New entrants intensify competition in paint industry with steep discounts

Don't want to miss the best from Business Standard?

Reflecting an intense competition in the Indian decorative paints industry with new entrants offering aggressive pricing and discounting, leading players have reported impact on sales realisation and margins in FY25, but expect a modest growth this year.

The industry, which also faced a demand slowdown from urban markets and downtrading, where consumers are moving towards more affordable options, expects a modest growth in FY26, driven by favourable macroeconomic conditions, rising urbanisation, and increased construction and infrastructure development activities.

Asian Paints which holds over 50 per cent of the domestic market said new entrants as well as established players with their "aggressive pricing and discounting strategies" are intensifying competition, which affected its value realisations as well as the profitability.

The overall weak consumption trends prevalent through FY25 had a dampening impact on the domestic decorative paints market, particularly the urban markets, Asian Paints Vice-Chairman Manish Choksi said at the latest annual general meeting of the company. 

"Subdued discretionary spending also led to extension of repainting cycles and home maintenance schedules, affecting the consumption of architectural paints and dcor items," he said, adding, "Consumers were also moving towards more affordable options, even within the premium segments of decorative paint products across categories."  Though rural demand showed relative resilience, urban demand contributed to an overall flat performance for the entire decorative paints market, marking a below-trend performance for the last 18 months.

Besides, challenges in the retail consumption were further compounded by heightened competitive pressure between new entrants and existing players.

"Both the new entrants as well as established players adopted aggressive pricing and discounting strategies, further intensifying competition in the industry. These dynamics affected the value realisations as well as the profitability for Asian Paints throughout the year," Choksi said in his address to the AGM, a copy of which was submitted to bourses.

A flat market and intense competition resulted in the company's decorative paints business recording a 5.7 per cent decline in value terms, despite registering a growth of 2.5 per cent in volume terms.

Expressing similar concerns, Kansai Nerolac Paints said, "In FY 2024-25, the Indian paints industry demonstrated resilience in the face of subdued demand and intensifying competitive pressures." 

  Rural demand remained muted for much of the year, with signs of recovery emerging towards Q3. The entry of new players into the market further intensified competition, prompting more aggressive pricing strategies, said the latest annual report of Kansai Nerolac Paints.

Berger Paints in its latest earnings call update had said in FY25, on a standalone basis, its "value growth muted despite volume momentum, impacted by full-year effect of FY24 price reductions, softer consumer demand and traction in construction chemicals space".

Asian Paints, Berger Paints, and Kansai Nerolac are the major players in the Indian paint industry, which, according to reports, control over three-fourths of the market.

In the last 5-6 years, several new players have entered this market, including Pidilite with Haisha Paints, Grasim with its Birla Opus, and JSW Paints.

Besides, pipes and fittings manufacturer Astral has acquired Gem Paints, while JK Cements acquired Acro Paints, leading to a proliferation of the sector.

Last week, JSW Paints, part of Sajjan Jindal-led USD 23-billion JSW Group, announced the acquisition of a controlling stake in Akzo Nobel India Ltd, the maker of Dulux Paints, for Rs 12,915 crore.

The Indian paint industry is led by Asian Paints. Besides, Berger, Kansai Nerolac, Akzo Nobel India (Dulux), Indigo Paints, Shalimar Paints, and Nippon Paints are other brands.

However, paint makers expect a silver lining in FY26, counting on several factors.

"The decorative segment is poised for an improved performance, underpinned by a rebound in urban demand, driven by higher disposable incomes from recent tax incentives and easing inflation. Rural growth is likewise expected to sustain, supported by forecasts of an above-average monsoon," said Berger Paints India.

Kansai Nerolac Paints expects a 'modest growth' in the Indian paints industry in FY26, driven by favourable macroeconomic conditions  "In the decorative segment, growth will be supported by higher disposable incomes, premiumisation trends, a rising consumer preference for eco-friendly products, and government initiatives such as the 'Housing for All' programme and the 'Smart Cities Mission'," it said.

According to an ICICI Direct report, the size of the India paints and coatings market is estimated at USD 9.60 billion in 2024. It is expected to reach USD 15.04 billion by 2029, growing at a CAGR of 9.38 per cent between 2024 and 2029.