Asian Paints to book ₹90 crore loss on divestment of Indonesia business, stock dips. Check details
Asian Paints announced the divestment of its operations in Indonesia, resulting in a potential loss of ₹90 crore. The deal, valued at SGD 7.5 million, involves selling its subsidiaries to Berger Paints Singapore, ceasing its presence in the Indonesian market.
India's biggest paints manufacturer, Asian Paints, on Friday, February 14 informed exchanges about the divestment of operations in Indonesia, which would result in a loss of nearly ₹90 crore in the consolidated financials of the company.
Deal Details
The blue-chip stock in an exchange filing today said that its wholly-owned subsidiary Asian Paints International Private Limited (APIPL) along with PT Asian Paints Indonesia (PTAPI) and PT Asian Paints Color Indonesia (PTAPCI) have signed an agreement to sell their entire 100% stake in PTAPI and PTAPCI to Berger Paints Singapore Pte Limited.
APIPL has been operating in Indonesia through its two subsidiaries, PT Asian Paints Indonesia and PT Asian Paints Color Indonesia, since FY 2016-17.
The deal is valued at SGD 7.5 million (approximately ₹48 crore), and the final amount will be adjusted after meeting certain conditions, the exchange filing by Asian Paints stated.
Following the closure of the deal, PTAPI and PTAPCI will cease to be the subsidiaries of APIPL and consequently the subsidiaries of the company. With this, Asian Paints will also cease to have operations in Indonesia. It further stated that both companies have limited presence in the country and are not material to the overall international operations of Asian Paints.
The loss arising from the divestment of operations in Indonesia in the consolidated financials of the company would be approximately ₹90 crores, subject to necessary adjustments at closing, Asian Paints added.
Stock Price Impact
Asian Paints shares, which are already reeling under heavy selling pressure amid growing competition in the paints market, declined 1.5% to the day's low of ₹2203.10 today following the divestment news. The stock is trading close to its 52-week low level of ₹2,186.35. Meanwhile, from its 52-week high of ₹3,394.00, the stock has tumbled 54%.
In the last one year, Asian Paints' share price has lost 25% while in the last six months, it has declined 27%.
During the third quarter of the financial year 2024-45, the company witnessed a decline in revenue and profit, impacted by subdued urban demand and a weak festive season. Margin pressure was also visible as EBITDA margins contracted by 344 bps to 19.1% due to unfavourable product mix and operational deleverage.
Management maintains a cautious stance on demand recovery over the next few quarters, given the ongoing pressure in urban markets. Rural demand remains relatively better. A favourable monsoon is expected to further boost rural consumption in Q4FY25 and Q1FY26. The company has guided for single-digit volume growth in FY25.
On the margin front, it has guided that margins will stabilise in the 18-20% range, aided by moderating raw material costs.
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