Profitable growth in a price war: Why margin discipline matters more than market share in the paints sector
There is an emerging narrative which posits that the relevant moats in paints have already been broken, and against which margin discipline is held to offer little protection, but this reading is partially correct and largely incomplete.
- Aug 13, 2026,
- Updated Aug 13, 2026 1:19 PM IST
Few industries in India carry the combination of attributes that make the paints sector analytically interesting: structural growth, oligopolistic stability, deeply embedded channel relationships, and a cost structure that punishes indiscipline with unusual severity. Estimated at USD 9.6 billion in 2024 and projected to reach USD 16.5 billion by 2030, with architectural coatings accounting for over 77 percent of demand, what makes the sector interesting today is not its well-established growth trajectory but the question that intensifying competition has forced onto the table: whether market share, pursued at any cost, is the right metric to optimise for. The answer that both economic theory and two decades of industry data provide is unambiguous: it is not. Volume Is Not the Same as Value
In 1973, Harold Demsetz challenged the dominant structure-conduct-performance paradigm by arguing that high returns in concentrated industries reflect not monopoly power but superior underlying capability, and Lippman and Rumelt (1982) formalised the mechanism by demonstrating that such an advantage persists precisely because the configurations generating it cannot be reliably decomposed and reproduced by competitors. Together, these insights reframe what is at stake when competitive intensity rises: the instinct to defend position through incentive escalation trades away the margin discipline that sustains the underlying system.
Paints is an industry that makes this logic unusually clear. Raw materials, primarily titanium dioxide, crude-derived petrochemicals, and resins, constitute 50 to 60 percent of total manufacturing costs, over 90 percent of them imported and globally priced, and a company that has eroded its margin buffer in pursuit of volume simultaneously eliminates its capacity to absorb the next input cost cycle, which crude oil price history makes near-certain on a two-to-four year horizon. Why Imitation Does Not Erase Advantage
There is an emerging narrative which posits that the relevant moats in paints have already been broken, and against which margin discipline is held to offer little protection, but this reading is partially correct and largely incomplete. The advantage that established players have built over decades is not reducible to any single asset, being instead embedded in the channel and advocacy ecosystem relationships nurtured over decades, proprietary demand data accumulated over years, and brand trust in a category where purchase cycles run to three to five years. Competitors can observe the outcomes, the low distribution costs and the high return on capital, but cannot straightforwardly decompose them into a replicable sequence of actions, which is precisely what Lippman and Rumelt meant by uncertain imitability: success here stems from a tightly integrated system whose causal architecture is not transparent even to careful observers, and capital expenditure can replicate the visible artefacts but not the embedded knowledge and relational capital that transforms those assets into margin. The pattern is not without precedent: Toyota's rise to global leadership through the 1980s and 1990s came not by matching competitors’ volume and incentive escalation but by compounding manufacturing capability and margin discipline. What Two Decades of Evidence Show
Between FY03 and FY24, combined revenues of India's listed paint companies grew approximately fifteen-fold, from Rs 3,472 crore to Rs 53,840 crore, with EBITDA expanding from Rs 470 crore to over Rs 10,600 crore, and the disaggregated story is more instructive than the headline numbers. Asian Paints grew revenues from approximately Rs 1,574 crore in FY03 to Rs 31,227 crore in FY24, yet the events of FY25 demonstrated that even the most entrenched scale faces earnings pressure when pricing discipline weakens. Kansai Nerolac grew revenues from Rs 695 crore in FY03 to Rs 7,393 crore in FY24, with EBITDA expanding from Rs 76 crore to over Rs 1,022 crore, and has more recently signalled a deliberate shift toward prioritising profitability over volume.
The most instructive case is Berger Paints, India's second-largest paint company and a business that has sustained profitable growth consistently across two decades without sacrificing margin to volume. From revenues of Rs 582 crore in FY03, Berger has grown to cross Rs 10,000 crore in FY24, with EBITDA expanding from Rs 55.5 crore to Rs 1,671.7 crore across the same period, reflecting steadily improving unit economics rather than merely expanding scale. In FY25, Berger's operating profit held broadly steady amid sector-wide margin pressure, and Q4 FY25 net profit rose 18 percent, driven by premium product momentum, cost efficiency, and international operations, which is the Demsetz proposition made concrete: sustained superior performance reflects capability differences rather than positional advantage, and it did not happen despite margin discipline but because of it. The cash flows preserved through pricing rigour are precisely what fund Berger's recently announced Rs 2,000 crore greenfield investments in West Bengal and Odisha, expected to expand capacity by nearly 30 percent, and margin discipline in this sense is not strategic passivity but the precondition for strategic investment. Discipline Today Funds Leadership Tomorrow
As India's paint industry enters a more capital-intensive and contested phase, the companies that define its next chapter will not be those that grew fastest through the current cycle but those that maintained the discipline to turn scale into sustainable profitability and preserved the margin structure to invest when others could not, because a strong number two with robust fundamentals does not need to win the incentive war so much as it needs to outlast it.
{Views are personal; the author is an Assistant Professor in the Strategy Area at SP Jain Institute of Management and Research (SPJIMR)}
Few industries in India carry the combination of attributes that make the paints sector analytically interesting: structural growth, oligopolistic stability, deeply embedded channel relationships, and a cost structure that punishes indiscipline with unusual severity. Estimated at USD 9.6 billion in 2024 and projected to reach USD 16.5 billion by 2030, with architectural coatings accounting for over 77 percent of demand, what makes the sector interesting today is not its well-established growth trajectory but the question that intensifying competition has forced onto the table: whether market share, pursued at any cost, is the right metric to optimise for. The answer that both economic theory and two decades of industry data provide is unambiguous: it is not. Volume Is Not the Same as Value
In 1973, Harold Demsetz challenged the dominant structure-conduct-performance paradigm by arguing that high returns in concentrated industries reflect not monopoly power but superior underlying capability, and Lippman and Rumelt (1982) formalised the mechanism by demonstrating that such an advantage persists precisely because the configurations generating it cannot be reliably decomposed and reproduced by competitors. Together, these insights reframe what is at stake when competitive intensity rises: the instinct to defend position through incentive escalation trades away the margin discipline that sustains the underlying system.
Paints is an industry that makes this logic unusually clear. Raw materials, primarily titanium dioxide, crude-derived petrochemicals, and resins, constitute 50 to 60 percent of total manufacturing costs, over 90 percent of them imported and globally priced, and a company that has eroded its margin buffer in pursuit of volume simultaneously eliminates its capacity to absorb the next input cost cycle, which crude oil price history makes near-certain on a two-to-four year horizon. Why Imitation Does Not Erase Advantage
There is an emerging narrative which posits that the relevant moats in paints have already been broken, and against which margin discipline is held to offer little protection, but this reading is partially correct and largely incomplete. The advantage that established players have built over decades is not reducible to any single asset, being instead embedded in the channel and advocacy ecosystem relationships nurtured over decades, proprietary demand data accumulated over years, and brand trust in a category where purchase cycles run to three to five years. Competitors can observe the outcomes, the low distribution costs and the high return on capital, but cannot straightforwardly decompose them into a replicable sequence of actions, which is precisely what Lippman and Rumelt meant by uncertain imitability: success here stems from a tightly integrated system whose causal architecture is not transparent even to careful observers, and capital expenditure can replicate the visible artefacts but not the embedded knowledge and relational capital that transforms those assets into margin. The pattern is not without precedent: Toyota's rise to global leadership through the 1980s and 1990s came not by matching competitors’ volume and incentive escalation but by compounding manufacturing capability and margin discipline. What Two Decades of Evidence Show
Between FY03 and FY24, combined revenues of India's listed paint companies grew approximately fifteen-fold, from Rs 3,472 crore to Rs 53,840 crore, with EBITDA expanding from Rs 470 crore to over Rs 10,600 crore, and the disaggregated story is more instructive than the headline numbers. Asian Paints grew revenues from approximately Rs 1,574 crore in FY03 to Rs 31,227 crore in FY24, yet the events of FY25 demonstrated that even the most entrenched scale faces earnings pressure when pricing discipline weakens. Kansai Nerolac grew revenues from Rs 695 crore in FY03 to Rs 7,393 crore in FY24, with EBITDA expanding from Rs 76 crore to over Rs 1,022 crore, and has more recently signalled a deliberate shift toward prioritising profitability over volume.
The most instructive case is Berger Paints, India's second-largest paint company and a business that has sustained profitable growth consistently across two decades without sacrificing margin to volume. From revenues of Rs 582 crore in FY03, Berger has grown to cross Rs 10,000 crore in FY24, with EBITDA expanding from Rs 55.5 crore to Rs 1,671.7 crore across the same period, reflecting steadily improving unit economics rather than merely expanding scale. In FY25, Berger's operating profit held broadly steady amid sector-wide margin pressure, and Q4 FY25 net profit rose 18 percent, driven by premium product momentum, cost efficiency, and international operations, which is the Demsetz proposition made concrete: sustained superior performance reflects capability differences rather than positional advantage, and it did not happen despite margin discipline but because of it. The cash flows preserved through pricing rigour are precisely what fund Berger's recently announced Rs 2,000 crore greenfield investments in West Bengal and Odisha, expected to expand capacity by nearly 30 percent, and margin discipline in this sense is not strategic passivity but the precondition for strategic investment. Discipline Today Funds Leadership Tomorrow
As India's paint industry enters a more capital-intensive and contested phase, the companies that define its next chapter will not be those that grew fastest through the current cycle but those that maintained the discipline to turn scale into sustainable profitability and preserved the margin structure to invest when others could not, because a strong number two with robust fundamentals does not need to win the incentive war so much as it needs to outlast it.
{Views are personal; the author is an Assistant Professor in the Strategy Area at SP Jain Institute of Management and Research (SPJIMR)}