With a consolidated turnover of over Rs 3,300 crore last fiscal (2012-13) and more than a dozen manufacturing facilities in India and abroad, Kolkata-based Berger Paints is the second largest player in the Indian paint industry.
In an interview to Business Line , Abhijit Roy, Managing Director and CEO of the company, discusses the outlook for Indian and overseas business.
How did the July-September quarter fare?
We should do reasonably well this quarter (July-September).
Industrial side, which accounts for 20 per cent of Berger’s turnover, is not doing well because of slowdown. There are payment issues too. This has impacted sales.
The remaining 80 per cent of our turnover comes from decorative paints (home) segment. This business is growing, riding on higher demand from smaller towns and semi-urban areas.
Industrial paint is technology-led. Don’t you earn a higher margin in this segment?
Ideally, it should be so. For Berger, industrial paints were at par, if not more profitable, in some cases, than decorative ones. But, the scenario has changed.
The fact that there are a lot of foreign companies which have come in and under-cut existing players on price has worsened the situation.
How has the decorative segment done well when home sales are down?
In decorative segment, nearly 85 per cent is repainting. The remaining 15 per cent is new buildings. So the impact has been less.
But aren’t people postponing repainting during slowdown?
There has been some slowdown in the major cities. But demand is strong in smaller towns and semi-urban areas. People here are not really postponing purchases.
What are your expansion plans?
For decorative paints, we have just completed commissioning our largest plant at Hindupur in Andhra Pradesh at Rs 230 crore. We are planning a second unit, albeit a smaller one, at Hindupur for British Paints division.
Besides this, a Rs 18-crore powder-coating and industrial paint facility is coming up at Jejuri near Pune. It would go on-stream by December.
Are you still looking for acquisitions?
We are on the look-out for acquisitions both in India and abroad. We are looking to acquire a technology-led boutique company abroad.
But we are not in a hurry.
What about your overseas business?
Bolix in Poland continues to make profits. In Nepal, we are doing well. In Russia, we are making losses. But we have recently taken some initiatives to turn it around. We might break even in Russia either by the end of this year or early next year.
Do you plan an exit from Russia, in case the turnaround is delayed?
We are not known to make exits in any venture. In most cases we’ve turned the venture around. We took over the Nepal unit of Jenson and Nicholson, when it was making heavy losses. Last year, we closed at Nepalese Rupee 120 crore (Rs 75 crore) with 18 per cent margins.
When we acquired Rishra (near Kolkata) unit of ICI, it was producing mere 800 tonnes a month. Now, the capacity is ramped up to 5,000 tonnes a month.
You acquired the loss-making Indian business of Sherwin Williams earlier this year. When should it start making profits?
The Sherwin Williams will turnaround by the end of this fiscal or early 2014-15.
The brand has a strong presence in the west and south where Berger is relatively weak. For us it makes senses as we can gain market share in these areas.