The Rs 4,500-crore O P Jindal group is exiting from its paint business by selling its equity in Shalimar Paints Ltd.
This comes close on the heels of Jindal group's decision to focus only on its core operations such as manufacturing and selling steel. The group has decided to sell the paint business "at an appropriate time", industry sources said.
Considering its plan to concentrate only on steel, the Jindals have also decided to set up a holding company. The new entity would enable the group companies to reduce cross-holdings within the group.
Shalimar Paints has a small market share in the organised paints industry. However, its mainly known in the industrial segment of marine paints.
Sajjan Jindal, chairman and managing director, Jindal Vijaynagar Steel Ltd (JVSL), confirmed that the group had decided to focus on steel and exit from unrelated businesses.
Shalimar Paints is currently managed by Ratan Jindal, promoter of Jindal Strips Ltd. Jindals hold a 44 per cent stake in Shalimar Paints, foreign institutional investors hold 20 per cent, government and institutions 19.7 per cent and the rest is with the public.
Shalimar Paints has an outstanding debt of Rs 42 crore, and networth of Rs 29 crore. The company posted a net profit of Rs 1.43 crore on a turnover of Rs 119 crore in June 1997-98. The company reports its annual accounts in June.
Analysts said the group's decision to exit from the paints segment is in line with industry expectations.
The company has not been investing either in its brands or expanding its distribution network. "The survival of the paints company depends on brand-building and by spreading the marketing network to cater to a larger canvass as the business depends on higher volumes," they added.
Asian Paints with a 40 per cent market share heads the Rs 2,500-crore domestic paint industry followed by Imperial Chemicals India Ltd (ICI). The other players with significant market share include Goodlass Nerolac and the merged entity of Berger and Rajdoot Paints with 13-15 per cent share each. Decorative paints cater to 75 per cent of the market, while the balance is with the industrial segment.
All paint majors including Asian Paints, ICI Ltd and Berger Paints have 90 per cent production capacity in the decorative paint segment and remaining is with the industrial segment. Goodlass Nerolac Ltd has a ratio of 50:50 in decorative and industrial segment.
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