NEW DELHI: Japanese Nippon Paint is counting on India’s “youth dividend” as the company – with a business of $400 million in the country – looks to make fresh investments and up the hiring to expand its local operations as well as broaden export commitments.
“There’s such a youth dividend in India. A lot of countries are ageing, but India is still young. India is urbanizing. India’s GDP is growing. So, there’s so much to speak for India. We are here for the last nearly 20 years, (and) I’m sure there’s a lot of headroom for growth,” Wee Siew Kim, Co-President of Nippon Paint Holdings and Group CEO, NIPSEA Group, told TOI. “The short answer is we are very positive on India.”
Nippon Paints, which started operations in India in 2006, currently has four business divisions — auto refinish; decorative; industrial; and automotive paints (JV with Berger). “All of them are growing, but also have different sets of challenges, especially the decorative space.”
The company locally produces paints for its various divisions, and much of them are also exported. “Coil coating is exported together with our auto refinish.”
The auto refinish division, led by Sharad Malhotra, is led globally out of India. “Which means that all the auto refinish business reports to Malhotra and he sets the direction for the group globally. So, it is an Indian team which is leading the division worldwide.”
Kim said the same situation is there in the coil coating division which is targeted at the steel industry. “This is also exported to different parts of the world. Importantly, just like in auto refinish, the leader who leads coil coating in India also leads the global business. Globally, auto refinish is around $250-$270 million business, while coil coating is slightly smaller at about $180 million. If you add Japan, it’s almost a $300-$400 million business for us. They are run by Indian leaders. These leaders run them and set the direction, whether it is the strategic business direction or important technology directions or product innovations.”
He said the company is looking at not just organic growth, but also through acquisitions and buyouts. “Organic growth is where we grow the people, we invest in factories, and develop and make the products. Then there’s the M&A growth. In the last two years, we have been fairly successful in acquiring local Indian companies where we not only bring the strength of the bigger Nippon Paint group, but also harness the value of these relatively-smaller companies. One such company has actually helped us get into the railways segment in India.”
Kim said the company may also look at acquisitions in the auto refinished business as the division looks at expanding beyond its stronghold in the north. “So, if we could find partners or acquisitions in other parts of India, it will help us strengthen our pan-India presence.”
On whether the company will look at funding its growth in India by raising money through an IPO, he said, “Well, I would say ‘never say never’. The Indian market is actually attractive and has very rich multiples. If you look at what some of the Indian counters are trading at, I mean they are far ahead of even the world benchmarks as far as paints and coatings are concerned. … if you ask me that would I be interested to consider raising funds in India? Well, at the right multiples, it’s worth considering.”
Kim said Nippon Paint Holdings is listed on the Tokyo Stock Exchange. “As far as our global approach to growth is concerned, we have actually articulated an asset assembler strategy. The asset assembler strategy drives us to take advantage of the lower cost of funding in Japan and using that to actually breathe life into our mission. The mission is to actually maximise shareholder value.”
