Asian Paints saw a volatile trading session on Wednesday as its shares initially declined nearly 2 per cent following news that the Competition Commission of India (CCI) has ordered a probe into the company's alleged anti-competitive practices. The stock touched an intraday low of Rs 2,326.45 on the BSE, a drop of 1.78 per cent, after the regulator acknowledged a prima facie case against the paint major.

The CCI’s directive was issued in response to a complaint by Grasim Industries, the paint division of the Aditya Birla Group. Grasim has accused Asian Paints of leveraging its market dominance to impose exclusionary conditions on dealers, thereby hampering the growth and entry of new players in the decorative paints market.

Rebound Driven By Value Buying

Despite the early dip, the stock rebounded strongly, supported by investor confidence and value buying. Asian Paints closed the day at Rs 2,419.85 on the BSE, registering a 2.15 per cent gain. On the NSE, the stock ended at Rs 2,426.30, up 2.39 per cent, after recovering from an earlier low of Rs 2,327.

Market analysts attributed the recovery to bargain hunting and belief among investors that the company’s long-term fundamentals remain strong despite the regulatory headwinds.

Allegations Of Market Abuse

The CCI order underlines potential contraventions of Section 4 of the Competition Act, 2002, which pertains to abuse of dominant market position. The commission cited concerns about unfair conditions being imposed on dealers by Asian Paints, including alleged enforcement of exclusivity that may qualify as exploitative conduct.

"The Commission is of the opinion that a prima facie case of contravention of the provisions of section 4(2)(a)(i), 4(2)(c) and 4(2)(d) of the Act by the OP (Asian Paints) is made out in the present matter," the CCI said in its order.

Investigation Timeline Set

The competition watchdog has now directed its Director General to initiate a formal investigation and submit findings within 90 days.

Grasim entered the decorative paints market in February 2024 under the 'Birla Opus Paints' brand, aiming to challenge the dominance of Asian Paints, which currently leads the market across both decorative and industrial segments.

Investors and market watchers will be closely following the investigation's outcome, which could potentially reshape competitive dynamics in India’s Rs 70,000-crore paint industry.