Grasim Industries on February 22 inaugurated its paint plants at three locations - Panipat (Haryana), Cheyyar (Tamil Nadu), and Ludhiana (Punjab). Construction at other three plants at Chamarajanagar (Karnataka), Mahad (Maharashtra) and Kharagpur (West Bengal) is in full swing and they will be commissioned in phases in FY25.

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Grasim has the Paint business under the brand name, “Birla Opus”.

The company announced its foray into the paint business in January 2021 with an initial capital outlay of ₹5,000 crore. Later in May’22, the management indicated that the capital investments in this business would be ₹10,000 crore (cumulative capex stood at ₹5,996 crore as of Dec’23) with an aggregate installed capacity of 1.33m kl. This capacity will be further increased by 0.5m kl in the second phase at a much lower cost.

We largely retain our EPS estimates for FY24-26. Reiterate BUY with a TP of ₹2,670 as we value its: holding in subsidiary companies by assigning a discount of 40 per cent; standalone business at 7x EV/EBITDA, and paint business at 1x of investments. We do not change our assumptions for the paint business as of now and would wait for the scalability of operations. We believe that the value of the company’s paint business is not captured in its CMP.