DMart, Asian Paints, and Bajaj Finance underperform: Here’s how these bluechip companies facing heat from competition and disruption

Established players across sectors are challenged by market forces like changing consumer preferences, technological advancements, and intense competition. Large-cap stocks like Bajaj Finance, Avenue Supermarts, and Asian Paints have significantly underperformed with negative returns of 9.88%, 3.46%, and 22.70% respectively, a significant diversion from benchmark NIFTY50’s 17.65% return in the last one year.

These companies face significant structural challenges affecting operational and demand concerns.

Are these stalwarts losing the heat?

Avenue Supermart Ltd

However, this competitive advantage is under threat due to Quick Commerce's emergence.

As Quick Commerce focuses on rapid deliveries and convenience-oriented urban consumers are changing consumer expectations and are challenging D-Mart’s traditional model.

As Quick Commerce players continue to scale, improve efficiency, and expand their product offerings, they are gradually moving upmarket to disrupt DMart’s traditional business model which is reflected through DMart’s following metrics.

(Source - Company’s investors presentation)

Quick Commerce (QC) is already beginning to attract some of DMart’s urban customers who prioritise convenience over cost. As a result of this change, inventory turnover decreased, showing discrepancies between customer demand and inventory levels. Consumer preferences have changed toward smaller and more frequent purchases due to QC growing faster in cities, making it difficult for DMart to maintain efficient inventory management.

The increase in inventory days directly impacts DMart's profitability since the extra expense makes it difficult to maintain its EDLP strategy. Overstocking raises the risk of inventory obsolescence, particularly in fast-moving areas where consumer preferences are rapidly changing.

Nonetheless, DMart's existing customer loyalty programs and community-focused initiatives will help retain some of its customer base.

Quick Commerce is a significant long-term risk for DMart, as adapting to the QC model of convenience-driven demand would undermine its cost advantage.

Asian Paints Ltd

In Q2FY25, net profit dropped sharply by 42.4 % to ₹694.64 crore, with a 0.5% decline in domestic decorative paint volumes. Net sales dropped 5.3% to ₹8,003.02 crore due to persistent rains, floods, price cuts and increased rebate.

According to management, the demand conditions remain challenging, which has added to the already subdued sentiment.

The domestic decorative paint volumes declined for the first time in the decade (excluding the Covid-19 pandemic). Competition, especially in the economy segment has intensified with new entrants like Birla Opus, backed by Grasim and promoted by Birla Group.

(Source - Screener.in)

However, its Industrial business outperformed the decorative segment, limiting Q2 revenue decline. Due to the wedding season and higher government spending, a recovery in demand is expected in H2FY25. Additionally, growth is expected in the industrial business, driven by a focus on auto OEM and protective paint segments.

Bajaj Finance Ltd

In Q2FY25, the company reported 29% YoY loan growth and increased operational efficiency. However, elevated credit costs hinder its optimism. However, the asset quality has shown signs of strain, with near-term concerns around asset quality. But, the company's new tech initiatives, which will enhance customer loyalty and accelerate growth and comfortable capital position are likely to attract investors' attention.

Additionally, newly added business segments, along with a focus on profitability, position the lender for sustained momentum.

The management has turned its focus towards strengthening risk controls in response to asset quality issues, and it expects stable borrowing costs and a 10-15 basis point NIM expansion in H2FY25, due to reduced financing costs.

Conclusion

For well-established companies like Avenue Supermarts, Bajaj Finance and Asian Paints, rapidly changing market dynamics provide serious hindrances. Although structural disruptions, competition, and operational issues affect their performance, adaptation to strategic technological adoption, product focus and market positioning would help these leaders maintain their prominence.