AkzoNobel India plans to set up manufacturing unit in Bangladesh via tolling agreement

The net profit rose 59% in Q1 to Rs 55 cr

Paints major AkzoNobel India is looking to set to up manufacturing unit via tolling agreement in Bangladesh. The company has joined hands with Bangaldesh distributing conglomerate ACI for the same and depending on the success of this move the company would look to set up its own unit in the neighboring country in the next 24-36 months.    

A tolling agreement is a contract between one company that owns raw materials and another that is engaged to process those materials.

“Bangladesh's paints market offers great potential with a market size of about Rs 1,500 crore. Once we have around five% market share then accordingly we would explore the opportunity to have our own unit,” J Krishnaswamy, MD at AkzoNobel India told reporters after the annual general meeting here on Monday.

According to him importing the products and selling into the country was also coming off as expensive move owing to higher import duty.. “It is, thus, important to set up unit by local management,”  he added.

On domestic plans, the managing director of the company said that things are looking positive and first priority would b to utilise the existing assets to the maximum. “We have made investments worth Rs 240 crore in the last three years in India. For example, we are utilising 33% of total  capacity of Gwalior unit. So we would first look to juice the maximum capacity from the existing units,” said  Krishnaswamy.

Meanwhile, the company reported almost 59% growth in its net profit at Rs 55.18 crore in the first quarter of the current fiscal compared against Rs 34.81 crore in a yea ago period. The boost in the profit was mainly aided by phasing of mutual fund maturities, said the company. Net sales stood at Rs 627.93 crore against Rs 561.55 crore in a year ago period, a growth of about 12%.

Margins during the first quarter stood at about 9%, believed to be higher than industry estimates.