asian paints: Asian Paints’ new acquisitions unlikely to add colour to its business soon

ET Intelligence Group: Asian Paints on Friday announced the acquisition of two companies – one engaged in decorative lighting and another in fenestration. These are small acquisitions enabling the company’s foray into these two new segments.

Nine years ago, the decorative paints market leader made an entry into modular kitchens through acquisition of Sleek Kitchen and a year later into bathroom fittings through the buyout of Ess Ess bath fittings. However, these businesses contributed only 2.5% to the company’s top line for the nine months ended December 2021.

It is unlikely that the latest acquisitions are going to make a major difference to the company’s overall business in the near to medium term. Asian Paints intends to expand from ‘share of surface’ to ‘share of space’ in homes through presence in kitchen, bath, furnishings, furniture and lighting. From a decorative paints company, Asian Paints intends to become a complete home decor company and these small acquisitions appear to be baby steps toward achieving that goal.

The inorganic expansion is likely to fill the gaps that exist in the company’s bouquet of home decor services.

Asian Paints’ New Acquisitions Unlikely to Add Colour to Its Business Soon

However, in chalking out its vision of becoming a home decor major, the company is exposed to a new problem – that of competition. Competition has been intensifying for the company in both its old and newly entered segments. Building material and steelmakers, such as the JSW Group, Grasim and JK Cement, have entered the decorative paints segment. In the home decor market, a motley group of companies like Ikea, H&M, Fab India, Marks & Spencer and NoBroker are eyeing growth besides the online and unorganised players.

During the pandemic, Asian Paints had rolled out hand and surface sanitisers that brought it in direct competition with fast-moving consumer goods makers such as Reckitt Benckiser, Hindustan Unilever and Godrej Consumer Products.

Asian Paints has had a formidable market share and a strong moat in the decorative paints segment. It is trying to build a moat in the home decor segment, too, by becoming a one-stop-solution provider for the consumer. However, while the moat building is a long-term proposition, the challenge of increased competition is immediate. For a company that is already battling the challenge of raw material inflation, battling competition on several fronts is another key area occupying managerial bandwidth. For now, the paints company has discovered small acquisitions to be a way of acquiring a relative edge against players in the home decor category.

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Divyansh Singh

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