US firm Valspar targets Grand Polycoats

Valspar Corporation, the $2.97-billion global paints manufacturer, is planning to enter the Rs 11,500-crore Indian paints market. The Minneapolis-based (US) company has held talks with Baroda-based Grand Polycoats, an unlisted firm that specialises in making protective industrial coatings.

Grand Polycoats CFO Maulik Mehta confirmed talks with Valspar, but said it was not up for sale. ''Many companies, including Valspar, have approached us but we have our own strategy for growth. There's no reason to sell out at this point.''

He could afford to say so. Grand Polycoats, whose protective coatings are used in auto parts, engineering and capital goods, chemicals and petrochemicals, has been growing at almost double the industry's average growth of 10-12 per cent.

The Rs 55-crore company, which hopes to end the year with a top line of Rs 75 crore, is among the top five players in protective coatings and has given paint majors like Akzo Nobel, Kansai Paints, Asian Paints and Berger Paints a run for their money, say experts. Valspar didn't respond to an emailed questionnaire.

Valspar, a leading coatings and paints manufacturer (ranked eighth in the world), is looking to expand overseas. Though Valspar makes a wide range of coatings, paints and related products, it is known for its coatings "" used in protecting many iconic brands from the green that defines John Deere's tractors to Coco-Cola's red cans and Caterpillar's machines.

Valspar has grown through acquisitions in the 1980s and 1990s, and is now trying to grow beyond the US""currently, 30 per cent of its sales come from outside the US compared with 5 per cent a decade ago. Its success in China has taken the annual sales growth in excess of 20 per cent per year.

The acquisition-led strategy has helped Valspar post good results: it increased its net profit 19 per cent in 2006 on a 9.7 per cent growth in sales. In July 2006, Valspar acquired a 80 per cent stake in Huarun Paints, a supplier of furniture, decorative and achitechtural coatings in China, for $200 million.

In October 2006, Valspar also acquired H B Fuller's powder coatings business""its first powder manufacturing facility in Europe. It plans to use this to serve its industrial customers worldwide. In 2006-end, the company also entered into a joint venture with Tekno S A to supply coil coatings in Brazil.

With the Indian paints market growing at 10-12 per cent and most of its global peers already here (see box), it can hardly ignore this market.

''What's attracting global majors is the growth prospects here. In infrastructure, India is trying to build in the next five years what it has built over the last 60 years,'' said Mehta.

For the protective business, which is Grand Polycoats mainstay, infrastructure is the main driver for growth. This has a trickle down effect on the demand for capital goods and equipment, said Mehta. If Grand Polycoats doesn't materialise, Valspar could explore other opportunities in India, including setting up a greenfield plant.