The Tata group company, Forbes Gokak Ltd, together with associates have decided to sell their entire stake of 28.56 per cent in Goodlass Nerolac Ltd. to Japanese collaborator, Kansai Paint Company Ltd. With this, Kansai’s shareholding in Goodlass Nerolac will rise to above 64 per cent from the current 35.96 per cent. Goodlass shares have been sold to Kansai at Rs 250 per share (Rs 10 face value). Consequently, Goodlass Nerolac will become a subsidiary of Kansai Paints, Japan’s largest paint company. Financial institutions hold a stake of 17.67 per cent and the public, about 16 percent of Goodlass’ equity capital of Rs 15.3 crore.

According to Forbes officials, the entire deal works out to Rs 110 crore out of which Forbes Gokak, which alone holds 25.84 per cent stake will receive Rs 98.56 crore. The proposed sale of Forbes’ stake is in accordance with the terms of the original agreement between Forbes and Kansai under which either party is required to offer its stake to the other in the first instance. Forbes is the main promoter of Goodlass Nerolac and the acquisition of its stake by Kansai is exempt from the provisions of SEBI regulations.

Forbes officials say that the deal has been concluded on the basis of a friendly and mutually acceptable agreement. Forbes officials say that though Goodlass Nerolac has been a profitable investment, its own business interests are unrelated to paints. The company feels that it considered it appropriate to divest its investment in Goodlass to be able to use the funds in a manner which would directly benefit its own shareholders. Though Forbes has been the chief promoter of Goodlass since 1976, its main interests are in fields like shipping, manufacture of engineering goods and specialized yarn.

Kansai first acquired the stake of Cooksons of the UK in 1986. Prior to this, Goodlass had a technical collaboration with Kansai. As a result of its collaboration with Kansai it is able to meet the paint requirements of automobiles at all stages. This gives it an edge over competition. Among its other tie-ups is a collaboration with US-based EI Du Pont de Nemours and Company Inc., US, for the manufacture of sophisticated coatings for the automobile Sector, and Nihon Tokushu Toryo, Japan, for automotive paint technology.

Goodlass Nerolac’s alliance with Kansai has ensured it access to world class and the latest paint technology as well as a preferred clientele. It is the largest manufacturer of industrial paints in India with a market share of about 43 per cent, while in decorative paints it has a share of around 13 per cent. Goodlass dominates the OEM segment with a 70 per cent share of passenger cars, a 40 per cent share of the two-wheelers and a 20 per cent share of commercial vehicles OEM market. It has a major share of alkyd and amino paints, which are rapidly replacing NC lacquers, traditionally used for automobile coatings.

Goodlass Nerolac supplies around 70 percent of Maruti’s automobile paint requirements. Its other customers include Mahindra Ford, Pal-Peugeot, Bajaj Auto, Telco, Ashok Leyland, M&M, TVS Suzuki and Hero Honda. The company has also bagged contracts for the Lancer car project of Hindustan Motors. In white goods, the major customers are Godrej, Voltas and Whirlpool.

Amongst decorative paints, it has stronger presence in distempers and emulsions. Emulsions is the fastest growing segment in decorative paints. It has Allscapes as a premium segment product. Its Super Acrylic Distemper is claimed to be the first water-based, any-surface, environment-friendly painting system. It has recently launched acrylic exterior paint, Excel, to counter competition in exterior paint segment. However, it is a distant second in the decorative paints segment, way behind industry leader Asian Paints.

The paints industry can be classified into decorative and industrial paints. While decorative paints account for a majority, about 65-70 per cent of the market, industrial paints account for the balance. However, the demand for industrial paints is growing rapidly at 18-20 per cent per annum against nine per cent of decorative paints. The market for decorative paints is more mature with slower demand growth. With low brand value, decorative paints are turning into commodities where high volumes, rather than value, are the key driver of revenues. The future for industrial paints is good, with demand prospects bright. Being a speciality product, it is a high-value, low-volume business. Technology and customer orientation drives revenues. A large part of the demand for industrial paints comes from the automotive and white goods industry. Growth of the industrial paints markets is therefore dependant on the growth of these sectors. The automobile market in India at present is growing in excess of 5 per cent per annum.

Goodlass Nerolac was incorporated in 1920 in collaboration with Goodlass UK, a part of the Cooksons group. The company manufactures paints, varnishes, enamels, and coatings for industrial and decorative applications and pigments.