Berger reforms auto paints business

The firm has 13% market share in the Rs 3,000 cr auto paints industry, but is totally absent in passenger-car segment

To increase its business in the automobile sector, Berger Paints has restructured its production line.

Now, a subsidiary, BNB Coatings, will make paints for passenger cars and three-wheelers. The parent company will continue to make paints for two-wheelers and commercial vehicles.  

According to Berger sources, the division of businesses is expected to open newer profit-making avenues.

BNB is a joint venture between Berger Paints (49 per cent) and Nippon Paints Automotive Coatings (51 per cent). Till now, it has been making coatings for plastic substrata of automobiles.

Berger Paints, with a nearly 13 per cent market share in the Rs 3,000-crore auto paints sector, has been absent in the passenger car segment.

“Even if we developed the paints on our own and matched the technology according to global standards in the passenger car segment, we may not get the approval from car makers immediately. It makes more sense to hand over the business to a subsidiary which can focus on this,” Abhijit Roy, managing director and chief executive officer, told Business Standard.

BNB will get three-wheeler makers Piaggio and Force on board immediately to supply paints to their products. Berger has been catering to the entire demand of Piaggio, while

70 per cent of Force's requirement was met by the Kolkata-based company.

The restructuring could also imply business from Japanese car makers Toyota and Honda, while Mahindra & Mahindra and Suzuki can be targeted at a later date.

This move will allow Berger to focus entirely on two-wheelers and commercial cars.

Of the five major two-wheeler makers in India, Berger Paints caters to four and commands a 26.8 per cent market share in the segment. It has plans to expand its business.  The turnover of the total business which will be transferred to BNB Coatings by Berger Paints is to the tune of Rs 29 crore on a slump sale basis at a consideration of Rs 90 crore, which is to be paid in cash.

To further its business in the segment, the firm has planned a two-phase expansion of its plant in Jejujdi in Maharashtra where it is ramping up annual production capacity from 4,000 tonne to 24,000 tonne at an investment of Rs 80 crore.

With the restructuring in place, Berger may soon get head-on with Kansai Nerolac Paints, commanding an absolute 60 per cent market share in the automobile coatings space.