Asian Paints will invest Rs 2,100 crore for the paints venture and another Rs 550 crore to manufacture white cement and other materials.
Buy / Sell Asian Paints share
Recommended ArticlesView All
'Elephant in the room' — Finance Minister red-flags gold smuggling
IST2 Min(s) Read
Asian Paints has approved setting up a manufacturing facility to manufacture Vinyl Acetate Ethylene Emulsion (VAE) and Vinyl Acetate Monomer (VAM). VAE is the key constituent to manufacture environmental friendly paints and VAM is a key input to manufacture VAE.
The company will invest approximately Rs 2,100 crore over three years, including the cost of land. The investment is subject to definitive agreements including technology license agreement and obtain other necessary regulatory approvals.
Installed capacity for the manufacturing facility will be 1 lakh tonnes per annum for VAM and 1.5 lakh tonnes per annum for VAE.
The manufacturing of VAM and VAE will provide sustainable cost efficiencies and reduce the Asian Paints' dependence on imports and will be used for the company's internal consumption. Currently, Asian Paints imports VAM and VAE for its internal consumptions.
Setting up of the manufacturing facility will be based on a licensed technology tie up with Kellogg Brown & Root LLC, USA. KBR is a company based in the US, valuied at $7.3 billion and has its presence in over 80 countries.
Shares of Asian Paints ended lower on Thursday after the company's September quarter results missed street expectations. India's largest manufacturer of paints reported margins of 14.4 percent during the quarter, a big miss compared to the estimate of 17.8 percent.
Also Read: Hindustan Unilever may see a subdued quarter even as shares near 52-week high | Earnings Preview
In addition, the company has also signed a binding term sheet to set up a Joint Venture in the UAE with Riddhi Siddhi Crusher and Land Transport, Associated Soap Stone Distributing Company and others. The 60:40 joint venture would manufacture and export white cement and white cement clinker. This is subject to the necessary due diligence and other regulatory approvals.
Initial capacity of the said manufacturing facility to be set up in Fujairah, UAE will be 2.65 lakh tonnes per annum. Additionally, clinker grinding units will be set up in India as well. The overall investment for the same would be Rs 550 crore over the next two years. The project will be funded through equity funding by Asian Paints, its partners, as well as external debt financing.
White Cement is a key raw material in the manufacturing of powder paints and undercoats like Putty. The market for usage in undercoats in repair or tile fixing is growing at 15-20 percent per annum.
Riddhi Siddhi holds mining rights for high quality limestone mines in the UAE.
"This unique endeavour of backward integration and having a finished product gives us a chance to value add to our customers and at the same time add to our revenue and margins," Asian Paints MD & CEO Amit Syngle was quoted as saying.