Asian Paints Under Scrutiny: CCI Launches Probe into Alleged Anti-Competitive Practices
Asian Paints faces a CCI probe over alleged anti-competitive practices, accused by new entrant Birla Opus of abusing market dominance. Learn why shares are sinking and what this means for India's paint industry.
Asian Paints Under Scrutiny: CCI Launches Probe into Alleged Anti-Competitive Practices
Shares of paint giant Asian Paints took a hit on Wednesday, July 2nd, following news that the Competition Commission of India (CCI) has ordered a thorough investigation into allegations of the company abusing its dominant market position. The probe, initiated by the CCI's Director General, stems from a complaint filed by Grasim Industries, a new entrant in the burgeoning paint market through its Birla Opus Paints brand.
Birla Opus Paints, in its official complaint dated July 1st, claims that Asian Paints has been implementing restrictive clauses with its distributors, effectively discouraging them from stocking and selling products from rival brands like Birla Paints. This move, if proven, could significantly hamper competition and consumer choice in the Indian paint sector.
International brokerage firm CLSA swiftly reacted to the news, reiterating its 'underperform' rating for Asian Paints and setting a target price of Rs 1,966 per share. The brokerage highlighted that this complaint underscores the increasing competitive intensity within the paint industry, a sector traditionally viewed as having relatively low barriers to entry. CLSA further noted that this development is likely to intensify regulatory scrutiny on how established players respond to the influx of new competitors.
Birla Opus also alleged that Asian Paints has been offering special incentives, such as exclusive discounts and sponsored foreign trips, to dealers who commit to exclusive arrangements. Conversely, dealers who choose to sell Birla Paints alongside Asian Paints' products are reportedly facing retaliatory measures, including reduced credit limits, enhanced sales targets, and a decrease in consumer leads.
According to data from the Centre for Monitoring Indian Economy (CMIE), Asian Paints held a commanding market share of 39.05 percent in FY23, solidifying its position as the country's largest paint company. Its closest competitor, Berger Paints, lagged far behind with a 12.13 percent market share, while Kansai Nerolac Paints and Akzo Nobel India each held less than 10 percent.
As of 9:30 a.m. on Wednesday, Asian Paints' shares were trading at Rs 2,343.8 on the NSE, reflecting a one percent dip following the news.
