What's the Right Brushstroke for Asian Paints: Acquiring Akzo Nobel India?

The Indian paint industry is at an inflection point. With Blackstone Inc., JSW Group, and Pidilite Industries actively bidding for Akzo Nobel India’s paints business, Asian Paints faces a crucial decision: should it enter the fray or risk long-term irrelevance? As the country’s largest paint manufacturer, Asian Paints has dominated the decorative paints segment for decades, but its market share is now under sustained pressure. The acquisition of Akzo Nobel India may be one of the company’s best shots at defending its leadership position in an industry undergoing rapid transformation.

A Shifting Competitive Landscape

The Indian paint industry, historically characterized by steady growth and limited competition, has evolved significantly over the past decade. The entry of new players—most notably the Aditya Birla Group—has intensified competitive pressures. Today, the market has expanded from four players in 2013 to fourteen in 2024, leading to aggressive pricing strategies, heightened marketing spending, and increased distributor incentives.

In response, rivals like Berger Paints have ramped up their urban expansion, while new entrants are disrupting general trade channels. Even cement giants such as Ultratech and Adani-owned Ambuja are consolidating in a bid to dominate their respective sectors. The paints industry is now witnessing a similar consolidation wave, and Asian Paints cannot afford to sit on the sidelines.

Asian Paints’ Struggles and the Cost of Inaction

Despite its dominant position, Asian Paints has been struggling with declining financial performance:

• Stock Performance: A 25% decline in share price over the past year.

• Revenue Decline: Net sales fell 7.5% in Q3, driven by weak demand.

• Sluggish Volume Growth: Just 1.6% for Q3, while value growth declined by 7.8%.

• Market Share Erosion: Increasing competition has chipped away at its dominance.

Asian Paints' ability to organically expand is becoming increasingly difficult. High-margin business is under threat as rivals outspend and outmaneuver the company in marketing and distribution. For instance, Birla Opus signage now dominates paint stores across Delhi, and Berger Paints is aggressively expanding in urban areas traditionally dominated by Asian Paints.

Lessons From The Consolidation of the Cement Industry in India

The consolidation trend in India's cement industry offers a useful parallel for the paints sector. Over the past few years, the cement industry has seen rapid mergers and acquisitions driven by large conglomerates like Aditya Birla Group (Ultratech Cement) and the Adani Group (Ambuja Cement and ACC). These players have aggressively expanded their market share through strategic acquisitions, capacity expansions, and price optimization, fundamentally reshaping the competitive landscape.

Ultratech Cement, India's largest cement manufacturer, has acquired multiple regional players to solidify its market leadership. Similarly, Adani’s acquisition of Ambuja Cement and ACC in 2022 for $10.5 billion made it the second-largest cement player in India overnight. This race for scale and efficiency is reducing fragmentation in the cement industry and allowing dominant players to dictate pricing, improve cost efficiencies, and expand their reach across urban and rural markets.

This pattern of consolidation highlights how industries with slowing growth and high competition often see a few well-capitalized players emerge as the ultimate winners. In paints, a similar trajectory is unfolding, with major companies acquiring established brands to strengthen their portfolios and distribution networks. If Asian Paints does not act decisively, it risks losing its market dominance as new entrants grow through acquisitions.

The Case for Acquiring Akzo Nobel India

Akzo Nobel India, which sells its products under the ‘Dulux’ brand, holds a 7% market share and is one of the most profitable players in the sector. With an annual production capacity of 250 million litres and a focus on high-end decorative paints, the company presents a unique opportunity for Asian Paints to strengthen its premium offerings.

Akzo Nobel NV has already signalled that the sale of its Indian business will be concluded before the end of 2025, retaining a 10% stake in the entity. Based on Akzo Nobel India’s current market capitalization of ₹17,531 crore, the deal size is expected to be approximately ₹13,107 crore, making it the largest such takeover in India’s paint industry. Given Asian Paints’ robust reserves of ₹18,632.4 crore, it has the financial muscle to make a competitive bid.

The paint industry is becoming a battleground for deep-pocketed players. If Asian Paints does not act now, it risks being squeezed out of key segments. The company has built an enviable legacy over decades, but the threat from well-capitalized competitors is real.

The Precedent from Other Industries

History offers numerous examples of once-dominant public corporations losing their edge due to capital misallocation and failure to respond to industry shifts. In the U.S., industries such as steel, chemicals, brewing, and tobacco have all seen major declines in their publicly traded firms due to an inability to reinvest strategically. The same risks apply to Asian Paints if it fails to capitalize on this pivotal moment.

Conclusion: The High Cost of Hesitation

With the sale of Akzo Nobel India underway, Asian Paints must decide whether to bid or risk being left behind. The Indian paints industry is no longer a high-growth monopoly but a battleground where only the most strategically aggressive firms will survive. While the price tag for Akzo Nobel India is steep, the cost of inaction could be far higher.

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