Asian Paints Shares Fall Nearly 2% After CCI Orders Probe into Alleged Abuse of Dominance; Stable in the Afternoon Session

New Delhi, July 2: Shares of Asian Paints slipped by nearly 2% in Wednesday morning trade after the Competition Commission of India (CCI) ordered a detailed investigation into allegations that the company abused its dominant position in the decorative paints market.

On the NSE, it dropped 1.79% to ₹2,327. This negative market reaction comes as the probe sheds light on the competitive landscape of the Indian paint industry.

However, as of 12:30 p.m., the shares stabilised and were trading at ₹2,388.10, up by 0.78% or ₹18.60.

CCI Probe Triggered by Grasim Complaint

The investigation order stems from a complaint filed by Grasim Industries (Birla Paints Division), a part of the Aditya Birla Group. Grasim entered the decorative paints market in February 2024 under the brand ‘Birla Opus Paints’ and has rapidly gained market share, reaching approximately 6.8% by March 2025, posing a significant challenge to established players.

Grasim alleged that Asian Paints engaged in exclusionary and restrictive practices to hinder its market entry and growth. According to the CCI, a prima facie case was established against Asian Paints for violating provisions of the Competition Act, 2002, specifically:

• Section 4(2)(a)(i): Pertaining to directly or indirectly imposing unfair or discriminatory conditions in the purchase or sale of goods or services.
• Section 4(2)(c): Related to indulging in practices resulting in the denial of market access.
• Section 4(2)(d): Concerning making the conclusion of contracts subject to acceptance by other parties of supplementary obligations which have no connection with the subject of such contracts.

90-Day Investigation Ordered

The CCI has directed its Director General to conduct a detailed investigation and submit a report within 90 days.

In its order, the regulator noted that Asian Paints allegedly imposed unfair conditions on its dealers by enforcing exclusivity clauses, effectively preventing them from dealing with competitors like Grasim. This conduct was described as exploitative in nature. Further allegations made by Grasim include Asian Paints offering additional incentives (such as foreign travel) for exclusivity, threatening to reduce credit limits for dealers who also stock Birla Opus, influencing raw material suppliers to restrict supply to competitors, and coercing landlords and transporters to avoid engaging with new entrants.

Asian Paints maintains a dominant position in the Indian decorative paints market, with various reports indicating its market share ranging from approximately 39% (CMIE, FY23) to over 50% (ICICIdirect, 2024). Its expansive dealer network (over 74,000 dealers) and influence over intermediaries were noted by the CCI as factors contributing to its dominant position.

The ongoing probe could have significant implications for Asian Paints’ competitive practices in the sector and might reshape the dynamics of the Indian paint industry, which is projected to grow substantially, reaching an estimated $32.71 billion by 2032.

Asian Paints has stated that it is reviewing the CCI’s order and intends to cooperate fully with the investigation. It’s worth noting that a similar complaint by JSW Paints against Asian Paints in 2020 was dismissed by the CCI after a two-year probe, with the appellate tribunal also upholding that decision. However, the current complaint from Grasim appears to have provided sufficient prima facie evidence for the CCI to proceed with a formal investigation.

Why Did the Share Price Stabilise?

After the initial dip following news of the CCI probe, Asian Paints’ share price found some stability by the afternoon. Here’s why:

1. Past Experience Matters: Investors may recall the 2020 JSW Paints complaint, which was eventually dismissed. That past outcome could be tempering fears about the current case.
2. Strong Business Foundation: Asian Paints continues to enjoy a significant market share and a large dealer network, which likely gives investors some comfort in its long-term position.
3. No Immediate Penalties: The investigation is at a preliminary stage, and there’s no financial impact or restrictions announced yet, helping reduce immediate concern.
4. Mild Buying Interest: The early fall in share price may have attracted some buying from investors who view the company as fundamentally strong.
5. Company’s Response: Asian Paints has said it is reviewing the order and will cooperate with the investigation, which may have helped calm market nerves.

What’s Ahead For Asian Paints?

While the CCI probe introduces an element of uncertainty, the road ahead for Asian Paints will likely depend on the depth and outcome of the investigation. For now, investors will be closely tracking any developments from the CCI or company responses over the next 90 days. Asian Paints’ strong fundamentals, wide dealer network, and brand loyalty may help it weather near-term sentiment shifts. However, any adverse findings could lead to regulatory action or operational changes in how it engages with distributors.

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