Following the report, Grasim shares rallied nearly 5% to Rs 2,735 in Tuesday’s trade.
Here are the four key reasons behind Morgan Stanley’s optimistic view:
1. Paints Business Enters Next Leg of Growth
Grasim’s entry into the decorative paints space has exceeded expectations, according to Morgan Stanley. The company has scaled its manufacturing capacity and distribution network rapidly, now offering a full range of products nationwide.Grasim is on track to emerge as the third-largest player in the organised paint sector by FY28, with expected revenues of around Rs 77,000 crore and a 10% market share. Morgan Stanley has revised its valuation for the paints business to Rs 360 per share, more than double its previous estimate of Rs 150 per share.
2. UltraTech Cement: The Consistent Compounder
Grasim’s largest value driver remains its 57% stake in UltraTech Cement. Morgan Stanley expects a multi-year earnings compounding story at UTCEM, driven by its pan-India presence, strong balance sheet, and cost optimisation efforts.
The brokerage values UltraTech at Rs 14,000 per share, translating to Rs 2,380 per share of value for Grasim after adjusting for holding company discounts. This accounts for nearly 68% of Grasim’s total sum-of-the-parts (SOTP) valuation.
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3. New-Age Businesses Scaling Up Rapidly
Grasim is also making significant progress in new-age ventures like B2B e-commerce and renewable energy.Its B2B platform, Birla Pivot, launched in 2022, is already generating annualised revenues of around Rs 5,000 crore and is targeting Rs 8,500 crore by FY27. While margins remain thin, management expects to reach cash break-even by 2030. Morgan Stanley has assigned Rs 68 per share value to this segment.
Meanwhile, Grasim’s renewables arm has ramped up capacity from 550 MW in FY22 to 1.5 GW currently, with plans to add 500 MW annually. This business adds another Rs 44 per share in value, the brokerage said.
4. Holding Company Discount Continues to Narrow
Grasim has historically traded at a steep holding company discount. But Morgan Stanley points out that this discount has moderated from around 50% (2018–2023 average) to about 30% recently. As the paints business scales and new-age ventures gain traction, the brokerage expects discounts to settle even lower—at 25% in its bull case and 30% in its base case.
This shift, combined with upgrades to valuations for subsidiaries and improved execution across businesses, has led Morgan Stanley to raise its target price on Grasim by 18% to Rs 3,500—offering 36% upside from current levels.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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