Asian Paints under pressure: Will the market leader regain its shine in 2025?

Economic Times

08-05-2025

10%. That was the discount offered by the Aditya Birla Group on prices as it entered India's $9 billion paint market last year. That number lured many dealers to the new brand, Birla Opus, as did the intent that the group signalled when it doubled the initial investment into the sector to Rs 10,000 crore.Birla is a big name, and with its plan to construct six plants spread nationally, it was clear to the dealers that this foray was to be taken seriously. Dealers are a critical cog in the wheel in the paint market, and in just one year, Opus became a weighty competitor to the incumbents.
Birla's aggression has resulted in many asking the behemoth Asian Paints a critical question—has the market leader lost its edge? It is a question worrying investors as well. Birla Opus's entry, combined with a slowing market, has led to Asian Paints' recording one of its biggest stock slides in years. It has fallen nearly 15% in the last one year, suffering a market cap loss of about Rs 40,000 crore.In the December quarter, Asian Paints' profit dropped nearly a fourth to Rs 1,110.5 crore from the same period in the previous year, while consolidated sales fell 6.1% to Rs 8,521.5 crore. Operating profit shrank more than a fifth to Rs 1,636.7 crore.Questions are being raised about the company's organisational culture, its sluggish response to emerging competition and its seeming lack of proactive approach in a disrupted marketplace. Once considered a 'leadership factory', second only to Hindustan Unilever in nurturing top industry talent, Asian Paints has suddenly found itself under a cloud. The market leader is now preparing to push back. Can it regain the sheen?
BIRLA'S BIG MOVE
What exactly is Asian Paints up against? For decades, it has enjoyed an almost unassailable position in India's decorative paints market. Aditya Birla Group's Grasim Industries has targeted that status quo with Birla Opus, shaking the landscape with huge price cuts and aggressive expansion.Opus is on track to reach an installed capacity of 1,322 million litres per annum (mlpa) by the first half of FY26 after it commences production in its sixth plant in West Bengal. Importantly, it has also managed to muscle up distribution. The company introduced 129 products with over 900 SKUs available in 4,300 towns across India. Birla Opus' CEO Rakshit Hargave claimed recently on an analyst call: 'We had talked about 50,000 dealers by the end of the first year, and I think we are very close to that journey in terms of where we will end the first year.'
This year, Birla Opus is looking to tap tier-2 and -3 markets through a franchise model, targeting smaller towns, with compact 300-400 sq ft stores equipped with paint consultants and trained local entrepreneurs. They are also piloting PaintCraft Partner, a franchisee-led painting services initiative. Aditya Birla Group Chairman Kumar Mangalam Birla has said the business is on track to achieve its revenue target of Rs 10,000 crore within the first three years of fullscale operations. The company has invested more than Rs 9,000 crore in the paints business so far, which is 90% of the planned capital outlay.Naveen Trivedi, a consumer analyst who also tracks the paints sector at broking firm Motilal Oswal Financial Services, says, 'From a competition point of view, the product quality of Grasim is getting good market feedback and they are at discounts. While Grasim's channel partners were mostly limited to smaller players last year, the positive product feedback will also lead to larger distributors partnering with them.' That should worry Asian Paints even more.
THE FIGHTBACKAsian Paints has responded to all this aggression with enhanced dealer incentives, more affordable product variants and increased marketing spend. The company is also investing in operational efficiencies and capacity expansion, hoping to fight on both cost and quality.
Amit Syngle, CEO, Asian Paints, struck a defiant tone on analyst calls: 'We strongly believe that as a brand we need to take calibrated action to ensure that we tackle the competition in a more sustainable way.' Dealers say Asian Paints has lately been aggressive on channel incentives, better quality product launches and has dialled up on-ground engagement intensity with dealers and contractors. A former senior executive at Asian Paints says on condition of anonymity: 'To be fair to Asian Paints, the launch of Birla Opus and its aggressive market-entry strategies coincided with a period of already low consumer sentiment. In such times, even the largest players tend to feel the impact. In a booming market, perhaps Asian Paints would not have been affected to the same extent.' However, he concedes that the company should have been better prepared. 'Asian Paints had months of prior knowledge that the Birla Group—with its deep pockets— would be a formidable competitor,' he says.
QUESTION OF ORGANISATION Industry watchers have highlighted another problem—Asian Paints' inability to retain key talent, with competition luring away some key senior and middle-level people. A few sudden senior-level exits around February sparked speculation about deeper organisational issues. Responding to questions from ET, Syngle says, 'The senior exits were on account of personal reasons and we had accordingly made the required disclosures. All these positions were filled up with internal replacements on an immediate basis which was also disclosed.'But the criticism has persisted, and one continuing theme is around company culture. A senior industry official says the thirdgeneration promoters, apart from vice chairman Manish Choksi, have little operational experience. 'They don't understand the bazaar network. The board is strong on governance, but who is stewarding the company's culture and future?' Asian Paints' alumni echo this sentiment, pointing to what they perceive as a drift in strategic clarity and a lack of cultural renewal as evidence. 'This isn't about one bad quarter,' says a former executive. 'It's about how the company has responded—or failed to respond—to a shifting landscape. You can't run a market-leading company on legacy alone.'Asian Paints' diversification into adjacent categories like kitchens, lighting and home décor under Beautiful Homes has also come under scrutiny. 'After 10 years, what do they really have to show in those segments? Either dominate or move out,' says a senior industry veteran.One common thread in the criticism is the perceived stagnation in brand identity and consumer engagement. 'When was the last time Asian Paints excited you?' asks a former marketing head. 'The campaigns are tired, uninspiring and disconnected. When a challenger brand like Birla Opus arrives, you should remind consumers of your heritage, your reliability. Instead, the messaging is all over the place.'
This is something Asian Paints seems to be addressing, having unveiled a new, highdecibel marketing campaign during the Indian Premier League. The ad, created by Ogilvy, emphasises on the brand being used in homes across regions in India, with the line, 'Asian Paints ki Warranty, India ka Har Doosra Ghar Kehta Hai (Asian Paints' warranty is evident in every second home in India).' It is evident that Asian Paints is trying to evoke nostalgia for the brand, but is that enough?
WAR PAINT In February, after the ear nings announcements, Syngle said they were negotiating possibly the industry's toughest demand environment in nearly three decades. Talking to analysts after Grasim results, Birla's Hargave countered, saying demand in the paints industry, while 'flat', was not as negative as competitors painted it to be. Competition has intensified even for narratives.Berger Paints India MD and CEO Abhijit Roy recently told ET that companies that are undertaking price cuts to make inroads may not be able to sustain and wrestle with the might and network of existing players. 'Newer players are also going via a discounting route, but is that a sustainable strate g y? We are going profitably but some of the other entrants will have to suffer losses,' said Roy. As Syngle says, 'Some of this aggression is reflected in terms of high sales and distribution expenses by competition.'
How much longer will Birla bankroll discounts? Insiders expect the likes of JSW to up the ante. The Jindal-led company and Indigo Paints are said to be in a close tussle to strengthen their market share in the luxury and uber-luxury segments and are currently said to be frontrunners to acquire the Dutch paint maker AkzoNobel's India business. Amid all this, it is easy to forget that Asian Paints still has more than 50% market share in India. 'This will be a defining year for Asian Paints,' says Trivedi, while maintaining a 'neutral' position on the stock. As an insider sums it up: 'Asian Paints has to sort itself out but, believe me, it will make a comeback if it gets the right ecosystem. It is still a very strong company.' Despite headwinds, analysts and industry experts are not writing Asian Paints off. Its dominant market share, vast dealer network and deep brand equity give it a strong platform to recover. But it will need to reignite consumer connection, sharpen strategy and reinvigorate its culture as it paints a fresh coat.