(Reuters) -Indian textiles-to-chemicals firm Grasim Industries’ stock fell as much as 6.5% on Thursday – its steepest in more than three years – as the exit of its paints segment’s chief stoked investor concerns about the business’ growth path.
Rakshit Hargave, who was at the Aditya Birla Group firm for four years, said on Wednesday that he will step down as CEO of Birla Opus to join biscuits-maker Britannia as its chief.
Grasim’s stock, which was last down 6%, has gained about 11% so far this year, outperforming the benchmark Nifty 50 index’s 8% rise.
Brokerage Motilal Oswal said the exit will be a key near-term “overhang” on the stock. Jefferies called it a “negative surprise” that can keep investor sentiment “cautious”.
Hargave had spearheaded Grasim’s ambitious 2024 paints foray, which notched significant market share within a year of launch and gave market leader Asian Paints one of its biggest challenges in decades.
“Investors are concerned whether the individual (Hargave’s successor) will be able to sustain the growth momentum, especially as its planned capex is almost deployed,” Antu Thomas, a senior research analyst at brokerage Geojit Financial Services told Reuters.
Grasim, while reporting its second-quarter earnings on Wednesday, said it has spent 97.3% of the 100 billion rupees capital expenditure earmarked to scale up Birla Opus.
Insider Himanshu Kapania will oversee the paints business in the interim, it said.
“The uncertainty at Birla Opus’ helm gives a breather to Asian Paints and other rivals such as Berger Paints,” Thomas said.
As of last close, shares of Grasim had risen 31% since the foray, while Asian Paints fell about 18%.
On the day, Asian Paints shares rose 5%, lifted by higher weightage on MSCI’s Global Standard Indexes as part of its quarterly review effective November 24.
(Reporting by Hritam Mukherjee in Bengaluru; Editing by Harikrishnan Nair)
