India’s largest paints manufacturer Asian Paints Ltd. does not expect a sharp turnaround in the ongoing quarter due to a high base in the same quarter last year, although the management does expect volumes to improve.
The management made these remarks in the post-earnings call on Monday, November 11. A combination of factors from competition to floods led to Asian Paints reporting its first volume decline in over a decade, excluding the Covid-19 pandemic period, during the September quarter.
Asian Paints shares fell 8% on Monday as a result of these quarterly results, which also saw a decline in both gross and EBITDA margins on a year-on-year basis. While the management in a post-earnings statement said demand conditions remain challenging, it said during the concall that urban demand is under stress but rural as a segment performed better.
While unorganised players continue to remain a threat to incumbents, aggressive forays by the Birlas, through Birla Opus and the JSW Group is further fuelling the competitive intensity. The management of Asian Paints too alluded to high competition from both organised and unorganised players.
Will the competitive intensity ease going forward? Not in the short-term, according to Asian Paints, who also added that discounting and promotions also remain elevated.
For the full year, Asian Paints anticipates single-digit volume growth and is confident of keeping margins between the 18% to 20% range.
So, what are the steps Asian Paints is taking to combat competition?
It has introduced regional packs, attractive packaging, “advanced products” with better quality, along with higher dealer margins. It has also appointed more field sales executives to improve the level of service.
Most analysts having coverage on Asian Paints had either downgraded the stock, or cut their price targets and Earnings Per Share (EPS) estimates.
Shares of Asian Paints ended 8% lower on Monday at ₹2,547. The stock has not only declined nearly 30% from its recent peak of ₹3,422, but has also turned negative for the financial year 2025. Asian Paints shares have given negative returns in a financial year only twice in the last 20 years, one in financial year 2009, during the global financial crisis and the other in financial year 2023.