CRISIL has reaffirmed its rating on Berger Paints India Ltd’s (Berger Paints’) short-term debt programme. The reaffirmation follows Berger Paints’ acquisition of a 100 per cent stake in Bolix S.A. (Bolix) of Poland from Advent International, a global private equity player. Bolix is a leading provider of external insulation finishing systems (EIFS) in Poland, and exports its products to other countries in Europe. The acquisition marks Berger Paints’ entry into the European Union market.

The purchase consideration for the acquisition is estimated at around Rs.1.63 billion, to be funded through a short-term bridge loan. The refinancing of the bridge loan will be through a mix of debt and equity. Though the acquisition is expected to weaken the company’s financial profile, with the consolidated gearing likely to increase to 0.9 times post-acquisition from 0.37 times as on March 31, 2008, CRISIL expects the equity infusion to correct the financial profile within a year. The company’s strong financial flexibility, with healthy cash accruals and the absence of long-term debt, also supports the rating.

The rating continues to reflect Berger Paints’ robust financial risk profile, strong market position in its core segments, and diversified revenue base. These strengths are, however, partially offset by the company’s susceptibility to fluctuating raw material costs, and by its limited pricing flexibility.

About Berger Paints
Berger Paints, incorporated in December 1923, is one of the oldest paint companies in the country. It manufactures paints and varnishes, and is present in all product segments, including decorative, general industrial, automotive paints, and performance and powder coatings. Berger Paints’ prominent brands include Luxol, Weathercoat, Rangoli, Illusions, and Jadoo.

For the year ended March 31, 2008, on a standalone basis, Berger Paints recorded a net profit of Rs.920.8 million (Rs.830.6 million in the preceding financial year) on an operating income of Rs.13.54 billion (Rs. 11.78 billion in the preceding financial year).

About Bolix S.A.
Bolix is the second-largest producer of EIFS in Poland, and exports to Ukraine and other European countries. EIFS is a comprehensive solution for meeting both the insulation and decorative requirements of external walls of buildings. Bolix had a turnover of USD45.5 million (around Rs.1.95 billion) in 2007; CRISIL believes that the company’s profitability is healthy.