New Delhi: ICI India, now the subsidiary of Akzo Nobel in India, is planning to set up a decorative paints plant in India to hike capacity. The location of the plant is as yet undecided.

The company has an investible surplus of Rs 1,000 crore and may utilise this to set up either a greenfield or brownfield project said Rajiv Jain, managing director of ICI India. 

"We are running out of capacity and need to augment it. We are examining various options including setting up greenfield and brownfield projects," Jain said.

He added that the investment details of the plant are likely to be finalised by the close of the calendar year. The new plant would produce over 100 million litres a year by 2010, he added.

Company officials also said the company may set up the new plant in a tax-free zone.

ICI India currently has a total installed capacity of 120 million litres at its three plants at Thane, Mohali and Hyderabad respectively and would run out of capacity by 2011, said company officials.

The company's last paints plant came up at Mohali near Chandigarh 10 years ago.  The company enjoys a less than 15 per cent market share in the decoratives segment and is the market leader in the refinished paints segment.

ICI India earned Rs850 crore last year by selling its subsidiary Quest International and advanced refinish business. It also generated about Rs70 crore from its old divestment collections and Rs260 crore from the sale of its adhesives business to Henkel. It spent Rs 260 crore for buyback and dividends.

About 27 lakh shares came in for buyback at an approximate price of Rs529.

ICI plans to raise prices of its emulsion paints by 2-3 per cent in August, as crude oil prices are soaring in international markets and major inputs of paints are derived from petroleum. This would be the third price increase by the firm this year adding up to an overall price increase of 7-8 per cent in FY09.

Akzo Nobel, which controls ICI India is said to be looking at acquisitions in India in the near future and is likely to come up with a strategy for utilising its cross synergies if it has to go in for an acquisition in the next few months.

Last year, ICI's paints business grew by 22 per cent. Sales for the quarter ended June 30, 2008, stood at Rs 222 crore, up 16 per cent over the same period last year. The paint segment profit grew by 7 per cent to Rs15.3 crore.

The company posted a net profit of Rs70.88 crore for the June quarter, up from Rs22.88 crore a year ago on higher investment income. Net sales remained at Rs227 crore for the April to June quarter, while other income rose 377 per cent to Rs62.67 crore.

Jain said the Amsterdam based AkzoNobel, a leading paints company globally, was taking keen interest in the Asian economies including India and China.

ICI, India registered a cumulative growth of 20 per cent over the last five years. AkzoNobel became the owner of the entire share capital of ICI Plc the holding company of ICI India in January 2008.