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Asian Paints pulls off ICI stake quest

Mumbai, Oct. 23: Asian Paints came out with flying colours in its bid for the government’s shares in ICI India, walking away with the 9.2 per cent holding for Rs 77.09 crore in a deal that values each share at Rs 205. It is 17 per cent higher than the stock’s close of Rs 175.30 on BSE.

“ICI India offers a good investment opportunity and Asian Paints does not intend to destabilise the current management of the company,” Ashwin Dani, vice-chairman and managing director of Asian Paints, said.

Analysts did not see it so straight. “There’s more to it,” some said, pointing to the massive sum that has been sunk in a company where parent ICI Plc holds a vice-like grip with 51 per cent. Surely, they say, Asian Paints’ promoters have seen something others have not.

At least Dani, who harbours ambitions of seeing his company among the top five paint makers in the world, sees it. His own firm is ranked number 10, while ICI’s paint business is several notches higher at five.

He, and the two other promoter-families, could be betting on “ICI’s never-ending restructuring story”. That’s how industry watchers cynically describe ICI’s persistent quest of attaining a critical mass that could even see the paints business ending on the chopping floor. A blasphemous thought for ICI India at this juncture, since they consider it their mainstay.

Attention now is riveted on whether Asian Paints will stake its claim to the board slot that the purchase of government’s shares in ICI India has entitled it to. If it does and has its way, long-time rivals would be sitting on the same side of the table and taking decisions. Asian Paints sources, careful not to sound impetuous, said, “It is their discretion, whether to give us a seat.”

ICI has restructured its business drastically since it was stalked Asian Paints six years back in a failed takeover bid that saw one of the four Asian Paints promoter-families quitting. Its explosives division has been sold off, as have its catalyst and pharmaceuticals businesses.

In that time, Asian Paints has snapped up paints businesses in Australia and Egypt, apart from buying Berger International in a transaction that gave it the right of usage in 70 countries, minus India. That, partly, explains the purchase of 37.60 lakh ICI India shares today at such a steep premium, an analyst said. If nothing, some analysts say the deal will give Asian Paints wads of cash from the generous dividends that ICI India is known to dish out, and its reserves of Rs 250 crore. It means a tax-free yield of 5 per cent, if ICI India retains the pay-out at Rs 10 a share.

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