'Paint stocks eye further downside as JSW Paints buys out Akzo Nobel India'

JSW Paints news: JSW Paints' recent acquisition will increase the cut throat competition in the industry. Analysts, now, eye how Asian Paints and other paint stocks will sustain their margins

JSW Paints, Akzo Nobel news: Paint stocks, which have skidded up to 31 per cent over the past one year, may have some more downside ahead with JSW Paints acquiring a majority stake in Akzo Nobel India, caution analysts.

 

On June 27, JSW Paints said it will buy 50.46 per cent stake of promoter entity Imperial Chemical Industries Limited and 24.3 per cent stake of Akzo Nobel Coatings International B.V., to buy up to 74.76 per cent stake in Akzo Nobel’s India arm, at a price of ₹2,762.05 per share.

 

The development, analysts said, could increase competitive pressures in the industry, which was already adjusting to the entry of Grasim Industries-owned Birla Opus.

 

"JSW Paints' recent acquisition will increase the cut throat competition in the industry. It would be interesting to see how Asian Paints and other related stocks sustain their margins. It is better to wait on the sidelines for now," said Kranthi Bathini, director of equities at WealthMills Securities.

 

Notably, JSW Paints buyout of Akzo Nobel has come at a time when the industry has been witnessing demand weakness. Shares of all but Berger Paints and Akzo Nobel, too, have tumbled in the range of 9.5 per cent to 30.6 per cent in one year. The Nifty index, meanwhile, is up 7 per cent during the period. 

 

Paint industry posts worst revenue in two decades

Consolidated revenue growth of the top five companies, including Asian Paints, Berger Paints, Akzo Nobel, Indigo Paints, and Kansai Nerolac, declined for all four quarters during the previous financial year of 2024-25 (FY25). This resulted in an overall revenue decline of around 3 per cent for FY25, the worst in 20 years, as per an analysis by ICICI Securities.

 

The decline, the brokerage said, were due to slowdown in premium paints and slower offtake in metros; negligible price hike; higher trade offers/discounts to counter competitive pressures; and loss of market share by incumbents.

 

While it seems that paint stocks have nearly bottomed out, Rohan Kalle, analyst at InCred Research Services, believes the next two years will continue to see high competitive intensity.

 

"The likes of Birla Opus, JSW Paints, and Pidilite, which has been advancing in the sector under ‘Hai Sha’ brand, could make near-term growth challenging for incumbents," he added.

 

What should investors do with paint stocks?

Analysts, for now, suggest new investors to wait on the sidelines, while asking incumbent investors to hold on to their positions as they anticipate the industry to recover during the second half of the current financial year aided by a cyclical recovery.

 

Returns in paint stocks, they said, hinge on recovery in volumes and stable margins amid rising competition and volatile input costs, especially crude oil. 

 

"Demand for decorative paints may improve in the second half of FY26, supported by the completion of new real estate projects and a repainting cycle during the festive period. On the industrial side, a revival in capex activity—across private and public sectors—alongside improved credit availability and recent tax incentives, aimed at stimulating auto demand, is expected to support recovery," said Rakesh Vyas, co-chief investment officer and portfolio manager at Quest Investment Advisors.

 

He suggests existing investors to hold their positions as paint stocks may perform in line with the broader market. New investors, meanwhile, could take a selective approach, he said.

 

Historically, too, the paints industry has seen a cyclical recovery following two years of weakness. This pattern, as per an analysis by ICICI Securities, was visible between FY16-19 and FY20-23.

 

Considering there was weak revenue growth in FY24 and FY25, the brokerage believes the industry is ripe for revival in revenue growth in FY26-27. It, however, cautioned against persisting weakness in H1FY26 due to excess unseasonal monsoon in April and May, slow off-take of white goods and durables, and a slowdown in automotive production.

 

"We remain sideways on paint majors and await signs of structural demand improvement before taking an investment call," said Rohan Kalle of InCred Research.