Paint Industry Faces a Tough Brush: Asian Paints Hits 52-Week Low

The Indian paint industry, known for its resilience, has faced significant headwinds recently. Leading players like Asian Paints, Indigo Paints, Berger Paints, and Shalimar Paints have seen a sharp decline in their share prices, with Asian Paints and Indigo Paints share prices reaching 52-week lows recently. The ongoing challenges stem from subdued demand, heightened competition, and rising raw material costs.

Stock Performance in CY2024 and Early CY2025

• Asian Paints: The stock experienced a steep decline, tumbling nearly 33% in 2024, a record fall in a single calendar year. From its September 2024 high, the share price is down 34%.
• Indigo Paints: Shares fell 6% in CY2024 and an additional 12.45% in CY2025 as of mid-January.
• Berger Paints and Shalimar Paints: These stocks witnessed a decline of 25.82% and 29.15%, respectively, in 2024.

Challenges Impacting the Sector

Several factors have contributed to the industry’s current predicament:

1. Muted Demand: The rural market slowdown, along with extended rains and floods, led to subdued sales volumes.
2. Competitive Pressures: New entrants have intensified competition, resulting in increased capital expenditure, dealer expansion, and higher advertising costs.
3. Rising Input Costs: Higher raw material prices have strained profit margins.

Asian Paints, in its quarterly report, highlighted a 5.5% decline in overall domestic coatings revenue for Q2FY25. Margins were further impacted by price reductions, increased material costs, and elevated sales expenses.

Anticipated Recovery

Despite these challenges, industry players remain optimistic about future growth as per news reports. Asian Paints’ management expects margins to improve, driven by:

• Softening Material Costs: Expected in the upcoming quarters.
• Price Adjustments: Price hikes implemented in July-August 2024.
• Demand Rebound: Improved urbanisation and infrastructure projects are anticipated to aid recovery.

Sector Outlook and Growth Drivers

While the growth rate of established players moderated to mid-single digits in FY24, revenue in H2FY25 is expected to rebound on a YoY basis. The sector is projected to grow at a rate of 8-10% in FY26, albeit with slightly lower operating margins (~14%) compared to the historical average of 18%.

Key Growth Drivers Include:

• Increasing urbanisation and rising disposable income.
• Shorter repainting cycles and demand recovery in rural and semi-urban areas.
• Affordable housing initiatives and large-scale infrastructure projects.
• Rising demand from the automobile sector.

Competitive Landscape and Future Strategies

The entry of new players has intensified competition, pushing existing companies to expand their dealer networks, invest in tinting machines, and explore product innovation. Additionally, enhanced branding and strategic expansion into new categories are likely to shape future growth.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.