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JK Cement has acquired 60 per cent stake in Acro Paints through a subsidiary at a cost of ₹153 crore. Acquisition was made through JK Paints and Coatings Ltd.
The remaining 40 per cent shall be acquired over the next 12 months “as per definitive agreement signed between the two”.
“This acquisition is a step towards fast-tracking JK Cement’s entry into the paints business, expanding its product offerings and potentially foray into new markets,” the company said in a statement adding that JK Cement will get access into the growing vertical of construction chemicals.
Situated in Bhiwadi, Alwar in Rajasthan, Acro Paints has two manufacturing facilities and is into manufacture of architectural and high-performance paints and coatings. The acquisition brings strong manufacturing capabilities and comprehensive product formulations with Acro having over 300 product SKUs.
Expansion plans
According to Raghavpat Singhania, Managing Director, JK Cement Ltd, the acquisitions will create adjacencies and “act as a key driver of growth”. “The current capacity (at Acro Paints) is undergoing expansion and is expected to be completed in the second quarter of FY24,” he said.
Post expansion, Acro will have a capacity of 60,000 kilo litres in decorative and textured paints; and 6700 kilo litres capacity in construction chemicals.
JK Cement is one of the major producers of wall putty in India; and the segment has significant overlap with the paint Industry. Acquiring a financially strong company like Acro with zero debt and healthy margins is a strategic move for JK Cement to leverage the strengths of its putty distribution network, those aware said.
Motilal Oswal in a recent report said, white cement faces an import threat from Iran because of which supplies to unorganized and paint players can not be restricted. White Cement usage in Putty is 16-18 per cent.
In the putty business, the market share of the two leading players has fallen to 40-45 per cent from 85-90 per cent four years back, indicating increased competition.
The pan India distribution network of JK Cement comprising of 1,00,000 dealers and 1,500 distributors will get a leg-up with Acro’s distribution network will enable the company to reach a wider market ready accessibility to customers in the region.
“The acquisition will also provide an opportunity to foray into the growing vertical of construction chemical and waterproofing products which has a current market size of over ₹5,000 crore growing at over 10 per cent per annum,” Abneesh Roy, Executive Director, Institutional Equities, Nuvama, said.
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