After valuation exercises, Berger Paints India Ltd and Nippon group of Japan have signed formal agreements to “transfer” some of their automotive paints businesses in India to their existing joint venture.
Berger Paints said on Thursday that it entered into a formal “business transfer agreement” with the joint venture BNB Coating India Pvt Ltd. It also said that Nippon group signed a similar transfer agreement with BNB. However, the valuations of respective businesses, which are being added to BNB, have been kept undisclosed.
Through a non-binding agreement in November last year, Berger Paints and Nippon group had proposed to transfer their automotive colour coating businesses to their Indian joint venture.
Sources told BusinessLine that the joint venture, in which Nippon holds 51 per cent stake and Berger Paints 49 per cent, would see an automatic jump in turnover. The business additions for BNB would take its turnover from the present Rs 50 crore of plastic substrate coatings to Rs 110 crore after the transfer of automotive colour coating businesses of both the partners.
The partners have agreed to transfer their three and four-wheeler coating businesses to BNB. Nippon Paints (India) Pvt Ltd has its automotive coating manufacturing unit in Bengaluru, while Berger Paints’ Howrah unit produces such coatings.
The proposed transfer deals will see Nippon and Berger Paints automotive coating assets and businesses coming under the BNB fold in a combination of cash and equity.
“The deals have been so designed that after the transfers, the joint venture’s equity stake profile would remain unchanged at 51 per cent for Nippon and 49 per cent for Berger,” a top company source explained.
Nippon has the high-end technology for producing automotive coatings. At present, Nippon is an OEM supplier of automotive coatings to Tyota passenger cars and SUVs in India.
As the joint venture would have additional capacity, the supply agreement could be extended to other foreign carmakers in India like Honda, Nissan, Volks Wagen and Suzuki.
The deal, according to industry insiders, would pave way for higher revenue and profitability for the joint venture in future. The joint venture, in 2014-15, had posted a net profit of Rs 4.46 crore.
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