Gurugram-based Kamdhenu Group has roped in consulting major EY (formerly Ernst & Young) as it looks to bring in an investor for a fund infusion of ₹200 crore for its about-to-be listed paints business (under Kamdhenu Ventures).
The listing of Kamdhenu Ventures is likely by this month-end. The process of fund infusion, including bringing in the partner, is likely to be completed over the next six months.
According to Harish Kumar Agarwal, CFO and CRO, Kamdhenu Group, funds would be used to scale up the paints business to a ₹1,000 crore segment, a 300 per cent jump from the existing ₹250 crore, over the next three-to-four years.
Scaling up plans include setting up a new plant with an annual capacity of 36,000-kilo litres (doubling existing capacity), preferably in Gujarat, to cater to the Central and West Indian market; ramping up distribution from the current 4,000-odd network, setting up and purchase of tinting machines for the retail network expansion; and distribution and branding activities.
The expansion will focus on tier-2, -3, and -4 markets, where some of the larger and dominant players have a lesser presence.
Kamdhenu’s existing paint plant, which caters to the decorative category, is located in Rajasthan and has a capacity of 36,000 kl per annum. It caters to markets like Uttar Pradesh, Rajasthan, Bihar, Odisha, Gujarat, and West Bengal.
Open to foreign players
The company also has outsourcing contracts for mass-market offerings. The plant at full capacity has a revenue-generating capacity of ₹450 crore and the outsourced capacities can generate close to ₹150 crore.
“So to scale up the potential ₹600 crore business to ₹1,000 crore, we would need fund infusion. Hence we roped in E&Y for consultation and finalisation of an investor. We are open to partnerships with large foreign players too, including co-branding opportunities. Discussions are on,” he told businessline.
The Chandigarh Bench of the National Company Law Tribunal (NCLT) had earlier allowed the demerger of the steel and paints business of Kamdhenu Ltd, the listed company. Post demerger, Kamdhenu Ltd will focus on the steel business; while Kamdhenu Ventures, which will be listed separately, will focus on the paints business.
The paints business contributed around 30 per cent of the FY22 revenues. Water-based products contributed 79 per cent; powder based was 11 per cent, and solvent-based at 10 per cent of the vertical’s revenues. The average selling price for a litre increased to ₹76 in FY2022 from ₹63.
The Rajasthan plant manufactures interior and exterior emulsions, stainers, colorants, designer paints, construction chemicals, waterproofing chemicals, and other water-based specialty products; whereas it also outsources median and low-range products like distempers, enamel, and putty.
“The decision to hive off the paint business is aimed to decouple the business. The paint industry in India has been witnessing around 18-20 per cent annualised growth, whereas the company is expecting to grow at a much faster rate at 30-40 per cent in the coming years in view of its wide presence and large network,” he said.