Birla Opus entry may spark tough paint sector competition, margin concerns; what should investors do?

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₹10,000 crore in its decorative paints business, aiming to build six manufacturing plants in India by 2025. In February, Aditya Birla Group chairman Kumar Mangalam Birla said he expected the group's new paints business to turn profitable in three years, as the conglomerate marked its entry into the rapidly expanding ₹80,000-crore Indian decorative paints market. As Mint reported earlier, Birla Opus products will be available in Punjab, Haryana and Tamil Nadu from mid-March and in towns with populations of at least 100,000 by July 2024.

The company aims to expand the distribution of its paints business to over 6,000 towns by the end of FY25. Also Read: 0 to 10,000 in 3 years: Birla sets ambitious target for new paints business The paint sector is rapidly growing and its growth outlook looks robust. According to a recent report from the rating agency Care Ratings, the industry may see a 20 per cent capacity expansion over the next three to four years.

This anticipated growth is poised to escalate competition, placing significant pressure on the margins of key industry players. "The Indian paint industry is expected to grow at a CAGR of 9-10 per cent between 2024 and 2029, primarily driven by increased activity in real estate, construction and renovation projects. This growth will particularly benefit the decorative paints segment which accounts for 70 per cent of the total paint industry consumption," said T Manish, a research analyst at SAMCO Securities.

But the stocks in this sector have not performed impressively in the last one year. The majority of stocks from the pain sector have underperformed the Sensex in the last one year. Shares of Asian Paints are down about a per cent over a year while those of Kansai Nerolac