Grasim gains 2%, hits record high on paint biz launch; Asian Paints dips 2%

The company will launch Birla Opus Paints Business and inaugurate three Birla Opus Paints plants at Haryana, Punjab and Tamil Nadu today on February 22, 2024.

Shares of Grasim Industries hit a new high of Rs 2,244.95, up 2 per cent on the BSE in Thursday’s intra-day trade after the company announced the launch of its paint business.

The chairman of the company Kumar Mangalam Birla will launch Birla Opus Paints Business and inaugurate three Birla Opus Paints plants at Panipat (Haryana), Ludhiana (Punjab) and Cheyyar (Tamil Nadu) on February 22, 2024 from its Panipat plant, Grasim said in an exchange filing.

Meanwhile, shares of Asian Paints were down 2 per cent to Rs 2,934.70. In past six months, the stock price of Grasim has outperformed the market by surging nearly 25 per cent. In comparison, Asian Paints was down 8 per cent, while the S&P BSE Sensex rallied 11 per cent.

Grasim had previously committed an investment of Rs 10,000 crore towards setting up the paints business. Paints will be produced at the company's manufacturing plants in Haryana, Punjab, Tamil Nadu, Karnataka, Maharashtra, and West Bengal. They will have a total capacity of 1,332 million litres per annum (MLPA).

The commissioning of new plants is scheduled to commence in phased manner starting from fourth quarter of FY24.  The strong housing demand on account of government's focus on 'Housing for All' and rising aspirations are key drivers for growth in decorative paints, Grasim said in its FY23 annual report.

Increasing premiumisation and shortened repainting cycles are further aiding to the growth momentum. With population growth there would be rapid urbanization in India which would fosters greater economic productivity and create demand for housing. Increasing income levels coupled with young population are aiding aspiration-led demand and growth, the company said.

Motilal Oswal Financial Services (MOFSL) retained its EPS estimates for FY24-26 and reiterated BUY with a target price of Rs 2,670 as the brokerage firm value its holding in subsidiary companies by assigning a discount of 40 per cent, standalone business at 7x EV/EBITDA, and paints business at 1x of investments.

The Viscose Stable Fibre (VSF) segment’s margin is expected to remain stable, and caustic soda prices appear to be bottoming out. Grasim will benefit from the capacity expansion of Epoxy, where margins are better than caustic soda. This would help improve the margin of the chemical segment. The company has started a trial run of the paint plants at three locations and is geared up to launch its Paints brand by March 2024. Management has successfully completed the Rights issue of Rs 4,000 crore with an oversubscription of nearly 2x, MOFSL said in Q3 result update.