Key bidders for AkzoNobel’s India paint business are at the forefront of intense negotiations, with a focus on a significant reduction in valuation. As talks progress, merchant bankers and top Akzo executives are facing demands for a 20-25% decrease in the current valuation, hovering around the ₹12,000 crore mark, a stark contrast to the initial ₹18,000–20,000 crore estimates. The Citi Group, serving as the merchant banker for Amsterdam-based Akzo Nobel NV, is overseeing the strategic review of Akzo’s India and South-East Asia operations.
The crux of the matter lies in the perceived “premium” attached to the Dulux brand in the Indian market. A source familiar with the discussions revealed that several bidders are expressing reservations about the high premiums being sought. Over the past four years, Akzo India’s market cap has typically ranged between ₹8,000–10,000 crore. However, a notable shift occurred in mid-2024, following the announcement of a strategic review, propelling the market cap to the ₹15,000–16,000 crore bracket, currently standing at approximately ₹14,800 crore.
Despite the premium valuation, some bidders argue that Akzo India’s market share, under 10%, does not fully justify the lofty figures. They emphasize the value associated with the Dulux brand and its extensive distribution network as key factors driving the premium. Additionally, these discussions underscore that any potential sale would encompass only the India decorative paints and industrial coatings segments, while the profitable powdered coatings business would be divested to a separate Akzo NV subsidiary, thus impacting the overall market cap.
In light of these considerations, a recalibration of the market cap is anticipated, with a projected reduction of ₹4,000-5,000 crore due to the separation of the powdered coatings business. Consequently, factoring in a control premium, the revised valuation is expected to fall within the ₹12,000–15,000 crore range, as elucidated by industry insiders closely monitoring the negotiations.
Top Bidders and Market Dynamics
Leading the pack in the bid discussions are prominent names such as JSW Paints and Pidilite, who have advanced to the second round after submitting non-binding bids. Joining them are contenders like Indigo Paints and a private equity firm, signaling a diverse mix of players vying for Akzo India’s assets. While JSW, Pidilite, and Indigo remained tight-lipped in response to queries, the landscape also features other private equity firms engaging with local paint manufacturers to formulate binding bids for Akzo India.
The looming timeline suggests that binding bids may materialize within the next three to four months, setting the stage for a definitive shift in the valuation landscape. Noteworthy absentees from the bid race are Asian Paints and Berger Paints, dominant players in the Indian market, commanding a combined market share of nearly 75%. Despite their withdrawal, discussions surrounding the evolving market dynamics and potential valuation adjustments continue to unfold, with merchant bankers anticipating aggressive bids reflective of the current market environment.
In conclusion, the valuation of AkzoNobel’s India paint business stands as a pivotal juncture, marked by intricate negotiations and strategic maneuvers as key stakeholders navigate the path forward. The push for a substantial reduction in valuation, juxtaposed against the allure of premium brands and evolving market dynamics, underscores the multifaceted nature of the deal-making process, setting the stage for a transformative transaction that could reshape the landscape of the Indian paint industry in the coming months.
