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Informist, Wednesday, Dec. 4, 2024

 

--Berger Paints MD:Keen to acquire Akzo Nobel India stake if valuation right

--Berger Paints MD: Need more clarity from Akzo Nobel on co's divestment plans 

 

By Avishek Rakshit

 

KOLKATA - Berger Paints India Ltd. could bid to acquire the paints business of Akzo Nobel India Ltd. once there is clarity on the proposed stake sale and the valuation, Managing Director and Chief Executive Officer Abhijit Roy told Informist. "Firstly, there has to be more clarity on what they (Akzo Nobel) are seeking. Is it an outright sale of their decorative paints business, or a partial stake sale or sale of some business units? All they have said as of now is that it is a portfolio review. Secondly, the valuation has to be right and should fit our purse," Roy said.

 

Paints industry officials said although there is no clarity on the kind of valuation Akzo Nobel is seeking for its Indian paints business for a 75% stake sale, the market speculates it to be around INR 120 billion. The promoters at Akzo Nobel India own 74.76% stake, while the remaining 25.24% stake is held by the public. The acquisition entails takeover of the promoters' stake fully or partially. 

 

"Added to the acquisition cost is bank interest and depreciation as well. Effectively, acquisition at INR 120 billion with an 11?nk interest cost will lead to repayment of around INR 20 billion per year to the banks," Roy said. "Does it make sense to acquire it at such a high valuation given that the annual profit of the company is INR 4 billion. So, the valuation has to be right."

 

Roy, however, did not comment on the kind of valuation Berger Paints could offer Akzo Nobel for the acquisition. "First we have to know what exactly they (Akzo Nobel) are seeking and at what valuation, then only we can discuss it."

 

Asked if Berger Paints plans to strengthen its manufacturing and asset position in the country in the face of growing competition from Birla Opus brand of paints from Grasim Industries Ltd's stable, Roy said the acquisition decision is to be based on the valuation and growth potential of the target company and is not reactionary in nature. 

 

"They (Birla Opus) have bagged a 2-3% market share in the decorative paints business, which is normal and is not a cause of worry for us. We will not make such acquisitions only to stave off competition, but will go ahead with one only if the acquisition is meaningful," Roy said. 

 

A month ago, Akzo Nobel--the largest paints company in Europe--said it is conducting a strategic review of its product portfolio in order to redeploy capital towards growing its core coatings businesses. The initial focus of such a strategic review will be on its decorative paints businesses in South Asia, the company said.

 

At 1220 IST, shares of Berger Paints India traded 0.5% down at INR 479.60 on the National Stock Exchange. Akzo Nobel shares were at INR 3,733.95 up 0.5%.  End
 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Vandana Hingorani

 

 

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