DivF - Group 7 - FSA Project

FSA Project
Industry: Consumer Paints

Firms: Asian Paints Limited & Berger Paints India Limited
Table of Content
1 Industry Overview .......................................................................................................................... 2
1.1 Introduction ............................................................................................................................ 2
1.2 Market Overview.................................................................................................................... 2
1.3 Drivers of the Industry ........................................................................................................... 2
2 Company Overview ........................................................................................................................ 3
2.1 Asian Paints Limited ............................................................................................................... 3
2.1.1 Key Highlights ................................................................................................................. 3
2.1.2 Stock Data of Standalone as on 20th November 2020 ................................................. 3
2.2 Berger Paints India Ltd ........................................................................................................... 3
2.2.1 Key Highlights ................................................................................................................. 4
2.2.2 Stock Data of Standalone as on 20th November 2020 ................................................... 4
3 Directors’ Report and Management Discussion & Analysis ......................................................... 4
3.2 Berger Paints India Limited .................................................................................................... 5
4 Trend Analysis ................................................................................................................................ 5
4.2 Berger Paints India Limited .................................................................................................... 6
5 Ratio Analysis ................................................................................................................................. 7
5.1 Management Perspective ...................................................................................................... 7
5.2 Lenders’ Perspective ............................................................................................................ 10
5.3 Investors’ Perspective ................................................................................................................ 10
6 References .................................................................................................................................... 16
1|Page
1 Industry Overview
1.1 Introduction
More than a century old, the Paint Industry in India was the second largest in the world in the year
2019. There are two key segments of the Paint Industry – industrial and decorative.
Decorative paints segment comprises of a range of products such as interior and exterior wall paints,
putties, primers, enamels and finishes while the industrial segment deals with a range of coatings
namely – automotive, marine, powder, floor and protective among others.
1.2 Market Overview

For the year 2019-20, the decorative segment dominated the Indian Paint Industry accounting for
three-fourth of the market share, and industrial segment constituted the remaining one-fourth.
Most of the demand for decorative segment is driven by repainting services.
In 2019, the Indian Paint Industry saw a 12% and 15% growth in its output volumes and total values
respectively.
Major players include Asian Paints, Berger Paints India, Kansai Nerolac Paints and Akzo Nobel India.
1.3 Drivers of the Industry

Industry Drivers (Growth & Cost)
Real Estate Infrastructure Auto Demand Std. of Living GST Input Costs
Investment
Building of As economic Automotive With the Implementation Moreover, the
commercial & growth revives, sector took a increase in of GST has industry is
domestic real infrastructure hit this year income levels, contributed largely
estate in development due to a there has been towards an impacted by
upcoming projects would myriad of a rise in the increase in the monsoon and
sections of create higher reasons, standard of formalisation of changes in
society (Tier II demand for however, with living resulting the sector. At price of crude.
& Tier III cities) paints in the predictions of in more home the same time, The sharp
and industrial its recovery in renovation and reduction in decline in
government segment FY21, maintenance, GST rates has crude prices in
initiatives like automotive thereby favoured the the year 2020
PMAY directly coating increasing the demand for has helped in
impacts the segment can demand for paints lowering the
demand for face a high decorative input costs and
decorative demand paints maintaining
paints the margins
2|Page
2 Company Overview
2.1 Asian Paints Limited

Asian Paints Limited is a major player in the Indian paints industry. It has a presence in multitude of
business segments and possesses a diversified portfolio of products and renders variety of services
like color consultancy and end-to-end painting and designing, etc.
It is broadly divided into 4 business segments as shown by the figure below. It is the market leader in
the decorative segment and enjoys huge brand equity.
Business Segments
Decorative Industrial International Home

Coatings Coatings Operations Improvements
2.1.1 Key Highlights
2.1.2 Stock Data of Standalone as on 20th November 2020
2.2 Berger Paints India Ltd

Berger Paints was founded by Lewis Berger in 1760 in the UK. It established its presence in India in
1923 and is now the second largest paint company in the country. It is renowned for its vibrant
portfolio of paints and tailored customer services.
3|Page
It is broadly divided into 4 business segments as shown by the figure below.
Business Segments
Retail GI & Auto Protective Powder (Coating

(Decorative (Industry Coating & for FMCD &Home
Coatings) Coatings) Infrastructure Appliances)
2.2.1 Key Highlights
FY 19-20 (Rs Cr.) FY 18-19 (Rs Cr.) Growth (%)

Total assets 4,342.70 4,034.27 7.65
Working Capital 730.79 854.92 (16.95)
Equity 2,625.04 2,354.79 11.48
Debt 467.54 451.29 3.60
Revenue from
5,691.69 5,515.55 3.19
Operations
PAT 699.05 435.85 60.39
2.2.2 Stock Data of Standalone as on 20th November 2020
3 Directors’ Report and Management Discussion & Analysis

Though the economic slowdown coupled with pandemic posed problems for Asian Paints, the
company witnessed a Y-o-Y growth of 24.5% and 4.9% in PAT and Revenue from operations
respectively. Apart from the industry growth drivers, the following factors have facilitated the
company’s growth:
4|Page
• Focus on rural market through low-cost paints like Tractor Sparc giving a tough competition
to unorganised players
• Diversification across different product categories and segments – growth in waterproofing,
adhesives, home improvements segment, etc.
• Economies of scale through its manufacturing facilities
• Increased R&D and advertisement expenditure
• Large variety - Launches 20+ paint varieties on average each year which is much greater than
its competitors
• Building brand equity, loyalty and trust owing to its superior quality
• Unmatched distribution network
Recent Initiatives:
1. Launched anti-bacterial coatings and safe painting campaigns

2. Produced sanitizers and surface disinfectants and sanitization services
3.2 Berger Paints India Limited

Even with various restrictions, the company grew substantially. The following factors have facilitated
the company’s growth:
• With the use of consumer apps, safety kits, protective equipment, cleaners, sanitizers and
disinfectants, it has transcended from the "FASTER, CLEANER & BETTER" platform to
"FASTER, CLEANER & SAFER” thereby increasing focus on health and hygiene
• Diversification across multiple categories and divisions of goods such as the launch of Wall
Shield 2k, Luxol Xtra, WeatherCoat Champ and Damp Shield Elasto
• Initiated cost reduction and cash conservation measures to adjust to the new norms for
business and they expect to come out of the pandemic and lockdown related challenges
with improved efficiency and effectiveness
• Acquired STP Ltd. to leverage the 5 manufacturing units, R&D centres, offices and
warehouses all over India
• Wide distribution network and customer base
• Huge expenses on R&D to shift to the new normal
Recent Initiatives:
1. Forayed into the Sanitizer and Home Hygiene market (floor cleaner).
2. Launched an anti-pollution paint certified by Singapore Green label as a “Green” paint.
4 Trend Analysis
Tracking the movements in figures across the years helps analysing the performance of the
company.
Particulars FY 2018 FY 2019 FY 2020

Total Income % 100% 112% 118%
5|Page
Expenses % 100% 113% 118%
Net Income % 100% 111% 120%
Asian Paints Trend Analysis

20,000.00 120%
115%
15,000.00 110%
105%
10,000.00 100%
95%
5,000.00 90%
85%
0.00 80%
FY 2018 (in crore ₹) FY 2019 (in crore ₹) FY 2020 (in crore ₹)
Total Income Expenses Net Income

Total Income % Expenses % Net Income %
Taking FY18 as the base year, the company witnessed growth of 12% and 18% in total income for
FY19 and FY20 respectively. The expenses and net income have also increased over the years. The
company focussed on growing through volume than price through its emulsion and distemper paints
which drove revenues and attributed to the overall increase in income.
4.2 Berger Paints India Limited
Particulars FY 2018 FY 2019 FY 2020

Total Income % 100% 114% 120%
Expenses % 100% 115% 117%
Net Income % 100% 108% 137%
6|Page
Berger Paints Trend Analysis
7,000.00 160%
6,000.00 140%
5,000.00 120%
100%
4,000.00
80%
3,000.00
60%
2,000.00 40%
1,000.00 20%
0.00 0%
FY 2018 (in crore ₹) FY 2019 (in crore ₹) FY 2020 (in crore ₹)
Total Income Expenses Net Income

Total Income % Expenses % Net Income %
5 Ratio Analysis
5.1 Management Perspective
Operating Profit Margin

0.25
0.20
0.15
0.10
0.05
0.00
FY 18 FY 19 FY 20
Berger Paints Asian Paints
Both the companies have maintained a steady Operating profit margin throughout the last 3 years.
Where Asian paints has maintained a steady rate of 0.20, Berger paints has continued to grow from
0.14 to 0.16. Asian paints has a better Operating profit margin.
7|Page
Operating Cash Flow Margin
0.20
0.15
0.10
0.05
0.00
FY 18 FY 19 FY 20
Asian paints has maintained a steady operating cash flow without much variation whereas Berger
paints has been able to increase its margin substantially and at par with Asian paints at 0.14.
A/R Turnover Ratio

20.00
15.00
10.00
5.00
0.00
FY 18 FY 19 FY 20
Even though the average receivables turnover ratio has grown for both the companies there is a lot
of difference in them. Asian paints maintain a much higher A/R turnover ratio which is around 1.4
times from that of Berger paints. As per the industry average Berger paints is performing better than
Asian paints in case of A/R turnover ratio.
A/P Turnover Ratio

0.80
0.60
0.40
0.20
0.00
FY 18 FY 19 FY 20
8|Page
Berger paints has maintained an average A/P turnover ratio of 0.48 whereas the ratio for Asian
paints has grown by almost 60%. If A/P turnover ratio is higher, the company has to maintain a high
working capital due to which we see a spike in the current ratio of Asian paints.
Inventory Turnover Ratio

5.00
4.00
3.00
2.00
1.00
0.00
FY 18 FY 19 FY 20
The inventory turnover ratio for both the companies is substantially less than the industry average.
Inventory turnover for both the companies has decreased meaning stock pile up but the ratio for
Asian paints is slightly better than Berger paints.
Asset Turnover Ratio

1.50
1.40
1.30
1.20
1.10
1.00
FY 18 FY 19 FY 20
The situation for both the companies is same for assets turnover ratio as well both have a very low
asset turnover than the industry average. This means that they have not been very efficient but
Berger paints has performed better than Asian paints.
Even though Berger paints has a better A/P turnover and assets turnover ratio, Asian paints is still a
better company as far as management is concerned.
9|Page
5.2 Lenders’ Perspective
Current Ratio
2.00
1.90
1.80
1.70
1.60
1.50
1.40
1.30
1.20
1.10
1.00
FY 18 FY 19 FY 20
From a short-term perspective, lenders look at liquidity ratios at their disposal. A high Current Ratio
is preferred as it suggests sufficient funds to meet current liabilities. For both Asian Paints and
Berger, the Current Ratio was maintained around the industry average for FY18 and FY19; however,
Berger Paints’ current ratio is a bit lower than the industry average for FY20.
Rise in Asian Paints’ current ratio for FY20 is attributable to the increase in cash and bank balance
and other financial assets. On the other hand, decrease in bank balances and investments surpassed
the change in current liabilities leading to decline in the ratio for Berger Paints.
10 | P a g e
Debt Coverage from Operating Debt Service Coverage Ratio
Cash Flows (DSCR)
8.00 8.00
6.00 6.00
4.00 4.00
2.00 2.00
0.00 0.00
FY 18 FY 19 FY 20 FY 18 FY 19 FY 20
Berger Paints Asian Paints Berger Paints Asian Paints
Asian Paints has a higher Cash flow to Debt Ratio indicating its strength in servicing its debt entirely
through the cash flows. Asian Paints’ has a DSCR compared to Berger Paints which suggests its
higher potential for servicing its debt requirements and greater solvency thereby increasing lenders’
confidence in extending credit.
Debt to Equity Ratio

0.25
0.20
0.15
0.10
0.05
0.00
FY 18 FY 19 FY 20
Berger Paints is more levered than Asian Paints. Though the total debt has increased for Asian Paints
in the past years, it is around 5% of the total assets whereas Berger Paints’ debt is around 11%.
Berger Paints’ ratio is higher than the industry average which shows increased risk.
Considering both short-term and long-term perspective, lenders should prioritise Asian Paints over
Berger. They can extend loans to Berger on stricter credit terms.
11 | P a g e
5.3 Investors’ Perspective

Financial ratios
FY 18 FY 19 FY 20 FY 18 FY 19 FY 20
Net Profit Margin 0.09 0.08 0.12 0.13 0.13 0.15
Return on Equity (ROE) 0.21 0.19 0.28 0.26 0.26 0.29
Debt to Equity 0.16 0.19 0.18 0.06 0.07 0.07
EPS 4.45 4.49 7.20 22.26 22.23 27.67
P/E 62.51 76.32 119.53 60.07 63.80 91.23
Net Profit Margin

0.16
0.14
0.12
0.10
0.08
0.06
0.04
0.02
0.00
FY 18 FY 19 FY 20
The Net profit margin for Asian paints is 25% higher than that of Berger paints due to more
investments making it more desirable.
ROE
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
FY 18 FY 19 FY 20
12 | P a g e
The Return on Equity for Asian paints has slightly increased whereas the growth in ROE for Berger
paints has been more than 33%. After mapping the increase in the ROEs there is not much difference
left in both of them.
The ROCE for both the companies is higher than the industry average but the Asian paints is much
higher than Berger paints even after the substantial growth of Berger paints.
EPS
30.00
25.00
20.00
15.00
10.00
5.00
0.00
FY 18 FY 19 FY 20
As far as EPS is concerned, Asian paints is almost 4 times higher than Berger paints which indicates
the high earnings provided by Asian paints.
13 | P a g e
P/E Ratio
140.00
120.00
100.00
80.00
60.00
40.00
20.00
0.00
FY 18 FY 19 FY 20
In terms of P/E ratio, both the companies have grown substantially. Berger has maintained a
continuous lead from Asian Paints but with time they have been able to widen the gap.
As far as Investors are concerned, Asian paints is a much more attractive company to invest than
Berger paints.
14 | P a g e
6 Exhibit
15 | P a g e
7 References
1. Asian Paints Limited. (2020). 2019-2020 Annual Report of Asian Paints Limited. Retrieved
from https://www.asianpaints.com/content/dam/asianpaints/website/secondary-
navigation/investors/annual-reports/Asian%20Paints%20Annual%20Report_Web.pdf
navigation/investors/annual-reports/Asian%20Paints%20Annual%20Report%20FY2019.pdf
navigation/investors/annual-reports/Asian%20Paints%20Limited%20-
%20Annual%20Report%202017%20-%2018.pdf
navigation/investors/annual-reports/Asian%20Paints%20Annual%20Report%202016-17.pdf
5. Berger Paints India Limited. (2020). 2019-2020 Annual Report of Berger Paints India Limited.
Retrieved from
https://docs.google.com/viewerng/viewer?url=https://www.bergerpaints.com/resources/p
df/anual-report/ar-19-20.pdf
Retrieved from https://www.bergerpaints.com/resources/pdf/annual-report/ar-18-19.pdf
Retrieved from https://www.bergerpaints.com/resources/pdf/anual-report/ar-17-18.pdf
Retrieved from https://www.bergerpaints.com/resources/pdf/anual-report/ar-16-17.pdf
9. Value Research. (2020, Nov 20). Berger Paints India Ltd.

https://www.valueresearchonline.com/stocks/488/berger-paints-india-ltd#snapshot
10. Statista GmbH. (2019, Oct). Market share of the paints industry across India in FY 2019, by
company. https://www.statista.com/statistics/914573/india-paints-industry-market-share-
by-
company/#:~:text=The%20Indian%20paint%20industry%20was,to%20the%20last%20five%2
0years
11. Satnalika, N. (2013, May 13). 6 Growth Drivers of the Indian Paint Industry. Green World
Investor. https://www.greenworldinvestor.com/2013/05/12/6-growth-drivers-of-the-indian-
paint-industry/
16 | P a g e
12. Value Research. (2020, Nov 20). Asian Paints Ltd.
https://www.valueresearchonline.com/stocks/329/asian-paints-ltd?utm_source=direct-
click&utm_medium=stocks&utm_content=Asian+Paints&utm_campaign=vro-
search#snapshot
13. Berger Paints India Limited. (2020). Innovation, Customer -Focus, Contemporary &
Responsible Products. https://www.bergerpaints.com/about-us/company-profile.html
14. Money Control. (2020). Berger Paints India Ltd.

https://www.moneycontrol.com/financials/bergerpaintsindia/ratiosVI/bpi02
15. Money Control. (2020). Asian Paints Ltd.

https://www.moneycontrol.com/financials/asianpaints/ratiosVI/ap31
17 | P a g e

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FSA Project

Industry: Consumer Paints

1.2 Market Overview

1.3 Drivers of the Industry

2.1 Asian Paints Limited

Decorative Industrial International Home

2.1.1 Key Highlights

2.1.2 Stock Data of Standalone as on 20th November 2020

2.2 Berger Paints India Ltd

Retail GI & Auto Protective Powder (Coating

2.2.1 Key Highlights

FY 19-20 (Rs Cr.) FY 18-19 (Rs Cr.) Growth (%)

2.2.2 Stock Data of Standalone as on 20th November 2020

3 Directors’ Report and Management Discussion & Analysis

3.1 Asian Paints Limited

1. Launched anti-bacterial coatings and safe painting campaigns

3.2 Berger Paints India Limited

4.1 Asian Paints Limited

Particulars FY 2018 FY 2019 FY 2020

Asian Paints Trend Analysis

Total Income Expenses Net Income

4.2 Berger Paints India Limited

Particulars FY 2018 FY 2019 FY 2020

Total Income Expenses Net Income

5.1 Management Perspective

Operating Profit Margin

Berger Paints Asian Paints

A/R Turnover Ratio

Berger Paints Asian Paints

A/P Turnover Ratio

Berger Paints Asian Paints

Inventory Turnover Ratio

Berger Paints Asian Paints

Asset Turnover Ratio

Berger Paints Asian Paints

Berger Paints Asian Paints

Berger Paints Asian Paints Berger Paints Asian Paints

Debt to Equity Ratio

Berger Paints Asian Paints

Berger Paints Asian Paints

Net Profit Margin

Berger Paints Asian Paints

Berger Paints Asian Paints

Berger Paints Asian Paints

Berger Paints Asian Paints

9. Value Research. (2020, Nov 20). Berger Paints India Ltd.

14. Money Control. (2020). Berger Paints India Ltd.

15. Money Control. (2020). Asian Paints Ltd.

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