Commodity Chemicals: Consolidation begins - JSW Paints bets big with AKZO acquisition by Kotak Institutional Equities
Consolidation begins: JSW Paints bets big with AKZO acquisition
JSW Paints has signed a definitive agreement to acquire up to a 74.76% stake in Akzo Nobel India (ANI) from Akzo Nobel NV for Rs94 bn, valuing ANI at 22X FY2025 EV/EBITDA. The combined entity would have ~Rs59 bn sales (Deco: ~Rs37 bn, 6% market share | Industrial: Rs22 bn) and EBITDA margin of ~10% (FY2025 pro forma). The acquisition marks a USD1 bn+ commitment to decorative paints by yet another large building materials group with strong execution capabilities, reinforcing JSW Paints’ ambition to emerge as a significant player in the segment. Even as JSW Paints is a rational competitor, we expect a rise in competitive intensity—especially in the premium segment where APNT holds a dominant 65-70% share—driven by Dulux's strong brand equity, under-penetration (latent potential) and JSW Group's execution prowess. We retain our cautious view on the decorative paints sector.
JSW Paints to acquire Akzo Nobel India
JSW Paints has signed a definitive agreement to acquire up to 74.76% stake in Akzo Nobel India (ANI) from Akzo Nobel NV for a consideration of Rs94 bn (Rs2,762/share), valuing ANI at about 22X FY2025 EV/EBITDA. This deal includes ANI’s decorative paints and industrial coatings business (excl. powder coating that would be retained by Akzo Nobel NV). This transaction has triggered an open offer—JSW Paints will acquire up to a 25.24% stake via open offer at Rs3,418/share. The open offer premium of 24% over Rs2,762/share is as per the SEBI formula (60 days VWAP). We expect JSW Paints to be listed through a reverse merger into ANI.
Dulux’s strong brand equity and JSW Group’s execution prowess augur well
ANI reported revenues of Rs41 bn (incl. ~Rs5 bn from powder coating) and EBITDA margin of 15.7% in FY2025. The revenue breakdown based on our estimate: (1) decorative paints (Rs23 bn; 4% market share but strong positioning in premium emulsions where it enjoys 9-10% share); (2) auto refinish/protective coatings (Rs4.5-5 bn each); and (3) coil coatings (Rs3-3.5 bn). We estimate JSW Paints’ decorative paints (over-indexed in the economy segment)/industrial coatings sales at Rs14 bn/Rs9 bn in FY2025, with a 3-4% EBITDA margin. The combined entity would have Rs37 bn/Rs22 bn decorative paints (6% share)/industrial coatings sales, with ~10% EBITDA margins. We see significant (1) revenue synergies—Dulux’s (ANI) strong brand equity and weak distribution (high dependence on distributor model in tier-1/2 and negligible presence in tier-3/4 towns) is an opportunity and (2) cost savings— (procurement, deco paints royalty, global/corporate overheads). We expect the combined entity to scale to about Rs10 bn sales by FY2029 (7-8% market share in deco), with 13-15% EBITDA margins.
Retain cautious view on decorative paints sector
This acquisition marks a capital commitment of USD1 bn+ toward the decorative paints by yet another major building materials conglomerate and underscores JSW Paints’ strategic ambition to be a significant player in decorative paints. Dulux’s strong brand equity (mind share ahead of market share), under-penetration, latent potential and JSW Group’s operational strength would increase competitive intensity, especially in the premium segment.
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