Operational Analysis

of

Submitted To: Submitted By:

Prof. M.H. Verma Chintan Shah

Operations Management 09BS0000616
IBS – Mumbai Section – D
Operational Analysis of Asian Paints

TABLE OF CONTENTS
COMPANY BACKGROUND 3

PRODUCT LINE 3

CAPACITY UTILIZATION 4

HUMAN RESOURCES 5

QUALITY ISSUES 5

SUPPLIER BASE 6

INVENTORY MANAGEMENT 6

LOGISTICS MANAGEMENT 7

ENERGY MANAGEMENT 8

CO-ORDINATION & COMMUNICATION BETWEEN PLANTS, OFFICES & VENDORS 8

PRODUCT FAILURES, IF ANY 9

WASTE AND SCRAP MANAGEMENT 9

ENVIRONMENTAL MANAGEMENT 10

TECHNOLOGY UPGRADATION – MANUFACTURING 10

R&D 11

OTHER INITIATIVES 11

PROFITABILITY 12

FUTURE OUTLOOK 12

EPILOGUE 13

ILLUSTRATIONS 14

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 Operational Analysis of Asian Paints

COMPANY BACKGROUND
Asian Paints India Ltd. was founded in 1942 as a small partnership firm & now is India's largest paint
company. It ranks amongst the top ten decorative coatings companies in the world today, with a
turnover of Rs.54.63 billion. Asian Paints operates in 22 countries and has 28 paint manufacturing
facilities in the world servicing consumers in over 65 countries. Asian Paints product range includes
Decorative Paints, Industrial Paints & Automotive Paints.

Besides, the Company operates around the world through its subsidiaries Berger International Limited,
Apco Coatings and SCIB Chemicals. Asian Paints has its presence in almost all the segment through its
brands Royale in the premium segment, Apcolite in the mid-segment, Gattu, Tractor, Utsav and 3-
Mango etc. in the lower segment.

PRODUCT LINE
Ancillaries: Decorative Paints:
 Asian Paints Decoprime Wall Primer WT  Exterior Walls
 Asian Paints Decoprime Wall Primer ST o Asian Paints Ace
 Asian Paints Acrylic Wall Putty o Asian Paints Apex Stretch
 Asian Paints Wood Primer o Asian Paints Apex Ultima
 Asian Paints Exterior Wall Primer  Interior Walls
 Asian Paints Knifing Paste Filler o Asian Paints Tractor Acrylic Distemper
 Asian Paints Wood Stains o Asian Paints Tractor Synthetic Distemper
 Asian Paints Exterior Sealer o Asian Paints Utsav Synthetic Distemper
 Asian Paints Utsav Floor Colour  Metal Surface
 Asian Paints Utsav Primer (ST)  Asian Paints Luxury Ultra Gloss Enamel
 Asian Paints Utsav Primer (WT)  Asian Paints Premium Semi Gloss Enamel
 Asian Paints Utsav Metal Primer Red Oxide  Asian Paints Utsav Enamel
 Asian Paints Utsav Stainer  Wood Surface
o Asian Paints Utsav Enamel
Automotive: o Asian Paints Luxury Ultra Gloss Enamel
 2K Nexa Auto color o Asian Paints Premium Semi Gloss Enamel
 Deltron
 Delfleet Floor Coatings:
 Bilux range of Products  APCOFLOR
 Aspa range of Products
Road Markings:
 APCOTRAK
 APCOTRAK WBR
 THERMOLINE

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Operational Analysis of Asian Paints

CAPACITY UTILIZATION
Decorative Paints:
Decorative Paints business contributes around 94% in the total paint business. The company ranks no.
1, in the country in this segment with around 8500 colours to offer to its customers. It has 5
manufacturing plants operating all over the country, which is strategically located in-order to cater to
the widely spread, market:

Plant Capacity
Bhandup, Mumbai 30,000 KL p.a.
Ankleshwar, Gujarat 1,00,000 KL p.a.
Patancheru, Hyderabad 80,000 KL p.a.
Kasna, NOIDA 80,000 KL p.a.
Sriperumbudur, Chennai 50,000 KL p.a.
Kothak 1,50,000 KL p.a.
Total Capacity 4,90,000 KL p.a.

In Decorative paint segment, the Company operates in 4 main segments i.e. interior wall finish, Exterior
wall finish, Enamels and Wood Finishes. Besides, the company outsources around 25-30% of its total
production.

Industrial Paint:
In this business, the company caters to automotive, powder, protective coatings, road markings
segment, floor coatings and General Industrial Paints. Most of the industrial paints business is operated
by two companies’ viz. Asian PPG Ltd. and Asian Paints Industrial Coating Ltd. The company ranks first
in the automotive paints business in domestic market. The company ranks second in protective
segment and first in the road-marking segment. Recently it has entered in floor coating segment. The
company operates through following plants:

Automotive Coating 14,000 KL

Non – Industrial Coatings
Powder Coating
Baddi, Himachal Pradesh 1800 MT
Sarigam, Gujarat 3600 MT
Chemicals:
Chemical business includes manufacturing of Phthalic Anhydride (PAN) and Pentaerythritol (PENTA).
Asian Paints Ltd., has its PAN manufacturing plant at Gujarat (capacity – 25,200 MT) and PENTA
manufacturing facility at Tamil Nadu (capacity – 3000 MT). The company consumes nearly 50% of its
production as captive consumption and sells the remaining in the open market. This business
contributes around 3% to company’s consolidated revenues.

Of the above mention total capacity of Asian Paint Plants the total utilization of all the plants is 75 -80%
of the total capacity. The plants do not utilize the total capacity of the plants and the other excess paint
is being outsourced from other companies.

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Operational Analysis of Asian Paints

HUMAN RESOURCE
Asian Paints believes that people are its strongest assets, for a company can go only as high as its
people aim. It is people who innovate and invent, and who engineer the efficiencies that make a
business succeed. It is they who drive growth and lead to greater heights. At Asian Paints, human
resources systems are designed to create a focused, performance oriented and agile company. A talent
pool of over 4700 employees employed across 23 countries brings in a unique blend of mindsets and
skills.

An open and interactive work culture brings out the best in the people. A sense of ownership and
freedom to experiment at their workplace brings out creativity and innovation in every individual.
Excellent training is provided to develop leaders and re-strengthen competencies from within the
organization. Besides encouraging achievers from within the organization, company also absorbs the
best talent from some of the best management and technology institutes in the country.

Company hire people who are best suited to the job and whose personal goals are in alignment with
company’s’ corporate purpose. Thus, the task is cut out for every individual within the framework of
result-orientation, market insight, customer perspective, trust, respect and problem solving.

The commitment of its people and their sense of discipline and ownership continue to drive growth for
the company.

QUALITY ISSUES
The company has various manufacturing units which are located at Mumbai, Ankleshwar, Patancheru,
Kasna, Cuddalore, Rohtak, Raigad, Buladshahar and Sriperumbudur. Each plant is headed by the
Factory Manager. Bhandup plant is the oldest plant with an installed capacity of 30000 Tonnes per
annum. All plants are awarded with ISO 9000 & ISO 14000 certification.

Asian Paints has won many awards & recognitions which include:

 Forbes rated it under 200 'Best Small Companies of the world' in 2002 and 2003 and amongst
the top 200 'Under a Billion Firms' of Asia in 2005, “Best small company in India” by Asia Money
in 2002.
 “Golden peacock environment management award” national quality award by union labour
ministry.
 “Best supply chain” award by i2 solutions.
 “Five star rating” by British safety council in 2003 & 2005.
 Awarded the "Sword of Honour" by the British Safety Council for all the paint plants in India.
This award is considered as the pinnacle of achievement in safety across the world.
 Ranked 24th amongst the top paint companies in the world by Coatings World - Top Companies
Report 2006.
 The Asset - one of Asia's leading financial magazine ranked Asian Paints amongst the leading
Indian companies in Corporate Governance in 2002 and 2005.
 Received the Ernst & Young "Entrepreneur of the Year - Manufacturing" award in 2003.

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Operational Analysis of Asian Paints

SUPPLIER BASE
 Mostly the Alkyd resin used in the manufacturing of paints is manufactured by Asian Paints
itself, but as the quantity manufactured by it is not enough, the company outsources from
many other companies one of it is Piyanshu Resins Pvt. Ltd., Hyderabad
 Baba Containers is one of the suppliers of 20lit tins to the company.
 Asian Metal Containers is one of the suppliers of the printed tins to the company.
 Titanium Dioxide (TiO2) is the largest consumed raw material for manufacture of paints. It
constitutes around 30% of the total manufacturing cost. TiO 2 is available in two grade i.e. rutile
(imported and mainly used by the Indian paint industry) and anatase (manufactured
domestically). Travancore Titanium Products, Kerala & Kerala Minerals and Metal Ltd., are
some of the suppliers of the TiO2 to the company.
 Besides TiO2, there are other petroleum based raw materials which constitute around 40-50%
of total raw material consumed. Hence any movement in crude oil prices will impact the
profitability of the company. These products are mostly supplied by HPCL and BPCL.
 Sudarshan Chemicals is major suppliers of pigments to the industry.
 Alpha Chem are the suppliers of driers to the company.
 20microns ltd., Vimal Minerals, Himalaya minerals are the suppliers of Extenders to the
Company.
 Indofil chemicals, Pidilite Industries, Fine Organics ltd., are the few suppliers of additives to the
company.

But of all the above the majority of Raw Materials for Asian Paints is being imported from other
countries.

INVENTORY MANAGEMENT
Asian Paints have been always on an upper hand when compared to others in terms of inventory
management. The inventory cost for Asian Paints is lowest in the industry. Asian Paints average
inventory level equals only 28 days sales, while the industry average is 51 days sales. This right away
provided a 45 per cent edge in inventory costs to Asian Paints compared to its competitors. Asian
Paints stock of finished goods was just 7 per cent of its net sales while for the others in the industry it
was nearly twice that level. What is particularly striking in this achievement is that Asian Paint offered
customers and dealers a high level of service in product delivery compared to its competitors and yet
kept the inventory costs down by 45 per cent compared to the competitors.

But large credit outstanding, running beyond two months or more, was a natural concomitant of the
distribution strategy chosen by Asian Paint. The dealers are required to maintain stocks of all the SKUs
that are on demand in the territory. It pushes up inventory levels at the outlets. They need credit.
Asian Paints allowed 15-21 days credit for dealers located in the major towns and 22-30 days credit for
dealers in upcountry regions.

Asian Paints had to pull off a smart credit control strategy for survival. It resolved the thorny problem
through an innovative dealer incentive scheme. Asian Paints stipulated that each of its dealers should
pay for the supplies within a specified time norm and offered them as attractive incentive scheme for
doing so. It consisted of two components:

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Operational Analysis of Asian Paints

 A special discount of 3.5 per cent. This was referred to as the discount for perfection in
payments. It was passed on at the end of the year, provided each and every payment
throughout the year was made within the stipulated time norms.
 A cash discount of 5 per cent. This was paid for all outright cash purchases. It was given
whenever payments were received within 24 hours of the supply/invoice. In respect of
outstation accounts, the payments have been made in advance by draft in order to be eligible
for the cash discount.
The scheme was a grand success. Asian Paints credit outstanding always stood below 25 days, while
the outstanding of the other major companies were in the range of 40 days and above. Systematic
computerization also helped Asian Paints maintain the credit outstanding within limits.

Asian Paints ‘Apcolite’, the largest selling brand of paint in the country, is available in 151 different
shades and in eight different pack sizes. Being in the business of ‘colours’, Asian Paints utilized colour
to achieve differentiation, and none of its competitors could match Asian Paints in this aspect.
Simultaneously, AP also achieved the lowest cost position in the industry. Normally, when a firm
consciously opts for the differentiation route with a wide product line, it automatically points towards
higher inventory levels and consequently higher inventory and other costs. But Asian Paints, through
its effective distribution management, inventory management and control of credit outstanding, in
particular, managed to retain its inventory size and inventory costs at the lowest possible level.

Asian Paints actually saved so much on inventory carrying costs that it almost earned its promotion
budget through these savings. This is again praiseworthy because Asian Paints spends as much as 10
per cent of its sales on promotion, the highest in the industry. It has to spend so much in order to
maintain its differentiation advantage. But strikingly, it has kept its total marketing costs the lowest in
the industry. The two factors together i.e., the lowest cost position as well as the highest
differentiation position has conferred a significant competitive advantage on Asian Paints.

This are few of the techniques used by the Asian Paints to manage the inventory in a better way and to
decrease the cost of the products manufactured so as to reduce the price of the goods supplied to the
consumers.

LOGISTICS MANAGEMENT
 The warehousing facilities are well maintained.
 The company specially looks after the environmental aspects and tries to avoid pollution and
pollutants by adapting eco friendly production methods.
 The company keeps low inventories in off seasons, and high inventory in festival seasons.
 The company has huge base of raw material suppliers, giving company bargaining power
resulting in higher profit margins than competitors.
 The company has succeeded in establishing themselves in rural parts of India by large
distribution network, retail outlets etc.
 Asian Paints has around 1,600 stock-keeping units (SKU; one SKU would mean a product of a
particular pack and shade), of which around 300-350 are fast moving with extremely high
liquidity at the counter. This puts great pressure on the demand forecasting and inventory
management functions of the company.

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Operational Analysis of Asian Paints

ENERGY MANAGEMENT

As energy cost is 16-18 % of total overhead

cost, Energy is treated as major raw material
and not only just an overhead expense so as
to have special focus on lowering down cost.

There are few Energy Conservation

Achievements achieved by the company:

 Incinerator flue gas waste heat recovery:

The investment done for this project is Rs. 4 lacs.
This has resulted in an energy saving of 34500 units
per year.
 Direct discharge of Mill base from TSD to Mixer:
It is a process improvement change and it had helped the company to conserve energy of 169456
units.
 Caustic barrel heating by steam:
Electric heaters were eliminated by use of steam coil and power consumption is reduced by 45000
units per year.
 ETP Modernization:
Investment done for this project was Rs. 20 lacs. It also has given advantage in the energy saving
because numbers of mechanical equipment available in the conventional ETP have become
redundant. The power units saved are 116.4 per day amounting to 42475 units/ year.
 Reduction in stripping time of CED Resin Batches:
This has given power reduction of 325 units/ batch. In 04-05 Power unit saving was to the tune of
39000 units for processing 120 batches in year.
 FRP fan for Cooling Towers:
Investment done for this improvement is Rs. 75000/- The total power units saved by this
modification in two cooling towers are 16500 units in a year.
 Trimming of Dowtherm impeller:
This improvement has resulted in reduction of power by 15 KW (48 KW earlier to 33 KW current).
The pump runs 60 hrs in a month and hence the saving is of 10800 units in a year.
 Screw pumps in place of Diaphragm Pumps:
These air operated pumps were replaced with electrically operated screw pumps. Thus the saving is
1.06 KW per batch. The numbers of batches produced as per production plan are 2800 which
resulted in a saving of 3000 units in one year.

CO-ORDINATION & COMMUNICATION BETWEEN PLANTS,

OFFICES & VENDORS
Asian Paints has harnessed the powers of state-of-the-art supply chain system using cutting edge
technology to integrate all its plants, regional distribution centres, outside processing centres and

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Operational Analysis of Asian Paints

branches in India. Eight of the company's paints plants in India, 2 chemical plants, 18 processing
centres, 350 raw material and intermediate goods suppliers, 140 packing material vendors, 6 regional
distribution centres, 72 depots are integrated.

Asian Paints always make sure the technology it implements is cost effective and increases employee
productivity. It has deployed SAP R3, i2 supply chain planning suite, ERM employee platform formula
management, product lifestyle platform, and so on. It’s very essential to adopt new technologies, since
IT is an enabler to service retailers. Also, the supply chain effectiveness has helped to capture more of
the enterprise platform. The i2 software, which was deployed nearly in 2001, has helped to increase
productivity from 3 tons to 8 tons.

Considering today's competitive scenario, it is essential that organizations have the best technology in
place to ensure good results. Asian Paints deploys technology that connects the entire field-force
across all its branches in the country as well as globally. To ensure connectivity we have provided
laptops and PDAs in the retail sales force areas. Laptops with data cards are a key driver for enterprises.
We have implemented VSAT, which is an early adopter in far-flung locations. All the offices within the
country and globally are connected through MPLS, VSAT, and radio, but the preferred medium is
landline. Ninety percent of our offices have MPLS and we use radio strategically where last mile
connectivity is required. It has VSATs for its operations in rural areas and there is a back up of two
VSATs in every location of operations.

Company’s biggest requirement is that it expects its vendors to be competent enough to be able to
forge a long-term partnership. They do not look for a vendor for a short period of time. All there
partnerships-large platform applications such as SAP, i2, and so on-have been long-term. Therefore,
while selecting a vendor, they spend a lot of time understanding their roadmap, their fit with
company’s strategies, their fit with company’s IT architecture, and so on. After a careful selection,
company makes sure that it implements the technology efficiently. The process does not stop here, it
makes sure that the future roadmap is in company’s interest and it has the capability to take us
forward.

PRODUCT FAILURES, IF ANY

If we consider the case of Product Failures of Paint in Paint Industry then the Company had been a
great failure in terms of Industrial Paints and then the company had done many R & D and then they
had come up with the formulations used for the Industrial Paints.

One more product issue is the content of Lead in the paints which is harmful and can be dangerous for
the health of the consumers and also for the environment, so to overcome this issue the company had
come up with the Lead – free paints which will not harm even the environment and also the consumers
thus improving the quality and thus increasing the sales of the company.

WASTAGE AND SCRAP MANAGEMENT

Asian Paints has identified a total of 78 types of wastes from paint manufacturing facilities, out of
which 18 are hazardous as per HW Amendment Rules, 2000.
Given below is the approach to waste minimization adopted by the company. (Options are not given
in order of preference)

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Operational Analysis of Asian Paints

 Recycling a potential waste or portion of it 'on site' where it is generated

 Improving process technology and equipment that alter the primary sources of waste
generation
 Improving plant operations, such as housekeeping, materials handling, equipment
maintenance, automating process and packing equipment
 Redesigning or reformulating products
 Conducting waste audits and monitoring and tracking of waste generation
The company’s efforts have resulted into almost no wastage during production. There are almost no
damages during transportation also.

ENVIRONMENTAL MANAGEMENT
 Asian Paints approaches the environment issue from the perspective of waste minimisation
and conservation of resources.

 It attempt is to reuse, recycle and eliminate waste, which results in less and less waste being
generated. Accordingly, the material losses in manufacturing have been reduced substantially
over the last few years.

 It has ISO 14001 certification for environment management standards.

 It has achieved 'zero industrial discharge' capability. This has been achieved by the installation
of upgraded effluent treatment facilities and installation of reverse osmosis plants in
conjunction with appropriate recycling and reuse schemes. Our emulsion manufacturing facility
has also achieved 'zero waste' status. It has adopted the principles of "green productivity".

 Some of its innovative schemes which enhance green productivity are dealer tinting systems
which has resulted in large batch sizes ; bulk storage facility for monomers which reduces
wastage; Use of natural gas which is a cleaner fuel ; solvent recovery plants have been set up
which has resulted in zero reduction of solvent disposal ; Improved incinerating systems and
reverse osmosis.

TECHNOLOGY UPGRADATION – MANUFACTURING

 Screw Compressor with Variable Frequency Drive: Total saving/annum = 7.03 lacs
 Hydrofoil Agitators in Medium Tank Yard: Total saving/annum = 1.16 lacs
 Variable Frequency drive in 2 Twin Shaft Dispenser machine: Total saving/annum = 1.31 lacs
 Replacement of Heat tracing in 3 Medium Tank Yard storage tanks: Total saving/annum = 0.90
lacs
 Air Pre-heaters on Thermopack: Total Saving/annum = 19.11 lacs

Small Group Activities:

 Adjustable Timers in 4 Ball Mill of Liquid Paint processing: Total saving/annum = 0.46 lacs
 Energy Savers Units in Room Air Conditioner: Total saving/annum = 0.43 lacs

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 Adjustable Timers in Twin Shaft Dispenser of Liquid Paint Processing & Stiff Section: Total
Saving/annum = 0.69 lacs
 RH Filtration Pump Upgradation: Total saving/annum = 0.20 lacs
 QRC Replacement in Liquid Paint Processing: Total Saving/annum = 0.41 lacs
 Solar Photovoltaic Street Light installed as non conventional Energy Source: Total
Saving/annum = 0.00650 lacs
 Installation of Energy Efficient Tube lights in Central UPS room & Canteen: Total savings/annum
= 0.24 lacs

R & D / INNOVATION STRATEGIES

At Asian Paints, Research and Development (R&D) plays an important role in developing new products
and innovations, and reducing costs by value re-engineering of formulations.

In India, the company's 140 strong R&D team consisting of 7 doctorates and around 115 qualified
scientists, has always backed the company's business plan and demands of the market place. Right
from the company's inception, all its decorative products for the Indian market and also in the overseas
market have been developed in-house. In the last few years, company’s R&D efforts have been focused
on developing new exterior finishes, economy emulsions and distempers.

Asian Paints' R&D team has successfully managed to develop High-end exterior finished and wood
finishes in-house, which was earlier imported into the country. These products are currently marketed
under Asian Paints Elastomeric Hi-Stretch Exterior paint and Asian Paints PU wood finish respectively.

Company is also in the development of the water based wood polish which is a new product as all the
other wood polish are solvent based, and they have odour which causes irritation. So, company is in
the process of developing a polish which is odourless and is of same quality as of solvent based polish.

The R&D team also provides technological support and develops customized products for the
company's international operations spanning across 19 countries.

The company is also in the process of setting up new a new R&D centre near Mumbai (India).

OTHER INITIATIVES
Improving infrastructure and healthcare at local schools
Besides water management and age care, the company also invests time and energy in providing
infrastructure support to primary schools. In Ankleshwar - Gujarat, the company continues to support
the "Shree Gattu Vidyalaya" school which was established along with the Ankleshwar Industrial
Development Society in 1983. The school today boasts of around 2,500 students in primary as well as
secondary sections and the plant has sustained its commitment of providing infrastructure support to
this school, be it through donations of computers, tables and chairs, or through assistance in other
maintenance work for the school.

In addition, the Ankleshwar plant has also taken up the cause of improving the health and hygiene
situation of schools in nearby villages. Understanding that prevention is better than cure, the plant
conducts Vaccination and Health camps. Not only students, but teachers are also briefed on hygiene
aspects in such camps.

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In Sriperumbudur (South India) also, the plant is treading on similar lines and has taken up the task of
improving facilities in the neighborhood primary schools. It presented the Pondur primary school with
desks, tables, a PA system and even school bags for the students.

Tsunami relief: Helping community in need of time

The massive disaster Tsunami hit the coastal areas of South India and South East Asia on Dec 26, 2004
and left behind a trail of devastation. As a socially responsible company, Asian Paints rose to the
occasion and decided to play its rightful role in extending support and relief to the affected. All the
employees contributed in cash and kind to the best of their capacity. These contributions were
supplemented with a contribution from the company. A total amount of Rs. 4.7 million was generated
as relief aid and handed over to the Tsunami victims. Besides India, all the units across the world also
contributed to the best of their capacities towards Tsunami relief.

PROFITABILITY
 Operating Ratio
Operating Cost
Net Sales
 Gross Profit Margin
Gross Profit
Net Sales
 Net Profit Margin
Profit after Tax
Net Sales
 Return on Net Worth
Profit after Tax
Average net Worth

Ratios 07FY 08FY

Operating Ratio 14.77 15.83
Gross Profit Ratio 13.23 14.62
Net Profit Ratio 9.11 10.28
Return on Net Worth 39.82 44.86

 Operating Ratio establishes a relationship between operating costs and net sales. The operating
ratio of the company is 14.77 in 2007 and increased to 15.83 in 2008. A rise in operating ratio
indicates decline in efficiency. Lower the ratio, the better it is.
 The Gross Profit Ratio establishes relationship of gross profit to net sales of a company. The
company had a ratio of 13.23 in 2007 and it increased to 14.62 in 2008 which indicates that
there has been adequate coverage of administrative and marketing expenses.
 Net Profit Ratio establishes the relationship between net profit and sales. The company had a
ratio of 9.11 in 2007 and it decreased to 10.28 in 2008 which means the company’s efficiency
has increased because higher the net profit ratio better the business.

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FUTURE OUTLOOK
The company plans to consolidate its dominant position in India by launching new products in line with
the market developments in both decorative paint and industrial coating segments. The company is
focusing on further improving the operations of all of its subsidiaries in India and abroad and has
already launched E-Strides, an ERP initiative through which all the overseas ventures are being covered
for sharing of global knowledge, best practices and better control on operations. The company’s
objective is to be among the top three players in each market where it is currently operating or plans to
operate in the future.

 Introducing Water – based Paints

 Repositioning of existing Brands in Rural Market
 Broadening of Distribution Network
 Adding more choices for shades and effects
 Enhancing Better Quality
 Demand will be generated through the new
 constructions coming in housing and industries

EPILOGUE
Asian Paints is India’s largest and Asia’s third largest paint company. It is a vertically integrated paint
company with in-house manufacturing facility. Its product portfolio includes wall paints, metal paints,
wood finishes, primers and others. The company’s market segments include decorative and industrial
coating segment. The industrial coating segment consists of automotive coating, powder coating and
protective coating. Besides Asian Paints, the group operates around the world through its subsidiaries
Berger International, Apco Coatings, and SCIB Chemicals.

One notable aspect that I personally like about Asian Paints is that, it has been able to expand globally
without taking on too much debt. It is able to support its expansion plan from its internal sources.

Post acquisition of SCIB Chemicals (for Rs245mn) and Berger International (for Rs576mn), Asian Paints
has emerged as a major decorative paint company in the world with 28 plants spread over 23
countries.

However no substantial gains could be expected from the international operations in the medium term.
BI has an accumulated loss of US$24mn. Of the balance, most of the international operations are
relatively small in size and in the growth phase.

Asian Paints domestic operations, particularly exterior paints, have been driving volume growth. To
cater to rising volumes, Asian Paints is setting up a new 100,000 tpa plant at Pondicherry. Investments
in IT have led to a substantial reduction in working capital cycles. Like it has done in the past, we expect
Asian Paints to exceed industry growth rates.

QUALITATIVE ANALYSIS:

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 Over the years, Asian Paints has been a very stable and growing corporation. It has kept
growing along with the economy in both real estate and industrial paints segment. It is also
increasing its reach in global markets.
 It has had a very favorable dividend strategy in which it consistently shared its profits with
shareholders. The dividends have doubled in last 5 years.
 In addition, historically, it has been a very low debt company, with most of the growth coming
from organic sources. I like this aspect of Asian Paints.
 Along with slowdown in our countries and global economy, I expect Asian Paints to shows
reduced earnings. This is expected and extrinsic factor which company does not have any
control over. The most recent analyst presentation shows that management acknowledges this
challenge and presents a realistic picture. It does not hype its positioning and maintains a firm
footing in realities.
 I believe company is very well position to navigate this downturn (brand value, distribution
network, negligible debt, excellent management, presence in different markets).
 I like Asian Paints as a company, its brands, and management’s dividend strategy. I like its
market positioning and ability to navigate the current downturn.

ILLUSTRATIONS

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