The Aditya Birla group hopes to shake up India’s decorative paints business the same way that Reliance jolted the telecom sector out of its clubby somnolence back in 2016, triggering a fierce, no-holds-barred battle for survival.
Birla Opus — the paints division of the Aditya Birla group — has rolled out plans to grow at a blistering pace of a kind that the paints industry has never seen before. The Birla entity aims to create an installed capacity to manufacture paints that will be greater than the combined current capacities of the second, third and fourth players by the end of first year in business.
By the end of that period, it will establish his presence in each and every town with a population of 50,000 or more, boasting a dealer network that will rank second only to the market leader, Asian Paints.
On Thursday, Kumar Mangalam Birla, chairman of the Aditya Birla group, inaugurated three of the six upcoming plants in one go from Panipat, Haryana, where a 230 million litres per annum unit has come up. In his speech, Birla drummed up the idea of a ‘dramatic transformation’ of the Indian economy.
“In sector after sector, competition has spurred incumbent players to significantly improve the quality of services and, in turn, upgrade the lives of Indians. It is with this spirit of transformative impact that the Aditya Birla group has stepped into the paints sector,” Birla said.
In telecom, the incumbent players such as the then market leader Airtel and Vodafone Idea, where Kumar Birla has a significant stake, were at the receiving end of Jio’s onslaught. Backed by unmatched scale and competitive pricing, Jio soon shook up the industry like never before.
Asian Paints is the market leader in decorative paints now, followed by Kansai Nerolac, Berger and AkzoNobel. The JSW group is the latest entrant in the industry which boasts revenues of Rs 65,000 crore and has been growing at 7-8 per cent. Many companies tried to enter this business but failed due to intense competition and high entry barriers.
Birla described the entry into the paints sector as the Aditya Birla group’s most ambitious ground-up consumer business yet. “Globally, no paints company has ever launched in one shot — factories, operations, products and services at the scale we are about to undertake.”
With an investment of Rs 10,000 crore, the six plants including one in Bengal’s Kharagpur, will have a capacity of 1332 million litres a year, which will account for 40 per cent of the total industry capacity built over several decades. The company has the capability to raise capacity further by 500 million litres with a low incremental capital cost.
To begin with, the company’s paints will be launched in Punjab, Haryana and Tamil Nadu. It will reach all urban areas with a population of 100,000 by July. Birla said the company was aiming to achieve a turnover of over Rs 10,000 crore within three years of full operations and also become profitable.
Birla compared the new business to a start-up. “It should be seen as a scale start-up incubated by ABG,” he added.
ABG’s strategy also includes wooing the distributors and customers. The customers are going to get 10 per cent extra in the pack to begin with, apart from 1 year of additional warranty. For distributors, group company Aditya Birla Finance will offer financing. Moreover, it will create enough depots to ensure 4 hour delivery at distributor’s doorstep to reduce working capital cost. The tinting machines will also be 40 per cent smaller in sizes compared with competition.
Focus on consumer
Birla explained the foray into paints is a move towards a consumer-facing business. He pointed out all of the group’s B2B businesses have been mandated to go as close to consumers as possible. ABG is already into the fashion retail and restaurants business. Later this year, the group will launch jewellery retail across India, Birla said.
The plant at Kharagpur, where both water-based and solvent-based paints will be produced, is going to be ready by the fourth quarter of FY25. Birla said the unit would cater to Bengal and the entire eastern market. Investment in the project, which is under construction, is pegged at Rs 1,350 crore.
