iifl-logo

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

sidebar image

Paints: Big bang launch of Birla Opus

23 Feb 2024 , 10:41 AM

Analysts of IIFL Capital Services attended the launch of Birla Opus Paints at Panipat today, interacted with the senior management team, and came away impressed at their strategy and ambition. In analysts of IIFL Capital Services note “Can entry barriers be broken?” written in Mar 2021, analysts of IIFL Capital Services had argued that entry barriers in the sector can be broken provided the company tackles product, dealer, influencers and consumer — all at once, and Birla has the ability to do so. Analysts of IIFL Capital Services note that today’s event makes the probability of their success higher in analysts of IIFL Capital Services estimation, as they have ticked off their checklist and also added some other items such as frictionless digitally enabled incentive scheme system and tinting machines with real-time data tracking. The management has laid out an ambitious target of Rs.100bn in third year of full scale operations; analysts of IIFL Capital Services believe that this could impact the top line and the bottom line for incumbents. Analysts of IIFL Capital Services maintain their cautious view on the sector with Asian Paints, Berger and Kansai rated REDUCE. 

Ambitious targets: 

The company laid ambitious targets of Rs100bn in the third year of full scale operations. In order to achieve this, the company is on a recruitment spree and targets 50,000 dealers by FY25 end. It has already recruited 3,500 dealers in 1.5 months in Punjab, Haryana and Tamil Nadu. Analysts of IIFL Capital Services believe that even if the company falls short of its targets, the ambition is not to be taken lightly and incumbents could get impacted with even partial fulfilment of these targets. 

Industry firsts: 

The company claims product superiority across several parameters vs competition and in order to demonstrate this, it plans to hold Expos (similar to FMCG companies doing product demonstrations to show product superiority vs competition) in all 1lakh+ towns shortly. Such large-scale expos are possibly an industry first. Similarly, a huge sampling program at scale (0.2mn painters being given 4 litres of paint free) to let the trade satisfy itself about the product is possibly a first in the industry. QR code on every paint pack, through which schemes will be digitally managed and sim card enabled tinting machines allowing for real-time inventory and sales tracking (implemented at scale), would also be a first-timer in the industry. 

Something for everyone: 

The company did not give much information on marketing the product, as it is yet to unfold. However, it assured us that the budget would not be much dissimilar vs the industry leader, despite the smaller scale. Dealers are likely to be incentivised well in margins (did not disclose exactly) but also via reduced inventory (better real-time tracking via tinting machines). For painters and contractors, schemes will be attractive, in addition to them being digitally enabled and dispute/hassle-free. Combined with the Birla brand name, claimed product superiority and best-in-class warranties — if executed well — the question will not be why anyone should use Birla Opus, but why not. 

Impact on incumbents:

It would be naïve to believe that Birla’s market share gain will come only at the cost of unorganised players. A ~100-200bps impact on growth may not seem large, but compounded over several years will be material. Moreover, margins too may face pressure on account of investments in product, marketing and trade schemes. On account of these factors, analysts of IIFL Capital Services believe that the valuation multiples, too, could gradually come under pressure. Therefore, analysts of IIFL Capital Services remain cautious on the Paints sector.

Related Tags

  • Paints
sidebar mobile

BLOGS AND PERSONAL FINANCE

Read More
Knowledge Center
Logo

Logo IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000

Logo IIFL Capital Services Support WhatsApp Number
+91 9892691696

Download The App Now

appapp
Loading...

Follow us on

facebooktwitterrssyoutubeinstagramlinkedintelegram

2025, IIFL Capital Services Ltd. All Rights Reserved

ATTENTION INVESTORS

RISK DISCLOSURE ON DERIVATIVES

Copyright © IIFL Capital Services Limited (Formerly known as IIFL Securities Ltd). All rights Reserved.

IIFL Capital Services Limited - Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
ARN NO : 47791 (AMFI Registered Mutual Fund Distributor)

ISO certification icon
We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.