Paints leader Asian Paints Ltd shares sank on Wednesday, July 2, after the Competition Commission of India (CCI) has ordered its director general (DG) to investigate allegations of abuse of market dominance by the firm.
This investigation has been ordered following compliant raised by Grasim Industries, which is a new entrant into the paint market through Birla Opus Paints, an official order dated July 1 showed. In the complaint, Birla Opus Paints has also accused Asian Paints was putting restrictive clauses with its distributors discouraging them from selling products of Birla Paints.
International brokerage CLSA maintained its 'underperform' rating on Asian Paints with a target price of Rs 1,966 per share, following news that the Competition Commission of India (CCI) has ordered an investigation into the company.
The brokerage noted that the complaint highlights rising competitive intensity in the paints industry, which has relatively low entry barriers. CLSA said that this development will heighten regulatory scrutiny on how established players respond to new entrants.
Birla Opus also said that some of the dealers who are entering into exclusive arrangements with Asian Paints are being specially rewarded by offering special discounts, sponsoring foreign trips etc. On the other hand, dealers who are selling Birla Paints along with Asian Paints are being targeted by Asian Paints through reducing credit limit, enhancing sales targets and reducing consumer leads.
According to Centre for Monitoring Indian economy (CMIE) data, Asian Paints was the largest paint company in the country with a market share of 39.05 percent in FY23. Berger Paints was distant second with market share of 12.13 percent while Kansai Nerolac Paints and Akzo Nobel India were third and fourth with market share less than 10 percent each, respectively.
At 9.30 a.m., shares of the firm were quoting Rs 2,343.8, lower by one percent on the NSE.
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