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127
Management Discussion
Overview
& Analysis Macro-economic landscape
The year 2022 proved to be a tumultuous period OUTLOOK
ESG commitments
for the global economy. Since the beginning of The year 2023 has continued to see bouts of
the year, there were a lot of growing voices about uncertainty that have tested the growth conditions
the deteriorating situation in Ukraine, but the across the world. Headline inflation continues to
beginning of the conflict took all by surprise. While remain elevated, exceeding the comfort zone of
the loss of human life and the sufferings it induced the monetary authorities and it would result in
is undeniably unfathomable, its impact on the continued uncertainties in the financial markets
overall global economy was also profound. and a carry-on impact on the economic conditions.
The surge in inflation witnessed across These interdependencies were clearly at play
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commodities in the aftermath of the conflict, during the recent upheaval in the banking sector
added to the already elevated inflationary concerns in the US and Europe. While the turmoil appears to
across economies grappling with the fractured be contained for now, risk indicators continue to
supply chain networks resulting from the COVID remain a matter of concern.
fallout. This led to unprecedented, synchronised Multi-lateral agencies have already cautioned
increases in policy rates across all major economies about the slowdown in global growth with geo-
which not just resulted in monetary policy
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gradually moderated, yet remaining robust. Global to the evolving conditions while simultaneously
risk aversion on the back of the rapid rate increases building resiliency in their business models to
by the developed economy meant persistent ensure sustained performance.
pressure on the exchange rate, adversely
impacting import-dependent businesses such as
ours. Simultaneously, the Reserve Bank of India
tightened the monetary policy to counteract the
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sticky inflation in the economy. Consequently,
the Indian economic growth was expected to be
lower - at about 6.8% to 7% mark for FY 2022-23,
as compared to 9% registered for the previous
fiscal year. However, in a year which saw growth
decelerating across the world with recessionary
expectations building up, the Indian economy
Integrated Annual Report 2022-23
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Asian Paints Limited
129
Management Discussion & Analysis
Overview
Business Segment Review
DECORATIVE BUSINESS IN INDIA
Putting the consumer at the core Government spending categories. The growth has been led
ESG commitments
FY 2022-23 started with very positive consumer by the acceptance of Asian Paints as a trustworthy brand
sentiments for the decorative business. Quarter 1 this of our strategy, we ensured the not just in the Paints category but in allied categories
year was in all comparisons the first normal quarter availability of products across towns of Waterproofing and Construction chemicals as well,
with large gains coming in the Admixtures, Repair and
after almost two years as the environment headed to
normalisation post the pandemic in the context of the and channels, giving spurt to the Flooring categories. Innovation through offering an end-
major COVID waves behind us. demand of premium products across to-end service model for large project customers is a clear
differentiator for us in the market.
We were well-prepared for the surge in demand with the barriers of rural and urban.
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our distribution infrastructure and supply chain ready Décor and consumer services
to address this demand most efficiently. We deployed product - SmartCare Hydroloc, in the waterproofing Asian Paints is committed to becoming the largest
all enablers in servicing the consumers with the best- segment. And we further added to the repertoire with integrated home décor brand in India. We intend to achieve
in-class products and collaborated very closely with the successful introduction of SmartCare Hyroloc Xtreme this by building an enviable digital presence through the
our influencers. However, the season demand which is which takes performance to the next level. At the entry- website and social media, creating unmatched consumer engine, www.beautifulhomes.com, underwent a
typically centred in the third quarter of the financial year, level exterior emulsions space, we launched Ace Power+ access through the stores and creating an unparalleled span refresh to become India’s leading destination for
was impacted by an early Diwali and extended monsoons which offers unprecedented shade retention properties of décor products & services across categories. home décor enthusiasts and design professionals for
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out to new consumers on a massive scale. Putting the and true one-stop shop for décor, enabled by cutting-
consumer at the core of our strategy, we ensured the propositions bringing delight to customers was the core
edge technology and the best physical store elements.
availability of products across towns and channels, giving message aptly delivered through these reach-outs and this
A new addition to the décor retailing portfolio was the
a spurt to the demand for premium products across led to significant penetration of our premium and luxury
the barriers of rural and urban. We brought delight to ranges of products.
consumers with a range of new product launches and For the last two decades, every year, we collaborate with
offerings. For the discerning customer, we launched experts from a range of creative disciplines - architecture,
the Royale Glitz Ultra Matt which provides a luxurious
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art, interiors, fashion, sociology, media and FMCG, to
dead matt look. The entire Royale Glitz range now also put together ColourNext, a comprehensive forecast
talks about a crack-free performance in interiors for the
very first time in the industry. We continued to see the
of design directions in colours, materials, textures and At the heart of the digital
finishes that are relevant to the world. ColourNext 2023
tremendous response to our pathbreaking innovative forecast captures the spirit of 2023 about building a better experience for décor is
future, embracing our past and present and creating with inspirational content, engagement
joy, hope and intention. The colour of the year 'Silver
and good design curation to build
Integrated Annual Report 2022-23
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Management Discussion & Analysis
Overview
franchise-owned stores of White Teak, to rapidly expand a sharp focus on a delightful consumer experience
the reach of the premium lights offering. led by designing and execution excellence as its
We continued to augment our décor offerings for our key differentiator.
ESG commitments
décor conscious customers expanding into newer décor Focusing on our core mantra of providing customers
categories and increasing the width of our offering. Our with a hassle-free and reliable painting solution, our Safe
offerings now include products in furniture, furnishing, Painting Service and Trusted Contractor Service, gained
lights, rugs, modular kitchens, bath solutions, wooden further momentum with a presence in more than 600
flooring & tiles, home automation and UPVC windows. towns, addressing lakhs of customers. We are committed
We continued to expand our offering in furnishings to both, elevating our service levels as well as expand the
fabrics and came out with award-winning collection which reach of the service so that every Indian has access to a
helped us become one of the leading players in the Indian
Fundamentals
world-class painting service. Our newly launched Platinum
furnishing fabric industry. We also launched an exciting tier of service also received a warm response from
range in bedding and rugs to further deepen our home customers. The Trusted Contractor Service has also scaled
décor offerings and leverage our design expertise across up in an extremely strong manner across geographies and the excitement. Metal carcass and waterproof options
categories. In the new businesses of Lights through the now provides a strong bridge with our trained contractors for kitchens are also under development enabling an
White Teak brand, we added a host of new offerings while providing consumers with budget-friendly options. enhanced offering for consumers. Expansion and gains in
providing unmatched design and differentiation to the depth at Beautiful Homes Stores and with the Beautiful
customers. We also launched customisation services to Home Services are expected to be drivers for the year
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focus on building a strong technological backbone and Our luxury kitchen options range across technical, material range expansion. New products like sliding and profiles water on the CP fittings. The business also moved ahead
on-ground execution capability, to bring every “Dream and design superiority and enable the inclusion of a wide also have scope for further expansion in reach across the with the launch of concept bathrooms under BESPOKE
Home” alive. The service continued to work on bringing variety of options for all consumer groups. Beautiful country. Apart from indigenisation, we are also developing – which offers themes and designs for a full bathroom
Home Stores and Services have also begun to add to the special coatings that provide value-for-money offerings solution as a service to customers in select cities. This has
business. We also have a dedicated projects channel to in components. The distribution structure and logistical helped us not only access consumers seeking design and
provide Full Modular Solutions for new constructions, tie-ups for kitchens, especially components have been décor options but also tie in with influencing retailers.
especially residential housing. revamped to lower costs. With an enhanced offering, We were also able to reach out to the Architect and
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greater reach and working with influencers the promise designer fraternity with our offerings and have received
Business performance for the FY 2023-24 is strong and exciting. appreciation for the products, services and after-sales
During FY 2022-23, Sleek clocked revenue growth of service. Plumber training and knowledge building have
6.3% to register sales of D 425.5 Crores, driven by growth BATH FITTINGS AND SANITARYWARE been key touchpoint in the year with accreditation-led
in the modular solutions segment led by the exclusive Asian Paints entered the competitive Bath business by training. Enhancing access with influencers will continue
Sleek stores for Kitchen and Wardrobes. Beautiful Home acquiring the front-end business of Ess Ess in FY 2014‑15. to be the driver for FY 2023-24 as we seek to build our
stores added in contribution. Fitted furniture launched Over the years, we have expanded our network as well strength in the retail channel. The business continues
Integrated Annual Report 2022-23
exclusively for Beautiful Home Services has seen initial as product range, particularly the sanitaryware and to work on various product development initiatives
launch success in the year. With over 270 stores, the kitchen sinks’ range to further leverage our network and for the future, further enhancing its capability to offer
reach is unparalleled in providing access and service presence in the Chrome-plated (CP) fittings market. We contemporary, innovative and differentiated solutions,
excellence to our consumers. Luxury kitchens contributed are committed to creating a new world of bath products catering to a wide spectrum of consumer preferences.
to about one-third of the value sale strengthening Sleek’s and solutions, where the consumer can actively look The business continued to make a strong impact in the
brand positioning as a premium player in the market. at solutions and customised offerings to meet varied Projects segment during the year. We are now working
In the Wardrobes category, the launch of the premium functional, design and décor needs. with prominent builders and construction companies
collection under the label 'Crest' was received well. and also catering to government infrastructure orders
Walk-in wardrobes and new finishes and shutter options at an enhanced scale. The network expansion drive
kept the offering contemporary and continue to sustain also continued right through the year, with increased
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Asian Paints Limited
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Management Discussion & Analysis
Overview
representation in large cities as well as next-tier towns. All of the Asian Paints factories have adopted the
Continuing with service excellence as focus, we ensured TRACC Manufacturing Excellence programme which
that technicians provided prompt and reliable post-sales builds excellence on various pillars - Teamwork, Visual
ESG commitments
support, strengthening our offering to consumers. We Management, 5S, Focused Improvement, Asset Care,
have placed significant focus on operational performance Autonomous Maintenance, Quality and Safety, with
and thus concentrated on productivity enhancement strong bottom-up engagement of the entire teams. Your
through automation, mechanisation and training at our Company is focused on creating a sustained capability to
manufacturing plant in Baddi. The distribution structure manufacture products with the highest quality standards
has also been revamped to lower the costs of distribution. along with optimal resource utilisation and through
This helped the business reduce costs significantly and, the empowerment of teams on the shopfloor. Further,
along with the efficiencies of scale, enabled the business a curated “Manufacturing Excellence” programme was
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to ensure gross margins and also deliver overall profits also launched for our contract manufacturing partners.
for the year. Work on setting up a second manufacturing Maturity on Manufacturing 4.0 for your factories
facility for both the Kitchen and Bath businesses is near continued to scale up further. Real value creation
complete and will be commissioned in FY 2023-24. through data analytics by integrating IOT data with
other contextual data led to the creation of higher-order Employee event at UAE
Supply chain predictive analytics models in manufacturing. These have
During the year, Supply Chain networks across the world not only optimised manufacturing costs but also enabled
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– a major manufacturing hub. This led to two contrarian Five of our other plants are at Proactive stage and two
scenarios - manufacturing cost escalation and at the same of our newer plants are already at Calculative stage. especially in Asia and Africa. With high inflation, US Dollar shortages and record
time softening of demand, especially with China still under Further, three of your Company's plants viz. Khandala, interest rate hikes, a series of price increases were pushed
stringent restrictions. After the initial spike in commodity Kasna and Patancheru received the 'Sword of Honour' as Operating environment through all markets to ensure margins are not significantly
prices, most raw material prices saw a softening trend, recognition for reaching the pinnacle of health, safety and During FY 2022-23, the COVID-related restrictions were impacted. At the same time, working capital management
with most bottoming out in the third quarter. We actively environment management. completely lifted across all economies that we operate and overhead cost optimisation initiatives were at the
collaborated with all key suppliers through strategic in. This allowed for global travel to resume assisting forefront of all our Units to tackle the difficult conditions.
alignments undertaking multi-pronged actions to address in better collaboration across group entities. At the
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Across markets, our strategy was to capture new network
the challenges and yet deliver the reliability of service in same time, businesses had to face multiple headwinds, counters, enrol new contractors and improve consumer
the market to exacting standards. These actions resulted the most significant being the continued inflationary mind share. Growth in premium-luxury products played a
in operating the manufacturing processes with the least environment which impacted not only the procurement pivotal role and enabled deeper shop-shares in existing
hindrances and ensured a steady supply of products in of raw material and packing material but also all other critical and competitive retailers. We also continued
the market. operating costs. Interest rates increases to record highs in our focus on product value propositions and worked
many of the economies that we operate in and the broad- on launching/revamping products across markets,
From a demand servicing perspective, your company
Integrated Annual Report 2022-23
range strength of the USD against all emerging economy ensuring better quality and comprehensive offerings to
continued to deploy cutting-edge technologies that
currencies, especially in key markets of Egypt, Sri Lanka consumers. The waterproofing category continued to
continuously optimise the supply chain parameters and
and Bangladesh, further impacted the business conditions. expand well, ramping up our presence in a short duration
servicing. As the Company scaled into adjacent products, a
segmented supply chain has been created that is tuned to Sri Lanka experienced its worst economic crisis with an with a spurt of new product launches and activations
address the nuances of specific product streams. This year acute shortage of essential goods, severe power cuts, and intensive contractor and retailer training, drawing
we delivered the highest-ever ‘Day Zero’ service levels in high inflation, and political unrest. A series of fiscal and lessons and synergy from your Company's well-established
an ever-expanding distribution network covering dealers, non-fiscal measures were undertaken by the Sri Lanka waterproofing portfolio in India. The Safe Painting Service,
distributors and direct-to-site deliveries. Emerging government to ensure confidence build-up and funding rolled out in FY 2020-21 across most of the geographies
logistics ecosystems including multi-modal shipment support from International Monetary Fund (IMF). During continued to do well. Décor and painting solutions
routes were leveraged on identified lanes which not only the year, the Egyptian Pound depreciated by close to 66% offered under this umbrella have been well-appreciated,
optimised costs but were also carbon positive. and even the Bangladesh Taka depreciated significantly in revolutionised customer experiences and have helped us
the first half and remained in a secular depreciating trend create a strong differentiator vis-à-vis competition.
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Asian Paints Limited
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Management Discussion & Analysis
Overview
undertaken along with Contractors and other influencers. INDUSTRIAL BUSINESS IN INDIA
Your Company continues to evaluate all opportunities to Asian Paints operates in the Industrial Coatings segment
optimise its presence in the large, though fragmented through two 50:50 JVs with PPG Industries Inc. USA – PPG
ESG commitments
paint market in Indonesia. Asian Paints Pvt. Ltd. (PPG-AP) and Asian Paints PPG Pvt.
Africa: In Egypt, US Dollar shortages impacted operations Ltd. (AP-PPG). Of the total industrial paint demand, about
and a series of price increases were undertaken in line two-thirds come from the automotive sector.
with competition enabling a lesser dent in margins. The Automotive, industrial, refinish, packaging and
institutional segment was an area of focused effort and we marine coatings
were able to take our engagement with major institutional
PPG-AP, the 50:50 JV of the Company with PPG Industries
customers to a higher level across the paint, waterproofing
Inc., USA, is one of the largest industrial coatings
& construction chemicals range. We were also able to
Fundamentals
suppliers in India, manufacturing and trading in paints,
grow our Safe Painting Service offering, providing a good
Spectra launch at Asian Paints Causeway, Lanka coatings and adhesives and sealants for automotive
opportunity for delivering more innovative products
Original Equipment Manufacturers (OEMs), industrial
to customers and enhancing the brand image. On the
segments, automotive refinish segment, packaging and
Asia (South Asia and Indonesia): Nepal, one of our larger profitability front, there were continued challenges due to
marine segments.
international units, had a strong first half but were later intense competitive pressures and inflationary conditions.
impacted by uncertainties around elections and lack of Operating environment
The Ethiopia market showed signs of recovery after the
liquidity. Strong work in the Luxury category and working
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the Safe Painting Service brand by working with large and inflation was high, the units in the Middle East were able Business performance
medium-sized painting contractors as well as ramping to take adequate price increases protecting margins. Cash
PPG-AP registered double-digit growth in terms of
up our presence in the Projects segment. The second flow issues though, have been a cause of concern across
revenue across segments along with good improvement
manufacturing plant in the country with an initial capacity various customer categories in the market which required
in profitability. The first half of the year witnessed steep
of 25,000 KL/annum was commissioned and scaled up focused efforts to handle the ensuing pressure. Business in
raw material inflation while the second half saw some
during the year. Profitability remained a challenge through waterproofing & construction chemicals continued to see
of this pressure abetting. Currency depreciation further
the year on the back of high inflation and interest costs. good expansion, with a large number of products being
added pressure on the bottom line. Price increases
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launched in both retail as well as institutional segments.
Your Company took unprecedented measures to counter across businesses supported the topline growth as well
Further, investments have been made in engaging
the impact of runaway inflation experienced in Sri Lanka as improvement in margins. Innovation in formulation,
with contractors and consultants to create a long-term
as a result of the economic and political turmoil in the sourcing efficiency and other cost optimisation efforts
partnership. The Protective Coating and Project business
island country, taking steep price increases and sharply helped further in improving profitability. PPG-AP
segment also performed well in the UAE. The Oman
optimising overhead expenses to protect resources. continued to focus on its R&D capabilities to innovate,
unit grew steadily throughout the year with gains in the
Despite these external challenges, the unit continued to leverage technological support from both its parents,
Premium-Luxury category. And while retail business was
work on its strategic focus areas, pushing its reach in the PPG Industries Inc. USA and Asian Paints, and provide a
Integrated Annual Report 2022-23
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Asian Paints Limited
137
Management Discussion & Analysis
Overview
Operating environment Internal control systems and
The government’s thrust on capital expenditure their adequacy
ESG commitments
particularly in infrastructure and renewable energy sectors
The Company has designed and implemented detective control to automated preventive controls. The updated during the year and is available on the Company’s
led to strong growth in demand for Industrial Coatings.
robust internal control systems in line with Company has a strong compliance management system website. The risk-based internal audit plan covering
Production Linked Incentive (PLI) schemes and China plus
the nature, size, geographical spread and to monitor the compliance status online and to update key business processes and establishments is approved
one strategy opted by global manufacturers supported
complexities of business operations. Internal compliance requirements with the latest changes in by the Audit Committee. This Committee periodically
capital investments. Manufacturing activity, though,
control policies and procedures are designed statutes and business operations. The Company has laid reviews the adequacy and effectiveness of the Company’s
remained subdued throughout the year with inflationary
to provide reasonable assurance towards the out a process for business plan approval and periodic a internal financial controls and the implementation of
pressures and resultant weak consumer sentiment,
effectiveness and efficiency of its operations, review including review of business performance, capital audit recommendations.
especially in the second half of the year.
reliability of financial reporting, compliance with and revenue expenditure and new business investments.
Fundamentals
applicable laws and regulations, prevention and The Company’s shared service centre plays an active role ENTERPRISE RISK MANAGEMENT
Business performance
detection of frauds & errors and Safeguarding of in driving uniform policies and compliance by actively Our business and operations are subject to risks and
AP-PPG registered robust growth in revenue across market its assets. leveraging new technologies with efficiency and delight. uncertainties that can have both short-term and long-
segments. The Company’s expanded product portfolio,
The Company has a strong governance structure The Company's key functions and processes are term implications. The constantly evolving business
distribution reach and influencer engagement with
with related authorities and responsibilities certified with ISO 9001, ISO 14001, ISO 45001 and environment, evolving customer preferences, and updated
support from the parents, propelled the growth trajectory.
assigned to the Committees of the Board, ISO 27001 focused towards control systems towards compliance landscape have led to significant changes
Introduction of high-end products, the proliferation of
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standards and improved delivery capabilities helped the operating effectiveness. Compliance with
Company improve its position in the industry, gaining policies and procedures is an integral part of the
share across all business segments. KEY RATIOS
management review process. The Company’s
Steep inflation in raw material prices was seen in the first ERP, system infrastructure and checks are Standalone Consolidated
Ratios
half of the year. Quick actions taken in the area of price integral parts of the internal control system. The FY 2022-23 FY 2021-22 FY 2022-23 FY 2021-22
increases, product mix enhancement and cost savings Company has been leveraging data analytics, Debtors turnover ratio 9.4 10.6 8.1 9.0
measures helped the Company to protect its margins. predictive and visualisation tools to identify
Financial statements
Inventory turnover ratio (on cost of goods sold) 3.5 3.7 3.4 3.7
Overall, AP-PPG registered good growth in terms of data exceptions and trends for minimising
errors and avenues to improve the processes. Interest coverage ratio 158 202.2 72.0 45.8
revenue along with a significant rise in profits.
Active efforts are invested to move from manual Current ratio 2.4 2.3 2.1 2.0
Debt equity ratio* 0.006 0.001 0.062 0.056
Operating margin ratio(%) 21.1% 20.0% 19.3% 17.8%
Net profit margin(%) 13.6% 12.4% 12.2% 10.6%
Integrated Annual Report 2022-23
For Standalone
* Increase in borrowing (interest free loan from state governments) during the year has resulted into higher debt equity ratio.
**RONW has decreased in FY 2022-23 by 15% mainly on account of increase in retained earnings.
For Consolidated
^RONW has decreased in FY 2022-23 by 21% mainly on account of increase in retained earnings.
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