JSW Group, led by billionaire Sajjan Jindal, is exploring a potential stake sale in JSW Paints as it seeks to expand capacity and establish a countrywide presence to compete with its larger rivals. According to two sources familiar with the matter, the group has internally valued the family-held paints business at approximately $2 billion and engaged Axis Capital as an advisor for the transaction. Preliminary rounds of discussions with several bulge-bracket global private equity funds have already begun.
One of the sources stated that the group is initially looking to raise $100 million for a relatively small minority stake, divesting around 5% stake for now, which will set the course for future rounds of valuation. However, the final valuation figure and the quantum of stake sale could change as the discussions progress. A spokesperson for JSW Group declined to comment, and Axis Capital didn’t respond to queries.
JSW Paints was incorporated in 2016 and is led by Parth Jindal, son of Sajjan Jindal, group chairman and managing director. The company produces industrial and decorative paints and has two plants, one at Vasind in Maharashtra and another at Vijayanagar in Karnataka. The Vasind unit has an installed capacity of 40,000 kilolitres per annum (klpa) and produces industrial paints, while the one at Vijayanagar has an installed capacity of 90,000 klpa and produces decorative paints.
To streamline production and expand capacity in the industrial and decorative segments, JSW Paints invested around Rs 100 crore in FY23, according to recent corporate filings. 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 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, driven by increasing urbanisation. Of overall industry sales, the top three players – Asian Paints, Berger Paints, and Kansai Nerolac Paints – control 80% of market share.
The proceeds from the stake sale of JSW Paints are expected to be used for capex and possibly to repay a part of the company’s debt, which has remained elevated, according to one of the sources. The stake sale will set the course for future rounds of valuation, as JSW Group seeks to establish a countrywide presence and take on its larger rivals.
The Indian paints market is expected to touch Rs 1 lakh crore in the next five years, led by increasing urbanization. JSW Paints aims to establish itself as a key player in this market and take on its larger rivals by building capacity and expanding its presence countrywide. The stake sale is seen as a step towards achieving this goal, and the final valuation figure and quantum of stake sale could change as the discussions progress. The funds were intended to expand operations in both industrial and decorative segments and to become a pan-India player to take on larger rivals.
