Should You Invest in Asian Paints Ltd. for Long Term? Stock Analysis by Finology

India’s leading paints and decor company, Asian Paints operates at remarkable 30%+ ROE with ~0x debt-to-equity ratio.

Finology Research Desk has analysed the company this week, providing a clear verdict on whether Asian Paints Ltd. is a good long-term stock or not. Find out in this article.

What makes the Paint Industry special?

The Indian paints and coatings industry was valued at USD 10.46 billion in 2025 and is expected to grow at a CAGR of 9.38% to reach USD 16.37 billion by 2030. This growth is expected to be driven by rapid urbanisation, increasing disposable income and a booming real estate sector. Additionally, Government initiatives like Smart Cities Mission and Housing for All are playing a crucial role in boosting the demand for paints across the country.
 

Source: Mordor Intelligence

The continuous development of urban areas, coupled with large-scale infrastructural projects such as highways, airports and metro rail systems, is significantly driving the growth of India's paints and coatings market. This growth is particularly pronounced in developing regions where rapid urbanisation is accompanied by increased construction activities, further stimulating the demand for paints and coatings. Among various areas, the western region of India, particularly Maharashtra and Gujarat, dominates the paints & coatings market. These states have a high concentration of industrial activities, solid infrastructure, and significant residential and commercial construction projects.

The paints and coatings industry is broadly classified into organised and unorganised segments. The organised sector accounts for approximately 70% market share of the industry. Within the organised segment, Asian Paints is the market leader, holding around  50% market share as of 2024. Other major players such Berger Paints, Kansai Nerolac Paints, Akzo Nobel, and Indigo Paints along with Asian Paints collectively command about 90% of the organised market.
 

Source: Finology Research Desk, Wright Research

In terms of product categories, the market is divided into decorative coatings, industrial coatings and speciality coatings. The decorative paints segment dominates the market due to strong demand from residential and commercial sectors, fueled by increasing urban population and ongoing real estate developments. The industrial coating segment is the second largest, catering to industries like manufacturing, power, railways, etc. Speciality coatings addresses needs such as anti-bacterial properties, water and fire resistance, textured finishes that reflect evolving trends towards higher functionality and durability. Each of these segments contributes uniquely to the overall market landscape, with manufacturers continuously innovating to meet the evolving consumer and industrial needs.

The wave of real estate development and renovation is not just fueling the paints and coatings sector but is also driving growth across the home decor sector in India. As new homes and commercial spaces emerge, consumers are increasingly investing in home furnishing and decor to enhance their living environments. The home decor industry was valued at USD 25.50 Billion in 2024 and is expected to grow at a CAGR of 5.40%, to reach USD 40.80 Billion by 2033. This market expansion is supported by rising disposable income, rapid urbanisation, influence of social media trends and booming real estate sector, resulting in growing demand for fashionable, functional and space efficient home decor products that cater to modern lifestyles and changing customer preferences in India.
 

Source: Finology Research Desk, IMARC 

Business Model of Asian Paints

Founded in 1942, Asian Paints is the leading paint and decor company in India and ranks as the 8th largest coating company in the world. It is engaged in the business of manufacturing, selling and distributing paints, coatings, home decor products and bath fittings while also providing related services. With 27 manufacturing facilities across 15 countries, Asian Paints serves a diverse customer base in over 60 countries, reinforcing its position as a leading player globally.

Business Segments of Asian Paints
 

Source: Finology Research Desk

Revenue Mix of Asian Paints

Source: Finology Research Desk, Annual Report FY24

Asian Paints derives majority of its revenue from its core, Decorative Paints and Home Décor business in India contributing 88.2% to the total revenue. This segment, comprising interior and exterior paints, waterproofing solutions, wood finishes, and home décor offerings. The company’s International Business segment accounted for 8.7% of the total revenue, catering to a wider base of customers across geographies, particularly in Asia, Africa, the Middle East, and the South Pacific. Additionally, the Industrial Business segment, which includes automotive and protective coatings, contributed 3.1%, reflecting its steady presence in specialised industrial coatings solutions.

Analysing the revenue by nature, 99.30% revenue was generated through the sale of products, clearly indicating Asian Paints product-led business model. Revenue from services accounted for 0.37% of total revenue, which includes colour consultancy, painting services, waterproofing solutions, bathroom designing services etc. Other income, comprising royalty income, scrap sales and processing and service income, contributed the remaining 0.33% of the overall revenue.
 

Cost Mix of Asian Paints
 

Source: Finology Research Desk, Annual Report FY24

Asian Paints’ material costs primarily comprises crude oil derivatives (such as solvents, resins and additives) along with titanium dioxide and other pigments. Material cost accounts for approximately 55% - 62% of the total revenue, making it the largest component of the company’s cost structure. Although relatively stable over the years, these costs are sensitive to volatility in global crude oil prices, foreign exchange fluctuations, and supply chain disruptions, particularly from international markets. India imported approximately 232.5 million metric tonnes of crude oil in FY24, reflecting significant dependence on external supply for crude oil. Consequently, rising geopolitical tensions and commodity price volatility could have a substantial impact on the company’s profit margin.

Depreciation and amortisation expenses constitute about 2.3% of the company’s total revenue. These expenses have remained stable, typically ranging between 2% to 4% of revenue over the years.

Employee benefit expenses make up around 6.4% of total revenue and have typically ranged between 5% - 7% over the years. Despite increasing adoption of automation and technology across operations, employee involvement remains critical to the company's success particularly in areas such as product development, customer service, and strategic planning. Asian Paints maintains a strong focus on talent development, offering structured training programs and initiatives to enhance workforce capabilities and support long-term business objectives. 

Other expenses, including freight, advertisement, sales promotion, repairs and maintenance, power and fuel etc, account for approximately 15% of revenue. These have remained relatively stable, ranging from 14% to 16% over the years.

The company’s Finance costs are relatively low, accounting for less than 1% of the total revenue. The company follows a conservative financial strategy, maintaining minimal reliance on external debt, which helps keep the interest expenses under control.

The company’s tax expenses accounted for 4.93% of its revenues in the FY24. It has typically ranged between 4% to 7% over the years, aligning with the prevailing corporate tax rates in India. 

After accounting for all costs, Asian Paints reported a net profit margin of 15.30% in FY24, It has been ranging between 11% to 14% over the past 5 years, reflecting the company’s consistent operational efficiency and stable profitability over the years.
 

Porter’s Five Forces Analysis of Asian Paints

Source: Finology Research Desk

1. Moderate Threat of New Entrants: The threat of new entrants is moderate in the paint industry due to substantial barriers to entry in terms of high capital expenditure, technological expertise and established brand recognition of existing players in the industry. Also, Asian Paints has built a strong reputation over the decades and enjoys customer loyalty and trust, making it difficult for new players to capture the market easily. 

2. Moderate Bargaining Power of Customers: Customers have moderate bargaining power in the paint industry due to the availability of various alternatives in the market. Individual consumers generally have little power due to their low-volume purchases, but they are price-sensitive and can easily switch brands based on pricing or perceived quality. Institutional buyers like construction companies, automotive manufacturers, and industrial clients purchase in large volumes, giving them greater negotiating power.

3. High Competition in the Market: The paints industry in India is highly competitive, with major players like Berger Paints, Birla Opus, Nerolac, AkzoNobel and JSW Paints constantly battling for market share. Although Asian Paints is the market leader, the competition remains intense because of similar product offerings and competitive pricing strategies of competitors.

4. Moderate Bargaining Power of Suppliers: Suppliers have moderate bargaining power in the industry due to availability of multiple suppliers in the market. However, the paint industry is highly dependent on crude oil derivatives such as solvents, resins and additives. Since the prices of crude oil are volatile, their fluctuations significantly impact the production costs. Additionally, certain specialised chemicals such as titanium dioxide, polyurethane are critical inputs and have limited number of suppliers, thus having high supplier’s bargaining power.

5. Low Threat of Substitutes: The threat of substitutes in the paint industry is relatively  low due to lack of direct substitutes for paint. While alternatives like wallpapers and decorative laminates exist for interior applications, they are often used alongside paints rather than replacing them entirely. Moreover, for exterior surfaces, industrial use and automotive applications, paint remains essential. Although limewash was once used as an alternative to paints, it has largely been replaced by paints in the modern era.

What led us to reject Asian Paints Ltd. for Finology 30?

1. Promoter Pledging  - Promoter pledging has been increasing steadily over the quarters, rising from 7.04% in Mar 2024 to 9.30% in Mar 2025. This rising trend in promoter pledging raises concerns regarding the company’s financial stability and corporate governance practices. Higher promoter pledging typically increases financial risk, contributes to stock price volatility and undermines the confidence of investors.
 

Source: Finology Ticker

2. Intensifying Competition - Asian Paints is facing increasing competitive pressure as new players like Birla Opus, HAISHA Paints, JSW Paints are aggressively challenging its dominance in the Indian paints industry. Grasim Industries' Birla Opus has made a massive investment of ₹10,000 crore to expand its presence aggressively. It is leveraging UltraTech Cement’s brand reputation and extensive distribution network to gain the market share quickly. In a short span, Birla Opus has already emerged as the second-largest player in the industry (in terms of capacity). JSW Paints had already disrupted the market with its “Any Colour, One Price” policy, triggering price wars and margin pressures across the industry. Meanwhile, HAISHA Paints is also making bold moves with innovative product offerings and competitive pricing, adding to the growing pressure on Asian Paints.

3. Declining sales and profits - Asian Paints is showing clear signs of financial difficulty, with both sales and profits under significant pressure. In the nine months ended FY25, the company’s sales dropped by 5% compared to the same period during last year, largely due to intensifying competition and weakening market demand. What’s more concerning is the sharp 30% decline in profits, accompanied by a 8% decline in gross margins, raising serious concerns about the company’s financial stability and its ability to sustain growth. These challenges highlight the difficulty Asian Paints is facing in navigating a tough and changing market environment.

The Bottom Line

For Finology 30, our ideology has been to focus on business models with strong moat and good management pedigree.

For now, Asian Paints Ltd. failed to pass our investment checklist. So, we decided not to go ahead with Asian Paints Ltd.