Financial Daily from THE HINDU group of publications
Thursday, Apr 04, 2002
Mergers & Acquisitions
Corporate - Mergers & Acquisitions
Asian Paints eyes buys; `talking to Snowcem'
MUMBAI, April 3
ASIAN Paints Ltd is understood to be in advanced talks with Snowcem India Ltd for a possible takeover.
Merchant banking sources said the deal appeared to be "as good as done". A top Asian Paints official on condition of anonymity confirmed that the company was talking to Snowcem for a possible buy-out. He, however, said the main issue of pricing had to be dealt with. The official also said that Snowcem was not the only company the paint major was interested in.
"We are interested in value acquisitions and are looking at other companies too. The main issue in all the cases, of course, is the price," he said.
The Managing Director of Snowcem, Mr T.B. Ruia, however, denied that the company was an acquisition target. "We are not talking to anyone. In fact, we are making a couple of small acquisitions in the North-East to consolidate our operations there," Mr Ruia said. The acquisitions were in the unorganised sector, he added.
Until now, the unorganised sector had almost a 50 per cent market share in the paint industry. However, the reduction in excise duty to the current level of 18 per cent is slowly giving the organised sector the upper hand.
Mr Ruia also said that his company was setting up a joint venture subsidiary with Jenson and Nicholson for product distribution.
Talk of Asian Paints acquiring Snowcem has been doing the rounds of the stock market for quite some time, but this is yet to be reflected in the stock prices of these companies. The share price of Asian Paints has been trading around Rs 315 in the last few days, while Snowcem has been trading around the Rs 40 levels. Trading volumes in these two counters have also been normal in the last two weeks.
Analysts feel that acquiring Snowcem makes business sense for Asian Paints because the company lacks strong products in cement paints segment. Snowcem is the largest player in cement paints with a 25 per cent market share and has built some very strong brands (Snowcem Plus, Sandtex Matt, etc) in the segment.
Asian Paints controls more than 40 per cent of the country's Rs 4,500-crore paint market. Its main strengths are 12,000-dealer distribution network, innovative marketing and brand equity. Goodlass Nerolac follows in market share at about 20 per cent and ICI India at about 15 per cent.
The paint market is expected to grow at around 10 per cent in the current year. Currently, decorative paints dominate the domestic market with almost three-fourths share. This is against the trend in other world markets where industrial paints constitute the larger chunk.
The industrial paints segment is expected to grow if the economy makes a turnaround. Asian Paints has tied up with US paint major, PPG, to strengthen its product range in that segment.
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