The King’s comeback: How Asian Paints outsmarted Jio-style discount warrior Birla Opus

In January 2021, when conglomerate Aditya Birla Group announced its grand entry into the stable paint industry with a huge capital investment that was subsequently increased to Rs 10,000 crore, the clear target was market leader Asian Paints, which dominated more than half the market share in decorative paints. Analysts then started calling this the Jio moment for the paint industry.The Nifty blue chip stock, long a favorite among long-term investors due to its steady compounding history, was hit hard in 2024, losing 33% of its value after Birla Opus entered the market in March 2024 and lured both distributors and consumers with aggressive marketing and discounts.

Now analysts say the feared disruption has not yet manifested itself deeply enough. Although competition remains fierce, dyeing is a business of long-term relationships. In the second quarter, Asian Paints reported domestic volume growth of around 11% in the decorative sector, well above expectations and well ahead of the broader sector’s 3.5-4% growth.”Competitive intensity remains high and is expected to continue, but unlike FMCG, bundling does not work, which is a strategy adopted by competitors (additional volumes). Instead, paint depends on building long-term relationships,” said Vivek Maheshwari of Jefferies, which raised its target price from Rs 2,900 to Rs 3,300. “Initiatives such as free volumes have been tried in the past but don’t really work as paint customers typically return every five years, making short-term strategies ineffective.”

The market leader outperformed through new advertising, stronger execution, regional micromarketing, innovation and premiumization.

Birla’s breakneck sprint hits a wall

Nomura’s recent research shows that the easy choices are over. Birla Opus has achieved its target of 50,000 dealers and exhausted its project investment of around Rs 10,000 crore. While it has historically scaled faster than any other paint player since launch, gaining market share in the mid-to-high single digits, “our research indicates that parabolic growth has moderated in recent months as the easy gains from distribution expansion are likely behind us,” Nomura noted. More tellingly, Birla Opus witnessed a low-single-digit quarter-on-quarter revenue decline in the second quarter of FY2026 – unexpected on its small base due to the large investments made for growth. “Our research also indicates that dealers have returned to their old businesses because margins and sales were not enough for them,” Nomura added. Jefferies said the easy gains from the new competition have already been made and a gradual profit recovery is expected for Asian Paints from FY26 onwards.

ICICI Securities marked another potential turning point, saying the CEO’s departure from Birla Opus rival “could potentially result in a lull in the new competitor’s aggression.”

However, Systematix Institutional Equities struck a more cautious note: “Birla Opus now faces the real test – with an initial dealer base of 50,000 established and older players looking to make a recovery – but it cannot yet be said to be stable; there could also be increasing competitive aggression from JSW-Akzo.”

Also read: Infosys’ Rs 18,000 cr buyback: 10 things you need to know before November 14 record date

Perhaps most surprising, the disruption barely affected profitability. “While FY24 volumes were not significantly impacted (growing by around 10%), FY25 volumes were impacted by a mix of weak industrial demand (seen across all consumer sectors) and the Birla Opus win. However, the impact on margins was only around 200/100 basis points and within the long-term normative range,” Nomura said. “We note that there has not been any major disruption to product prices, dealer margins or operating margins to date, which ideally could/should have been at its peak during the launch/expansion phase.”

Asian Paints management maintains sales growth forecast to be mid-single digits in fiscal 2026 and expects volume-to-value differential to be 4-5%, with EBITDA margins in the range of 18-20%.

“Over the past six to nine months, the company has been strengthening relationships with dealers and distributors, with a focus on improving returns on investment and driving higher levels of retail,” said Motilal Oswal, adding that with the peak of disruption behind it, Asian Paints “seems well positioned to sustain steady growth and defend its market leadership.”

Dalal Street is divided. HSBC raised its target to Rs 3,050, citing market share gains and margin surprises, with fiscal 2027 earnings 10% above consensus. Goldman Sachs, however, maintains a sell recommendation of Rs 2,500, warning that sustaining growth in the second half “will be a challenge.” Citi also has a sell guidance of Rs 2,250, arguing that improvements will mainly come from a low base and not from a moderation in competitive intensity.

The stock, currently trading around Rs 2,900, remains 19% below its all-time high of Rs 3,590 on September 28, 2022 – before disruption fears took over.

At least for the time being, relations have preferred discounts. Whether that remains the case as Birla Opus regroups and JSW-Akzo looms on the horizon will determine whether this is a real comeback or just a breather in a protracted battle.