Shalimar Paints, the 109 year-old Indian paints manufacturer, is up for sale. Promoters Ratan Jindal Group and the Jhunjhunwala Group ? who jointly own 62.8% in the company ? are planning to sell their entire stake. It is understood that Kansai Nerolac and Sherwin-Williams are in the race to buy Shalimar.

Kansai Nerolac is owned by Kansai Paints of Japan, while Sherwin Williams of the US entered India only in end-2009, and does not have any local manufacturing plant. Both are No. 1 in their respective home markets. The successful suitor will narrow the gap with India?s paints leader Asian Paints, which currently has a market share of 51.7%.

Industry sources said that investment bank Avendus Capital has been given the mandate to find a buyer. The slow growth of the company has prompted the the two promoters to exit the company.

With a turnover of R410 crore in 2010-11, Shalimar could be valued at around R800-1,000 crore. The acquirer will also need to make an open offer for an additional 20% in Shalimar.

When contacted, Shalimar Paints COO Sandeep Sarda said: ?The company will intimate all developments concerning stakeholders at the appropriate time in accordance with company policy and the relevant applicable regulations. We would like to clarify that as a matter of policy, the company does not comment on any market reports unless they relate to matters to which the company is party and which have reached definitive stage. Otherwise, any comment by the company would be speculative.?

Both Nerolac and Sherwin-Williams have strong reasons to be interested in Shalimar: While Sherwin-Williams, which entered India late gets access to production facilities which will help it grow and consolidate its position, Nerolac, the No.2 will inch closer to the market leader Asian Paints. Shalimar, despite its long heritage, has a market share of only 3.2%.

When contacted, a Kansai Nerolac spokesperson declined to comment.

With a growing market for automobile, consumer durables and infrastructure, India has emerged as an attractive destination in the industrial paints category. A recent Standard Chartered Securities report pegged the domestic paint industry at $4.23 billion, expected to grow 13-15% in volumes.

Incorporated in 1902, the Mumbai-based Shalimar paints is into manufacture, marketing, sale, and export of paints, enamels, and varnishes primarily to the architectural and industrial sectors in India. It has three plants with an installed capacity of 57,000 tpa and is in the process of setting up a fourth plant with a capacity of 18,000 tonne in Chennai. The company also has tinting systems under the brand name ?Color Space? where it offers more than 9,000 shades across all product lines to its customers.

For the quarter ending March 31, 2011 the company registered a net profit growth of 36.15% at R3.5 crore. On Monday, the Shalimar Paints scrip closed at R339.50, up R8.50 or 2.57%, while the benchmark 30-share Sensex closed at 18345.03 points, down 186.25 points, or 1.01%.