FM Cia 3

FINANCIAL MANAGEMENT
CIA 3
A report on sectoral Analysis

on Capitalisation, Leverage
and Dividend Policy
Aditya Jain (2123202)

Tanmay Jain (2123250)
Vibhav Gupta (2123254)
Submitted to,
Dr Roshna Thomas
1. ASIAN PAINTS LTD:
Based in Mumbai, Asian Paints Limited was established in 1942. Paints and coatings for
ornamental and industrial applications are manufactured, marketed, and distributed by the
business in India. For interior and exterior surfaces, it provides wall finishes, metal finishes,
and wood finishes. It offers a vast selection of mechanised tools, wall coverings, bath fittings,
waterproofing goods, adhesives, and surface cleaners. Additionally, they provide services for
home painting, decorating, interior design, and sanitization.
The business produces crucial materials including thinners, organic composite solvents,
varnishes, enamels, and lacquers (used for glossy finishes). Additionally, it has dabbled in
modular kitchens and kitchen accessories including wire baskets, cabinets, and appliances. The
firm sells its goods under the labels Causeway Paints, SCIB Paints, Taubman's, Asian Paints,
Asian Paints Berger, Apco Coatings, and Kadisco Asian Paints. They have 26 paint production
sites worldwide and are active in 19 different countries. More than 70,000 dealers make up its
extensive distribution network.
Financial performance for the year 2020-2021:
For the quarter that ended in December, Asian Paints recorded a 62% year-over-year (YoY)
increase in its consolidated net profit to Rs 1,265.35 crores (Q3). During the same period, its
operating revenue increased 25.43% YoY to Rs 6,886.39 crore. The company's domestic
decorative division had a volume increase of more than 30%, with luxury and premium
portfolios leading the way. Asian Paints' worldwide operations saw double-digit volume
growth, with Asia and the Middle East taking the lead. With the recovery of the economy, the
firm has seen an increase in demand from automakers, real estate developers, and other
industries for its selection of paints and coatings.
The company's sales increased at a CAGR of 6.18% during the past five years, while the
industry average was 6.68%. A market share of 63.38% has been attained by Asian Paints. By
concentrating on R&D and releasing cutting-edge products, it has maintained its market
leadership.
Asian Paints' stock price has increased by more than 56% since the start of the current fiscal
year.
Financial statements of Asian paints:
Balance sheet:
Income statement of Asian paints:
CAPITALISATION:
Capitalization means the total par value of all the securities, i.e. shares and debentures issued
by a company, and reserves, surplus and value of all other long-term obligations. The term thus
includes the value of ordinary and preference shares, the value of all surplus earned and capital,
the value of bonds and securities still not redeemed and the value of long-term loans.
Capitalization is thus the sum total of all long-term funds available to the firm along with the
free reserves.
Capitalisation of Asian paints ltd:
2022 2021 2020
Share capital 95.92 95.92 95.92
Long-term loans 16.16 14.31 18.50

Reserves and surplus 13,253.17 11995.18 9357.37
Other long-term liabilities 522.05 473.23 501.32
Long-term provision 168.29 163.51 136.78
Deferred tax liabilities 205.30 265.19 282.68
TOTAL 14,260.89 13,007.34 10,392.57
The capitalisation of Asian paints from 2022-2020 are as follows:
2020 – 10,392.57 cr
= 2653.95 / 10,392.57*100 = 25.53% (Over capitalised)
2021 – 13,007.34 cr
2022 – 14,260.89 cr
Since all the values are less than 30%, we can say that firm Asian paints is over-capitalised i.e.,
the profits are very much low as compared to the capitalisation.
Capital structure:
2022 2021 2020
Share capital 95.92 95.92 95.92
Long-term loans 16.16 14.31 18.50
Retained earnings 13253.17 11995.18 9357.37
Other long-term liabilities 522.05 473.23 501.32
Long-term provision 168.29 163.51 136.78
total 14055.59 12,742.15 10,109.89
ASIAN PAINTS Income Statement Analysis:
• Operating income during the year rose 7.2% on a year-on-year (YoY) basis.
• The company's operating profit increased by 16.8% YoY during the fiscal. Operating
profit margins witnessed a fall and down to 22.4% in FY21 as against 20.5% in FY20.
• Depreciation charges increased by 1.4% and finance costs decreased by 10.5% YoY,
respectively.
• Other income declined by 0.4% YoY.
• Net profit for the year grew by 16.7% YoY.
• Net profit margins during the year grew from 13.4% in FY20 to 14.6% in FY21
Leverage:
Leverage is the use of debt (borrowed capital) in order to undertake an investment or project.
The result is to multiply the potential returns from a project.
Financial Leverage = EBIT/EBT
FY 2020:
Financial leverage = EBIT/EBT = 3524.61/3446.23 = 1.022
FY 2021:
FY 2022:
Operating leverage = Contribution / EBIT
As we know that Contribution = Sales - Variable cost and variable cost is not given to us so we
have assumed 30% of all the expenses as variable cost.
FY 2020:
Contribution = 17551.63 - 4231.62 (30% of 14105.4 which is the total expense)
= 13320.01
Operating Leverage = Contribution / EBIT = 13320.01 /3524.61 = 3.78
FY 2021:
= 14444.92
FY 2022:
Contribution = 25640.4 - 6417. 75 (30% of 21392.53 which is the total expense)
= 19222.65
Ratios:
Capital structure ratio = Equity/debt
FY 2020:
Equity = 9,453.29
Debt = 939.28 + 3195.05 = 4,134.33
9453.29/4134.33 = 2.286
Y 2021:
Equity = 12,091.10
Debt = 916.24 + 4,575.33 = 5,491.57
12091.10/5491.47 = 2.201
FY 2022:
Equity = 13,349.09
Debt = 6,559.24
13349.09/6559.24 = 2.035
This ratio is calculated to assess the correctness of the equity level with regard to debt.
The greater the value the better the financial standing, but since the value is decreasing for the
past 3 years the company should perform a debt structure analysis to check the reason for long-
term debt which can affect the solvency of the firm.
Dividend policy:
A dividend policy is a policy a company uses to structure its dividend payout to shareholders.
Some researchers suggest the dividend policy is irrelevant, in theory, because investors can sell
a portion of their shares or portfolio if they need funds.
For the year ending March 2022, Asian Paints has declared an equity dividend of 1915.00%
amounting to Rs 19.15 per share.
The company follows a Regular Dividend policy because every year the board of directors
have decided that they will pay the dividend to their investors and in most cases their interim
rate of dividend is higher than their final rate of dividend and both the rates are high only also
the company has stable cash flows as well so this also shows the company follows a regular
dividend policy They might have decided on the different rates because the profit earned in 3
years is different from each other.
The company has a good dividend track report and has consistently declared dividends for the
last 3 years.
Trend Analysis of Asian Paints:
Year Stock prices

Jan - 2020 1793.2
Jan - 2021 2755.55
Jan - 2022 3422.4

Interpretation of trend analysis:
For Asian Paints we have collected the stock prices for the last 3 years and have performed
trend analysis and we can clearly see that stock prices for all the three years have risen and
almost 50% share price have hiked for the 1st year and 25% for the next year this shows that
Asian Paints have given a good amount of profits to their investors. Also, it highlights their
financial stability and financial growth. Though we should perform the trend analysis for at
least a minimum of 10 years, if we consider only these 3 years it is evident that Asian Paints
have been a good company for investment purposes as their financials kept improving year on
year.
2. BERGER PAINTS LTD:
Based in Kolkata, Berger Paints India Limited was established in 1923. For domestic,
commercial, and industrial uses in India, the business makes and markets paint products. It
provides a variety of wall coatings for the inside and outside. Additionally, they provide
coatings that are protective and anticorrosive, flooring compounds, adhesives, and
waterproofing solutions. It has 16 production plants spread out throughout Russia, Poland,
India, and Nepal. Berger Paints has been able to offer specialised services to both private
individuals and businesses because of its distribution network of more than 25,000 dealers. A
division of the U.K. Paints India Private Limited, the business.
Financial performance:
Berger Paints recorded a remarkable 13.55% YoY rise in overall net profit to Rs 221.05 crore
for the quarter that ended September despite the Covid-19 epidemic (Q2). The business will
shortly release its Q3 earnings. Industry analysts predict that the company's revenue and sales
will increase significantly.
In contrast to the industry average of 6.68% during the previous five years, the company's sales
increased at an annual rate of 8.1%. During the same period, it has consistently seen an increase
in revenues and earnings. Market share was attained by Berger Paints at 19.83%.
The share price of Berger Paints India has increased by more than 54% since April 2020.
The balance sheet of Berger paints ltd:
Income statement of Berger paints:
Capitalisation of Berger paints:
2022 2021 2020
Equity share capital 97.13 97.13 97.12
Reserves and Surplus 3666.76 3182.48 2527.92
Long-term loans 515.56 155.44 222.46
TOTAL 4279.45 3435.05 2847.5
The capitalisation of Berger Paints from 2022-2020 are as follows:

2020 – 2847.5 cr
= 699.05 / 2847.5*100 = 24.54% (Over capitalised)
2021 – 3435.05 cr
2022 – 14,260.89 cr
Capital structure:
2022 2021 2020
Equity share capital 97.13 97.13 97.12
Long-term loans 515.56 155.44 222.46

TOTAL 4279.45 3435.05 2847.5
BERGER PAINTS Income Statement Analysis:
profit margins witnessed a fall to 16.7% in FY20 against 15.4% in FY19.
respectively.
• Other income grew by 14.1% YoY.
• Net profit margins during the year grew from 8.2% in FY19 to 10.4% in FY20.
•
Leverage:
FY 2020:
FY 2021:
FY 2022:

FY 2020:
= 4361.39
FY 2021:
= 4534.04
FY 2022:
= 5764.40
Ratios:
FY 2020:
Equity = 2625.04
Debt = 222.46
2625.04/222.46 = 11.80
FY 2021:
Equity = 3279.61
Debt = 155.44
3279.61/155.44 = 21.09
FY 2022:
Equity = 3763.89
Debt = 515.56
3763.89/515.56 = 7.30
This ratio is calculated to assess the correctness of the equity level concerning debt.
The greater the value the better the financial standing, but since the value has increased for the
year 2021 and then drastically reduced for the year 2022, the company should perform a
structural analysis to check the reason for long-term debt which can affect the solvency of the
firm.
Dividend policy:
For the year ending March 2022, Berger Paints India has declared an equity dividend of
310.00% amounting to Rs 3.1 per share. The company has a good dividend track report and
has consistently declared dividends for the last 3 years. Also, the company paid dividends twice
in 2020 and only once in both 2021 and 2022 this shows the company follows a Regular
Dividend Policy also because every year the board of directors has decided the quantum and
rate of dividends which is different in all the 3 years but the quantum is very small in each case
and dividends have been paid out regularly. They might have decided on the different rates
because the profit earned in 3 years is different from each other.
Trend analysis of Berger paints:
Year Stock prices

Jan - 2020 517.45
Jan - 2021 767.05
Jan - 2022 776.4
So, from the share price variation of Berger Paints we can see that almost 50% growth has been
seen for 2021 but for the next year which is 2022 the growth is almost negligible and only 1%
rise in the stock price could be seen so if we look at the income statement of Berger Paints we
can see that though have improved their sales and profit for the particular period one thing
which they did not only improve but have made things more complex is the amount of long
term debt, their long term debt almost increased by 3.5 times of the previous year and as a
rational investor if I see a high amount of debt in company’s financials my decision in investing
in the firm also gets affected. As a result, we can see that for the year 2022 share price didn’t
improve much but maybe the company might carry long-term plans and they can reduce its
debt in the upcoming years financially wise Berger Paints looks good.
3. Indigo Paints Limited:
When Indigo Paints originally launched in 2000, it had a modest beginning. Before gradually
expanding its product range to encompass the majority of water-based paint categories, such
as exterior emulsions, interior emulsions, distempers, primers, etc., it originally manufactured
more reasonably priced cement paints. From an early age, the Company quickly spread its
influence throughout India and left its mark on the entire country. The Company is now
regarded as a creative paint manufacturer, regularly releasing novel products that have never
been offered in India and becoming one of the top competitors in the sector.
Financial Performance:
The revenues of INDIGO PAINTS stood at Rs 9,169 m in FY22, which was up 26.1%
compared to Rs 7,269 m reported in FY21.INDIGO PAINTS' revenue has grown from Rs 4,116
m in FY18 to Rs 9,169 m in FY22. Over the past 5 years, the revenue of INDIGO PAINTS has
grown at a CAGR of 22.2%. The net profit of INDIGO PAINTS stood at Rs 840 m in FY22,
which was up 18.6% compared to Rs 709 m reported in FY21. This compares to a net profit of
Rs 478 m in FY20 and a net profit of Rs 269 m in FY19. Over the past 5 years, INDIGO
PAINTS net profit has grown at a CAGR of 139.1%.
Financial statements of last three years:
Balance sheet:
Capitalisation of Indigo paints Limited:
Capitalization refers to the entire par value of all of a company's instruments, including its
shares and debentures, as well as its reserves, surplus, and the value of any other long-term
debts.
As a result, the word encompasses the value of common and preferred shares, the value of all
capital gains and surplus, the value of bonds and other instruments that have not yet been
redeemed, as well as the value of long-term loans.
As a result, capitalization is the entire amount of long-term funding available to the business
as well as the no-cost reserves.
2022 2021 2020
Share capital 47.57 47.57 29.02

Reserves and Surplus 599.57 515.92 149.73
Employee Stock Option 2.72 0.00 0.00
Long Term loans 7.74 0.00 27.54
Deferred Tax Liabilities 8.47 6.95 6.97
Other Long-term Liabilities 4.84 9.79 3.85
Long Term Provisions 4.75 2.53 1.30
Total 675.66 582.76 218.41
The capitalisation of Indigo Paints from 2022-2020 are as follows:
2020 – 218.41 cr
2021 – 582.76 cr
2022 – 675.66 cr
Capital structure:
2022 2021 2020
Share capital 47.57 47.57 29.02
Long-term loans 7.74 0.00 27.54
Employee Stock Option 2.72 0.00 0.00
Other Long-term Liabilities 4.84 9.79 3.85
Long Term Provisions 4.75 2.53 1.30
Total 667.19 575.81 211.44

INCOME STATEMENT OF INDIGO PAINTS:
INCOME STATEMENT ANALYSIS:
profit margins witnessed a fall and stood at 15.0% in FY22 against 16.9% in FY21.
respectively.
• Other income grew by 203.1% YoY.
• Net profit margins during the year declined from 9.8% in FY21 to 9.3% in FY22.
LEVERAGE:
FY 2020:
FY 2021:
FY 2022:

FY 2020:
= 458.72
FY 2021:
= 538.22
FY 2022:
Contribution = 916.87- 240.77 (30% of 802.57 which is the total expense)
= 676.10
Ratio Analysis for INDIGO PAINTS:
FY 2020:
Equity = 178.75
Debt = 39.65 + 185.25 = 224.9
178.75 / 224.9 = 0.79
FY 2021:
Equity = 563.49
Debt = 19.27 + 228.40 = 247.67
539.49 / 247.67 = 2.17
FY 2022:
Equity = 649.86
Debt = 25.81 + 244.22 = 270.03
649.86 / 270.03 = 2.40

This ratio is calculated to assess the correctness of the equity level concerning debt.
Dividend policy:
For the year ending March 2022 Indigo Paints has declared an equity dividend of 30.00%
amounting to Rs 3 per share. Indigo Paints had last declared a dividend of 30.00% for the year
ending March 2022. But Asian Paints is a newly listed company on the stock exchange and its
shares started getting traded in February 2021 only as of now its share price is continuously
decreasing but still, the company has declared the profits for the next year so this shows a case
of Regular Dividend policy under which company gives the dividend to its investors and also
the company was in loss for the year 2022 but still it paid out the dividend to its investors.
Trend analysis of Indigo paints:
Year Stock prices

Feb - 2021 2924.25
Feb - 2022 1994.25
Nov - 2022 1440.1
Indigo Paints has recently listed on the stock exchange and if we look at their share price trend
it is continuously decreasing only although the company has made high profits and the growth
in the sales and profits is also there but still the share price has reduced because one reason
might be the high share price from starting only their beginning share price was 3000 Rs and
as a retail investor one can buy 4 shares of a Berger Paints which is again a financially strong
company and they also have similar rise in profit percentage and sales and even they were listed
much before than Indigo Paints on Stock Exchange which wins the interest of investors over
Indigo Paints so according to our analysis the share price of Indigo Paints might further reduce
only up to an extent where they could match up with the other companies on stock exchange
and from there it can rise depending on their financial performance.

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FINANCIAL MANAGEMENT

A report on sectoral Analysis

Aditya Jain (2123202)

Financial performance for the year 2020-2021:

Financial statements of Asian paints:

Capitalisation of Asian paints ltd:

2022 2021 2020

Share capital 95.92 95.92 95.92

Long-term loans 16.16 14.31 18.50

Other long-term liabilities 522.05 473.23 501.32

Long-term provision 168.29 163.51 136.78

Deferred tax liabilities 205.30 265.19 282.68

TOTAL 14,260.89 13,007.34 10,392.57

The capitalisation of Asian paints from 2022-2020 are as follows:

2022 2021 2020

Share capital 95.92 95.92 95.92

Long-term loans 16.16 14.31 18.50

Retained earnings 13253.17 11995.18 9357.37

Other long-term liabilities 522.05 473.23 501.32

Long-term provision 168.29 163.51 136.78

total 14055.59 12,742.15 10,109.89

ASIAN PAINTS Income Statement Analysis:

Operating leverage = Contribution / EBIT

Trend Analysis of Asian Paints:

Year Stock prices

Jan - 2021 2755.55

Jan - 2022 3422.4

2022 2021 2020

Equity share capital 97.13 97.13 97.12

Reserves and Surplus 3666.76 3182.48 2527.92

Long-term loans 515.56 155.44 222.46

TOTAL 4279.45 3435.05 2847.5

The capitalisation of Berger Paints from 2022-2020 are as follows:

2022 2021 2020

Equity share capital 97.13 97.13 97.12

Long-term loans 515.56 155.44 222.46

TOTAL 4279.45 3435.05 2847.5

BERGER PAINTS Income Statement Analysis:

Operating leverage = Contribution / EBIT

Trend analysis of Berger paints:

Year Stock prices

Jan - 2021 767.05

Jan - 2022 776.4

Interpretation of trend analysis:

3. Indigo Paints Limited:

2022 2021 2020

Share capital 47.57 47.57 29.02

Employee Stock Option 2.72 0.00 0.00

Long Term loans 7.74 0.00 27.54

Deferred Tax Liabilities 8.47 6.95 6.97

Other Long-term Liabilities 4.84 9.79 3.85

Long Term Provisions 4.75 2.53 1.30

Total 675.66 582.76 218.41

The capitalisation of Indigo Paints from 2022-2020 are as follows:

2022 2021 2020

Share capital 47.57 47.57 29.02

Long-term loans 7.74 0.00 27.54

Employee Stock Option 2.72 0.00 0.00

Retained earnings 599.57 515.92 149.73

Other Long-term Liabilities 4.84 9.79 3.85

Long Term Provisions 4.75 2.53 1.30

Total 667.19 575.81 211.44