The recent acquisition of Perma Construction by Kansai Nerolac for Rs 29.1 crore is likely to intensify the competition in the market as Kansai plans to increase its revenue in 2-3 years with new geographical expansion. Perma Construction operates in western part of India and offers a wide variety of chemicals used in construction.
The acquisition indicates Kansai’s plan to expand its category and product portfolio by leveraging its distribution channel. Perma’s technological capabilities along with dealer network of Kansai are expected to expand construction chemicals business. Meanwhile, the acquisition will not have much impact on consolidated financials as the target company has gross sales of Rs 28 crores than Kansai Nerolac’s gross sales of Rs 5,000 crores.
Intense Competition among Players
Other companies are also focusing on geographical expansion, for instance, Pidilite’s position in the construction chemical business is being challenged by companies in other sectors. Asia Paints also diversified its sealants and adhesive business by launching synthetic and epoxy resin adhesives under Loctite and Trugrip brands. Similarly, Astral Poly Technik scaled its construction chemical business by acquiring Resinova in 2014.
This acquisition of Perma Construction by Kansai Nerolac is likely to intensify competition, as the company plans to triple its revenue in 2-3 years with expansion plans in new geographies. According to Kansai, this acquisition will help the company to offer more and better products in construction chemical business and strengthen existing product portfolio. The transaction is likely to be completed by 28th January 2019.
The cost of acquisition is subject to adjustments for working capital, borrowings, and fixed assets for acquiring 9, 90,000 equity shares with the face value of Rs 10 each. This represents 100% paid-up share capital of Perma Construction.