Increased competition driving Akzo Nobel to consider divestments
Time to grab the rollers and brushes, folks! The paint game's heating up as JSW Paints has scooped up Akzo Nobel India, the company responsible for our favorite Dulux paints, for a whopping Rs 8,986 crore. But, wait, what about Akzo's India Powder Coatings business and International Research Centre? They're staying put under Akzo Nobel's wing.
Akzo's Exodus from India After 70 Years
Drowning in competition and battling stagnant growth in the decorative paints sector might've convinced Akzo Nobel to wave goodbye to India after seven decades. Experts monitoring the company confirm the speculation.
JSW Paints announced their stroke of luck on a Friday, expressing their intentions to scoop up Akzo's nearly 75% stake in Akzo Nobel India. Now, Akzo Nobel India, the country's fourth-largest paint manufacturer, will fall under JSW's umbrella. Yet, the India Powder Coatings business and International Research Centre, integral pieces of Akzo's Indian operations, won't change ownership. These entities will remain under Akzo Nobel's Dutch parent company.
A strategic review of the India business had commenced nine months ago for Akzo Nobel, recognized for painting our walls 'Let's color' with Dulux, International, and Sikkens. The move—influenced partly by Birla Opus' rapid expansion, racing its way up the Rs 80,000-crore domestic paint market—left Akzo struggling to hold onto its 6.2% share.
JSW Gains Footing in the Indian Paint Market
Asian Paints, Berger Paints, and Kansai Nerolac continue to lead the market with estimated shares of 52%, 18%, and 12%, respectively. However, up-and-comers such as JSW Paints, empowered by their newfound connection with Akzo Nobel, and Birla Opus are predicted to storm onto the scene, taking advantage of synergies in sectors like cement and steel to make their mark.
While urban areas are still feeling the heat, demand for paints has cratered by 4-5% in the previous fiscal year. Decorative paints sales owe much to Akzo Nobel's second-half growth in the previous fiscal year, accounting for nearly 65-70% of their Rs 4,091 crore revenue. JSW Paints' acquisition of Akzo Nobel seems to be a calculated bet on the resurgence of the urban markets.
The Future of Decorative Paints in India
In May, Akzo Nobel expressed optimism for a recovery in urban markets. Fiscal measures should nudge both revenue and volume growth in decorative paints, benefiting the premium segment. Nevertheless, the mass and economy segments remain ensnared by cut-throat competition.
"The decorative paints segment should soon return to single-digit revenue growth, with volume growth projected to be marginally higher," the MD of Akzo Nobel India's executive team stated during their investor call.
Sources:
- Business Standard
- Mint
- The Economic Times
- Enrichment Insights:
- Akzo Nobel India had been a prominent player in the Indian paint market for 70 years.
- The acquisition by JSW Paints would significantly reshape the market landscape.
- JSW Paints aims to challenge established giants in the premium paint segment.
- Birla Opus' rise was one of the factors influencing Akzo Nobel's decision to sell.
- Market consolidation is likely to occur following the acquisition.
The acquisition of Akzo Nobel India by JSW Paints marks a turning point in the decorative paints market, potentially leading to market consolidation as newer players like JSW aim to challenge established giants in the premium paint segment. Akzo Nobel's decision to sell might have been influenced by the rapid expansion of Birla Opus, adding pressure to Akzo's 6.2% share in the Rs 80,000-crore domestic paint market. As Akzo's Exodus from India after 70 years signifies a significant shift, experts anticipate the future of the market to revolve around financing opportunities, business synergies, and investing strategies, all of which are integral aspects of the global economy and finance.
