Asian Paints, the country’s largest paint-maker, will invest about Rs 2,650 crore for manufacturing of key raw materials including Vinyl Acetate Ethylene Emulsion (VAE) and white cement. Separately, the company has also entered into a deal to acquire a majority stake in Harind Chemicals and Pharmaceuticals.
In a key backward integration project, the company intends to invest Rs 2,100 crore over three years to set up a manufacturing facility for VAE and Vinyl Acetate Monomer (VAM) in India. The installed capacity of the facility would be 1 lakh tonne per annum (TPA) for VAM and 1.5 lakh TPA for VAE.
VAE is a constituent for manufacturing environment-friendly paints, while VAM is a key input for manufacturing of VAE. The VAM facility would be set up based on licensed technology tie up with US-based Kellogg Brown & Root.
In addition, the company has also signed an agreement to set up a joint venture for manufacturing of white cement and white cement clinker. The 60:40 joint venture – signed with Riddhi Siddhi Crusher and Land Transport, Associated Soap Stone Distributing Company and others – would set up a manufacturing facility of 2.65-lakh TPA in the UAE.
The overall investment would be Rs 550 crore over the next two years, which includes setting up of grinding units in India also.
Further, Asian Paints also entered into a deal with Aapex Power and Industries and Harind Chemicals and Pharmaceuticals to acquire a majority stake in Harind over the period of next 5 years. The deal would be done in phases, with the first tranche of 51% to be bought for Rs 12.75 crore, while the second tranche of 19% and third tranche of 20% would be acquired during the FY24 and FY28, on achievement of certain financial targets.
Harind is a specialty chemicals company built with nano-technology at its core, primarily in the area of surface coating and care.
The company’s capital expenditure over the next three years would be about Rs 6,750 crore, including Rs 3,400 crore earmarked for capacity addition, Rs 2,550 crore for backward integration and an expected outflow of Rs 800 crore for acquisitions, Asian Paints managing director and CEO Amit Syngle said in an investor call.
Paint maker posts 32.83% rise in consolidated net profit in Q2
The paints maker has posted a 32.83% rise in consolidated net profit of Rs 803.83 crore for the second quarter ended September 30, despite an extended monsoon. In comparison, it had posted a net profit of Rs 605.17 crore for the same period of the previous financial year.
However, the company’s second quarter earnings came below street estimates. A consensus estimate of 16 brokers by Bloomberg was expecting the company to post a consolidated net profit of Rs 1,063.90 crore.
During the quarter under review, its revenue from sales rose 19.81% to Rs 8,430.60 crore from Rs 7,036.51 crore recorded during the same quarter of last financial year.
“The domestic decorative business showed resilience to deliver a double-digit volume growth and healthy value growth despite subdued demand conditions, impacted by the extended monsoon. The home decor business continued to gain traction with focus on lighting, kitchen and bath along with proliferation of our Beautiful Homes Stores and the home décor implementation arm, Beautiful Homes Service, across markets,” Syngle said.
The company had also taken a series of calibrated price hikes to offset the impact of the rise in inflation on margins. Asian Paints’ board also approved the payment of interim dividend of Rs 4.40 per share.