Asian Paints acquires 100% stake in Reno Chemicals for ~Rs160cr

India’s largest paints company, Asian Paints Limited (APNT), announced acquisition of 100% stake in Reno Chemicals Pharmaceuticals And Cosmetics Private Limited (Reno) for a cash consideration of Rs159.52cr. This was announced to the stock exchanges on December 12, 2017.

APNT is India’s largest and Asia’s fourth largest paints company with more than 50% market share in India. The company operates in 16 countries and has 25 paint manufacturing facilities in the world.

APNT bought 4,950 equity shares of Reno at Rs3,22,258 per share totalling Rs159.52cr. The purchase entailed 100% equity share capital of Reno and was done in cash. APNT plans to use Reno’s land and buildings to meet its own infrastructure requirements.

APNT has been on a buying spree in 2017. Its other acquisitions this year include Sleek International Private Limited (49% stake for Rs50cr in December 2017) and Sri Lanka’s Causeway Paints Lanks Private Limited (100% stake for cash consideration of Rs387cr).

To cater to the rising demand, company is planning to set up 5,00,000 KL plant in AP and 6,00,000 KL plant in Karnataka. The first phase of both the plants are likely to be completed by FY19E. Post GST implementation, lower tax advantage for unorganised players will diminish, which is expected to benefit organised players like Asian Paints. Also, its decorative paints segment (89% of revenue) is expected to grow at ~14% CAGR till FY20E. Overall, we see revenue CAGR of ~14% over FY17-19E (vs 4% over FY15-17). Further, the company expects raw material prices (mainly monomer) to moderate in coming years. Thereby, we expect EBITDA margin to improve by ~50 bps to 20% over FY17-19E. We expect company to maintain FY17 D/E of 0.1x in FY19E as well. Overall, we see PAT CAGR of ~14% over FY17-19E.

Asian Paints Ltd is currently trading at Rs1,120.8, up by Rs4.25 or 0.38% from its previous closing of Rs1,116.55 on the BSE.

The scrip opened at Rs1,117.1 and has touched a high and low of Rs1,126 and Rs1,117.1 respectively. So far 139247(NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs 1,07,099.23cr.




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