The international brokerage noted that share prices of Asian Paints and Berger Paints have corrected about 25% and 11%, respectively, since January 2024, mainly due to concerns over Birla Opus’ aggressive entry and weak demand in FY25. But those fears, it said, have not played out.
“While FY24 volumes did not see much impact, FY25 was affected more by industry-wide weakness than by competition,” the report said, adding that margins declined only 200 basis points for Asian Paints and 100 basis points for Berger, staying within their long-term normative bands. There has been no major disruption in product pricing, dealer margins or company profitability even at the peak of Birla Opus’ expansion, it added.
Nomura’s dealer survey found that Birla Opus has already reached its 50,000-dealer target and used up its full investment budget. The firm said the company’s rapid scale-up phase appears over, with “easy pickings from distribution expansion likely behind us”. In fact, Birla Opus’ sales fell slightly quarter-on-quarter in 2QFY26 — a surprise given its low base — and dealers have begun returning to established brands as margins and throughput were unsatisfactory.
“In 2QFY26, Birla Opus witnessed a low-single-digit q-q decline in sales, which was not expected on its small base following the large investment made for growth. Our survey also indicates that dealers have started going back to their old companies as the margins and sales throughput were not sufficient for them. We believe with the major investments and distribution reach being behind us, competition will be gradual going forward and impact of growth/share gains will be more measured, if any,” Nomura said in a note dated November 6.
In a significant development, Birla Opus CEO Rakshit Hargave announced his resignation during the mid-week holiday. Hargave, who had been leading the company since its launch 18 months ago, will take over as CEO of Britannia Industries from December 15.The brokerage highlighted that past entrants such as JSW Paints, Nippon Paints, Sherwin-Williams and Jotun also struggled to make a dent in the market due to the incumbents’ deep distribution, tinting machine network, and strong brand trust. It called the resilience of Asian Paints and Berger Paints despite such massive competition a “re-rating event”.“Competitive intensity will remain high but healthy, not disruptive,” Nomura said, adding that the sector is likely to revert to steady growth once economic and demand conditions normalise.
The brokerage raised its target price for Asian Paints to Rs 3,100 from Rs 2,285 and upgraded the stock to Buy from Neutral, implying a 25% upside from the current price of Rs 2,487. It now values the company at 60x Dec-27F EPS, in line with its 10-year average. Nomura expects Asian Paints to post an EPS CAGR of 10% over FY26–28, noting that the company historically delivered about 18% annual EPS growth between FY18 and FY24.
Similarly, Berger Paints has been upgraded to Buy from Reduce, with a new target price of Rs 675 (from Rs 500), implying a 26% upside from Rs 537. The target P/E has been revised to 55x Dec-27F EPS, a tad lower than its 10-year average. Nomura forecasts EPS growth of 12% over FY26–28 for Berger.
“Peak competition is behind us, and disruption was far and few despite the large investment,” the brokerage said, adding that both companies are likely to revert to early-to-mid-teens earnings growth once the operating environment stabilises.
Risks, Nomura cautioned, include higher-than-expected competitive intensity and lower-than-anticipated decorative volume growth.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)
