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Asian Paints counting on core business, allied segments to drive growth

According to experts, this strategy is expected to continue into the next few quarters as Asian Paints consolidates its gains

Viveat Susan Pinto & Shreepad S Aute  |  Mumbai 

Higher costs take colour off Asian Paints

Consumer goods major is putting the building blocks in place to capitalise on the growth momentum in the market. The firm is likely to post its fifth straight quarter of double-digit sales volume growth for the three months ended March 2019, with analysts pegging the number to be between 15 and 20 per cent.

For the quarter ended December 2018, had reported volume growth of 20-22 per cent, which was the highest in eight years. The company had also sharpened its focus on its core paints business as well as allied segments such as waterproofing, adhesives and home decor and improvement.

According to experts, this strategy is expected to continue into the next few quarters as consolidates its gains. The firm does not give a break-up of all segments barring home improvement, which includes its modular kitchen brand Sleek and bath fittings unit Ess Ess. But, it did indicate in a recent call with analysts that the contribution of water proofing was growing in its portfolio and when combined with paints, it gave an edge to the business.

On an average, home improvement contributes around 2-3 per cent to Asian Paints’ top line every quarter, with the rest coming from its paints business. The company remains the leader in paints, which is the retail end of the paints market. paints, including both organised and unorganised, constitute 80 per cent of the total market, with industrial paints making up the rest. Asian Paints has around 55 per cent share of the organised market. The latter (organised) is 70 per cent of the decorative market, while the unorganised segment is 30 per cent, said experts.

Asian Paints counting on core business, allied segments to drive growth

“A slash in the goods and services tax (GST) in July 2018 by 10 per cent to 18 per cent (from 28 per cent earlier) has also supported growth of Asian Paints in the decorative segment,” Abneesh Roy, senior vice president, research, institutional equities, Edelweiss, said. “We expect strong decorative volumes to sustain in the coming quarters on the back of improving demand and a shift from the unorganised to the organised market,” Roy said.

In recent quarters, competition from players such as Berger, Kansai Nerolac and Nippon Paints has also grown as the organised market gets stronger, said experts. Recently, Asian Paints had admitted that Nippon Paints had become aggressive in Tamil Nadu, forcing the firm to defend market share with attractive pricing and trade promotions. It is doing the same, said experts, in other parts of the country too, especially, in the east and the north, where players such as Berger have a strong presence.

Innovative store formats such as ‘Color Ideas’ and ‘AP Homes’ are also additional growth levers for the company besides capacity augmentation, analysts said.

“Asian Paints is looking to double its manufacturing capacity over the next few years from one million kilo litres per annum now. This will give a push to its decorative paints volume,” said Dhaval Dama, research analyst at Equirus. The company is also adding 3,000 dealers per annum to consolidate its hold in trade channels, said experts. Asian Paints, for the uninitiated, has the largest network of dealers in the decorative market at around 65,000.

This has allowed the firm to improve reach of its products and implement distribution and marketing strategies quickly.

First Published: Sat, April 06 2019. 22:39 IST
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