadi Prakritik Paint, an eco-friendly alternative to chemical paints. Driven by a mission to create local employment and curb urban migration, the 31-year-old invested in his own machines and launched Shri Krishna Khadi Works, producing eco-conscious paint at competitive prices. “I wanted to curb migration to cities and provide work for village women,” Yadav explains.

To avoid being pigeonholed as a local brand he is looking to collaborate with other Prakritik Paint makers — the brand is owned by Khadi — across Uttar Pradesh, creating a network that now comprises 15 producers across districts such as Ghaziabad, Moradabad, Unnao, and Amethi. “If a bucket of Prakritik Paint is visible in one place, it should be visible in other places, too. Only then will people see it as a national brand,” Yadav asserts. This collective approach is aimed at strengthening their market position, making their presence felt in different regions. “We are not competing on price but the fact that it’s a better alternative to chemical-based paints,” says Yadav.

Yet, the challenge from industry giants such as Asian Paints looms large. Asian Paints, India’s largest home decor paints company, is no stranger to competition. The rise of eco-friendly alternatives reflects a broader market shift where sustainability and innovation are increasingly valued by consumers. In response, Asian Paints launched Neo Bharat Latex Paint, designed to disrupt the unorganised segment with a branded, affordable solution. Amit Syngle, MD and CEO of Asian Paints, acknowledges the competitive landscape but remains confident. “We still feel that the bottom of the pyramid is a very huge market, estimated at about ₹5,000 crore,” he recently told analysts. The company’s strategy focuses on leveraging technology to offer a durable product at the cost of distemper, targeting rural consumers.

However, it’s not just the likes of Yadav but even stronger contenders who intend to give Asian Paints a run for its money.

The Heat Is On

JSW Paints, which debuted in 2019, has swiftly established itself as a formidable competitor, breaking even in FY24 with over ₹2,000 crore in revenue. The company aims to reach ₹5,000 crore by FY26 by expanding its retailer network and presence in both decorative paints and industrial coatings. Similarly, Birla Opus, launched under the Aditya Birla Group in April 2024, is aggressively scaling up, with over 80% of its planned 145 products already available. With 50,000+ dealers in its first year of operation, Opus is soon going to pip Berger (with 55,000 outlets) as it looks to close ranks on Asian Paints’ 1.6 lakh dealer network.

Close on the heels is Pidilite, though it is taking a more measured approach, in building its presence. Bharat Puri, MD, Pidilite Industries, highlights the company’s preference for a steady, sustainable entry into the market. “We are not entering this ring with all the big bang and fighting with the 300-pound gorilla; we will go about it our way organically,” Puri tells analysts.

Despite these challenges, Syngle remains unfazed, dismissing competition as mere “copy-paste” efforts that lack innovation. “There is nothing unusual, nothing innovative. Just because someone can put pricing pressure or muscle into a launch doesn’t mean it will impact the market,” he asserts. Syngle’s confidence stems from Asian Paints’ ability to maintain a premium pricing position, even as competitors attempt to undercut prices. “Today, Asian Paints commands a premium in the market by at least 5-10%,” he notes.

Syngle is confident of the company’s strategy, emphasising the importance of return on investment (RoI) for retailers. “The entire game on distribution is about aiding the retailer from the perspective of RoI. Are we generating demand? Are we helping them liquidate and rotate their capital effectively?” Syngle explains that the company uses AI to improve forecasting and order fill rates, coupled with strong marketing investments to drive consumer demand.

Nonetheless, analysts are questioning Asian Paints’ plans to retain dealer loyalty and expand its distribution network amidst increasing competition. “The chapters of this competition have been unfolding gradually. Talent loyalty was put to test over the last two years. In the next six months, customer loyalty will be tested, followed by dealer loyalty,” says Tejash Shah, analyst at Spark Capital, in the recent earnings call.

And it’s already happening.

In all luxury offerings (emulsion, wood finish and waterproofing) Birla Opus offers 9-12% in-bill discount vs 1-2% by Asian Paints, according to Elara Securities.

Not surprising, despite various initiatives to drive volume growth, Asian Paints’ revenue growth trend in FY25 is expected to be weak owing to price cuts, downtrading, and competitive pressure. In fact, the value-to-volume gap expanded to 12% in Q4FY24 from 7% in Q3FY24, owing to 3.5% price cut and downtrading.

“Everything goes through a cycle,” says Rushabh Sheth, co-founder and co-CIO, Karma Capital. “At the end of the day, every cycle will come to an end. This is true not just for India but across the world. Great businesses mature and become more like other normal businesses.”

While Asian Paints claims to have a pricing premium of 15% over Birla Opus, the company’s elevated EBITDA margin may not sustain in the near term.

Sheth sees Asian Paints facing a phase where its once-impenetrable market position might start to show cracks, especially with new entrants making significant inroads. “Structurally, Asian Paints is now in a far more competitive industry,” Sheth adds. “So, valuation, growth — everything gets impacted.”

Losing Its Shade?

Asian Paints continues to innovate, as reflected in its robust patent portfolio. Over 126 patents have been filed in the last six years, with 60 granted, contributing to new products that account for 11-12% of the company’s top line. But the market is starting to tell a different story. “The best is over for now,” Sheth asserts. “It’s not that Asian Paints will lose tomorrow, but structurally, it’s in a more competitive environment.”

Sampath Reddy, chief investment officer at Bajaj Allianz Life Insurance, provides a different view. “The paint industry is going through intense competition right now. However, the industry itself continues to grow reasonably well. Asian Paints still stands out in terms of distribution strength, reach, and their network of tinting machines. That gives them an edge.”

With record (FY24) net sales of ₹35,495 crore and a 33% YoY increase in PAT to ₹5,460 crore, Asian Paints continues to hold its ground as India’s leading paint company. But declining return ratios and a sceptical Street have tempered expectations with the three promoter families’ cumulative stake value having fallen 10% to ₹1.54 lakh crore in Fortune India’s Rich List ranking this year.

While the iconic jingle concludes with the line, Har ghar chup chaap se kehta hai, ke andar isme kaun rehta hai, the real-life scenario is anything but silent. The ensuing high-decibel battle royale among industry giants and emerging challengers will soon reveal who, in this vibrant clash of colours, will truly paint the town red.