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Asian Paints and India’s Middle-Class Spending Boom

June 10, 2021

As India's middle class grows, Asian Paints is poised to command the lion's share of spending on decorative paint.

It’s a Saturday morning in Mumbai in the fall of 2019. Shoppers are gearing up for India’s festive season. They’re streaming into a jam-packed, brightly lit paint store called Colour with Asian Paints, where the buzz is reminiscent of a U.S. Apple Store in December. Excited families crowd displays, using handheld scanners to save favorite paint colors from the 1,800 on display. Couples debate décor ideas in a series of display rooms. In one corner, shoppers pick out wallpaper and take selfies with wall decals, while in another, a pro teaches a painting class. Throughout the store, customers engage in excited conversations with décor consultants.

Watching it all are Danielle Menichella and Ashraf Haque, Sands Capital analyst and portfolio manager, respectively. The shop is the flagship store of Asian Paints—a company that we consider one of the best ways to capitalize on the long-term growth of India’s middle class. Menichella and Haque are visiting the store as part of our ongoing due diligence into this opportunity.

The Biggest Middle-class Boom in History

India has more than 1.3 billion people. It’s also among the world’s fastest-growing large economies, with gross domestic product (GDP) growth in the mid-single digits expected over the next several years.

The combination of enormous size and economic growth is creating new consumers on a staggering scale: By 2030, India is expected to become the third-largest consumer market in the world.1

In our view, that burgeoning consumer class, combined with increased spending on real estate and infrastructure, is likely to translate into sustained growth in spending on paint. India’s paint consumption has risen about twice as fast as GDP in recent decades, and is expected to keep growing at that rate for years to come. At the same time, branded paint companies are benefiting from a shift in India away from small, unorganized “mom and pop” suppliers and toward large companies that provide higher quality paints, selection, and service. This formalization, in an industry buoyed by the historic rise of Indian consumption, creates the potential for top brands to produce durable secular growth that could last decades.

At the forefront of these trends is Asian Paints, the undisputed leader in the Indian paint market for the past half-century.

The Asian Paints Advantage

In a typical year, our investment team visits India five or six times. Our analysts and portfolio managers meet with management at the company and its competitors, interview experts such as paint dealers and former paint industry executives, visit Asian Paints’ and competitors’ dealers and stores, and talk to customers. We’re looking to see whether the company can continue building on its dominant position, if the market space continues to be attractive and if Asian Paints can continue to grow. Asian Paints has controlled more than 50 percent of the market share for over 10 years, with both impressive financials and a stock that by our estimation is reasonably priced.

We’re confident that the market can continue to grow rapidly for many years to come. Our research has consistently shown that Asian Paints is the clear favorite of consumers, painters, and paint dealers, with little competition in India’s high-end paint market. Almost all new entrants to India’s middle class grew up watching Asian Paints commercials—the company has outspent competitors on marketing and advertising for at least 40 years—and dealers we spoke with tell us they have to sell the company’s products to get customers in the door. These aspirational consumers are willing to pay a premium for Asian Paints.

Perhaps the greatest key to Asian Paints’ success is its dealer network. The company has over 67,000 dealers—almost triple its nearest competitor—and it’s been adding more than 2,000 every year. Asian Paints’ more than 10 plants, more than 100 warehouses, and industry-leading logistics enable it to deliver paint within four hours to most dealers and within a day to the others. “It’s very complex to transport things in India,” notes Menichella. “And most dealerships are incredibly small, crowded spaces, so they have no room to store inventory.” Nearly instant delivery is one of the reasons nine in 10 dealers say they’re happy with Asian Paints.

Weighing Risks

Every company faces risks. Our challenge is to distinguish the short-term noise from threats that could derail a company’s long-term growth.

Input costs are a constant wild card in the paint business. We believe Asian Paints’ brand and its market and price leadership help insulate the company from this risk. The firm has demonstrated the ability to adjust prices as needed to offset fluctuations in raw material costs—and when Asian Paints changes prices, competitors usually follow its lead.

A major slowdown in India’s economic growth would pose a greater threat. But while an economic downturn would be damaging, our analysis of past declines suggests that Asian Paints should be able to ride out periods of weakness thanks to its brand strength and consumers’ hunger to improve their homes. In the past, consumers have continued to invest in paint even when they’ve slashed spending on other discretionary items, such as jewelry, motorbikes, and restaurant meals. As a result, Asian Paints has posted impressive growth in sales volumes, revenues, and earnings even during past periods of economic weakness.

A Vision for an Even Bigger Future

Asian Paints’ management’s long-term vision is to parlay leadership in paint to become a Home Depot–style big box store offering not just paint, but also home improvement goods and contracting services—the types of things many of the 380 million new consumers are going to need.The company has begun working toward this vision by developing professional programs for contractors, expanding into stores that provide kitchen and bath improvements, co-branding with tastemakers like ELLE Décor, and throwing home furnishing expos to debut wallpaper, furnishings, and other home improvement ideas.3

We expect that Asian Paints’ secular growth opportunity, market leadership, and clear vision positions the company to produce strong, steady earnings growth for many years to come. Menichella, Haque, and other Sands Capital professionals will be there, monitoring its progress.

2 Home Depot is not a Sands Capital holding.

3 ELLE Décor is not a Sands Capital holding.


The business profiled was selected because it is the longest-held common industrials business in the Sands Capital Global Growth and Emerging Markets Growth strategies.

The views expressed are the opinion of Sands Capital Management and are not intended as a forecast, a guarantee of future results, investment recommendations, or an offer to buy or sell any securities. The views expressed were current as of the date indicated and are subject to change. This material may contain forward-looking statements, which are subject to uncertainty and contingencies outside of Sands Capital’s control. Readers should not place undue reliance upon these forward-looking statements. There is no guarantee that Sands Capital will meet its stated goals. Past performance is not indicative of future results. A company’s fundamentals or earnings growth is no guarantee that its share price will increase. Forward earnings projections are not predictors of stock price or investment performance, and do not represent past performance. The specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. There is no assurance that any security will continue to be owned by Sands Capital Management. You should not assume that any investment is or will be profitable. All company logos and website images are used for illustrative purposes only and were obtained directly from the company websites. Company logos and website images are trademarks or registered trademarks of their respective owners and use of a logo does not imply any connection between Sands Capital and the company. GIPS®-compliant presentations and additional disclosures for the related composites may be found at Sands Capital Disclosure Presentation.

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