The picture on the wall is changing, and Birla Opus is giving it a fresh coat of paint. From February 2024 to today, the brand has leapfrogged industry peers to clinch the third position in the decorative paints segment.
Asian Paints is finally acknowledging what the market already sensed: Birla Opus is a serious disruptor. In a candid analyst call, the market leader admitted it misjudged the competitive threat. The stock has slumped nearly 40 percent from its peak, with weak demand and pricey trailing valuations (~60x earnings) leaving little room for cheer. Is this just the beginning of a long grind - or an opportunity to bottom-fish a fallen blue chip?
India’s largest paints player posted a poor earnings show for the quarter ended March 31, 2025. The bottom-line saw a sharp 45 percent degrowth in the bottom line, falling more than the Street expectations. The management sounded out poor demand conditions, along with rapidly intensifying competition.
The current demand conditions in the paint industry are possibly the weakest seen over the past two decades, CEO Amit Syngle during the post-earnings call with analysts and investors. He added that over the past 20 years, there hasn’t been a single year of negative growth in decorative paints until now. The rising competition also came as a sharp hit during the demand slowdown.
However, despite the waning demand and rising competition in the industry, listed peers Indigo Paints and Berger Paints managed to eke out profit growth for the quarter.
Further, Birla Opus managed to chip away at the industry’s market share while charging the same price as the ‘market leader’, while smaller competitors cut prices to retain market share in turn, impacting margins.
While Asian Paints had prepared to fight for market share, the paints leader said that it did not predict the ferocity of competition it would face. “We did not anticipate the kind of competitive intensity which would come up, given the fact that demand was not there and everyone was fighting for the same share,” Syngle added during the call.
What brokerages are saying
“Considering the uncertainty of demand recovery in the near term, the performance worries continue. Moderation in raw material prices is positive for the business; however, growth recovery will remain critical for a rebound in the stock performance,” said Motilal Oswal.
HDFC Securities wrote that the firm’s earnings show ‘disappoints on all counts’, also cutting its target price amid muted earnings. Axis Securities, Centrum Broking, and Nomura Holdings were also among the many research players that slashed their 12-month price target outlook.
Most brokerages trimmed their earnings estimates on Asian Paints, valuing it at 45x FY27E EPS, which is 20 percent lower than its 10-year average. In comparison, the paints company's stock price currently commands a valuation of 60x earnings.
How institutional investors are adapting
The number of foreign portfolio investors holding shares of Asian Paints is on a steady downtick. From 1,014 FPIs who held Asian Paints shares in December FY24, before Grasim Industries announced the launch of Birla Opus, the most recent quarter has only 797 foreign investors holding Asian Paints’ stock.
On the domestic front, the picture is mixed. Names such as Axis Mutual Fund, SBI MF, LIC Mutual Fund, and Quant Mutual Fund have been paring their stake in the rapidly falling stock.
On the flip side, funds like Aditya Birla Sun Life, ICICI Prudential Mutual Fund, Mirae Asset Mutual Fund and Nippon India Mutual Fund have reported some of the largest increases in shareholding.
What should investors do?
According to Bloomberg, 22 analysts currently suggest selling Asian Paints’ stock, while only 10 suggest holding shares. Given the negative sentiment surrounding the counter, six analysts have a contrarian buy call.
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