JSW Paints has positioned itself as the leading candidate to acquire Akzo Nobel India, surpassing the sole competing offer from a consortium comprising Advent International and Indigo Paints, according to sources familiar with the matter. After weeks of rigorous negotiations, both parties have entered into an exclusivity agreement to engage in bilateral discussions aimed at finalizing the terms and documentation for a share purchase agreement prior to making an official announcement.
If this acquisition is successful, it will elevate JSW to the fourth position in the Indian market, moving it closer to third-placed Kansai Nerolac in the decorative paints sector and securing the second position in industrial paints.
Additionally, this acquisition will assist JSW Paints in approaching the Rs 10,000 crore revenue threshold, positioning it favorably for a potential IPO. Decorative paints represent 75% of the overall demand in the country, driven by repainting and new construction activities. The segment is currently led by Asian Paints, followed by Berger and Kansai Nerolac. However, it is important to note that profit margins are declining due to heightened competition from new entrants such as Birla Opus.
Both bidders for Akzo Nobel India submitted binding offers at the end of last month, as first reported on April 24. Intense discussions have been ongoing in recent weeks, beginning with a notable discount to the current market value, considering the rapidly evolving competitive environment of the Indian paints sector. It is reported that the bid-ask gap has considerably narrowed during this time.
Akzo Nobel India’s present market valuation stands at Rs 15,857.14 crore, with the stock closing at Rs 3,482 on Thursday, reflecting a 25% decline from its 52-week peak of Rs 4,649 on October 9. Notably, the stock has appreciated approximately 36% over the past year in anticipation of a sale, making it the priciest paint stock globally. The parent company, AkzoNobel NV, possesses a 74.76% stake as the promoter, and JSW’s bid will initiate an open offer.
JSW’s proposal is reported to be at a 5-8% discount to the market price, valuing the promoter’s stake at Rs 11,854.63 crore ($1.39 billion). It is anticipated that privately held JSW Paints will undergo a reverse merger with the publicly listed Akzo Nobel India, according to sources. It remains uncertain whether AkzoNobel will maintain a minor stake in the merged entity. Citi and Morgan Stanley are serving as advisors for this transaction.
Currently, JSW is seeking to acquire the operations in India with the intention of eventually taking over the operations in Sri Lanka, where Akzo already has a local joint venture partner. JSW, led by Sajjan Jindal, has been in negotiations with various global banks and financial institutions, including Standard Chartered Bank, MUFG, and Barclays, for funding the acquisition.
Additionally, it is reportedly in discussions with Ares Capital, KKR, Goldman Sachs, and Apollo Global Management for structured financing amounting to Rs 4,000-4,500 crore. Apollo is already an investor in the group’s cement sector. The financing consortium has yet to be finalized.
The promoters, the Sajjan Jindal family, are anticipated to contribute Rs 2,500-3,000 crore as equity. The overall deal size will be contingent upon the success of the open offer. In October 2024, AkzoNobel announced plans to reassess its business operations in the Indian subcontinent. In February, Akzo Nobel India divested and agreed to sell its powder coatings business—its most lucrative segment, accounting for 12-14% of sales—to its Dutch parent company.
This development diminished the appeal of the deal for several potential buyers, according to industry executives. JSW Paints has struggled to penetrate the top three in the decorative segment since its establishment six years ago. Conversely, the newcomer Birla Opus, from Grasim Industries, has managed to capture a 3-4% market share in just the third quarter, as reported by industry executives.
Given that Akzo Nobel India’s Dulux Paints operates in the luxury and ultra-luxury segments within urban markets, a deal would significantly enhance JSW Paints’ market position. In January, JSW Paints managing director Parth Jindal referred to the Akzo Nobel India stake sale as an ‘exciting opportunity.’ He stated, ‘There is no choice… I must dedicate all my efforts to Akzo Nobel India.’
Akzo Nobel India, like most in the industry, has been bracing for sectoral headwinds. The company has about 7% market share in India and is one of the most profitable in the segment with an annual production capacity of 250 million litres, focused on high-end decorative paints. It has experienced low single-digit growth in value while profits in Q3FY25 were down by 5%, partly due to a special dividend issued in the previous year. But the automotive and vehicle refinish segments as well as the coil coating part of industrial paints faced challenges, impacting overall business performance.