Financial Reporting Analysis

Lead company - Asian Paints

Competitor Company - Burger paints

GROUP No. 06
VLMP/16/03 – ANKUR ARYA
VLMP/16/06 – ARUNACHALAM
VLMP/16/20 – MANALI KHANDELWAL
VLMP/16/40 – VIVEK PILANIA
 1. Market trend of Paint Industry in India
In India, Paint industry has shown a promising
growth over the past decade. It has grown by
227% in term of value from 2008 to 2012.
Paint industry has mainly two segments
i.e., industrial paint segment and decorative
paint segment. Industrial segment has been
steady on its growth path but decorative
segment has grown exponentially over the last
decade.
In India, there are many players in paint
segment but four are main i.e. Asian Paints Ltd.
Being the market leader, followed by Berger
Paints India, Kansai Nerolac Paints, Akzo Nobel
India, etc. As we go ahead, we will consider top two
market leaders in paint segment of India, Asian
Paints Ltd. & Berger Paints Ltd., for financial
analysis and will compare their financial
statements.
Below is the quick comparison of both the
companies. Both companies operate in both the
segments i.e. decorative & industrial paint
segments.

Incorporated in 1942 1923 (as Hadfield Ltd.)

1983 (Renamed as Berger
India Ltd.)
Incorporated as Partnership firm Public Limited
Industry Sector Chemical/ Paint Chemical/ Paint
Company Type (present) Public sector/ Listed in India Public sector/ Listed in India
Market Position by Vol. #1 since 1967 #2
(India)
 2. Multi-Step Income Statements
Asian Paints Ltd. uses single step income statement during annual financial report
disclosure. Income statement of FY 2020-21 is shown below on left side. Team has worked
and converted this single step income statement into multi-step income statement. Gross
profit i.e. Rs. 8,434.33* and operating profit i.e. Rs. 3,795.72* for FY 2020-21 were not
conveyed in single step income statement while these are clearly shown in multi-step
income statement.
 Berger Paints Ltd. uses single step income statement during annual financial report
disclosure. Income statement of FY 2020-21 is shown below on left side. Team has worked
and converted this single step income statement into multi-step income statement. Gross
profit i.e. Rs. 2321.99* and operating profit i.e. Rs. 833.76* for FY 2020-21 were not
conveyed in single step income statement while these are clearly shown in multi-step
income statement.
 3. Income Statement Analysis

Horizontal Analysis of Asian Paints (FY 20-21)

Net sales revenue of Asian Paints has increased by 7.7% with respect to previous
year but gross profit has increased by
9.7%. The reasons are marginal increase
of 1% in direct material cost. EBT has
increase by ~20% due to marginal
increase in operating expenses.
Advertisement expenses were reduced by
11%. But increase in PAT couldn’t follow
the EBT due to higher tax & less deferred
tax as compared with previous year.

Horizontal Analysis of Berger Paints (FY 20-21)

● Net sale of Berger Paints increased

by 5% with respect to previous
year but gross profit couldn’t
follow the same due to high COGS.
● Net operating expenses got
decreased by 2.11% due to
considerable amount of cost saved
in utilities and administration cost
compared to last FY.
● Net Profit for the financial year
ended 31st March, 2021 was `680.78
crore as against `699.05 crore recorded in the previous financial year. The net profit for the
quarter ended 31st March, 2021 included `3.92 crore as other income from dividend as
against `100.09 crore in the previous financial year and hence the figures for both the
financial years are not comparable
 4. Analysis of Balance Sheet
CSFS analysis b/w Asian Paints and Berger Paints (FY 20-21)

Asian paints manages COGS efficiently than Berger Paints and it’s around ~55% of net sales
whereas Berger Paints has ~60% of its net sales (observation based on last 3 years).

5. Analysis of Cash Flow Statement

CSFS analysis b/w Asian Paints and Berger Paints (FY 20-21)

Current assets percentage of Berger paints is slightly on higher side in proportion due to
execution of various projects like Auto-GI paint manufacturing set-up at Jejuri with HMI
automation and Implementation of MES (Manufacturing Execution System) and integration
with fully automatic filling lines for increased productivity etc. and Berger’s current liabilities
on higher side compared to Asian paints as Berger is having outstanding due to creditors
around 1400 cr. rupees.
 Cash Flow statement Analysis

Asian paints’ net cash flow from operating activities is increasing continuously from the last
3 years while Berger Paints’ cash flow from operating activities is not consistent. Berger’s
cash flow from operating activities has decreased in FY 2021 due to increase in inventories
and payment receivables with respect to previous year and they are in process of Identifying
rural markets to service demand & restore cash flow.

Asian Paints Berger Paints

Cash Flow Activities 2021 2020 2019 2021 2020 2019
Net cash generated from operating
activities 144 117 100 124 145 100
Net cash used in investing activities 52 93 100 133 68 100
Net cash from financing activities 54 230 100 77 224 100