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Our primary research on comparing cash discount scheme and payment terms of Birla Opus paints with peers reveals:
Most dealers prefer to pay in seven-15 days to avail 5% cash discount offered by leading paint companies. Due to channel financing, dealers pay just ~10% interest cost per annum but still avail 5% cash discount in 15 days.
Dealers have limited space and do not want to hold excess inventory as it results in higher inventory holding cost warehouse rent, pilferage, spoilage, etc.
The 5% cash discount scheme also benefits paint companies as dealers start pushing secondary sales to release the blocked funds. We note BOP is offering credit up to 50 days @2% cash discount compared to maximum 30 days credit offered by peers.
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