Industry

The Indian paint industry is over 100 years old. The first factory was set up by Shalimar
Paints in Calcutta (now Kolkata) in 1902. Until World War II, the industry consisted of small
producers and two foreign companies. After the war, the imports stopped, which led to the
setting up of manufacturing facilities by local entrepreneurs. After Independence of India,
still major players were foreign companies but not for long.

In the 1990s, the Indian paint industry recorded a healthy growth of 12-13% annually. A
staggering reduction of 40% to 16% in excise duty was the main reason behind this growth.
Though, the growth was restricted to single digits till 2003. There was a revival in 2003-04
with a robust growth of 13%. In 2003-04, the organized sector held 70% share of the
approximately $1.5 billion (Rs 6,800 crore) industry, while the balance was made up of the
unorganized units.

The Indian Paint industry is approximately a Rs.50,000 Cr and is expected to reach Rs

70,000crores by 2021. Industry and has been growing at a rate of above 17% CAGR for the
past 7 years.
The Indian paint industry has two main market segments-industrial and decorative paints.
The Indian decorative business has a share of approximately 75% share in total sales.

Within Decorative segment:

Decorative segment
Wood
finishes
2%
Solvent Exterior
based Paints
enamel 23%
paint
35%
interior
emulsions
Distempers 11%
29%

The industrial coatings segment has 25% share in sales

Industrial Segment

High
performan
Automotiv ce coatings
e coatings 30%
50%
Powder
coatings
10%
coil
Marine coatings
coatings 5%
5%
 The major players are

 Asian Paints,
 Goodlass Nerolac
 Berger
 ICI
 Shalimar

Recently, world leaders like Akzo Nobel, PPG, DuPont and BASF have set up base in
India.
Macroeconomic indicators

GDP growth rate 2009-2021

FDI inflows in india 1990-2017

Moreover, Covid19 has slowed down the economy and GDP has fallen. the progress that is
exhibited in controlling the spread of the pandemic will determine the rate of recovery for
the economy. This would have a direct impact on the demand conditions for all sectors of
the economy. Inflation is expected to stay low with demand conditions being unsupportive;
this is expected to provide a much-needed comfort to consumers and manufacturers alike.
Paint being a discretionary spend item, there is a likelihood of customers putting their paint
requirements on hold for some time, impacting renovation demand. The paint industry
would also be looking for increased focus from the government in pushing infrastructure
investments as the real estate market is not expected to recover soon
GDP rate is supposed to increase by 2021. The flow of FDI has increased in the last two
years due to Government initiatives at various levels which attracts the foreigner to invest
more in a country like India. In all there is positive atmosphere for the growth of a country.
Also slashing of GST rates from 28% to 18% recently has given industries a breath. The
growth of paint industries may generate more employment opportunities in a country.

External factors influencing Growth of industry

Political factors

Reduced GST induces sales

Make in India initiative will help in expansion

Economical Factors

Slowdown in economy due to COVID19

Downfall in demand of automotive coatings

Social Factors

Emerging middle class in India with disposable income

Shifting consumer preference from traditional whitewash to high quality paints

Technological

Home décor tips through mobile app and website

Environmental

Increasing demand for eco-friendly paints

Legal

GST imposition
 About company

Started in 1942, Asian paints has become an integral part of Indian paint industry. Asian
Paint is current market leader and has crossed over 75yrs in this industry and is now
present in Asia, the Middle East, Africa and South Pacific. Company believes in and has
high standard of ethics, professionalism, stakeholder transparency and continuously tries to
excel in everything they do.

In industrial coating segment Asian Paints works in joint venture with PPG inc. having 50:50
partnership. In home improvement and décor space, Asian Paints is present in areas of
kitchen, bath fittings and sanitaryware.

Asian Paints is looking forward to create a more sustainable business model, which takes
into account the insights and interests of all stakeholders. Simultaneously company puts in
continuous effort in conserving water and energy and optimizing their use.

Offerings

Products

Paints | Chemicals | Wall coverings | Textures Painting aid | Waterproofing solutions | Wall
stickers | Mechanised tools | Kitchen fittings | Bath fittings and sanitaryware | Sanitizers and
surface disinfectants | Adhesives | Kitchens & Wardrobes

Services

Home Painting Services | Interior Design Services | Experience Retail Stores | Colour
Consultancy | Projects | Sanitization servicess

Company overview 2019-20

 Revenue from operations: Rs17,194.1 crores, 4.9% growth from previous year.
 EBITDA: Rs4214.6 crores, 11.2% increase from previous year
 Profit after tax: Rs2654.0 crores, 24.5% increase
 Earnings per share: Rs 27.7 crores, 24.5% increase
STP

Segmentation: based on demographic, geographic and psychographic segmentation

Targeting: differentiating strategy so as to meet the varying needs of different segments

Positioning: based on usage class and value based.

Business life cycle

 SWOT Analysis

Strength Opportunities

Strong presence in home décor Potential in industrial and automobile

products products coating segment
Strong financial position change in consumer attitude towards
Strong distribution channel home décor
Variety of product offering economic affluence

Weakness Threats

Low market share in industrial and High competition

automobile products coating segment Changing government policies
Slow growth rate in foreign market Failure of monsoon

Marketing mix- The four P’s

Product mix

 Industrial coatings include Road markings, floor coatings and protective coatings
targeted at industries
 Decorative paints include metal surface paints, wood surface paints, exterior wall
paints and interior wall paints. For industries, building, machineries
 Ancillaries include wood primer, exterior wall putty, wall primer and acrylic wall putty
for industries, building, machineries
 Asian paints Royale – An interesting offering by Asian paints where they decorate
your house with colours and Asian paints direct painters are involved in the process
targeted at premium segment.
 Pricing strategy

 For premium segments: Products are priced higher than competitors, providing high quality
and high standards.
 For medium and economy segments Value based pricing Policy. Various sub brands have
been created for different sections of society i.e demographic and geographic segments.
Price range varies with brands.

The overall pricing is based on product quality, competition and the solutions required by
the customers.

Place

Company is operational in 19 countries and has manufacturing facility present in every

country.

In India it has Signature Stores in Mumbai, Kolkata and New Delhi where consumers can
get expert assistance on painting ideas, know what’s trending, and visualise dream home
using latest visualisation technology. It has 6 manufacturing locations, 70 sales branches,
15,000 dealers and numerous warehouses.

Promotion

The slogan “har ghar kuch kehta hai” and Mascot “Gattu” are the signatures of Asian
Paints. Gattu was replaced in 2000 with company logo. Various Bollywood celebrities are
brand ambassadors of the company. An interactive website and CSR activities add up to
the promotional strategies. Asian Paints boasts about their product quality, and repeated
marketing communications keeps telling about their preference for families and how it is the
best brand in the market.
 Challenges to company

 Exterior paint is the fastest growing segment in the Indian paint market It is a raw material-
intensive business with cost of material accounting for 69 per cent of total expenses and 54
per cent of net sales. Demand for exterior paints is not price-sensitive and unlike other
segments it is not cyclical.
 A very vibrant and competitive market and there are almost no entry barriers.
 A slowdown due to covid-19
 Covid19 Impact
70.00%

60.00% 65.60%
63.34% 62.12%
50.00% 55.95% 51.88%
54.68%
51.83%
55.71%

40.00% 41.83%
38.61%
30.00% 34.16% 34.16%
28.85%
20.00% 25.49%

10.00%

0.00%
total income total ebitda ebit tax expense pat net income
expense

compared from previous year Q Compared from previous quarter

Note:

*Blue column compares financial reports of Quarter ended 30thJune2020 to Quarter ended
30thJune2019(for example: total income is 55.95% of income on 30thJune2019.)

*Orange column compares financial report of Quarter ended 30thJune2020 to Quarter

ended 31stMarch2020.

During covid all the operations of the company were shut down, but company entered a
new product segment of sanitizers and hand washers. working with Government initiatives,
company was able to portray itself as a “responsible and caring brand”, with campaign of
“safe painting” Asian paints has taken measures to ensure safety of painters, and coming
up with safety equipment for painting purposes gives a sense of security. Now company
provides safe painting to all its customer segments. Now company has started its partial
manufacturing process.

Although company faced decline on financial front compared to previous quarters

due to covid, but company was able to avoid losses. With marketing campaigns, CSR
activities and as a new entrant in sanitizer and hand wash segment, Asian Paints made
successful marketing attempts and reacted faster than the spread of covid.
 Competitive Advantage
 Strong product portfolio:  It product portfolio consist of wide range of paints for different
purposes such as Interior Wall Finishes, Exterior Wall Finishes, Enamels and Wood
Finishes along with Waterproofing, adhesives and wall coverings, Industrial painting, Home
Improvement, and Décor.
 Visibility of the brand:  Asian Paints distributes its products in every corner of the country by
making its products with varied SKU’s (stock keeping units) available on the shelf of the
stores which creates high visibility and TOMA (top of mind awareness).
 Extensive distribution: Asian Paints uses distribution network and logistics very efficiently.
The company has extensive distribution network and works very efficiently.
 Mass customization: combining the flexibility and personalization of custom-made products
with the low unit costs associated with mass production. Allowing the customers to
customize their own product. Currently Asian paints has more than 2200 colours in their
palette.

Management of company and credentials

 Ashwin Suryakant Dani – non executive chairman

 vice chairman and managing director from December 1998 to March 2009.
 master's in polymer science from University of Akron , Ohio United States
 ‘Ernst & Young Entrepreneur of the year’ award in the ‘Manufacturing’ category in
November 2003
 ‘Lifetime Achievement Award’ by Indian Paint Association (IPA) in 2011.
 ‘Businessman of the Year’ award in 2015 by Business India magazine

AMIT SYNGLE managing director/ceo 04/2020

 Chief operating officer 05/2018 -03/2020

 President sales and marketing-01/2012 – 05/2018
 Mechanical engineer and postgraduate in management 1990 from UBS chandigarh
 With Asian paints from past 30yrs.

Manish Choksi – vice chairman

 MBA in chemical engineering from university of Houston

 Chief of corporate strategy and cio from 1992 to 2011
 PRESIDENT - INTERNATIONAL, IT, HR AND CHEMICALS 2007 -2011

Management is highly Qualified and very experienced. Most of the current management
has been Associated with Asian Paints from a long period of time(more than 10 years) and
are now members of Board of Directors.

Vision: We want to be an innovative, agile, and responsive world class research and
technology organisation that’s aligned to future customer needs and catalyses the growth of
the company across existing and future businesses.
Mission: “To become one of the top five decorative coatings companies worldwide by
leveraging its expertise in the higher growth emerging markets.”

Company has been quite successful in achieving their vision and mission.

Asian Paints is ranked 9th globally. Last year Asian paint was ranked top global company by
coatingsworld.

Asian Paints is the top company of India with market share of 42%. Asian paints have
diversified itself in home décor segments but has only 14% share in industrial segment
which is quite low.

Trend Analysis
 Balance Sheet
300.00%

250.00%

200.00%

150.00%

100.00%

50.00%

0.00%
Total non Total Total Total Total Total Total
current current assets equity noncurrent current liabilities
assets assets liabilities liabilities

2017 2018 2019 2020

Statement of Profit and Loss

160.00%
120.00%
80.00%
40.00%
0.00%
ue s x x se x e S
se DA ta ta ta m EP
ven en IT d re pen er co
e p EB an fo ex aft in
l R ex s e x t t
ta ta
l
te
m
fitb Ta ofi Ne
to To li o Pr
na Pr
ptio
c e
ex
re
fo
be
ofit
Pr
2017 2018 2019 2020

Financial Ratio analysis and competitor comparison

 Liquidity Ratio
2.00
1.80
1.60
1.40 AP2018
1.20 AP2019
1.00 AP2020
0.80
0.60 BP2020
0.40
0.20
0.00
current ratio Quick Ratio Cash ratio NWC to
total assets

Current ratio

Current ratio of Asian paints has increased from 1.55 to 1.82, i.e. there is an increase in
liquid assets and can easily meets its short term obligations (obligations within 1 year).

When compared with Berger paints (current ratio 1.49 in 2020), Asian paints has 1.82,
depicting Asian paints is more reliable for payment of debts.

Quick ratio

Quick ratio is below 1 depicting there are high number of inventories, but still a 0.94 quick
ratio means company may struggle paying off its debts. In the past 3 years quick ratio has
remained moreover same.

On the other hand, competitor has a quick ratio of 0.70, showing excess of inventories.

On the common grounds Asian paints can pay its debts more easily than Berger paints.

Cash ratio

Cash ratio is extremely low for both the companies. 0.11 for Asian paints and 0.04 for
Berger paints.

NWC to total assets:

For Asian paints: 0.19

For Berger paints: 0.17

 Turnover ratio

16.00
12.00 AP2018
8.00 AP2019
4.00
0.00 AP2020
er er er er BP2020
nov nov nov nov
r ur ur ur
tu tt
ory e sT se etT
nt bl as As
s
ve i va d l
In ec
e
F ixe To
ta
R

Inventory turnover ratio

A ratio above 6 means company’s Sales is not balanced with inventory.

ratio has decreased from 6.68 to 6.21 for Asian paints. Company is trying to bring a
balance in sales and inventory, by fixing inventory management.

Comparatively: Berger paints has a ratio of 5.01. Company has well balanced sales and
inventory.

Receivables turnover

Receivables ratio is high and has kept on deceasing since 2018. From 12.79 to 15.82. This
shows that collection of accounts receivable is efficient and that the company has a high
proportion of quality customers that pay their debts quickly.

Comparatively Berger paints has lower receivables turnover. Meaning company takes more
time collecting or receiving their debts.

Fixed asset turnover

This ratio remained constant over the years, on an average 2.20. comparatively Berger
paints has a higher turnover, of 2.74. interpreting Berger paints is better in generating sales
from its fixed asset.

Total asset Turnover

Total asset turnover has increased from 1.22 to 1.29, for Berger paints it is 1.35. on
industrial comparison Berger paints is better using its asset
 Leverage ratio
1.80
1.60
1.40
AP2018
1.20
1.00 AP2019
0.80 AP2020
0.60 BP2020
0.40
0.20
0.00
Debt Equity Equity multiplier Total Debt Ratio
ratio

Debt Equity Ratio

Has decreased from 0.55 to 0.44 from Asian Paints. Company has reduced the usage of
investors funds to finance assets.

is higher for Berger Paints 0.65, Berger paint uses more of its investors funds to finance
asset.

Equity multiplier

A lower multiplier is considered more favourable because such companies are less

dependent on debt financing and do not need to use additional cash flows to service debts
like highly leveraged firms do. Has decreased from 1.55 to 1.44

Is higher for Berger paints, 1.65. A higher asset to equity ratio shows that the current
shareholders own fewer assets than the current creditors

Total debt ratio

The debt ratio indicates the percentage of the total asset amounts a ratio of 0.4 – 40
percent – or lower is considered a good debt ratio

Decreased from 0.35 to 0.30, depicting Asian Paints is increasing cash flow to service its
debt

It is higher for Berger paints 0.40 comparatively but still in the range of ideal debt ratio.
 Profitability Ratio
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Gross Profit Net Profit ROA ROE
margin Margin

AP2018 AP2019 AP2020 BP2020

Gross Profit margin

Continuously growth observed, 20.06% to 22.72% to 24.01%. Profit percentages have

increased in the past three years.

15.50% for Berger paints; lesser than Asian paints in FY2020

Net Profit margin

The net profit margin illustrates how much of each Rs in revenue collected by a company

translates into profit. Continuously growing for Asian Paints 11.08 to 15.41%

For Berger paints 11.96%

ROA

13.43% to 19.90%. Asian Paints have continuously improved and is better utilizing its asset
every year.

16.10% for Berger paints and is less than Asian paints in 2020.

ROE

Increasing 20.80 % to 28.61%

From the above graph it is observed tha ROE of Asian Paints was 20.18% in the year
2018where as it is increased to 28.61% in the year 2020. It shows there is significant
increase in the Return on equity as well as increase in shareholder equity.

26.63% for Bp
 Market value Ratio
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
EPS P/E Ratio Market to book ratio

Du Pont Analysis
 Strength

 Asian Paints has higher Liquidity Ratios.

 Asian Paints is more efficient in recovering debts.
 Asian Paints rely less on lenders for financing comparing to BP. And faces less risk.
 Comparatively lesser assets are owned by creditors.
 Is more profitable than competitors.
 Has average net profits
 Has higher returns than competitors.

Weaknesses

 Asian Paint has Higher inventory turnover ratio. Inventory management is better at Berger
paints.
 Fixed Asset turnover and total asset turnover are higher for Berger Paints, implying Asian
paints, is not able to optimally use its assets.
 Conclusion

Over the years Asian Paints has seen continuous growth, which can be easily seen in the
trends chart. Non-current liabilities have increased marginally meaning company is
financing from long term financing options. Also, Loans are increasing as well as investors
equity. Total income is growing 1% every year whereas total expense has decreases by 1%
every year. Net income has seen a growth of 4.65% compared to 2018 and 2.65%
compared to 2019. Although the growth is slow but there is a definite growth and with
acquisitions of ESS ESS and Sleek, company is looking forward in kitchen and bath fitting
segments.

Fixed assets have increased by 25% whereas noncurrent assets by almost 6.5%. and total
assets by 30%. Company is increasing its manufacturing capacity and operations Equity
has increased by approx. 23% and total liabilities decreased by 4%(approx.). Rise in Equity
shareholders is depicting the investors trust in Asian Paints. Liabilities have decreased and
assets have increased And Profits have increased marginally.

Observing the financial data, marketing strategies, and recent acquisitions, it is clearly seen
that Asian Paints is moving forward and is looking for not only growing its operations but
also diversifying.

On technological fronts, company has successfully implemented SAP ERP in all

international units to bring the units on a unified technological structure, and now have a
very strong IT backbone and has already prepared for the manufacturing complexities of
future.

This year due to COVID pandemic, most of the sectors have been affected. Both at national
level and international level, everything stopped but company has already prepared for the
future.

This is the right time for investing in this company as post covid, company has already
started its operations and one should look for long term investments in this company.
Initially the return maybe low, but in near future profits may grow exponentially.
Future Growth
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