By Martin Shwenk Leade
ETMarkets.com
Deven Choksey, MD, DRChoksey FinServ Pvt. Ltd, points out that paint manufacturers have been instrumental in organizing the sector, previously dominated by unorganized players. Consolidation within the organized segment is creating margin pressure, as companies struggle to pass on costs due to competitors’ higher distribution margins, including Birla Opus. While challenges exist, integrated players like Asian Paints are well-positioned.JSW Paint’s Parth Jindal is saying that after partnering with Akzo Nobel, they are aiming to become the top three players within the paint industry. We saw the shake-off that Asian Paints went through when Birla got into the market. How do you think the sector is going to shape up? From an investment perspective, what are the best bets right now?Deven Choksey: If you see the entire home decor segment and paints as part of it, then possibly somebody is making a good amount of effort in making this particular entry into the paint business. Akzo Nobel is in number four position in the home decor segment or home paint segment and at number two position in the industrial segment. I feel it is a good proposition as far as the acquisition is concerned for JSW Paints. On one hand, they are getting ready-to-use infrastructure facilities including the distribution points for the retailing segment and at the same time, access to the industrial customers whose acceptance for the technology, the product itself is also giving an advantage to them. It is a cash generative business at the same time. However, the bigger challenges are going to be in the form of acquiring the larger part of the market share and that is where we are seeing some more consolidations happening in this particular space. Up till now, most of the paint manufacturers have independently grown this business. They have dealt with unorganised players and made this entire business more organised. Within the organised players also, now we are seeing a consolidation and in this situation, near-term, we are likely to see some pressure on the margin. They will not be in a position to pass on the cost because of the higher amount of distribution margins being paid by some of the competitors at this point of time including Birla. So, from that perspective, the margins may remain under pressure, but overall, the proposition remains comfortable for companies like Asian Paints because they are well integrated into the manufacturing space from back end to the front end. We feel that though challenges will be there, valuations are adequate at this point of time. So, upside is limited. Maybe some amount of margin improvement can be expected because of the lower crude oil prices and the relatively lower price for the derivatives of crude oil and that is where the market may see some up move, but not a major one in some of the paint company stocks.Live EventsYou Might Also Like:JSW Paints inks deal to buy Dulux-owner Akzo Nobel for nearly Rs 9,000 cr, fresh coat of rivalry in over $10 bn market How do you see the market share picture shaping up because as of now, Asian Paints, Berger, and Kansai are the top three spots when it comes to the leaders in the paint sector. But Birla Opus as well as JSW Paints will face tough competition with 7% market share each right now and Birla Opus is very aggressive on the point that they want a double-digit market share. If they are on the winning side, then who could be at the losing end? How do you see the market share shaping up?Deven Choksey: For how long they will be putting this kind of aggressiveness as far as acquiring the market share is concerned at the cost is important to be seen because this business is unlikely to generate for the Birlas a significantly large amount of profit. There might be small profit at some point of time given the kind of push that they are making, but the large profit on capital employed is not likely to be an immediate reality.We will have to see this business for the next five-year period in which we will see a relatively better outcome. At this point of time, the leaders like Asian Paints will probably be able to maintain the terms with the distributors. Earlier they used to have 2% to 3% price hike in a year. That is unlikely at this point of time. But we will have to wait and see. I do not think that the particular companies in the listed space will see a major upside immediately. Maybe a small upside is possible in Asian Paints at this point of time.You Might Also Like:JSW Paints eyes sharp rise in mkt share in decorative, industrial coating segment: Parth Jindal(You can now subscribe to our ETMarkets WhatsApp channel)
Read More News onasian paintsakzo nobelAsian Paintspaints industryDeven ChokseyBirla OpusJSW Paintspaint manufacturersconsolidation in paintsDRChoksey FinServ Pvt. Ltd
(What’s moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price…moreless
(You can now subscribe to our ETMarkets WhatsApp channel)Read More News onasian paintsakzo nobelAsian Paintspaints industryDeven ChokseyBirla OpusJSW Paintspaint manufacturersconsolidation in paintsDRChoksey FinServ Pvt. Ltd(What’s moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price…moreless
Prime ExclusivesInvestment IdeasStock Report PlusePaperWealth Edition123View all Stories