Berger Paints to build new plant in Uttar Pradesh with Rs 1.5 bn investment

Anticipating at least seven per cent higher sales volume in the next two years, Berger Paints, the second largest paint maker in the country, is setting up a plant near Lucknow, Uttar Pradesh at an investment of Rs 1.5 billion.

Coming up in Sandila Industrial Area, the plant will enjoy fiscal incentives such as refund of the state’s share of the Goods and Services Tax and will cater to the Uttar Pradesh-Bihar belt. 

Incidentally, the region has delivered the highest decorative paint sales for the company but has been catering largely to units from West Bengal, Jammu and Delhi so far.

“We anticipate that by 2020, the installed capacity will need to be increased by 7-8 per cent to cater to demand from the market and this plant will help meet the projected volume. Additionally, apart from fiscal incentives, we will also be able to save more on logistics cost as the paint can be manufactured locally,” Abhijit Roy, managing director at Berger Paints told Business Standard.

The plant will largely manufacture decorative paints and cater to local needs for industrial coatings.

The paint maker decided to set up the new plant after it felt that the existing installed capacity in its plants for decorative paints in West Bengal, Jammu and Delhi can neither be augmented nor will be cost-effective to service the Uttar Pradesh-Bihar region in the near-term. Decorative paints make up nearly 80 per cent of the company’s annual sales.

Currently, the company has an installed manufacturing capacity of 609,247 KL per annum, of which 79 per cent caters to the decorative paints business, followed by protective coatings which account for 11 per cent of total sales.

It is also scaling up the production capacity at its Jejuri plant in Maharashtra and has completed building its putty unit in Assam.

According to the company’s estimates, the paint sector will grow 1.5-2 times over the country’s GDP growth rate which calls for expansion of current capacities.

Moreover, as per Abneesh Roy, research analyst with Edelweiss Securities, the transition to GST will help larger paint companies like Berger Paints to consolidate their growth.

Although the four organised biggies -- Asian Paints, Berger Paints, Kansai Nerolac and Akzo Nobel -- account for 54 per cent of the Rs 500 billion paint industry in the country, smaller regional players, mostly having local brands in their kitty, make up for the rest of the market.

“The paint industry will be one of the prime beneficiaries of GST implementation in terms of market share gains from the unorganised segment. Berger Paints will also significantly benefit from a recovery in rural demand following better monsoon and increased rural stimulus”, Roy said.

To increase its sales volume, Berger Paints is also expanding its dealer network at an annual rate of 12-15 per cent. Currently, it has 17,000 active dealers in its fold.