After World Cup deal, Berger scouts for assets in Russia
Berger Paints is looking to scale up operations in Russia and acquire a local company
Kolkata: Four years ago, a professor at the Indian Institute of Technology (IIT) Kanpur had pushed Berger Paints India Ltd, the country’s second-largest paints maker, into developing a variety of emulsion that was more resistant to rain and rough weather.
The professor insisted on a silicon-enhanced exterior paint if Berger were to hold on to the contract to supply paints worth ₹4.5-5 crore to IIT Kanpur.
The company did not have the technology immediately, but its research team came up with a product that the institute liked.
The same product has helped Berger compete with leaders such as the AkzoNobel group and Tikkurila Oyj of Finland to secure a contract to supply silicon-enhanced emulsion to two airports in Russia and three football World Cup venues: Rostov Arena, Volgograd Arena and Kaliningrad.
Revenue from the sale was small at ₹7.5 crore, but it has given Berger the much-needed traction to expand in that country.
The deal will help the company’s Russian subsidiary break even in the current financial year, said Abhijit Roy, managing director and chief executive officer.
Berger, which has had a manufacturing facility in Russia for the past four-five years, is now looking to scale up and is even weighing the possibility of acquiring assets in that country, said Roy.
The company’s manufacturing unit in the Krasnodar region of Russia can produce 1,000 tonnes of decorative paint a month.
Capacity utilization was at 30-40%, but after the company secured the deal to supply paint to the World Cup venues, things have looked up, Roy said.
Revenue in Russia is expected to jump to ₹16-18 crore from less than half last year. Cash flow, too, is expected to turn positive.
Still, it’s too early to invest in brand building in Russia. Instead, Berger is looking to acquire a local company to bring into its fold better-known brands and to shore up its distribution strength, Roy said.
In line with Berger’s policy of “not taking big risks”, the company is scouting for opportunities among smaller paint makers in Russia, which will cost less than ₹200 crore, said Roy. “We are looking at companies that have resource constraints,” he added.
One of Berger’s forebears, Rajdoot Paints Ltd, has had business interests in Russia for decades.
Rajdoot had supplied paints to venues of the 1980 Summer Olympics in the erstwhile Soviet Union, according to Roy.
But it is only now that the company is looking to ramp up operations in Russia, he said.
The company is also looking to scale up sales of industrial coatings in Russia. The country imports around half of such chemicals it consumes from Europe.
Berger is looking to export these chemicals from India, which is a more economical production base, Roy said.