A deep dive into Grasim’s new paints business venture

As Grasim enters the decorative paints segment, we look at its expansion plans

The Aditya Birla Group is entering the paints business through a new venture announced by flagship company Grasim Industries Ltd. The company plans to introduce the latest range of paint products in line with global mega-trends.

Grasim has a long and successful history of incubating large businesses for the Group. It started as a textiles manufacturer back in 1947. Since then, it has diversified into a host of B2B and B2C businesses. Today it holds a global leadership position in Viscose Staple Fibre and is the India leader in specialty chemicals, and grey and white cement. It also holds a strong market position in insulators. The foray into decorative paints, a B2C segment, will provide scale and growth to its existing business portfolio.

Business sense

With the economy pulling out of the COVID doldrums, Grasim sees this an opportune time to add a high growth, high ROCE business which will provide new avenues for growth and importantly, steady earnings. The strategy for entry into the high-end paints business is backed by a strong balance sheet which is expected to be further strengthened after the sale of its fertiliser business. Grasim is set to incur capex of around Rs.5,000 crores over the next three years in the initial phase. The business will be funded through internal accruals and debt.

Riding the infrastructure wave

The decorative paints sector is a large Rs.40,000 crore market, with unorganised players holding one-fourth of the market share. The sector is on an upward trajectory – in the last five years ending 2019, the decorative paint segment has been growing at 11 per cent CAGR. The demographics-led demand, urbanisation, shortening of repainting cycles and the Prime Minister’s ‘Housing for All’ vision has provided an impetus to this sector. Grasim believes that the entry of power brands will lead to a shift of demand from unorganised players to organised players which the company aims to catalyse.

Focus on research and technology

This venture is backed by significant industry experience. Grasim has already identified a team which includes industry experts from within and outside the Group. This team has been working on research, product development and technology for some time now. Insights from consumer research, trade partner research as well as influencer research, and a study of global industry trends and practices have helped Grasim identify gaps in the marketplace.

Strong distribution network

With the new venture, Grasim will carve out its niche in the decorative paints sector. Although the market already features established brands, Grasim’s initial focus is on becoming one of the leading players. It plans to leverage the decades-old strong distribution network established by Birla White, a market leader in white cement and putty distribution.

Birla White – a premium brand from Grasim subsidiary UltraTech Cement – has the second largest distribution network in the paints industry and is a pan-India operator with a presence across 6,000 towns in metros, tier-1 cities and rural India. It is aggressively growing its business and expanding its overall presence, which will add synergy to Grasim’s paints business. The company believes that the attraction of a complete portfolio of paints will lure more dealers on board.

Backed by brand equity

Grasim also plans to capitalise on the well-established brand equity of the Aditya Birla Group.  “We already have touch points in the market in the form of brand-conscious influencers who understand the Aditya Birla brand,” says Ashish Adukia, Chief Financial Officer, Grasim.

Grasim also has the advantages of strong manufacturing capabilities which will help establish the paints production base. It is already in discussion with the multiple divisions and companies within the Aditya Birla Group and outside for setting up paint manufacturing units. The strategy is based on in-house manufacturing of water-based and oil-based paints as well as key raw materials which could be manufactured through backward integration.

The Group’s paints business will offer new and quality choices to discerning Indian consumers. It will also support growth in the construction ecosystem, such as suppliers, dealers, painters and applicators. And, just as important, it takes forward the vision for ‘Atmanirbhar Bharat’.