KNPL is expanding its product portfolio in construction chemicals and the acquisition of PCAPL will add to the product offerings of KNPL in construction chemicals business. The deal is estimated to be completed by January 28, 2019.
The acquisition cost is subject to adjustments for borrowings, working capital and fixed assets, for the acquisition of 9,90,000 equity shares of face value Rs10 each, representing 100% of the paid-up equity share capital of Perma Construction Aids Pvt. Ltd.
KNPL, India’s third-largest paint manufacturer, will benefit from increasing urbanisation, government’s housing push and capacity expansion. It is favourably positioned to benefit from IIP revival and increasing demand for housing. Its Q1/Q2FY19 results reflected pressure on operating margins due to high crude prices and exchange rate volatility. Price hikes in both segments w.e.f. October 01, 2018 (with another 1.5% hike expected in December 2018) and the recent fall in crude oil prices would aid the company’s profitability. The benefit of lower crude price, however, will come with a lag because of high-cost inventory. Thus, we estimate revenue and PAT CAGR of 15% and 8%, respectively, over FY18-20E.