JSW to fund Rs 13k-cr Akzo Nobel India deal via mix of promoter capital infusion, debts

Mumbai, Jul 1 (PTI) JSW Paints will fund its Rs 13,000-crore deal to acquire Akzo Nobel India Ltd (ANIL) through a mix of fund infusion of promoters, debts and PE funds, said its Managing Director Parth Jindal on Tuesday.

JSW Paints, a 5-year-old firm, expects that the deal once completed will help the combined entity to become the third-largest player in the decorative paint segment and is expected to touch around Rs 7,500 crore turnover in the next three years.

Meanwhile, Dutch firm Akzo Nobel CEO Greg Poux-Guillaume said it is not exiting India and will retain full ownership of its powder coatings business and remain the technology partner to JSW across all coating segments with a 4.5 per cent royalty and licensing agreement.

When asked about the funding of the deal, which includes Rs 8,986 crore for buying promoters' stake and Rs 3,929.06 crore through an open offer, Jindal said Rs 7,000 crore would come from internal accruals and fund infusion.

"There is (fund) infusion by the family for equity, and there are private equities that are coming. So, roughly Rs 7,000 crore is being put in by the family between the debt at Paints level as well as the promoter infusion, and the rest is going to come in from private equity," said Jindal, adding, "Otherwise it will come as equity infusion by the family." JSW Paints is currently an unlisted entity, in which 85 per cent of the shares are held by the family trusts and the rest owned by the flagship firm JSW Steel.

When asked whether the family trust would be diluted, Jindal said: "No... I am assuming there will be a dilution of JSW Steel also in this transaction in the holding of JSW Paints." However, he also clarified that the other listed entities of the USD 23-billion JSW group would not be leveraged.

Recently, Sajjan Jindal Family Trust, one of the promoters of JSW Infrastructure, divested a 2 per cent stake in the company for Rs 1,210 crore through an open market transaction.

When asked whether it would utilise that fund for the acquisition of Akzo Nobel India, Jindal said: "Yes. It is part of the plan." Jindal is hopeful to receive all required regulatory clearances by the end of this calendar year, including approval from shareholders of Akzo Nobel India Ltd (ANIL) and the Competition Commission of India.

"... if it happens earlier, the earlier the better, but you know we have to cross all those hurdles," he said.

Last week, JSW Paints announced the acquisition of a 74.76 per cent stake from Dutch promoters of Akzo Nobel India Ltd for a consideration of Rs 8,986 crore and announced an open offer of up to Rs 3,929.06 crore.

He expects the combined entity will have a Rs 6,000 crore turnover, and become the number three player with about Rs 7,500 crore turnover.

When asked about the timeframe for completion of the deal, Jindal said: "We have to grow significantly to come into the number three player. We anticipate it would take a three-year period to come into the top three." 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 as per the previous agreement.

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

Earlier, ANIL was paying 3.5 per cent for the decorative technology and 4.5 per cent on the industrial coatings.

"Now, ANIL has purchased the IP for the decorative business. So, now, after the transaction gets through, the 3.5 per cent royalty on decorative goes away. But the 4.5 per cent royalty on industrial continues as we continue to use their technology," said Jindal.

Jindal also clarified that it has the right to use the brand Dulux for the Indian market only, as per the agreement with the Dutch firm.

Akzo Nobel has retained its powder coatings business and International Research Centre (R&D).

According to Guillaume, powder coating is a fast-growing business, which has applications in several sectors, including electric vehicles.

"We see a lot of potential in that business, and it's a business in which Akzo Nobel is twice the size of the number two worldwide. (14:16) So we'll continue to push in that," he said.

Beyond that, in India, Akzo Nobel has other business opportunities, in which it is not currently present, such as aerospace coating.

"We are a 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," he said, adding as aircraft maintenance facilities are increasing in India, it makes a sense to enter into. PTI KRH HVA