Fresh coat of confidence for legacy paintmakers as stocks rebound

Birla Opus' early gloss fades, giving seasoned players room to repaint the market as disruption fears dry out and demand colours back in

Shares of the country’s largest paintmaker, Asian Paints, rose 4 per cent last week. Brokerages are turning optimistic about the market leader and its peers, Berger Paints India and Kansai Nerolac Paints. Analysts say the feared disruption from new entrants hasn’t played out.

 

They expect legacy players to regain ground once demand begins to pick up from the third quarter (October–December/Q3) of 2025-26 (FY26). That could also help reverse their weak run over the past 18 months. Asian Paints and Nerolac are down 8 per cent and 12 per cent, respectively, over the past year, while Berger has stayed slightly positive with a 2.86 per cent gain. The slide in share prices and valuation cuts stemmed from worries about new competition and subdued demand since 2024-25.

 

In a note dated November 6, Nomura upgraded Asian Paints and Berger to a ‘buy’. Analysts Mihir P Shah and Riya Patni said that despite rivals investing ₹10,000 crore in expansion, neither margins nor sales were hit, and competitive pressure should ease from here.

 

Birla Opus, though it expanded faster than any other paint company since its launch and captured a mid- to high-single-digit market share, has seen its rapid growth cool in recent months. Nomura says the easy gains from widening its distribution network are now behind it. In the second quarter (July–September/Q2) of FY26, Birla Opus saw a low single-digit sequential decline in sales — unexpected, given its small base and heavy investment.

 

The paint industry’s high entry barriers continue to protect incumbents from large-scale incursions. Earlier attempts by newcomers such as JSW Paints and global brands made little dent. Nippon Paint, which entered India in 2006, is the fourth-largest globally; Sherwin-Williams, the world’s second-largest, also launched in 2006; and Jotun, the tenth-largest, entered a year earlier.

 

Nuvama Institutional Equities points out that distribution reach, tinting machine placement, and brand credibility are the sector’s real moats. Consumer offers such as 10 per cent free grammage and high dealer margins can’t corner market share. Companies must build brand equity, expand dealer networks, and endure long lead times before achieving scale, the brokerage said.

 

According to Nuvama analyst Abneesh Roy, Birla Opus’ monthly revenue has stagnated for six to seven months. Competitors have started trimming dealer rebates, as those margins aren’t viable. As the company targets profitability by 2028-29, rebates will shrink further, and dealers often return to established brands when that happens.

 

Beyond competition, investors are closely tracking demand recovery and volume growth among the major players. Asian Paints will announce results on November 12, while Berger and Nerolac both reported underwhelming Q2 numbers.

 

India’s second-largest decorative paintmaker, Berger, reported modest 1.9 per cent year-on-year (Y-o-Y) revenue growth, below estimates. Heavy rains and flooding across key markets — including Andhra Pradesh, Kerala, West Bengal, Gujarat, the Northeast, and Maharashtra — dampened sales.

 

An unfavourable product mix shaved 15 basis points (bps) off gross margin, though softer crude prices offered some relief on input costs.

 

Operating margin fell 320 bps Y-o-Y to 12.5 per cent — its lowest in five years — due to sluggish sales. Costs rose as Berger increased advertising ahead of the festival season and expanded its salesforce and dealer base.

 

The company expects mid-single-digit growth in Q3FY26, followed by double-digit growth in the fourth quarter (January–March/Q4) of FY26, as competitive intensity eases.

 

Nerolac’s revenue growth was also subdued at 0.4 per cent. Its gross margin improved by 107 bps Y-o-Y, but its operating profit margin slipped by 21 bps to 11.3 per cent.

 

The company remains cautiously positive in the near term, supported by steady growth in automotive and industrial paints and rising decorative volumes during the wedding and festival season in Q3 and Q4. It expects margins to improve to 13–14 per cent as product mix and demand strengthen.