For decades, Asian Paints wasn’t just a company—it was a fortress. Its walls were built on unshakable distribution, a cult-like brand, and a dealer network that rivals treated with envy. The Asian Paints stock delivered a CAGR of 22.6% (excluding dividends) between March 2013 and March 2021, while earnings increased only at 13.5% CAGR. Investors believed in the moat and they paid any price for it.
Then, almost overnight, the fortress came under siege.
This isn’t just a story about paints. It’s a lesson as old as capitalism itself: abnormal profits are a flashing beacon for competition. And when that competition arrives — armed with deep pockets and ruthless ambition — even the widest moats can evaporate.
Porter’s Warning: The Threat of New Entrants
Michael Porter is a renowned Harvard professor known for his work on business strategy and competitive advantage. His Five Forces framework teaches us that profitability isn’t just about your product — it’s about the structural barriers protecting your industry. High margins? They’re an invitation. Strong demand? A magnet. When capital spots an opportunity, it rushes in, driving up competition. This often eats into excess profits and can even turn a once-profitable industry into a loss-making one.
Asian Paints & its investors learnt this the hard way.
The ₹10,000 Crore Invasion
When Grasim Industries — the Aditya Birla Group’s heavyweight — announced its paint venture in January 2021, skeptics dismissed it. Asian Paints had survived decades of competition. What could change?
Then came Birla Opus.
With ₹10,000 crore in investment, Grasim rewrote the rules:
- Capacity at scale — factories built to flood the market.
- Dealer incentives — better margins than incumbents could stomach.
- Marketing blitz — ads, celebrities, influencers.
The result? Asian Paints, once the price setter, became the price taker. Volumes shrunk and even margins compressed. Marketing spend surged. The stock corrected ~33% within 3 months.
The moat? Not as unbreachable as once thought.
Déjà Vu: The Wires & Cables Bloodbath
Just as the paint war raged, Aditya Birla Group struck again — this time in wires & cables under UltraTech. The market’s reaction? Sheer panic.
On February 27, 2025, after Aditya Birla announced their plans – Polycab, KEI, and Havells plunged up to 20% in a single day. Investors had seen this movie before — a deep-pocketed entrant, collapsing prices, and incumbents scrambling to defend turf.
And Birla holds another ace: Hindalco’s aluminum and copper supply, slashing input costs. If history repeats, margins in the cables industry could soon follow paints into the abyss.
The Jio Playbook: A Global Phenomenon
Of course, this isn’t unique to India. History is littered with industries where fat profits invited destruction:
U.S. Airlines (2000s): After years of consolidation and high fares, ultra-low-cost carriers like Spirit and Frontier undercut legacy players, turning a profitable industry into a margin battleground.
European Telecom (2010s): Free Mobile’s entry in France demolished ARPUs, forcing giants like Orange into brutal price wars.
Chinese Solar (2010s): Sky-high margins lured in hundreds of manufacturers, collapsing prices and bankrupting former leaders.
The most brutal example in India? Reliance Jio.
In 2016, Mukesh Ambani’s Jio dropped free data and near-zero tariffs on an unsuspecting telecom market. Airtel, Vodafone and Idea bled billions. Profits vanished, and the industry consolidated to just a few players. Vodafone and Idea had to merge simply to survive.
The lesson? Capital chases returns. And when it arrives, it doesn’t ask for permission — it takes.
Investing in the Age of Disruption
The hard truth? Being a great businesses isn’t enough. You need durable businesses. Ones that can:
- Withstand price wars (like Coca-Cola’s brand dominance)
- Lock-in customers (Apple’s ecosystem)
- Control scarce resources (TSMC’s semiconductor monopoly).
Asian Paints hasn’t failed. It’s still the category leader and may well remain so for years to come. But it wasn’t as untouchable — or as invincible — as many investors believed. The mistake wasn’t in the business. It was in the valuation. Investors simply overpaid for the company.
In capitalism, no advantage lasts forever. The only constant? Competition — and its ruthless ability to turn today’s winners into tomorrow’s casualties.
So if you’re holding a stock simply because “it’s always been strong,” ask yourself: What happens when a predator with deeper pockets and sharper teeth enters the arena?
Because sooner or later — they always do.
I hope you enjoyed this newsletter and if you did, feel free to share it with your friends and family.
Also, if you have any topics that you would like us to cover or any other feedback, do write to us at connect@incredmoney.com
Till the next time,
Vijay
CEO – InCred Money
