Akzo Nobel plans new Rs 250 cr plant in India

May 15, 2011, 07.10pm IST

NEW DELHI: Global paints and coatings maker Akzo Nobel plans to set up a new manufacturing plant in India at an investment of up to Rs 250 crore as part of a strategy to become a one billion euro entity in the country by 2015. The Indian arm of the Amsterdam-based company is scouting for locations in Madhya Pradesh and Karnataka to set up the plant, which it expects to be ready by 2012-13. "Currently, we are pretty close to full capacity and the management understands that in order to achieve our target of becoming a one billion euro entity in India by 2015, we need more capacity," Akzo Nobel India Chairman Nihal Kaviratne told PTI.

Akzo Nobel India Ltd is the listed company of the group and is mainly into decorative paints, automotive coatings and surface chemistry. The group's other business areas such as performance coatings and specialty chemicals are also significant in India but are not under the aegis of the publicly listed entity. In the year 2010-11, Akzo Nobel India reported a total revenue of Rs 1,096.8 crore with a profit after tax of Rs 176.6 crore. The company, which currently has an installed capacity of 80 million litres per annum of decorative and auto paints at different locations including Hyderabad, Mohali and Thane. It is at present quadrupling the capacity of its Hyderabad plant to 40 million litres per annum. The additional capacity is slated to be available by September this year. "The brownfield expansions are not going to be enough ... The idea is to build new plant that we need to be ready by 2012-13. We have already started scouting for locations and are currently talking to Madhya Pradesh and Karnataka governments," Akzo Nobel India Ltd Managing Director Amit Jain said. Asked about the investments and size of the new plant, Kaviratne said: "It will be significant and could be around Rs 200 crore to Rs 250 crore and the capacity can be anywhere between 50-100 million litres per annum." He said the company will also be investing in capability and brand building exercise in order to achieve the stated aim of 2015 but did not disclose details. As a consumer brand, the company will be emphasising on Dulux, which it had inherited after the global acquisition of ICI Paints by Akzo Nobel NV in 2008, both in the premium and mid segment.

"In the economy range we will leverage on the ICI brand," Jain said, adding the aim of the company is to be among the top two players in each of the segment it is present.

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Mumbai: Paint maker Akzo Nobel India expects to sustain its 20% sales growth in FY12 in the face of an expected demand dip for the Indian paints industry as hardening rates dent demand for homes, offices and cars. The Indian unit of the worlds largest paint maker Akzo Nobel posted a 55% jump in net profit in June quarter to Rs. 67.98 crore while sales grew a fifth to Rs.340 crore in the same period a year earlier. Indias central bank raised interest rates by a higher-than-expected 50 basis points on Tuesday, its 11th rate increase since March 2010 stepping up its fight against persistently high inflation despite slowing growth. Indian paint makers such as Kansai Nerolac and Berger Paints are expecting a slowdown in growth in the current fiscal year, while the countrys largest paint maker Asian Paints said it expects demand growth to remain a challenge as the macro-economic environment forces consumers to cut back purchases.

However, Akzo Nobel, whose flagship products include the Dulux range of paints, expects to sustain and drive growth by ramping up distribution and launching new products in the mid-tier market in India. Akzo has been a large player in urban India but now we are expanding our distribution to smaller cities and moving closer to emerging India, Amit Jain, managing director of the Indian unit, told Reuters in an interview on Tuesday. The bulk of our products have been premium, this is the first time we are moving into the mid-market with paint prices at Rs. 300 per litre, Jain added. Also, the company gets 88% of its revenues from decoratives coatings, which caters to the housing industry and is still seeing good growth. It gets only 12% from the industrial segment, which caters to the auto industry that is reeling under a demand slowdown. Akzo Nobel India, however, expects its margins to remain under pressure as rising prices of titanium dioxide, a key raw material, continue to remain a cause for worry. Titanium dioxide prices have been going up and we expect it to escalate a further 15% in the next six months...In the next 6-9 months we will take another round of price increases, but we will try to keep the quantum of the hike to a minimum, Jain said. The company has taken two price hikes in the June quarter to the tune of 6-7%. Its June quarter Ebitda margin grew a mere 4% year-on-year to Rs. 45.4 crore largely on the back of a 330 basis points gross margin contraction. New capacity Akzo Nobel India, which has an annual capacity of 80 million litres, is planning to set up a new plant with an additional capacity of 100 million litres. We are looking for land for the factory in Karnataka and Madhya Pradesh and are still in the process of finalising it. The new plant will come up in two phases, over a period of three years and the investment will be around Rs. 200 crore, Jain said. The company will also add an additional capacity of 30 million litres at its existing plant in Hyderabad, Jain said. The paint maker will also focus on increasing its retail footprint in the country and plans to open 75 Dulux decorative centres this fiscal year, in addition to its existing 75. It has earmarked a total capital expenditure of 800 million rupees in FY12.

At 3.20 p.m., shares of the company were down 0.79% at Rs. 971.1 in a weak Mumbai market. Tags - Find More Articles