Berger Paints India Ltd is the second largest decorative paint player in India with a market share of around 17%. The company is headquartered in Calcutta and provides service in the market through a distribution network comprising of 75 stock points and above 14,200 paint retailers. The company was incorporated on December 17, 1923 as Hadfield's (India) Ltd in Kolkata. In December 1983, the company name was changed to Berger Paints India Ltd. The company has solely used and developed the name and trademark of Berger and all their other variants in India from 1983 till date. During the year 2001-02, the Motors & Industrial paints business of ICI India was acquired through their subsidiary, Berger Auto & Industrial Coatings Limited.

Berger Paints Overseas Ltd in Russia has commenced commercial production in September 2007 at their modern plant in the Republic of Adygeya, with alkyd based and water based paints. The company expanded the capacity in the Goa solvent based paint to 18000 KL per annum. In August 2008, the company acquired Bolix SA (Bolix), a leading provider of External Insulation Finishing Systems (EIFS) in Poland, from Advent International, a global private equity group. It has Subsidiaries include Beepee Coatings, Berger Jenson & Nicholson (Nepal) and Berger Paints (Cyprus) and the company has interests in Berger Paints Overseas (Berger Russia). The company has plans to increase its manufacturing capacity by more than 50%, through the addition of 160,000 MT capacity plant in Andhra Pradesh over the next 2 to 3 years.

The company has their manufacturing facilities in West Bengal, Uttar Pradesh, Pondicherry, Goa, and Jammu & Kashmir. The Company has Technical License Agreements with DuPont Performance Coatings in the area of automotive coatings, Nippon Paint Co Ltd for new generation of automotive coatings, Orica Australia Pty Ltd In the area of protective coatings, TIGERWERK Lack-u. Farbenfabrik GmbH & C. KG, Austria for specialized powder coatings and Nippon Bee Chemical Co Ltd for coating on plastic auto parts and mobile phones. The company has Color Bank tinting system through which the consumer can select form a range of over 5000 colors and which are then made available in minutes.

The Company manufactures a variety of innovative painting solutions, decorative or industrial. The company offers decorative paints for all interior and exterior surfaces including concrete, plaster, metal, wood, and special applications like water storage etc. Acrylic brands like Luxol Silk and Rangoli for interiors, and Weathercoat for exteriors are quality leaders in technology. Luxol Hi-Gloss is the national hallmark for excellence in paint enamel. It also provides industrial, automobile, and powder coatings.

Berger Paints solely used and developed the name and trademark BERGER for all its variants in India. The company manufactures and markets a range of decorative & industrial paint products under various product brands and has it operations spread throughout the length & breath of the country; with seven manufacturing facilities in India and more than 75 stock points, several regional & area offices, besides four facilities overseas. It has a workforce of over 2300 employees and a countrywide distribution network of 14200 plus dealers with 8000 tinting machines.

Valuation & Conclusion

Berger Paints has plans to increase its production capacity rapidly in next 2 years. We expect company’s earnings to grow at a CAGR of 21% for next 3 years. At current market price, stock is trading at 16.9 P/E multiple of its FY2013 estimated earnings. We recommend investors to buy “Berger Paints India Limited” at every correction with medium to long term investment horizon.