Singapore subsidiary of Indian paint maker raises stake in Egyptian unit

Asian Paints International, the Singaporean subsidiary of largest paint maker in India that goes by the same brand name, has entered into an agreement to buy an additional 24.3% stake in its Egyptian unit, Scib, for US$4.13m. Upon completion of the deal with certain minority shareholders, Asian Paints will own 85.6% of the equity in the firm. Asian Paints made debut in Egypt in 2002 when it acquired a majority stake in Scib, which has two factories that produce paints. With a large population and a growing economy, Egypt shares characteristics with India, where Asian Paints has benefited from millions of people joining the middle class and buying their first homes. Egypt currently has a population of over 107m and boasts Africa’s second-largest GDP at US$347bn. Paint manufacturers are likely to benefit from the development of the New Administrative Capital called New Cairo - a US$58bn township being built 45 km outside of Cairo.

In 2015, Asian Paints also expanded into Ethiopia by acquiring a 51% stake in Addis Ababa-based paint maker Kadisco for US$18.9m. Kadisco manufactures and sells decorative paints, industrial paints, automotive paints and adhesives in Ethiopia. The company currently operates three production facilities. Together, Asian Paints’ two African markets account for annual revenue of INR 7.341bn (US$87.9m), or 23.6% of its international business, which includes operations in countries like the UAE, Oman, Indonesia, Bangladesh, and Fiji.

However, the latest annual report released by Asian Paints does flag inflation risks in Egypt as well as Ethiopia. In Egypt, inflation reached 24.4% in 2023, increasing Asian Paints’ operating costs and forcing the company to raise prices to protect its margins. The Egyptian pound depreciated nearly 53% by the end of 2023-24 financial year, following a 66% depreciation the previous year. Additionally, a shortage of dollars created financial difficulties for the company. Despite these challenges, Asian Paints expects the situation to improve due to improved political stability and International Monetary Fund support.

In Ethiopia, Asian Paints faces double digit inflation (Inflation was 30.2% in 2023) and a shortage of US dollars. The firm has identified inflation and shortage of hard currency as key operating challenges. It also reported that civil unrest in parts of Ethiopia caused supply chain bottlenecks. Although the 2022 peace agreement between the federal government led by Prime Minister Abiy Ahmed and the Tigray People’s Liberation Front (TPLF) concluded a two-year civil war in the northern Tigray region, conflicts persist among various groups in other areas.

References

‘Asian Paints goes to Egypt’, The Telegraph India, 27 August 2002

‘Global/country study and report on Asian Paints Ltd.’, Oxford School of Management, April 2013

 ‘Asian Paints: Riding the Indian middle class’, Forbes India, 03 October 2013

‘Asian Paints to buy 51% stake in Ethiopia-based Kadisco Paint’, The Economic Times, 22 October 2014

‘India's biggest paint-maker acquires Ethiopian rival’, Nikkei Asia, 13 February 2015

‘Urban development in Egypt boosts economic growth by more than 60% in nine years’, Daily News Egypt, 07 January 2024

‘10 largest economies in Africa in 2024 - IMF’, Business Insider Africa, 22 April 2024

‘Cairo is bursting at the seams, so Egypt is building a new $58 billion capital 30 miles away. Take a look’, Business Insider Africa, 04 May 2024

‘Asian Paints International acquires further stake in SCIB Chemicals S.A.E., Egypt’, Business Standard, 27 May 2024

‘Intimation under regulation 30 of the SEBI (listing obligations and disclosure requirements) regulations, 2015’, Asian Paints, 27 May 2024

‘Integrated Annual Report 2023-24’, Asian Paints, Accessed 14 June 2024

‘About us’, Asian Paints, Accessed 14 June 2024

‘Corporate information’, Scib Paints, Accessed 14 June 2024