As global giant AkzoNobel NV nears the sale of its India subsidiary, AkzoNobel India Ltd, to JSW Paints, analysts and industry observers say the JSW Group-backed entity, which has failed to capture a meaningful share in India's $8.5-billion decorative paints market, may have bought itself a lifeline. The fight for market share is expected to intensify as paint sales slow due to sluggish urban consumer spending and lengthened repainting cycles.
Moneycontrol reported last week that JSW Group promoters the Sajjan Jindal family is preparing to pledge its stakes in flagship JSW Steel, as well as JSW Paints, to fund the proposed acquisition, worth around Rs 9,000 crore. The group is in talks with a clutch of global banks and private credit players to arrange the financing.
A consortium of Indigo Paints and private equity firm Advent International had also put in a binding bid for AkzoNobel's stake, while Pidilite Industries had also evinced interest in the bid, albeit only for AkzoNobel's decorative business. The stake sale process is being managed by investment banking arm of Citibank.
Analysts say that with AkzoNobel's Dulux being a brand with a long-standing manufacturing and market presence in India, any large promoter will be well-placed to use the brand to erode market share of other players in a fiercely-competitive business, where the earlier dominance of Asian Paints is being challenged by new entrants, such as Grasim's Birla Opus, and Pidilite's HAISHA Paints.
"There could be potential revival of the Dulux brand under the new owner with pan-India operations, as AkzoNobel is not an aggressive player and currently operates primarily in North India. JSW Paints will get a strong brand like Dulux and a strong distribution network of Akzo. Pricing and margins can come down further as Akzo expands aggressively beyond north India under the new owner," said Amit Agrawal, senior vice president of fundamental research, Kotak Securities.
According to a senior paint industry executive, Dulux, despite the relative non-aggression of their promoters in marketing the brand, remains a formidable presence in some markets, even giving established brands a run for their money in key markets. AkzoNobel India has six manufacturing plants located across the country.
"AkzoNobel's Dulux is a brand that has succeeded due to its lengthy presence in the Indian market, and word-of-mouth marketing. It also has a manufacturing presence in nearly all the country, and a legacy dealer network. In some markets, it competes directly with premium brands like Asian Paints' Royale, despite the presence of Berger Paints, Kansai Nerolac, and others," the executive said.
Fight For Market Share
Despite recent market share erosion due to the entry of Birla Opus, industry sources say that Asian Paints remains the market leader, with a market share of around 52 percent as on March 31. This is lower than nearly 60 percent in the previous year, with Birla Opus gaining more share at its expense.
Asian Paints is followed by Berger Paints at 20 percent, with AkzoNobel and Kansai Nerolac's market share in the low single digits.
Grasim Industries-owned Birla Opus, which was launched by the Aditya Birla Group firm with an investment of Rs 10,000 crore, has a market share nearing double digits in the decorative paints segment, market sources said. In comments after its Q4 and FY25 results, Grasim's management said that the decorative and wall putty businesses together have already reached double digit percentages in terms of market share.
Grasim plans to have its 1.33 billion litres per year capacity fully up and running later this year, having already operationalised five of the six plants, and has aggressively onboarded dealers in most major markets.
Analysts, however, said the decorative paints segment remains in a flux amid increased competition, poor pricing power and demand from urban markets continuing to be weak. Asian Paints' Q4 revenues declined by more than 4 percent year-on-year, with a steeper 45 percent decline in profit, while AkzoNobel India, despite a 5 percent increase in revenue, reported declines in both EBIT and profits for the quarter.
2025 will make it six years since JSW Paints' big bang launch in paints, with a large marketing spend, as well as significant leg-up from group flagship JSW Steel in the form of investments, Rs 750 crore over a three year period, and both of JSW Paints' manufacturing facilities are co-located with key JSW Steel facilities at Vijayanagar in Karnataka, and at Vasind in Maharashtra.
The two plants have a total capacity of 150,000 kilolitres (KL) per annum. The Vasind facility manufactures industrial coatings, while the Vijayanagar facility is dedicated towards decorative paints.
Despite the company's topline crossing the Rs 2,000 crore-mark at the end of FY24, and achieving break-even on an operating profit basis, industry insiders say that there is more to the story than the sizeable revenue, with the company currently having negligible market share in the decorative paints business.
This is despite aggressive dealer onboarding activity, as well as marketing, with the company sponsoring multiple teams in this year's Indian Premier League. Last year, the company also hired Ashish Rai, a FMCG industry veteran, to helm its decorative paints business, to corner more market share in the segment and reach its topline goal of Rs 5,000 crore by the end of the ongoing financial year.
"While JSW Paints does not provide the break-up of the revenue, most of its topline comes from the sale of its industrial coatings, in which JSW Steel itself is a large customer, as it has a large, coated steel business. As it stands, the company has almost no market share in decorative paints, and despite strong sales in the coatings business, the real money lies in decorative paints. JSW Paints needs a strong brand like Dulux in its stable, especially as competition is increasing with the entry of Aditya Birla Group-owned Grasim in the business with a big investment," said an industry source.
Moneycontrol has written to the JSW Group for its plans with AkzoNobel India's business, brands, and its strategy for the decorative paints business, and the story will be updated once the responses are received.
The source also noted that the JSW Group will be spared the hassle of listing its paints business separately, which it did with its ports business, if it can acquire AkzoNobel India and carry out a reverse merger. The Group has received approval from the Securities and Exchange Board of India (SEBI) to list its cement business, JSW Cement, with a public listing expected in the latter half of the year.
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