Berger exploring acquisitions in Russia

Our Bureau Kolkata | Updated on August 05, 2019 Published on August 05, 2019

Abhijit Roy, MD and CEO, Berger Paints,

Expects operations there to be profitable in next 2-3 years

Berger Paints India is looking at acquisitions in Russia as it eyes profitability in operations there.

Berger operates in Russia through a step-down subsidiary which has an impairment loss to the tune of over ₹28 crore, recognised in Q4 of FY19. The losses are primarily on account on forex exchange fluctuations, company officials said.

According to Abhijit Roy, MD and CEO, Berger Paints, the company’s Russian operations are expected to turn profitable over the next two-three years. A part of this strategy would be to look at acquisition of a profitable business there, primarily a company which is in the decorative paints segment.

“We are exploring opportunities there,” he told reporters on the sidelines of the company’s Annual General Meeting here, on Monday.

In a stock market notification later in the day, Berger said, “At its meeting held on August 5, the Board of Directors recognised that the company is considering investment opportunities in Russia to complement its existing operations. However, no decision has yet been taken in this regard.”

According to Roy, the company is also in the process of de-risking its business following the slowdown in sales to the auto sector. De-risking is being done by bringing on-board clients (within the auto industry). Automobile paint sales account for less than 10 per cent of its total topline.

Berger is “also entering new segments” that include categories in infrastructure sector and across general industries (like pump and compressor paint, among others).

“There is a slowdown in demand from the automobile sector. However, we are de-risking the business by getting new accounts and also by entering other categories across general industries,” he said. Sources say, the paint industry has seen a 15-16 per cent slowdown in demand from the auto sector.

Capex plans

Berger also plans a capex of ₹200 crore this fiscal. While approximately ₹80 crore is expected in existing facilities, the remaining will be spent towards its upcoming unit at Lucknow in Uttar Pradesh.

The company has also planned to bring on-stream its colourant facility in Rishra, West Bengal by December. About ₹45 crore has been invested in the plant. Earlier an emulsion unit was brought on-stream at Rishra with an investment of ₹30 crore.

The second phase of the Jejuri unit at Pune in Maharashtra is expected to go on-stream by September.

Berger reported a 27 per cent rise in net profit to ₹164 crore (apprx) for Q1 FY20 (April-June) as against ₹129 crore in the corresponding period last year. Revenue from operations saw a 16 per cent rise to ₹1,585 crore, year-on-year (₹1,371 crore).

The company’s stock closed at ₹333.65, down 0.28 per cent, on the BSE on Monday.

Published on August 05, 2019
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