The nearly Rs 9,000-crore acquisition of a 74.76% stake in Akzo Nobel India by JSW Paints will not upend the domestic paints market, said Berger MD & CEO Abhijit Roy. Instead, the top two paint companies may still manage to hold their ground despite stiff competition coming from the JSW-Akzo combine and Birla Opus, Roy told FE during an interaction.
Berger is the country’s second-largest paintmaker after Asian Paints with a market share of 20%. Asian Paints has an estimated market share of 52%, according to industry experts.
“The good part of this acquisition is that it will consolidate the market in favour of larger players. And the number one and two positions within paints will be intact, though competition may grow for the third, fourth and fifth slots,” Roy said. As things stand now, Kansai Nerolac, JSW-Akzo and Birla Opus are ranked third, fourth and fifth, with estimated shares of 12%, 9.2% and 7%, respectively.
While sector analysts differ with Roy’s view of relative stability at the top, saying that leader Asian Paints has been losing share to newer entrants such as Birla Opus over the past year, some others believe that Berger may have to work harder to retain and grow share.
“The paints market is evolving and newer entrants are giving a tough fight to incumbents,” Gautam Duggad, head of research and director, institutional equities at brokerage Motilal Oswal, said. Both JSW Paints and Birla Opus have larger group strengths in allied segments such as cement and steel that they are expected to leverage to grow their presence in paints, he added.
Roy said Berger is both an incumbent and insurgent in paints. “We have a plan to raise our market share from 20% to 25% in the next few years,” he said. “This will include improving our distribution network in markets where we are weak; leveraging our strengths in protective and industrial coatings to bag more infrastructure projects and to grow our presence in construction chemicals and water proofing,” he added.
Berger is a key player in industrial paints and is among the top three players in construction chemicals and water proofing along with Asian Paints and Pidilite Industries.
On the distribution front, Roy said the company has a nearly 70,000-strong dealer network on the ground at the moment. While tinting machines have been provided to some 57,000-58,000 dealers so far, the plan would be to increase this number going forward so that more painters would be able to sample its products. The company, which is strong in the east and north, is also actively working to increase its distribution footprint in states such as Maharashtra, Gujarat, Karnataka, Tamil Nadu, Telangana, parts of Madhya Pradesh and Chhattisgarh, where it has a weak market presence.
“That is a gap we have to fill if we have to grow share for which we are working on a few action plans,” Roy said, adding that the company is open to acquisitions, provided it happens at the right price.
“While we do have cash on our books (Rs 600 crore), we propose to utilise it judiciously. We do not intend to do acquisitions for the sake of it,” he said.
The company has a current capacity of 95,000 tonne per month. It will set up two new plants or greenfield projects in West Bengal and Odisha and is working on a brownfield project at its Hindupur factory in Andhra Pradesh. The projects, which will be completed in the next 2-3 years, will be done at an investment of Rs 2,000 crore. The three projects are expected to help Berger achieve an overall capacity of 160,000 tonne per month in the future.