AkzoNobel to withdraw from the Indian decorative paints market, retaining a 4.5% royalty on coating technology from JSW in the deal
AkzoNobel Sells Decorative Paints Business in India to JSW Paints
In a significant move, Dutch multinational paint and coatings company AkzoNobel NV has agreed to sell its decorative paints business in India to JSW Paints for a near ₹9,000-crore deal. This sale is part of AkzoNobel's broader Asia restructuring, with India being the first market to be realigned under a new portfolio strategy.
The sale includes Akzo Nobel India, the fourth largest paint maker in India with less than 10% market share. However, AkzoNobel will retain its powder coatings business and R&D center in India, separate from the decorative coatings unit acquired by JSW.
A strategic partnership has been formed between the two companies. After the acquisition, JSW Paints will pay AkzoNobel a 4.5% royalty on the industrial coatings business. This replaces the previous arrangement where the Indian entity, AkzoNobel India Limited (ANIL), paid royalties to the parent company. The 3.5% royalty on the decorative business will cease because JSW, through ANIL, has purchased the intellectual property rights for that segment.
AkzoNobel remains the technology partner to JSW Paints for the coating businesses "for perpetuity". This partnership includes ongoing technology collaboration and the maintenance of AkzoNobel's R&D center in India. The royalty arrangement will kick in once the transaction is over.
The deal is being considered for regulatory clearances and approvals, including from the Competition Commission of India (CCI). The process of selling the powder business to the global parent and procuring the IP of the decorative is ongoing.
This arrangement reflects a strategic partnership where AkzoNobel continues to benefit from its technology in India while transferring operational control of its decorative paints business to JSW Paints. AkzoNobel intends to exit geographies where it lacks leadership in decorative paints, focusing on high-margin segments such as marine and protective coatings in India.
The sale contributes around €400 million (approximately ₹4,000 crore plus) in annual revenue for AkzoNobel, with the decorative segment accounting for 60% of this revenue. Akzo has completed its SG&A restructuring globally, delivering over €150 million in savings. AkzoNobel is not bidding for BASF's coatings division and is currently not pursuing acquisitions.
Meanwhile, JSW Paints could explore a reverse merger after the acquisition, potentially listing itself while becoming one of the top five paint-makers in India. The company has not made any official announcements regarding this possibility yet.
[1] Business Standard
[2] Livemint
[3] The Economic Times
[4] The Hindu BusinessLine
- The sale of AkzoNobel's decorative paints business in India to JSW Paints is a part of AkzoNobel's broader strategy to realign its business in Asia's markets, with a focus on high-margin segments like marine and protective coatings.
- According to the strategic partnership formed between the two companies, JSW Paints will pay AkzoNobel a 4.5% royalty on the industrial coatings business, with the royalty arrangement on the decorative business ceasing due to the transfer of intellectual property rights to JSW.
- AkzoNobel will continue to benefit from its technology in India while transferring operational control of its decorative paints business to JSW Paints, maintaining its R&D center in India for ongoing technology collaboration.
- Regulatory clearances and approvals, including from the Competition Commission of India (CCI), are underway for the deal, which is expected to contribute around €400 million in annual revenue for AkzoNobel.
- In the wake of the acquisition, JSW Paints may explore a reverse merger, potentially listing itself and emerging as one of the top five paint-makers in India, although no official announcements have been made regarding this possibility yet.
