Shalimar Paints has seen three ownership changes
Anand Adhikari June 23, 2011Shalimar's lunch used to be the cynosure of all eyes in Calcutta corporate circles," begins 48-year-old Sandeep Sarda. Sitting comfortably at Shalimar Paints' corporate office in Mumbai's suburban Andheri, Sarda, Chief Executive Officer, says the company was run like a British company till the 1960s. The managing director and a number of other managers were all British. The corporate office shifted from Kolkata in early 2000, after its last ownership change, when it was taken over by the O.P. Jindal Group, "The lunch used to be an 11-course one with drinks and dessert," he says. Sarda is yet to assimilate all the historical facts about India's oldest paint company, having joined it only in 2000 after working in Pune for Force Motors, He found out quite a bit though, when the paint major was planning to celebrate its centenary in 2002.
The history of Shalimar Paints is the history of the paints industry in India and also in South East Asia. Way back in 1902, two British nationals - A.N. Turner and A.C. Wright - sowed the seeds of a paint unit at Howrah, Calcutta (now Kolkata). "Imagine setting up a paint manufacturing unit with no raw material suppliers or distributors," stresses Sarda, sizing up the monumental task before the two entrepreneurs. In fact, the company still possesses the rights to mine raw material. For over a decade, Shalimar was the only Indian player which had imports coming in from the US and Europe. Ironically, even as the two world wars hit import supplies, the industrial activity they generated spiked the domestic market for paints. By then other foreign paint majors were also moving into Kolkata: Elephant Oil Mills, Goodlass Wall, British Paints and Jenson & Nicholson, among others.
Multinationals began wooing Shalimar for a buyout. The first change of ownership took place in 1928 when the UK-based multinational Pinchin Johnson & Associates took control of Shalimar. The company became part of Pinchin's parent, the Red Hand Composition conglomerate. Pinchin ran Shalimar for three-and-a-half decades till 1964, before International Paints Plc acquired Red Hand Composition.
What helped Shalimar while it was under the two multinationals' control was its strong footprint in the industrial paints segment. It gained access to high-end technology in the industrial coating segment, especially in areas like aviation coatings, marine paints and the painting of thermal power plants.
The dilution of foreign ownership of Shalimar started when the Foreign Exchange Regulations Act, or FERA, was passed in the 1970s, which laid down that foreign companies could only be minority shareholders in Indian firms. Many foreign firms like IBM and Coca-Cola shut down their India operations, rather than dilute ownership. Shalimar, too, was hit. The owners soon lost interest in the company. In 1972, Shalimar tapped the capital market and foreign holding in the company fell to 60 per cent. It was during this period that other paint companies grabbed crucial market share.
In 1989, just before the liberalisation of the economy, Shalimar again changed hands with Indian promoters taking control for the first time. Shalimar was acquired by the O.P. Jindal Group with interests in steel, and the Hong-Kong based S.S. Jhunjhunwala Group, that ran businesses in real estate and hospitality. "By then the company was not at all in good shape," says Sarda. Asian Paints, Kansai Nerolac, Berger Paints and Akzo Nobel had already pushed Shalimar to fifth position in the market.
Undeterred, Shalimar embarked on a major effort to regain its past glory. "It was a struggle till 1997, but after that we picked up steam," says Sarda. The real growth for Shalimar came in the early 2000s when it started growing on the back of increased activity in housing, infrastructure and other core sectors.
To meet the growing requirement, Shalimar set up its first plant outside Kolkata in 1992 at Nashik, Maharashtra. Then, in 2003, it acquired a plant in Sikandrabad near Delhi. Today, it has a combined capacity of 57,000 tonnes of paint per annum. A fourth plant in Chennai is also expected to come up by April 2012 to produce another 18,000 tonnes a year. But the company still has a long way to go. It has a revenue base of Rs 400 crore, compared to the market leader Asian Paints' Rs 6,000 crore. Kansai Nerolac, US-based Sherwin Williams and a few others are all wooing Shalimar Paints for a buyout. A fourth change of hands in the coming months is entirely possible for this iconic brand.