Akzo Nobel eyeing for long-term ties with JSW, exploring opportunities in aerospace, marine coating biz

Mumbai: Akzo Nobel NV, the Dutch multinational operating in paints and performance coating business, is looking for a long-term partnership with JSW Paints and it will continue to have "important presence" in India, where it is looking for a play in aerospace and marine coating space, said CEO Greg Poux-Guillaume.

The company is retaining its powder coating business and R&D centre in India after transferring its stake in Akzo Nobel India Ltd (ANIL) to JSW Paints, part of Sajjan Jindal-led USD 23-billion JSW Group.

Akzo Nobel NV will remain the technology partner to JSW Paints, with a 4.5 per cent royalty and licensing agreement, said Guillaume in a media round-table here.

"So India remains a large and important presence for us. And it remains a significant market for us to tackle, but with powder and with things like aerospace," said Guillaume.

About ANIL, he said it's an 'exciting time' as the firm is joining a group that has a track record and is owned by a family that has been visionary.

"...this is a long term partnership and we will be JSW's technology partner for the coating businesses and that is for perpetuity and we will also look at opportunities to do things in other areas in which we were not historically present in India, because we have a lot of businesses that have potential applications in India," said Guillaume.

Akzo Nobel has retained its powder coatings business and International Research Centre (R&D). These two units were transferred by ANIL earlier this February to its Dutch parent firm Akzo Nobel NV in a Rs 2,143-crore deal.

When asked about his plans with these businesses, Guillaume said now powder coatings is a fast-growing business globally and has a lot of new applications.

"One of the biggest ones these days is electric vehicles (EVs), because powder has not only coverage applications, but also electrical insulation applications. So it's really well suited to that. Most of the large electrical vehicle companies, like BYD in China, are customers," he said.

Guillaume sees a "lot of potential" in the powder coatings business, in which Akzo Nobel NV is twice the size of the number two worldwide and will continue to push in that.

Besides, the multinational firm is also looking for another vector for growth in India, such as aerospace coatings, in which it is a market leader globally and not present in India.

"We are the market leader in aerospace coatings. If you take a plane, the likelihood that that plane is coated by Akzo Nobel is roughly 50 per cent and if you go into any maintenance facility for large planes, the likelihood that what you're seeing sprayed is Akzo Nobel is actually north of 50 per cent," he said, adding, "So we were not historically present in India because the market was still nascent but it's changing now." The aircraft maintenance facilities are increasingly in India, said Guillaume.

"And at some point, it makes sense for us to have a physical presence too, and then we will decide whether we want to do it by ourselves or whether we want to do it with a friend," he said about the partnership.

Speaking about India R&D centre, Guillaume said JSW gets the R&D centre for decorative paints; however, it retains it for its powder coating business.

"But, we also have a large R&D centre for our coating businesses around the world, which is based in India. And which we retain. It's an integral part of us," he said.

Guillaume said as per the agreement, JSW Paints will continue to pay 4.5 per cent royalty on the industrial coating business to the global entity.

"Before, it was the Indian entity (ANIL) paying to the parent company, and now it is JSW paying to the parent company," he explained.

Last week, while announcing the deal, Akzo Nobel NV said that from the sale of the stake in ANIL, it expects approximately 900 million euros, of which around 500 million euros will be used for deleveraging. It also intends to launch a 400 million Euro share buyback programme.

When asked whether it also includes India, Guillaume said: "No, it's for a global company. We have a global shareholding base, actually 60 per cent of our investors are US investors."

"And as part of a normal capital allocation for a large industrial as well as large global company, you invest in buybacks, you invest in acquisitions, and you also return capital to shareholders. That's part of the good hygiene of serviceicing your share-holders and rewarding them for their trust," he said, adding, "In this case, we felt that it was a good message to buyback some of our shares because we feel that right now we are undervalued, and deploying 400 million for buy back, shows that we are actually putting our money where our mouth is."

Guillaume further added that India is the only country in the world where Akzo Nobel has a listed entity.

"Otherwise, Akzo NV is a globally listed company" on the Dutch exchange with a market cap north of 10 billion euros, he added.

JSW Paints Managing Director Parth Jindal said there would be a synergy between Akzo Nobel for its other business also besides decorative paints business, which it acquired from the Dutch multinational.

"In industry, it's a very synergistic move because today JSW Paints is the number one player in coil coatings in the country. ANIL also has a very strong position in coil coatings and protective coatings. So together we'll become number one in that segment for sure. They are very strong in auto refinish. Again, we can definitely grow that with MG (JSW MG Motor) and others," he said, adding, "Those synergies will get unlocked."

JSW MG Motor India is a joint venture between JSW Group and SAIC Motor (owner of MG Motor India).

Akzo Nobel is also very strong in marine, and hence JSW "will double down" on that.

"So aim is very clear that we want to grow. We want to grow fast. We want to grow sustainably, and we want to grow by being competitive," he said.