Reliance Industries Asian Paints investment is in the spotlight again. In 2008, RIL paid around ₹500 crore for a share in Asian Paints, which, at the company’s most recent closing price, is now worth ₹10,730 crore. RIL may earn a 2046% return on its investment at this point. Dalal Street is ablaze with rumors that Mukesh Ambani’s Reliance Industries (RIL) may sell a share in the blue-chip firm Asian Paints, which would result in a tidy profit of more than 2,000% for India’s most valuable corporation.
In 2008, when Asian Paints was a stock market sensation, RIL paid over ₹500 crore to purchase a share in the firm. According to Asian Paints’ most recent closing price, the share is currently worth ₹10,730 crore. It might provide a 2,046% multibagger gain for Reliance Industries if sold at present prices.
RIL’s ownership of Asian Paints
RIL now owns 4.9% of the largest paint producer in India, which is going through a difficult period due to increased competition in the market.
Reliance had already thought about making money off of its stake in Asian Paints. According to a Bloomberg story, it had also started negotiating with banks about selling its 4.9% interest in Asian Paints back in 2020.
Reliance Industries has resurrected its proposal to sell its 4.9% holding in Asian Paints and has enlisted Bank of America (BofA) to handle the transaction, according to a story published in the Economic Times on Wednesday.
Shares of Asian Paints are under pressure.
Due to increasing competition in the paints market, Asian Paints’ stock has seen strong selling pressure, which might cause the business to lose its leading position.
Asian Paints’ stock has dropped 18% in the past year, and investors have not received any returns during the previous two or three years. In two years, the stock has dropped 26.50%, and in three years, it has dropped 25%.
Reliance Industries Asian Paints Stake Set for Massive Windfall
According to statistics from Elara Securities, Asian Paints’ market share dropped from 59% to 52% in the 12 months ended March 31. This has increased pressure on the market leader to increase marketing and discounting in order to hold onto its top spot.
Brokerage Motilal Oswal stated in a report following earnings that Asian Paints’ performance concerns persist due to the uncertainty around a short-term demand rebound. According to the report, growth recovery will continue to be essential for a stock performance recovery. Although the brokerage maintained a “Neutral” recommendation on Asian Paints shares, with a target price of ₹2,500, it stated that recovery and a competitive pricing and incentive plan will be the major monitorables. Moderation in raw material costs is good for the business.
In its Q4 call, Asian Paints also emphasized how new competitors are reducing market share.
Asian Paints is still focused on striking the correct balance between profits and market share, so even while the firm is still focused on its strong brand and value offerings, we think these efforts might not be sufficient. After the paintmakers’ Q4 results last week, Elara Securities predicted that market share would continue to be under pressure unless there was a significant reduction in competition.
The stock of Asian Paints has a ‘Sell’ rating, with a target price of ₹1,940.
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