Consumer Discretionary- Likely M&A Scenarios In Paints; Why M&As Must Be A Priority For CEOs: ICICI Securities

ICICI Securities Report

As paint industry evolves from a ‘somewhat rational competition’ to a ‘perfect competition’ market, we expect accelerated industry consolidation over FY23-FY30. Drivers are:

1. market leaders’ focus on protecting their market shares even at the cost of profitability,

2. high growth ambitions of new entrants and

3. survival for mid-sized players.

That said, we also expect industry fragmentation to continue in the near to medium term – we forecast more than 10 players with market shares of 2% plus by FY26E versus just four in FY21.

We expect all listed players (including Grasim) to be (potentially) active buyers to fill product, geography and technology gaps.

We present in this report:

1. company-specific reasons why M&As can be economic value added-positive (assuming right price paid),

2. historical perspectives on M&As in paint industry, and

3. some of the likely scenarios.

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