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Breakingviews - AkzoNobel sale flags India's foreign capital angst
MUMBAI, June 27 (Reuters Breakingviews) - What's good for Indian tycoons is not always good for India. Dutch paint maker AkzoNobel ( opens new tab is selling a controlling stake in its local unit to the domestic JSW Group. The deal fits into its goal to focus its global portfolio amid a hypercompetitive market – but it also deepens India's capital outflow woes.
The $12 billion maker of the Dulux paint brand on Friday said it would offload, opens new tab up to a 75% stake in Akzo Nobel India to privately held JSW Paints for $1.1 billion. It will retain full control over its local powder coatings business and research unit. The proceeds from the sale will be used to cut debt and buy back shares of the parent.
The transaction comes at an opportune time for AkzoNobel, which decided last October to concentrate on coatings in key geographies. It eases the company away from a market shaken up by the entry last year of local tycoon KM Birla's Grasim Industries ( opens new tab, whose discounts to grab market share are hurting the margins of incumbents. It makes financial sense too, valuing Akzo Nobel India at 22 times EBITDA, more than twice the multiple at which the parent's Amsterdam-listed shares trade.
Inspired by these sorts of punchy valuations, multinationals in India have been paring stakes in local units. British American Tobacco (BATS.L), opens new tab sold shares in ITC ( opens new tab to raise $1.5 billion last month, and U.S. appliance maker Whirlpool (WHR.N), opens new tab plans to slash its stake in its Indian business to 20% from 51%. Less benign reasons underpin other transactions. Germany's Siemens sold 90% in its loss-making wind turbine division to TPG amidst cutthroat competition. Swiss drugmaker Novartis is looking for a buyer for its Indian operations, which it says are relatively small, opens new tab compared to other geographies.
The slate of assets on offer bodes well for Indian founders looking to grow through acquisitions. But it undermines India's vaunted position as a haven for global capital. Net foreign direct investment during the eight months to the end of November 2024 dropped, opens new tab to $500 million from $8.5 billion in the same period of 2023, per data from the Reserve Bank of India. Blame it on repatriations by global firms, which stood at $44.5 billion for the 12 months ended March 2024, having risen every year since March 2020.
Strong valuations aren't exactly bad news. But if they wind up making India look less of a magnet for global capital, they're not uniformly good news either.
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