InvestorQ : What is the idea behind Grasim foraying into the paints business?
prachi Patwardhan made post

What is the idea behind Grasim foraying into the paints business?

Answer
image
sara Kunju answered.
5 months ago
Follow

To be frank, that was a rather surprising announcement. But Grasim did announce that it was taking on Asian Paints and Nerolac at their own paints game. Grasim will foray into the lucrative but complex paints business with an initial investment of Rs.5,000 crore which will be spread out over next 3 years. Clearly, Grasim is looking to identify new growth engines, beyond its traditional reliance on commodities.

One thing is certain that Grasim has a strong balance sheet and so it will have the necessary balance sheet strength to take on the paints majors. Birla did that in cements as scale helped them to emerge the largest player but paints may be a different ball game altogether. The paints industry presents a high-growth option for Grasim but it is brand intensive too. In fact paints have grown by 11% CAGR in the last five years.

Grasim is betting in a big way on the value migration from the unorganized to the organized market; which provides the scope for a much larger addressable market. Grasim will introduce the latest range of paint products in line with global mega-trends. Remember, Grasim is not alone because even JSW group is making substantial investment in the paints business over the next few years. So surely competition will hot up for the better.

1 Views