JSW Paints and a consortium of Advent International and Indigo Paints are vying to acquire Akzo Nobel India, the owner of Dulux Paints, as Akzo Nobel NV seeks to exit the Indian market amidst intense competition. Pidilite Industries is also interested, primarily in Akzo's decorative business.
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Sajjan Jindal-led JSW Paints is competing with a consortium of Advent International and Indigo Paints to acquire Akzo Nobel India, the owner of Dulux Paints, from its Dutch parent Akzo Nobel NV, which is looking to exit India as part of a global restructuring, multiple people aware of the developments told ET.
Both contenders submitted binding bids this week after the first deadline—of April 15—was extended. The third contender, Pidilite Industries, which chiefly wants only Akzo’s decorative business, is also believed to be in the fray, but has not made an aggressive bid. Akzo Nobel NV, Europe’s largest paints company, holds a 74.76% stake in Akzo Nobel India. Since last October, the Amsterdam-based major has been working with its advisor to monetise its business as the $9 billion paints market in India has lately been witnessing unprecedented competition.
The arrival of Aditya Birla Group, which owns the Birla Opus brand, has disrupted the established pricing norms in the paints industry, denting incumbents. Akzo plans a series of board meetings starting this week to evaluate the bids and take a final decision, said the people mentioned above. However, the bids are all at a 10-15% discount to the current market price.
Valuation Hit The market value of Akzo India was Rs 15,565.68 crore at Wednesday’s closing price of Rs 3,418 per share. In February, Akzo India hived off and agreed to sell its powder coatings business—its most profitable stream that contributes close to 12-14% of sales to its Dutch parents.
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This has impacted the valuations of the residual business, which includes decorative and industrial paints. Moreover, the Akzo stock has risen 40.22%—with the scrip touching its 52-week high of Rs 4,649/share in October—in anticipation of the sale. That’s in contrast with the fortunes of its peers in India, like Shalimar or Indigo, which have seen oneyear returns crater 20-35%. Between last October and December, market leader Asian Paints’ stock has fallen 28% to reach four-year lows. From its 52-week low of Rs 2,125 in early March, yearto-date the stock has crawled back up 7.53% even as consumption eased and competition intensified.
Commodity? No way Globally, paints is a commodity business, while in India it is a brands play. That explains why the stock is trading at more than double the global multiples, both on speculation and the profile of business, said a former senior executive of the company. “Many MNCs want to capitalise on this valuation arbitrage and monetise their portfolio in India,” said the executive.
The bids also include taking over the Sri Lanka operations where the company has a JV with a local partner. The successful bidder will also have to launch a public offer for an additional 26% shareholding. It is unlikely though that the bidders will bid for the entire 75% stake in one go and delist the company.
Mails to Akzo India and Akzo Nobel N.V remained unanswered until the publication of this report. JSW, Indigo, Pidilite remained unavailable for comments. Advent declined to comment.
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