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ICI readies Rs 300-crore war chest

Partha Ghosh in New Delhi

ICI Ltd is readying a war chest of Rs 300 crore (Rs 3 billion) for a major acquisition in the paints industry in the country.

ICI, with a 10 per cent market share, lags behind Asian Paints which leads with a share of around 30 per cent, and Goodlass Nerolac and Berger Paints, each having a 15 per cent share. The balance is shared by a host of small players.

A top executive in ICI said: "Now is the time for consolidation in the Indian paints industry. One of the players will be gobbled up. As per our balance sheet, we are in a position to raise debt close to Rs 300 crore (Rs 3 billion). We have a healthy cash reserve." The executive, however, declined to name the company ICI was targeting.

During the whole of this year, ICI India has shed its non-core businesses to clean its balance sheet.

"That was our plan for this year. If we are going to make an acquisition to become a larger player in the paints business, we have to be a focused player first," the executive said.

Worldwide, ICI has sold its industrial paints businesses.

Industry sources pointed out that if ICI wanted to be a serious competitor of Asian Paints, it could be eyeing a stake in one of the other two companies.

Kansai of Japan holds a majority (around 65 per cent) shareholding in Goodlass Nerolac. But while in India the company is a major in decorative paints, Kansai, worldwide, is primarily an industrial paints company. Analysts put Goodlass Nerolac's current valuation at Rs 300 crore (Rs 3 billion).

Goodlass Nerolac managing director S Bharukha, however, denied there was any move in this regard.

"Kansai also has interests in decorative paints, though like any other global company its main business is industrial paints," he added.

Five years ago, ICI had made its first move towards consolidating its paints business in India by acquiring a 9.5 per cent stake in Asian Paints from one of the promoter-shareholders, Ashwin Choksey.

The deal, however, was not endorsed by the government since the prevalent foreign investment guidelines did not permit an acquisition of shares in a company by a firm already having a subsidiary in the country, without the approval of the shareholders of the target company.

The management of Asian Paints challenged the deal and ICI offloaded its shares to the Unit Trust of India and in the open market.

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