Shalimar Paints plans Rs 100 crore PE fund infusion for turnaround

Shalimar Paints, once a thriving paint brand which is currently working on a revival strategy under a new management, plans to infuse fresh equity preferably from outside investors like private equity funds even as the company is being weighed down by a credit downgrade.

The company is believed to be already in talks for raising about Rs 100 crore from PE funds and deals are likely to be finalised when the transformation exercise shows up in its bottomline and its balance sheet.

"We understand that some of our planned initiatives will require investments and we are looking at the option of infusing funds into the company by expanding the equity base. We have sufficient technical know-how to execute our plans," Sameer Nagpal, managing director and CEO, told dna.

However, going would be a bit difficult for the company as its long and short term credit profile has just been downgraded from A+ to BBB+ by rating agency CARE, as its finances continues to be under strain even as capacity constraints weighs due to non-operation of its oldest plant, in West Bengal.

"The revision in the ratings of Shalimar Paints takes into account the deterioration in financial performance in FY14 and Q1FY15 marked by decline in profitability and interest coverage and deterioration in overall gearing and debt protection metrics...The ratings also factor in the impact of the indefinite suspension of work at the Howrah unit due to fire on SPL's profitability, high volatility in raw material prices, working capital intensive nature of operations and delay in implementation of the ongoing project at Chennai," the rating agency said on Monday.

In a bid to revive the brand and product portfolio after years of neglect, promoters, Ratan Jindal and Girish Jhunjhnuwala, a Hongkong based businessmen, brought in Nagpal a year ago and hired Chandan Arora last month as chief financial officer.

"We plan to expand to mid and premium range (of decorative paint) over next 9-12 months. We are targeting to launch a new product every 3-4 months for next 2 years. As part of the repositioning exercise we had engaged Wieden+Kennedy for logo revamp and we are very pleased with the outcome. Our new brand identity is being rolled out on dealer signage across India. All our new products too will carry this new identity. We expect this process of roll out to last for around a year. Being India's oldest and iconic paint maker, we are bringing the conversation back on the product quality," Nagpal said.

Shalimar is setting up a new decorative paint plant at Gummidipoondi near Chennai, when completed would compensate for the lost the capacity at its Howrah plant.

"Our product introduction strategy is focused around water based products opposed to solvent based and the introduction will be done in a phased manner. We are beginning with entry level as they have much wider reach and help build new connect with customers, dealers and painters," said Nagpal.

Emphasising on its distribution infrastructure, Shalimar reaches out to 2,000 towns and cities through 56 depots and 8,000 dealers, out of which 2,200 are premium dealers.

"The important part of our strategy is that all new products will be first available only through our club dealers, who are our premium dealers before being rolled out through others," he said.