Berger builds up Rs 150 crore war chest

Berger Paints India Ltd has put together a war chest of about Rs 150 crore (Rs 1.50 billion) for an acquisition or investment in a joint venture.

"We have reserves of about Rs 130 crore (Rs 1.30 billion) and can easily raise up to Rs 150 crore (Rs 1.50 billion) for a possible acquisition or investment in joint venture in an area where we are not very strong in," managing director Subir Bose told newspersons in New Delhi on Wednesday.

He was speaking at the sidelines of a press conference to announce the launch of a designer wall finish under the 'Illusions' brand name.

Bose added that these areas include automotive paints, wooden paints and finish and exterior paints.

He also expressed the possibility of a joint venture with Nippon Paints of Japan in the automotive paints segment.

Berger Paints, the third-biggest paint manufacturer in India, already has a technical tie-up with Nippon and Dupont Performance Coating for its auto paints business.

There is a likelihood that Berger will hive off its automotive paints division as a separate company and Nippon will pick up stake in that company.

"To be a serious player in the automotive paints industry, we have to have equity participation with one of the formidable international automotive paints companies," he said.

Bose said the company is eyeing organic as well as inorganic routes for expansion. The company had earlier acquired Jenson & Nicholson (Nepal) and bought out the 50 per cent holding of ICI Paints in its joint venture - Berger Auto and Coating.

The company is also pumping in Rs 30 crore (Rs 300 million) to set up a manufacturing base in Jammu, which is likely to be operational by the year-end.

Berger Paints is eyeing a growth of 12-15 per cent during the current financial year. It clocked a turnover of Rs 680 crore (Rs 6.80 billion) and net profit of Rs 33.4 crore (Rs 334 million) during 2002-03, mainly spurred by rising sales in the home decorative paints, he added.

The total paint market is estimated at Rs 5,000 crore (Rs 50 billion) with the five companies together accounting for Rs 3,500 crore (Rs 35 billion) business.

These include Asian Paints [with a turnover of Rs 1,550 crore (Rs 15.50 billion)], Goodlass Nerolac [Rs 791 crore (Rs 7.91 billion)], Berger [Rs 688 crore (Rs 6.88 billion)], ICI Paints [Rs 360 crore (Rs 3.60 billion)] and Shalimar with a turnover of Rs 100 crore (Rs 1 billion).

Bose expects a remarkable growth in the home paints business owing to growing disposable incomes and an increase in building construction owing to tax breaks offered by the government. He said the industrial category will, however, grow at a relatively slow pace.