Grasim increases expenditure plan, sending Asian Paints and Berger Paints down 6%
Individual stocks Asian Paints fell 6% to 2,902, while Berger Paints reached a 52-week low of Rs 576 in intra-day trade on the BSE ahead of the March quarter results, which are expected on Thursday.
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For its debut into the paints market, Grasim has increased its capital investment to Rs 10,000 crore.
Paint stocks were under pressure on Wednesday, with Asian Paints and Berger Paints both falling 6% after Grasim Industries raised its capital expenditure (capex) for its debut into the paints market to Rs 10,000 crore. The diverse Aditya Birla Group firm plans to begin production in the fourth quarter of 2023-24. (FY24).
"The decorative paints market dynamics have evolved, with new capacity announcements backed by robust growth and outlook. We have advanced the implementation of our 1,332 MLPA paint capacity, with plant commissioning expected to begin in Q4FY24.The project's cost is expected to be over Rs 10,000 crore by FY25, according to Grasim Industries.
The board of Grasim Industries authorised a Rs 5,000 crore capital plan to start a paints company in August of last year.
Individual stocks Asian Paints fell 6% to 2,902, while Berger Paints reached a 52-week low of Rs 576 in intra-day trade on the BSE ahead of the March quarter results, which are expected on Thursday.
The S&P BSE Sensex, on the other hand, was down 0.17 percent at 53,961 points. After touching a low of Rs 1,357.60, Grasim Industries traded flat at Rs 1,401.They expect the company to take advantage of Birla White's extensive distribution network (UltraTech).
Meanwhile, ICICI Securities analysts believe that Grasim has a strong foothold in the building materials business through its group companies, which will enable the company to leverage its dealer networks and gain market share, primarily from unorganised players (which account for 25% of the total industry). "In the last five years, the decorative paint sector has developed at a CAGR of 12%, with many national and international brands entering domestic markets. However, the major players continue to preserve their market share, showing that the paint sector is becoming more formalised "said the brokerage firm.
