India’s second-largest paint maker Berger Paints has entered into a partnership with Japan-based Chugoku Marine Paints (CMP) in a deal that marks the former’s entry into the marine paints segment.
While Berger will initially act like a production partner for CMP India to cater to its clients, the partnership also opens up the possibility of a joint venture in future.
Abhijit Roy, managing director and CEO, Berger Paints said under the current terms of the treaty, CMP will procure paint from its VVN plant in Gujarat which has an installed capacity of 4,000 tonnes per month.
Its plants in Jejuri in Maharashtra and in Pondicherry will also be used for rolling out marine paints products in the near future.
While Berger Paints will have limited branding visibility as the paint will be sold under the CMP brand name in India, the company is expected to gain hands-on experience in the marine coatings business to decide on the final plan of entering this segment.
Industry officials are of the view that the marine coatings industry, although estimated at a meagre Rs 250 crore, is growing at 25 percent a year and is expected to maintain the momentum in the coming five years. On the other hand, the organised decorative paints sector, estimated at Rs 26,000 crore, is poised for 8-10 percent growth in the near term.
“Protective coatings is definitely a sector to look out for in the near term. Compared to the decorative segment, the marine coatings industry is expected to grow three-fold in the near term”, an analyst said.
The marine paints joint venture, which is under consideration, will not entail substantial investment from Berger Paints as the installed capacity in its plants has already been set up and the production technology will be provided by CMP.
Besides, with much optimism, the company has also decided to bring in the Bolix brand of insulation paints, which it feels has the potential to become one of the future key growth drivers for the company.
With this new revenue stream too, Berger Paints is eyeing to form a joint venture company with state-owned real estate company, NBCC India.
Although Berger will import the energy efficient Bolix building materials and technology initially, it is evaluating options to come up with a new plant after forming a joint venture.
The current agreement allows NBCC India to use Bolix technology in India but the Dhingra family-promoted company is eyeing a larger consumer base.
“For a Bolix joint venture, we need to ensure that we not only sell to NBCC, but a larger consumer base can be catered to. However, this venture will need a fresh plant as the paint can’t be made from our existing facilities”, Roy said.
Poland-based Bolix is a 100 per cent subsidiary of Berger Paints India.
In May last year, Berger reorganised its automotive paints division allowing the company to focus its efforts entirely on the two-wheeler and commercial cars segment directly while the passenger cars and three-wheeler division were transferred to BNB Coatings, a company subsidiary. Its auto segment is also driven by an agreement it signed with Nippon Paints.
“The idea is clear. We are going to enter the segments where we don’t have a presence via a joint partnership route”, Roy said.
The decorative paints business accounts for the majority of Berger Paints’ earnings which stood at over Rs. 4,100 crore in the year ended March 31, 2016. In the first three-quarters of the last fiscal year, its revenue grew by seven per cent at Rs. 3,472 crore with the net profit growing by 42 per cent at Rs. 372 crore.
Source: Business-Standard