Company History

The history of Berger Paints India Limited (NSE:BERGEPAINT) as a company started in 1923 as Hadfield's (India) Limited which was a small colonial venture producing ready-mixed stiff paints, varnishes and distempers setup on 2 acres of land in one of India's first industrial towns close to Kolkata in Howrah, Bengal. Subsequently in 1947, British Paints (Holdings) Limited, an international consortium of paint manufacturing companies bought over Hadfield's (India) Limited and thus the name changed to British Paints (India) Ltd. The gentleman who took over, as its first managing director was Mr. Alexender Vernon Niblet, an Englishman who was later on followed by Mr. Alfred Godwin in 1962.1

Further in the year 1965, the share capital of British Paints (Holdings) Limited was acquired by Celanese Corporation, USA and the controlling interest of British Paints (India) Ltd was acquired by CELEURO NV, Holland, a Celanese subsidiary.

Subsequently in 1969, the Celanese Corporation sold its Indian interests to Berger, Jenson & Nicholson, U.K. Then onwards the company British Paints (India) Ltd became a member of the worldwide BERGER group having its operations across oceans in numerous geographies and this marked the beginning of Lewis Berger's legacy in India – which the company would later take forward to enviable heights. From 1973 the company entered into one of its dynamic phases of business with introduction of new generation products in the industrial, marine and decorative segments under the able leadership of its first Indian Managing Director Mr. Dongargaokar Madhukar.

Year 1976 was another turning point in the history of the company when the foreign holding in the company was diluted to below 40% by sale of a portion of the shares to the UB Group controlled by Mr. Vittal Mallya. The reins of the company were taken over by Mr. Biji K Kurien as its Chief Executive & Managing Director in the year 1980. Finally in the year 1983, the British Paints (India) Limited, changed its name to Berger Paints India Limited.

The entire 80's & 90's saw the launch of many new products from company's stable such as premium emulsions and high quality acrylic distempers. The COLOUR BANK tinting system was launched through which the consumer could select from a range of over 5000 shades.

Again the fortunes of the company changed hands in 1991 with UB Group's stake in the company bought over by the Delhi based Dhingra brothers, Mr. K.S.Dhingra & Mr. G.S.Dhingra and their associates of the UK Paints Group. Presently Dhingras' control a majority stake of almost 73% in Berger Paints India Limited, a professionally managed organization, headquartered in Kolkata, Mr. Subir Bose, a 10-year company veteran, took over as Managing Director on 1 July, 1994. Completing a challenging 18 year stint at the helm with immense success, Mr Bose retired on 30 June, 2012, handing over the reign of the company to Mr. Abhijit Roy. Today the stewardship rests with the current Managing Director Mr. Abhijit Roy.

Berger Paints India is headquartered at Kolkata, with 16 strategically located manufacturing units across India (including the subsidiaries), 2 in Nepal, 1 each in Poland and Russia and about 162 stock points. The company also has an international presence in 4 countries (Nepal, Bangladesh, Poland and Russia). With employee strength of above 3450 as on 31st March, 2019 excluding the subsidiaries and a countrywide distribution network of 25,000+ dealers, Berger is acclaimed as a game changer in the sector with a vibrant portfolio of paints and tailor-made customer services in every paint segment.

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Plant Locations

  • Howrah
  • Sikandrabad
  • Puducherry
  • Jammu
  • Goa
  • Rishra
  • Surajpur
  • Jejuri
  • Hindupur
  • Assam (Nalbari)
  • Assam (Naltoli)
  • Taloja

Subsidiary and Joint Ventures

The company has the following 5 wholly-owned subsidiaries as on the date of this report: -

  • Beepee Coatings Private Limited (“Beepee Coatings”) in Gujarat
  • Berger Paints (Cyprus) Limited (“Berger Cyprus”) in Cyprus
  • Lusako Trading Limited (“Lusako Trading”) in Cyprus
  • Berger Jenson & Nicholson (Nepal) Private Limited, Nepal (“BJN”)
  • SBL Specialty Coatings Private Limited (“SCPL”) in Chandigarh.
  • Surefire Management Services Ltd., UK, is determined to be a joint venture of Bolix S.A.,
  • Poland with Agility Eco Systems Limited, UK, based on the criteria of joint control.

Product

  • Interior Wall Coatings
  • Exterior Wall Coatings
  • Exterior Textures
  • Metal Finishes
  • Wood Finishes
  • Glass Finishes
  • Undercoats
  • Waterproofing Solutions
  • ETICS

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Industry Overview

Paint Industry Structure and Development

The Indian paint industry can be broadly divided into two segments – decorative and industrial. Decorative paints include higher end acrylic exterior and interior emulsions, medium range exterior and interior paints, low end distempers, wall putty, wood coatings, cement paints, primers and thinners. These account for almost 70% of the paint market in India. Decorative paints can be either water based or solvent based, the latter being commonly known as enamels. The category share of water based paints (or emulsions) is on the rise in India owing to superior aesthetics, durability, washability and environmental reasons. Solvent based paints or enamels continue to attract attention in certain traditional market segments though the percentage share of overall paint consumption in both volume and value terms seem to be on the decline.2

Industrial paints essentially comprise general industrial, automotive, protective, powder, glass, can and pipe coatings. The Company is present in all these areas. In addition, there are niche segments such as coil coatings, automotive refinish coatings and marine coatings and the Company deals with many of these through its subsidiaries, joint ventures and strategic alliances.

During the year, India’s economic growth slowed down somewhat to about 4.2%. In the final quarter, the growth rate of domestic product fell to 3.1%, reflecting an impact of the first week of COVID 19 lockdown which began on 25th March, 2020. The markets were already affected before the lockdown due to the doubts surrounding the situation. In spite of a lower overall growth and sharp lockdown related decline at the end of the year, the Company and the paint industry performed reasonably well. The good news is that the agricultural sector picked up steam in the last quarter, growing at 5.9% and once the unprecedented crisis is over and the world settles down, with Government expenditure, particularly in the infrastructure sector, supporting the economy, the industry will look forward to a steady recovery and release of pent up demand.

Going forward, especially with the lockdown due to the COVID 19 pandemic, the growth will be dependent on a number of factors like disposable income in the hands of the public, urbanization, economic development, satisfactory monsoons, the volatility affecting raw material prices including crude oil, growth in infrastructure and possible recovery in the real estate and automobile sectors. With the Government’s initiative on affordable housing and spending on infrastructure, it is expected that the paint industry will try and keep up with the projections made earlier and further innovate new ranges of products so that it can keep pace with the growth achieved during the past few years. Additionally, being a strong competitive market, the players are utilizing different strategies to tap demand in the market for a larger share. The reduction in GST rates on paints in 2018 had a positive impact on demand. The benefits extended by the Government of India offering corporates the option to avail of reduced tax rates are expected to yield further results. The paint and coating business is expected to grow and new technologies are also expected to evolve which should contribute to better per capita consumption of paints in India.

The Industrial paints businesses serve various industrial customers including automobiles, utility vehicles such as tractors, general industrial goods, machinery and household equipment such as fans, washing machines, refrigerators and consumer durables, structures and pipelines, power plants and large factories and installations, steel, glass and every other items of daily use. These largely depend on the growth of the manufacturing and infrastructure sectors. While there were signs of fatigue in the automotive sector, other industrial consumers performed well and the Company believes that once the current uncertainties are overcome, there will be a rebound in growth. India became the world’s fifth largest economy last year, according to data from various reports. When ranked by nominal GDP, the country leapfrogged both France and the UK. This will look particularly dramatic if the company remember that as recently as 2010, India was in 9th place, trailing countries such as Brazil and Italy and since 1995, the country's nominal GDP has jumped more than 700 per cent. This has been fueled by a number of factors, including urbanization and technologies that have improved efficiency and productivity. Paints are an inseparable part of the overall growth and given a relentless drive towards a better future, the demand should continue to favour the industry in the long term.

In the Decorative business, new products were well received in the market and contributed to the overall growth of the business line. This business can be broadly classified into the following categories - interior wall coatings, exterior wall coatings, metal finishes, wood finishes, undercoats and construction chemicals. Some of the premium exterior emulsions introduced earlier continued their strong run in the market. These include WeatherCoat Anti Dustt, WeatherCoat Long Life, WeatherCoat All Guard and WeatherCoat Smooth. The benefits of WeatherCoat Anti Dustt and WeatherCoat Long Life with 10 year guarantee were acknowledged by the market. Superior resistance to dust on account of advanced dust guard technology, long lasting protection against exterior wall issues, absence of stains and black strike marks and a rich soft sheen finish and its suitability for dusty and dry areas have made WeatherCoat Anti Dustt a popular product. WeatherCoat Long Life, with a high sheen, has been proven to be suitable for heavy rainfall areas. The interior emulsion offerings include Silk Glamor, Silk Luxury Emulsion, Easy Clean and Easy Clean Fresh. Easy Clean Fresh has a rich, luxurious finish backed up by cross-linking polymers. Other Decorative coatings products, including the Luxol line of solvent based paints and wood coatings, performed well. The year under review witnessed introduction of a newly formulated product - Silk BreatheEasy under the popular Silk brand of luxury interior wall coatings. Silk BreatheEasy comes in the anti-pollution paint category and is loaded with certified features like being anti-bacterial (99% efficacy against over 29 strains) and abatement of harmful formaldehyde, sulphur oxides and nitrogen oxides. It has the certification by the Singapore Green Label as a low VOC, “Green” paint. The Company is currently testing for anti-viral efficacy of Silk BreatheEasy. Another product introduced was the WeatherCoat Champ to cater to the requirement of a durable, value for money product. It is reinforced to enhance the tensile strength and weatherability of the paint film. Other new products developed were Luxol Xtra which economizes tinting cost and Luxol 7in1, a quick drying, high gloss, corrosion resistant, durable PU enhanced enamel aimed at consumers in high rainfall and coastal markets for protecting metal grills, gates, shutters, etc.

Business Overview

The CAGR of EBIDTA was 16.8% over the last five years (FY 2015-2016 to FY 2019-2020). The Decorative business contributed the most to this achievement. Protective Coatings business also did well and Powder Coatings business recorded a positive growth in the year under review. The Company’s General Industrial and Automotive earnings came under pressure, particularly in the second half of the year, impacted by the overall lack of demand in the automotive sector. The Company continued its pursuit for introducing new and innovative products through research and development, recasting its marketing strategies designed to suit specific sectors and areas, launch new product lines and serve opportunities with specific programmes to identify and address market needs through tailor-made solutions.

The Company’s construction chemicals business continued to grow at a rapid pace with introduction of new products in the last two years. The Company’s waterproof putty, with unique hydrophobic properties, continued to be appreciated by the customers. The Company launched new products like Wall Shield 2k, a white cement based product with high waterproofing ability and crystalline effect and Damp Shield Elasto, a high-build barrier coat for extended durability of paint with 200% elongation, anti-carbonation property and 7 years exterior waterproofing warranty. Water proofing business has considerable growth potential and the Company, along with its subsidiary STP Ltd., is taking all measures to become a leading player in this segment.

The Company’s pioneering home painting solutions business under the style Berger Express Painting™ endeavours to make home painting a hassle free, end to end solution for the customers and is drawing good response across the country. The Company has adopted various new tools and methods to make the process beneficial and cost-effective for the end customer. From a platform of “FASTER, CLEANER & BETTER” it has transcended to “FASTER, CLEANER & SAFER” with the use of consumer app, safety kits, protective equipment, cleaners, sanitizers and disinfectants by the painters for protection against spread of infection. The Company’s Prolinks Business, aimed towards painting of large housing projects, continued to grow satisfactorily.

The Company has just forayed into the Sanitizer and Home Hygiene space with the introduction of ‘BreatheEasy Sanitizer’ and ‘BreatheEasy Floor Cleaner’. The common characteristic of all products under the “BreatheEasy” umbrella is to protect the consumers from germs, bacteria, viruses, etc., so that they can breathe easy.

The Company retained its position as the leader in Protective Coatings business in the country. The Business registered strong growth in sales and reached new levels in spite of surge in raw material prices and depressed industrial conditions during the year. The Business continues to supply paints to the OEM’s, contractors, dealers and fabricators, in Government and railway infrastructural projects and is widely accepted due to its quality and after sales services. As reported in the previous year, the Company’s businesses of supply of fire proof coatings by itself as well as in collaboration with Promat International Limited NV of Belgium, with which it has a Memorandum of Understanding and supply of marine coatings in terms of its Memorandum of Understanding with Chugoku Marine Paints, Ltd of Japan were satisfactorily enhanced.

The General Industrial & Automotive paint business managed to identify potential customers with whom business has started. The General Industrial business line performed comparatively better and the Company continued to address this segment with developed products and new applications. As reported last time, the Company commenced manufacturing epoxy CED resin and paste at one of its factories at Hindupur, Andhra Pradesh in collaboration with Nippon Paint Automotive Coatings Co., Ltd of Japan (“NPAU”) which is known for its quality.

The Powder coatings business registered decent growth and is expected to do better this year by concentrating on improvements in productivity, higher value added sales, developing new and innovative products, tested and certified by accrediting agencies, moving into new segments, focusing on special areas having potential and exploring new avenues of exports and reduction of costs.

The Manufacturing services supported the growing needs by catering to the demands of the businesses with adequate and timely supply from all the factories with improved productivity. Dedicated workforce with upgradation of equipment, process improvement and continuous refinement of technology, installation of energy management systems, designing methods to reduce costs especially energy costs, training and re-training, implementation of best practices and refurbishment of storage facilities allowing higher and more organized capacities were few of the enablers. As a continuous practice, housekeeping, safety and environment were emphasized and monitored round the clock during the year. The Vallabh Vidyanagar plant (“VVN”) belonging to Beepee Coatings Private Limited, a wholly owned subsidiary of the Company, received Environment Award organized by Greentech Foundation, New Delhi, National Energy Efficiency Circle Award organized by CII, New Delhi, Occupational Health and Safety Award organized by Indian Chamber of Commerce, Kolkata, National Award for Excellence in Water Management organized by CII-Triveni Water Institute, New Delhi, National Energy Conservation Award organized by Ministry of Power and Bureau of Energy Efficiency. The Human Resources team at the VVN plant received HR Convention Award “Creating a Quality Centric Role of HR” organized by Quality Council Forum of India, Vadodara Chapter. The Jammu plant received Appreciation Certificate in large business category from ICC Environment Excellence Award 2019 - Greentech Environment Award, 2019 and Greentech Safety Award, 2019 from Greentech Foundation.

The positive effects of softening of crude oil prices were partially offset by a depreciating Rupee and increase in prices of some of the raw materials, especially during the second half of the year. The Company’s efforts of vendor development and raw material substitution were supplemented by enhancement of systems and processes, continuous coordination and collaboration with suppliers and strengthening of processing capabilities of emulsions and resins.

Striving for innovation to achieve differentiated and value-added products is the core of the Research and Development (R & D) function. Since last few years, R & D had been working on many unique technology platforms to bring in new products for various applications. Pollution scavenging and anti-bacterial performance of interior coatings, high dirt pick up resistant exterior coatings, air drying anti-yellowing resin, mono coat systems for industrial surfaces, polyurethane finish to extend service life of construction equipment being some of them. These concepts and technologies got their final shape in the year 2019-2020. Various new products were launched during the year which were the result of these new ideas. Many new industrial products were also developed. There were significant breakthroughs/ opportunities achieved in the form of pollution abatement technology for architectural paints, anti-bacterial acrylic paint for interior wall application, development of direct to metal finish for industrial coatings and automotive application and a few others. The process of invention and development is an ongoing exercise in R & D and the Company expects many more interesting outcomes from the Function in the future

Capex Projects

  • The capacity of the epoxy CED resin and paste project set up at Hindupur with technical support from NPAU was enhanced by 600 MT per annum in February, 2020.
  • The Powder coating manufacturing capacity at Jejuri was expanded from 2,400 MT per annum to 4,200 MT per annum in August, 2019. Facilities are put up for manufacture of sag control resin, an important intermediary at the same place. The expansion projects in regard to automotive, industrial and protective coatings and resin manufacturing capacity at Jejuri will be completed shortly, subject to obtaining all required statutory clearance from the Government authorities.
  • The colorant manufacturing facility with a capacity of 2,640 KL/MT per annum was commissioned at Rishra, West Bengal in February, 2020.
  • The water based paint manufacturing capacity at Rishra, West Bengal was increased from 36,000 MT per annum to 48,000 MT per annum in March, 2020.
  • The installation of water and solvent based decorative, industrial and protective coatings, resin, putty, emulsion and construction chemical manufacturing facility at Sandila Industrial Area in Uttar Pradesh is in progress. Subject to the Company obtaining all required consents and approvals in time, the Project is likely to be commissioned in the year 2022.

Financial Highlights

For the financial year ended on 31st March, 2020

Revenue from operations for the year ended 31st March, 2020 was Rs 6365.82 crore as against Rs 6,061.86 crore in the corresponding period of the previous year, representing an increase of 5.01%.

EBIDTA (excluding other income) for the year ended 31st March, 2020 was Rs 1060.98 crore as against Rs 935.54 crore in the corresponding period of the previous year, representing an increase of 13.41%.

Net profit for the year ended 31st March, 2020 was Rs 656.10 crore as against Rs 493.89 crore in the corresponding period of the previous year, representing an increase of 32.84%.

It is to be noted that the Company acquired 95.53% of the paid up equity share capital of STP Ltd. during the year. Accordingly, the consolidated financial results incorporate the financial results of STP Ltd. for the relevant period.

The Board of Directors have recommended a final dividend of Rs 0.30 (30%) per equity share of Rs 1/- each for the financial year ended 31st March, 2020. Together with the interim dividend of Rs 1.90 (190%) per equity share paid on 16th March, 2020, the total dividend for the financial year ended 31st March, 2020 aggregates to Rs 2.20 (220%) per equity share of Rs 1/- each. Final dividend is subject to approval of the shareholders

Q2 net profit up 13.55% at Rs 221 crore. 3

Berger Paints India Ltd on Thursday reported an increase of 13.55 percent in its consolidated net profit to Rs 221.05 crore for the second quarter ended September 2020.

The company had posted a net profit of Rs 194.66 crore during the July-September quarter of the previous fiscal, Berger Paints India said in a regulatory filing.

Its revenue from operations was up 9 percent at Rs 1,742.55 crore during the quarter under review as against Rs 1,598.58 crore in the corresponding period of the previous fiscal.

Berger Paints’ total expenses were at Rs 1,471.97 crore in Q2 FY2020-21.

References       

  1. ^ https://www.bergerpaints.com/about-us/history-milestones.html
  2. ^ https://www.bseindia.com/bseplus/AnnualReport/509480/65512509480.pdf
  3. ^ https://www.moneycontrol.com/news/business/earnings/berger-paints-q2-net-profit-up-13-55-at-rs221crore-6073251.html
Created by Asif Farooqui on 2020/12/22 04:06
     
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