Asian Paints on Friday said it has signed deals to acquire stakes in two companies – Obgenix Software (popularly known as White Teak) and Weatherseal Fenestration – staggered over a period of time and completion of certain milestones. The move is to strengthen its presence in the home improvement and decor segments.

The Mumbai-based company will immediately acquire a 49% stake in Obgenix Software for about Rs 180 crore, along with an earnout payment of up to Rs 114 crore, payable after a year. Further, it will acquire the remaining 51% stake in Obgenix Software over the next three years, Asian Paints said in a regulatory update.

The firm will acquire an 11% stake in FY23-24 for up to Rs 66 crore and the remaining 40% in FY25-26 for Rs 360 crore, both based on the achievement of certain milestones. The stakes would be acquired from the company’s promoters, it added.

“White Teak offers us a unique opportunity to further strengthen our foray into the home décor space by capitalising on its capabilities in the designer and decorative lighting products, and thus enhancing the overall value proposition of our home décor offerings to the consumers. This alliance would also help Asian Paints to leverage various categories of home décor on the online digital space and start exploding the e-commerce space in future,” Asian Paints Managing Director Amit Syngle said.

Set up in 2016 by Silicon Valley tech entrepreneurs Pawan Mehta and Gagan Mehta, White Teak is a designer and seller of decorative lighting products and fans among others. Following the deal, Pawan Mehta would continue to be the Chief Executive Officer of White Teak and Gagan Mehta its Chief Operating Officer.

At present, the decorative lighting market in India is pegged at about Rs 1,200 crore and is growing at about 18-20% annually. With this partnership, Asian Paints, along with White Teak, intends to gain a “sizable presence” in this market, it added.

Weatherseal deal

Asian Paints will acquire a 51% stake in Weatherseal Fenestration from its promoters Harish Munireddy and Pratibha SB, for about Rs 19 crore. It will further acquire an additional 23.9% over the next three years. Of the total 23.9% stake, 13.9% stake would be acquired during FY24–25 and the remaining 10% in FY25–26.

The enterprise value to compute the additional 23.9% stake would be at a multiple of 1.5 times the net revenue of Weatherseal Fenestration or 15 times its EBITDA, whichever is lower. The revenue and EBIDTA will be based on the financial year prior to the year of acquisition, it added.

Post the deal, Weatherseal will become a subsidiary of Asian Paints. Harish Munireddy would be the Chief Executive Officer and Pratibha SB would be the Chief Operating Officer of Weatherseal.

EY (Ernst & Young LLP) acted as the financial advisors to Asian Paints for the deal. Set up in 2022, Weatherseal is into interior decoration and furnishing, including manufacturing of uPVC ((unplasticised polyvinyl chloride) windows and door systems.

Staggered deals

* To acquire 49% stake in Obgenix Software for Rs 180 crore, along with an earnout payment of up to Rs 114 crore
* Will acquire the remaining 51% stake in Obgenix over the next 3 years
* Indian decorative lighting market is about Rs 1,200 crore, growing 18-20% annually
* Asian Paints to acquire 51% stake in Weatherseal Fenestration for Rs 19 crore
* Another 23.9% over the next three years