ICI India Ltd, now a part of Akzo Nobel NV, has decided to almost double its paints capacity in India over the next two years with a new 100 million litre unit as it sees demand outstripping its capacity.

“We are putting up a greenfield plant with a capacity in excess of 100m litre?the location has not been decided yet,” said Rajiv Jain, managing director of the paints and adhesives major.

At the same time, with crude petroleum prices surging, ICI plans to increase paint prices by 2-3% next month, for the third consecutive month. The company has absorbed some of the input cost hike by moving towards water-based paints.

ICI, which has a share of almost 10% in the organised market of a little over 700m litres, will run out of capacity by 2011 unless it expands. In paints, it has a share of 12-15% in the decoratives segment.

Meanwhile, ICI India has reported a net profit of Rs 70.88 crore for the quarter to June 30, 2008, up from Rs 22.88 crore for the same period last fiscal. Net sales of the company was Rs 227 crore for the April to June quarter, while other income rose by 377% to Rs 62.67 crore.

At present, ICI has a total capacity of about 120m litre with plants located in Mumbai, Chandigarh and Hyderabad.

While the location of the new plant would be finalised by the end of this year, it would take almost 18 months to build it, Jain said. He said the company has an investible surplus of Rs 1000 crore, but declined to specify the investment.

The last plant that ICI India had put up was in Chandigarh, in 1999. “We are in the best sector and we are going to be a major in that. In the past five years we have been the fastest growing decorative company,” he said.

ICI has grown by almost 20% in the past few years against the market growing at 10% per annum.

Meanwhile, ICI has deferred its share buyback plan.

“There has been quite a good response from the shareholders,” Jain said. “We have brought back Rs 125 crore worth of shares. The way share prices are dropping, I think we have made it quite attractive.”

Akzo-Nobel, the Dutch multinational, controls a 54.6% stake in ICI India following the takeover of ICI’s UK parent.

The shareholder base of the company has come down to 42,000 from 56,000 in two years.