NEW DELHI, June 17
Market demand for paints remains subdued due to the General Elections, fewer marriage days and a structural drop in paintable areas in homes over the years. Dealers reported muted demand for paints during April-May, but there was strong demand for waterproofing products ahead of the monsoon season, with expectations of improved paint demand in June post-elections.
As per a report by Elara Capital, Birla Opus has achieved a market penetration of 7-10 per cent in the visited areas, with all associated dealers equipped with Birla Opus tinting machines.
Analysts at Elara Capital visited the markets of Ludhiana, Chandigarh, and Panchkula in Punjab to understand trends for paints and the acceptance of the Birla Opus brand. Most dealers, it said, primarily sell Asian Paints (APNT) products, accounting for 60-80 per cent of their sales, followed by Dulux (AKZO) and Nerolac (KNPL). However, Birla Opus is actively expanding its sales team, and the Allwood brand has been well-received for its superior quality. At the dealer counters visited, Birla Opus represents 2-4 per cent of sales, with its growth dragging Nerolac and Dulux more than Asian Paints sales.
According to Elara Capital, the rising share of Birla Opus at its dealer outlets would have a Domino effect on other paints dealers.
Asian Paints has increased in-bill discounts in a few markets to address competition from new entrants. “We expect it to be rolled out in other markets as Birla Opus gains momentum. Asian Paints could double incentives for painters and contractors and extend warranty on products. We believe while revenue risk for Asian Paints is low in the near term, there is a possibility of margin risk; hence, we retain our negative stance on the sectors,” Elara Capital report stated.
It is anticipated that Asian Paints’ revenue growth for Q1FY25 is likely to be flat to low single-digit, primarily due to muted demand, increased competition and a high margin base in Q1FY24 (24.2 per cent standalone), leading to a likely EBITDA decline for Q1FY25.
When it comes to top selling categories, premium emulsion (mid-segment), premium exterior emulsion (APNT – Apex), economy emulsion (APNT – Tractor Emulsion) are the top players. Asian Paints Royale (luxury emulsion segment) has a salience of 15-20 per cent.
