Sun, May 19, 2024

GRASIM INDUSTRIES Market Price is moving in Ascending channel and market has rebounded from the higher low area of the channel

GRASIM: Grasim’s Birla Opus Discount: A Warning for Asian Paints

Jefferies Brokerage Firm Upgraded Grasim to higher rated due to Grasim entered Paint Business company named Birla Opus. Grasim offered 5% instant discount to Distributors to collect more customers in the new Launch. This is the Big drawback for Asian Paints productions. Nearly 10-15% Margin Gap between this two companies.

Grasim’s Birla Opus Paint Brand Presents Challenge to Asian Paints

Grasim’s newly launched paint brand, Birla Opus, has revealed dealer pricing with a notable discount of approximately 5 percent compared to industry giant Asian Paints. Analysts at brokerage firm Jefferies observed that when considering promotional volumes, the overall price gap across various segments appears to be around 10-15 percent, except in the luxury segment, where prices are similar to those of the market leader.

Jefferies predicts heightened competition in the Indian paints sector due to Grasim’s discounted offering, posing a potential downside risk to market leader Asian Paints. Consequently, Jefferies anticipates Asian Paints’ earnings per share to remain stagnant over the next two years, partly due to increased competition, which may lead to a downward revision of already conservative forecasts.

Paints

Jefferies has issued an ‘underperform’ rating for Asian Paints, with a price target of Rs 2,500, indicating a potential decrease of over 12 percent from the previous closing price. Conversely, the firm has assigned a ‘buy’ recommendation for Grasim, with a price target of Rs 2,600, reflecting a potential upside of approximately 17 percent.

Prepared for Competition

According to Jefferies, Grasim has entered the paints segment fully equipped on all fronts. Birla Opus offers a diverse product range covering various price points, boasting a portfolio of 1,200 SKUs, 145 products, and over 2,300 shades. Jefferies noted that the company claims a 98 percent product superiority over competitors based on blind tests.

Grasim’s entry into the paints industry is expected to increase sector capacity by 40 percent by FY25, with the potential to add a further 500 million liters in the medium term. The brokerage also anticipates cost advantages for Grasim due to the utilization of cutting-edge technology and automation, coupled with significant backward integration.

Grasim aims to establish a nationwide distribution network by July 2024 and onboard 50,000 dealers by March 2025, aspiring to develop the second-largest network in the paints sector. Additionally, the company is offering a 10 percent extra product discount during the promotional period.

Jefferies highlighted that absolute advertising expenditure for Grasim is expected to be comparable to that of Asian Paints and significantly higher than the next two players in the market. Grasim has also prioritized strengthening its organizational structure, with 2,400 employees already onboard, compared to 4,000-7,000 for industry peers Asian Paints and Berger Paints.

FPI Investors: FPIs Pour Rs 38K cr into Equities in March amid Optimism

FPI invested so far 38K crore in the Indian Equity market in March month. Debt Market invested as 55480cr so far. Due to Geopolitical tensions Foreign investors need safe guard investments like developing country – India chose for generating wealth creation. In January month 25k Cr rupees outflow, 1596Cr injection in February, Now March 38K crore is massive development from FPIs.

FPIs Inject Rs 38K cr into Indian Equities in March Amid Positive Outlook

Foreign portfolio investors (FPIs) have displayed a significant resurgence in their investment activity within the Indian equity markets this month, injecting over Rs 38,000 crore. This surge follows a modest investment of Rs 1,539 crore in February and a massive outflow of Rs 25,743 crore in January, according to data from the depositories.

With this, FPIs have turned positive in equities by Rs 13,893 crore so far in 2024 and Rs 55,480 crore in the debt market.

Himanshu Srivastava, Associate Director at Manager Research at Morningstar Investment Research India, highlighted that FPIs have become significant buyers in March. Improved global economic conditions and a positive Indian macroeconomic scenario have driven FPIs to invest in high-growth markets like India. The recent market correction has also provided a buying opportunity.

The influx of FPIs can be attributed to robust GDP growth and expectations of a potential shift in the RBI’s policy, possibly leading to rate cuts of 25-50 basis points in the latter half of fiscal 2025, according to experts.

However, FPIs turned net sellers last week, albeit marginally, to the tune of USD 314 million, largely due to a cautious approach.

GDP growth

In addition to equities, FPIs injected a massive Rs 13,223 crore into the debt market this month. This move came after Bloomberg announced the inclusion of India’s bonds in its Emerging Market (EM) Local Currency Government Index and related indices from January 31 next year.

Furthermore, FPIs have been investing in the debt markets for the past few months. They invested Rs 22,419 crore in February and Rs 19,836 crore in January.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, stated that the sustained FPI flows into debt are primarily due to the inclusion of Indian bonds in the JP Morgan EM Bond Fund and Bloomberg Bond Index. This inclusion is expected to attract around USD 25 billion in investment, beginning in June 2024. Consequently, FPIs are engaging in front running in anticipation of this potential investment.

Going forward, FPI inflows into debt are expected to continue. However, a sharp surge in debt flows is unlikely as US bond yields have also risen in recent days.


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