JSW Group, which internally values the family-held paints business at around $2 billion, has engaged Axis Capital as an advisor for the transaction and has begun preliminary rounds of discussions with several bulge-bracket global private equity funds, they said.
“The group is initially looking to raise $100 million for a relatively small minority stake and is looking to divest around 5% stake for now, which will set the course for future rounds of valuation,” said one of them.
“The final valuation figure and the quantum of stake sale could change as the discussions progress,” said one of the people cited above. A JSW Group spokesperson declined to comment. Axis Capital didn’t respond to queries.
A relative newcomer to the sector, JSW Paints was incorporated in 2016 and is led by Parth Jindal, son of group chairman and managing director Sajjan Jindal.
The company makes industrial and decorative paints and has two plants – at Vasind in Maharashtra and Vijayanagar in Karnataka. The Vasind unit has an installed capacity of 40,000 kilolitres per annum (klpa) and makes industrial paints. The one at Vijayanagar makes decorative paints and has an installed capacity of 90,000 klpa.
“The company plans to use part of the proceeds for capex and possibly to repay a part of its debt, which has remained elevated,” said the second person cited above.
Expansion Mode
Recent corporate filings showed that JSW Paints invested around Rs 100 crore in FY23 for streamlining production and expanding capacity in the industrial and decorative segments. Additionally, the company has planned a large debt-funded capital expenditure of Rs 750 crore, in the medium term, to set up an integrated plant to manufacture both industrial and decorative paints.
In July 2021, publicly traded JSW Steel invested Rs 750 crore in the family-owned business, which the group maintained was done at arm’s length. JSW Steel said it would invest the amount in three tranches. The first of these was Rs 300 crore for 7.5% of the issued and paid-up equity capital of JSW Paints and a 6.88% stake on a fully diluted basis. This was to be followed by Rs 250 crore in FY23 and Rs 200 crore in FY24.
At that time the company had said it intended to use the funds to expand operations in both industrial and decorative segments, and become a pan-India player to take on larger rivals such as Asian Paints, among others.
According to industry estimates, the domestic paints market is expected to touch Rs 1 lakh crore in the next five years, led by increasing urbanisation. Of overall industry sales, the top three players – Asian Paints, Berger Paints and Kansai Nerolac Paints – control 80% of market share.
