Asian Paints new acquisition to expand home decor biz

Asian Paints Ltd on 1st April announced that it will acquire a stake in two companies - White Teak and Weatherseal Fenestration to strengthen its presence in the fast-growing home improvement and decor segment.

White Teak is engaged in the business of decorative lighting products and fans. In FY 2020-21 White Teak's turnover was at Rs.37.66 crore.

Asian Paints will acquire a majority 51 percent stake in Weatherseal Fenestration, a company engaged in the business of interior decoration/furnishing, including manufacturing uPVC Windows and door systems, for consideration of Rs.19 crore​​​​​​.

It is also agreed to acquire an additional 23.9 percent stake in Weatherseal Fenestration from its promoters, in a staggered manner, over the next 3 years.

Weatherseal is one of the leading brands in the uPVC Windows and Doors space and has established a reputable presence in the retail and project customer segment, primarily in South India. As part of Asian Paints' endeavor to be an integral part of the home decor business, Asian Paints find this space attractive in the retail and B2B market segment. This association will enable it to widen its offerings in the home decor space.

The size of the current market is more than Rs.11,000 crore and the market share of organized players is about 40 percent. Therefore, the potential to innovate and enter this market is immense.

Asian Paints is a leading domestic paint company and ranked among the top ten decorative coatings companies in the world with a consolidated turnover of Rs.21,712.79 crore.

Asian Paints' two acquisitions are steps toward its journey to becoming a complete home decors solution provider. Asian Paints is expanding its offerings in the home decor category (bathroom, kitchen, lighting, furnishing, etc) to provide a complete one-stop home solution to consumers. The acquisition of White Teak (decorative lighting) and Weatherseal Fenestration (interior decoration/furnishing) would be in a staggered manner for the next 3 years. 

The acquisition looks expensive (20x sales for White Teak) given the businesses being in the nascent stage. However, the acquisition of under-penetrated and fast-evolving categories of home decor space with high consumer preference for decorative/premium products provides immense growth opportunity. Asian Paints would leverage its wide and strong distribution network (premium stores) along with the expansion of home decor stores (70-75 stores by FY22). Also, the investment will be in a staggered manner and is linked to the achievement of certain financial milestones. 

Importantly, the promoters of both companies would continue to drive respective businesses and leverage their expertise in respective segments. In the core business of paints, volatility in raw materials is expected to impact near-term profitability. However, over the long term, Asian Paints is expected to continue its strong growth momentum and deliver a sales/earnings CAGR of 18% to 28% over FY22-24e.