AkzoNobel considers stake sale or partnership for Dulux, hints at Grasim, Asian Paints as key players

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Dutch firm and Dulux owner AkzoNobel NV  has signalled its intent to engage with market players in India as it evaluates options for  its decorative paints business. In a post-earnings call with analysts, the company specifically referenced Grasim Industries, part of the Aditya Birla Group, and market leader Asian Paints, hinting at possible collaboration or even a stake sale in the Indian market.

The company flagged that it is looking at all options and  it could involve anything from establishing a relationship where it would take a junior role with a partner having stronger distribution capabilities, to a full exit from the market.

The comments come as the global paints and coatings leader reevaluates its position in South Asia, particularly India, amid intensifying competition in the decorative paints segment, which it describes as “ripe for consolidation”. Earlier this month, the company announced a strategic review of its portfolio to redirect capital toward expanding its core coatings business, noting it would explore various strategic options, including partnerships, joint ventures, mergers or divestments.

"We have been observing India...where you see that there's people pushing in like the Grasim guys from the cement sector, there's Asian Paints solidifying its position, there's other companies also trying to figure out what their differentiating assets are over time. It's a good time to have conversations with the various market players to see how we can contribute to a winning hand, winning play over time," chief executive officer Gregoire Poux Guillaume said in a call with analysts while announcing the company's third-quarter results on October 23.

Grasim Industries runs its paints business under the Birla Opus brand name.

Operated by AkzoNobel India, Dulux has a significant legacy in the country, of nearly 70 years. In a competitive landscape dominated by Asian Paints, Berger Paints and now Grasim’s entry, Dulux differentiates itself with a strong premium positioning. Dulux holds a market share of around 5 percent in the Indian paint industry, much smaller than what leaders like Asian Paints and Berger Paints boast. However, it maintains a strong presence in the premium segment of the market and is renowned for its higher-end decorative paints, including emulsions, glosses and wall coatings.

"We don't overestimate our ability to maximise the value of our businesses when we could do that more effectively, either in partnership with somebody else or by essentially passing on the business to somebody who's got stronger local distribution. That's the essence of the review," Guillaume  added.

The move comes as war for market share  intensifies in the Indian paints sector with the entry of Birla Opus, a paint brand launched by the Aditya Birla Group earlier this year. Grasim aims to take on the second spot after Asian Paints, the current market leader, while competitors like JSW Paints and Astral are aggressively marketing to strengthen their positions.

Asian Paints would definitely take a look if Dutch paints giant AkzoNobel were to put some of its assets on the block, CNBC reported citing comments from chief executive officer  Amit Syngle.

Guillaume noted this would not be a distress."India is a complicated market. It's a publicly traded entity. We want to make sure that we choose the right outcome for these businesses and something that maximises value for our people, value for Akzo, and creates the strongest partnership out there in order to take the fight to the market going forward.. We're not on time pressure, we're not on the clock, the business is doing really well. If anything, we'll only get more attractive as we progress. So we'll take the time that we need on this,"the CEO of Dulux's parent company said.