Grasim Industries paints fresh coat, drains market colour from rivals

Firm's mcap surges 84% in 4 years; combined mcap of rivals slips 23%

Aditya Birla group’s flagship firm, Grasim Industries, has quickly gained market confidence — at the expense of established rivals — since its foray into the domestic decorative paints space in 2021. 

Over the past four years, the company’s rising market capitalisation (mcap) has almost mirrored the erosion in value seen by the country’s top four listed paint makers — Asian Paints, Berger Paints, Kansai Nerolac, and Akzo Nobel. 

The collective mcap of these firms, alongside Grasim’s, has hovered around ₹5 trillion, but Grasim’s share in this pie has grown significantly. 

Since June 2021, the combined mcap of the top four paint players has declined to  ₹94,000 crore, or 23 per cent. 

In the same period, Grasim’s mcap has surged by ₹83,000 crore, or 84 per cent, as investors have warmed up to its prospects in the high-margin decorative paints space. 

On Thursday, the total mcap of the four incumbents stood at ₹3.13 trillion — down nearly 28 per cent from their December 2021 peak of ₹4.41 trillion. 

Asian Paints, the biggest name in this segment, has been hit hardest, shedding 35 per cent in value since December 2023 — from ₹3.26 trillion to ₹2.13 trillion. 

In contrast, Grasim’s stock continues to climb. Its mcap touched ₹1.82 trillion on Thursday, up from ₹1.07 trillion in December 2021 and ₹97,000 crore in June 2021. In January 2021, Grasim’s board gave the nod for a ₹5,000 crore investment to build a decorative paints business. 

The launch of the Birla Opus brand in Q3FY24 marked its formal entry, and the company is now targeting annual revenues worth ₹10,000 crore in three years—aiming to become the third-largest player, behind Asian Paints and Berger Paints. 

Asian Paints clocked ₹29,234 crore in net sales in FY25, while Berger posted ₹10,169 crore in the same period. 

The commercial launch of Grasim paints business has only increased pressure on incumbents while Grasim stock price continues to climb fresh peaks. 

“Grasim core businesses are experiencing margin pressure due to global challenges, as demand remains subdued. However, the paint and the B2B ecommerce businesses delivered a better-than-estimated revenue run rate,” analysts at Motilal Oswal Securities noted, reiterating a ‘buy’ rating on the stock with a higher price target following the company’s Q4FY25 results. 

Notably, the market has taken notice. Grasim’s trailing price-to-earnings (P/E) multiple has soared from 17.5x in June 2023 to nearly 46x — a valuation more typical of consumer goods firms than of cyclical commodity producers. 

Meanwhile, the average trailing P/E for listed paint incumbents has dropped to 50.7x from 65x in June 2023, and from 96x just before Grasim’s foray.