Shares of Asian Paints dropped 2% on July 2, as the company came under regulatory scrutiny after the Competition Commission of India (CCI) ordered a detailed probe into allegations of anti-competitive conduct.
At the centre of the controversy is Grasim Industries, which recently forayed into the paints market through its new brand, Birla Opus Paints. In its complaint, Grasim alleged Asian Paints of using its market dominance to stifle competition and create hurdles for new players. According to the filing, Asian Paints is reportedly entering into restrictive distribution agreements that discourage dealers from stocking or selling Birla Paints.
The complaint goes further, accusing Asian Paints of rewarding exclusivity through foreign-sponsored dealer trips, special discounts, and other incentives. Conversely, dealers who choose to stock both Asian and Birla brands are allegedly facing retaliatory measures including reduced credit limits, higher sales targets, and fewer consumer leads.
The CCI has now asked its director general to investigate these practices, signalling a deeper review into the conduct of dominant firms in sectors with growing competition.
Brokerage house CLSA responded by retaining its 'underperform' rating on the stock and assigning a target price of ₹1,966. It stated that the move underscores the rising competitive intensity in India’s paints sector, a space traditionally led by a few large players, but now seeing an influx of new entrants due to low entry barriers.
According to CMIE data, Asian Paints controlled 39.05% of the market in FY23, far ahead of rivals. Berger Paints was next with 12.13%, while Kansai Nerolac and Akzo Nobel India trailed with single-digit shares.
With the investigation now officially underway, Asian Paints not only faces a test of its regulatory compliance but also the challenge of defending its dominance in a rapidly evolving market.
