Shares of Asian Paints fell today, a day after Aditya Birla Group firm Grasim Industries. 10,000 crore and production is expected to start from the fourth quarter of 2023-24. In August last year, the board of Grasim Industries had approved a 5,000 crore capital expenditure (CAPEX) planning to set up a paint business.
The capital expenditure employed in the Paints business has been increased to INR100b from INR50b earlier and the installed capacity will be 1.33m kl. The increase in capex is due to higher capacity and cost inflation. The production is likely to start from 4QFY24E. Management targets an IRR of 20% from this business,” Motilal Oswal said in a note.
Shares of Asian Paints ended today at 8% lower 2,839. Another paint maker, Berger Paints, fell 7%. 568.80.
Grasim Industries is setting up five to six plants. Civil construction has already started at its two plants – Panipat and Ludhiana – and is expected to start soon in Chamarajanagar, Karnataka.
Paints stocks have been under pressure in line with broader markets due to rise in oil prices, which puts pressure on the paint maker’s margins.
“Declination in margins due to rise in oil prices has spoiled investor sentiment in the market. In FY22, paint companies already hiked prices by 20% due to inflationary pressure on raw material cost Further, Antu Thomas, Senior Research Analyst, Geojit Financial, ASI, Asian Paints said, 2% price hike is expected from April- May 22 and further price hike in Q1FY23. We expect a sharp rise in prices. The reason may impact the demand trend in the near term for services.