Reliance sells 3.6% Asian Paints for $900 million to SBI MF

SBI Mutual Fund has single handedly cut a cheque of Rs 7704 crore ($900 million) to buy 3.6% block of Asian Paints from Reliance Industries Limited, said people in the know. This would arguably be the largest block deal done bilaterally between a seller and a home grown asset manager. The share sale will help the oil-to-telecom conglomerate to monetise a lion’s share of its 17-year old investment, with handsome returns.

In 2023 GQG Partners and its associates had acquired shares worth Rs 8,700 crore (about $1.1 billion) in Adani Power Ltd. from the promoters. Thus far that has been the largest single buyer-single seller trade in India’s stock markets.

ET was the first to report on May 14th RIL revived its plans to sell out. The oil-to-telecoms conglomerate had initially engaged Bank of America (BoFA) to manage the transaction, through a single or multiple block deals. However, offers have been at a 6-7% discount to the current market price which made RIL pause the efforts.

Reliance informed the exchanges that 3.5 crore shares held by the company via Siddhant Commercials Ltd was sold at Rs 2201/share. The company’s stock closed at Rs 2218.05 a piece on Thursday. Inclusive of dividends, at current market value, Reliance would make a near 23-fold return on its investment.

Sources said on Thursday, Citi was engaged to manage the sale.

Reliance will still continue to own 87 lakh equity shares of Asian Paints, which falls under Regulation 30 of SEBI’s Listing Obligations and Disclosure Requirements (LODR). It had bought a 4.9% stake in the company for Rs 500 crore in January 2008, before the global financial crisis hit.Sources in the know said Reliance has been selling in dribbles in the running market for the last few weeks through multiple brokers including Bank of America. But had refrained from one big deal before Thursday.India’s $9 billion paints industry is facing acute margin pressure amidst heightened competition that has seen Asian Paints come under severe pressure from new entrants like Aditya Birla Opus who are striving to topple the number one player from its perch.

Asian Paints’ shares have declined by 17 percent over the past three years, making it one of the weakest performers among Nifty blue chips. According to Elara Securities, Asian Paints’ market share has fallen from 59 percent to 52 percent in FY25—a significant loss in a highly competitive market. Combined with revenue stagnation, Asian Paints has lost much of its lustre.

Domestic financial institutions continue to maintain a significant presence, collectively holding a 5.67 percent stake. ICICI Prudential and SBI Mutual Fund hold 1.24 percent and 1.51 percent, respectively. LIC alone owns 8.29 per cent of the company.

Reliance had explored divesting its stake five years ago, ahead of launching India’s largest rights issue. It was also in the process of deleveraging its balance sheet following a mega capex plan led by telecom. However, it did not go through with the plan and instead raised a combined $25 billion for the digital, telecom, and retail ventures of the conglomerate through a series of investments from marque global strategic and financial investors.

For Asian Paints, FY25 was a weak year. Decorative business (87% of consolidated sales) declined by 5%. YoY, with volume growth of 2.5% (weakest in over last two decades). Industrial business grew by 6% while International business sales were flat performance for the year. The management attributed underperformance in decorative segment to weakness in industry growth and emphasised that the competitive intensity of the business will continue over the near term.

“Near term demand trends remain subdued, FY26 outlook remains bleak,” said Mehul Desai of JM Financial. “Competitive intensity in Paints segment remains unabated (Grasim’s entry, increased activity from existing incumbents and a likely recovery in Dulux brand once the acquisition goes through).” JSW Paints is in final stages of buying Dulux from Akzo Nobel.

Asian Paints, still has a market share of 44% in decorative paints, is also the second largest in Asia and eighth globally. The company has an annual domestic decorative paint capacity of 1.85 million kilo litres, serving consumers in over 60 countries. It has the country’s largest distribution network, with 74,129 dealers, supported by over 50,500 Colour World shade-mixing machines and over 430 Colour Ideas stores.