KARNATAKA UNIVERSITY

DHARWAD
A PROJECT REPORT

ON

“A COMPARATIVE STUDY ON FINANCIAL PERFORMANCE

OF ASIAN PAINTS PVT LTD”
SUBMITTED TO

KARNATAKA UNIVERSITY DHARWAD

In partial fulfillment of the

Requirement for the Award of Degree of

Bachelor of Commerce
Submitted By
Mr. SUHEEL HAMPAPATTANA

Reg.No(U02HK21C0110)

B.Com 6th Sem

Under the Guidance of

MOHAMAD SHAFI. A. VADDO ASSISTANT PROFESSOR
GFGC, RANEBENNUR
 Government of Karnataka
Department of colligate education
GOVERNMENT FIRST GRADE COLLEGE
(AFFILIATE KARNATAKA UNIVERSITY, DHARWAD)
Ranebennur -581115
Dist-Haveri

CERTIFICATE
This is to certify that the research project entitled “A COMPARATIVE STUDY
ON FINANCIAL PERFORMANCE OF ASIAN PAINTS PVT LTD” is the
bonified research were carried out by Mr. SUHEEL HAMPAPATTANA bearing
Reg.No.U02HK21C0110. Final year student of this college during 2023-2024.
Under the guidance of Department of Commerce.

Signature of CO-ORDINATOR Signature of HOD

MOHAMAD SHAFI. A. VADDO Asst. Prof. Dr. RAMESH RATHOD

Department of Commerce, GFGC, Ranebennur Department of Commerce, GFGC, Ranebennur

 ACKNOWLEDGEMENT

A successful project is a fruitful culmination of efforts by many people, some were directly
involved, some others quietly encouraged and supported from the background. A project is not
complete if one fails to acknowledge all these individuals who have been instrumental in the
successful completion of the project.

I express my deep and sincere gratitude to Department of Commerce, Government First

Grade College, Ranebennur, which provided me the opportunity in fulfilling my most cherished
desire of reaching goals.

I would like to hereby express my sincere gratitude to everyone who had a part in making
the undertaken project a successful one. I am thankful to Dr. S K PATIL, Principal, Government
First Grade College, Ranebennur for his constant co-operation and support.

I am thankful to Dr. RAMESH RATHOD, HOD, Department of Commerce, GFGC,

Ranebennur for his constant co-operation and support.

I am thankful to my Project Guide and Project Coordinator MOHAMAD SHAFI. A.

VADDO Asst. Prof. Department of Commerce, GFGC, Ranebennur for helping me to finalize the
nature and site of my project work and for her valuable guidance, constant encouragement, support
and suggestions for improvement.

I am thankful to my parents, other teaching and non-teaching members of the Department

of Computer Science and engineering for their constant co-operation and support.

By,

SUHEEL HAMPAPATTANA [U02HK21C0110]

 DECLARATION

I, SUHEEL HAMPAPATTANA [U02HK21C0110] student of 6th semester, Bachelor of

Commerce, Government First Grade College, Ranebennur, hereby declare that the project work
entitled “A COMPARATIVE STUDY ON FINANCIAL PERFORMANCE OF ASIAN
PAINTS PVT LTD” has been successfully submitted to the Karnataka University, Dharwad, during the
academic year 2023-2024, is a record of an original work done by me under the guidance of MOHAMAD
SHAFI.A.VADDO Asst. Prof., Department of Commerce. This project work is submitted in the partial
fulfillment of the requirements for the award of the degree of Bachelor of Commerce. The results
embodied in this report have not been submitted to any other University or Institute for the award of any
degree.

Date:

Place: Ranebennur.
Project Associate,
SUHEEL HAMPAPATTANA [U02HK21C0110]
LIST OF CONTENTS
CHAPTERS CONTENTS PAGE NO
CHAPTER 1 INTRODUCTION 1
1.1 Background of the study 2
1.2 Statement of the problem 3
1.3 Relevance and scope of the study 3
1.4 Objectives of the study 3
CHAPTER 2 PROFILE OF PAINT INDUSTRY IN INDIA 4
2.1 Business Process of The Study 5
2.2 Market Demand and Supply-Contribution To GDP- 8
Revenue Generation

CHAPTER 3 METHODOLOGY OF THE STUDY 11

3.1 Research Approach and design 12
3.2 Sources of online data 12
3.3 Data analysis tools 12
3.4 Report structure 12
3.5 Limitation of the study 13
CHAPTER 4 DATA ANALYSIS, INTERPERATION, INFERENCE 14

CHAPTER 5 FINDINGS 35

CHAPTER 6 CONCLUSION 37
CHAPTER 1
INTRODUCTION
 INTRODUCTION
The analysis of financial statements is the process of evaluating the relationship between
parts of the financial statements to obtain a better understanding of the firms’ performance and
position. Financial statements are annual documents prepared by the organization for periodical
review on the progress by the management and deal with the status of investment in the
organization and results achieved during the period under review. Finance is the lifeblood of every
business enterprise. It is one of the basic foundations of all kinds of economic activities. Business
needs money to make more money it is possible only when it is properly managed. The objective
of financial management is the maximization of profit. To achieve this objective, various important
decisions are taken by the manager. Analysis of financial performance is essential for making a
business decision. A subjective measure of how well a firm can use assets from its primary mode
of business and generate revenues. This term is also used as a general measure of a firm's overall
financial health over a given period and can be used to compare similar firms across the same
industry or to compare industries or sectors in aggregation. There are many different ways to
measure financial performance, but all measures should be taken in aggregation. Line items such
as revenue from operations, operating income, or cash flow from operations can be used, as well
as total unit sales. Furthermore, the analyst or investor may wish to look deeper into financial
statements and seek out margin growth rates or any declining debt. The analysis of financial
statements is an important aid to financial analysis. They provide information on how the firm has
performed in the past and what is its current financial position.

The Asian Paints is India’s 1st largest, Asia’s 3rd largest and the world’s 9th largest paint
company. It has been setting a high standard of operational efficiency, management, world-class
innovation and technological vision for the last 7 years.

In this study, an attempt is made to identify the financial strength and weakness of the firm by
properly establishing a relationship between the items in the balance sheet and the profit and loss
account of Asian paints Limited for the past five years

1
1.1 BACKGROUND OF THE STUDY
Although performance systems can play a key role in communicating, evaluating, and rewarding
the achievement of strategic objectives. One of the primary critics of performance measurement
systems is that they are generally limited to financial indicators, thereby focusing the organization
on past performance and encouraging a short-term view of strategic objectives.
Investors and others stakeholders who have tremendous interest in every business, evaluate the
business and make quality investment decisions based on the financial performance of such
entities. Investors will have some level of assurance in the soundness of the management of their
investments which will be the basis for further capital investments and can focus most of their
efforts on how to improve their capital management in a different economic environment.
Finance is the lifeblood of the business. Financial management is the study of the process of
procuring and judicious use of financial resources in a view to maximizing the value of the firm.
Financial performance analysis means establishing a relationship between the items in the balance
sheet and profit and loss account for determining the financial strength and weakness of the firm.
The study entitled to know the financial position of the company that helps in making a sound
decision by analysing the recent trend.
In this study, an attempt is made to identify the financial strength and weakness of the firm by
properly establishing a relationship between the items in the balance sheet and the profit and loss
account of Asian paints Limited for the past five years. The study aims to analyse the liquidity,
profitability, solvency position of the company. The changes can be observed by comparison of
the balance sheet at the beginning and the end of a period and these changes can help in forming
an opinion about the progress of an enterprise. The present study attempted to discuss the financial
performance of the company.
For this purpose, the relevant secondary data from the study units for five years and data were
analysed. The most common methods used for financial statement analysis are trend analysis,
common‐size statements, and ratio analysis. These methods include calculations and comparisons
of the results to historical company data, competitors, or industry averages to determine the relative
strength and performance of the company being analysed.

2
1.2 STATEMENT OF THE PROBLEM
The financial statements reveal a true and fair view of the financial position of a concern. The
analysis of financial statement is a process of evaluating the relationship between the component
parts of financial statement to obtain a better understanding of the firm’s position and performance.
To evaluate the company’s profitability, liquidity, efficiency and solvency using the financial
statements. To take certain important decisions for their business various users like managements
of the companies, bankers, investors and creditors etc. uses the accounting ratios for analysing the
financial position

1.3 RELEVANCE AND SCOPE OF THE STUDY

Financial statement analysis is prepared primarily for decision-making. They play a dominant role
in setting the framework and managerial conclusion and can be drawn from these statements is of
immense use in decision-making through analysis and interpretation of financial statements. Every
business undertaking needs finance for its smooth working. It has to raise funds from the cheapest
and risky source to utilize this most effectively. So, every company will be interested in knowing
its financial performance.
The present study titled “Financial Performance Analysis of Asian Paints” has been carried out to
find the liquidity, solvency, profitability, and efficiency of Asian paints Limited. It is hoped that
the study would be beneficial to Wipro Limited in particular and all stakeholders in general. The
study aims to analyze the liquidity, profitability, solvency position of the company.

1.4 OBJECTIVES OF THE STUDY

• To analyze and evaluate the financial performance of Asian paints Limited for five years.
• To measure the short-term and long-term financial liquidity, solvency, profitability, and activity
ratio.
• To estimate the financial trend of the company in terms of profit, sales, and expenses.
• To prepare comparative and common size statements of the company.

3
 CHAPTER 2
PROFILE OF INDIAN PAINT INDUSTRY

4
2.1 BUSINESS PROCESS OF INDIAN PAINT INDUSTRY
The Paints and Coatings Industry is one of the most heavily regulated industries in the world. The
sector consists of manufacturers of paints, varnishes, lacquers, shellacs, stains and a variety of
other specialty coatings. The Indian Paint Industry is estimated to be Rs.50,000 Crores industry.
The paint industry can be broadly classified into the Organized & the Unorganized sector. The
unorganized sector controls around 20%-30% of the paint market accounting for the balance. Most
of the organized companies in India’s paint market have a nationwide presence with multi-location
manufacturing facilities. The companies in the unorganized sector are mostly regional and deal in
low value products and have been consistently losing market share to the organized sector. Till
FY17, organized players had a market share of about 65%. However, post GST application, the
organized players are recapturing market from unorganized players with share of organized players
increasing to about 80% now.

The top players in the organized sector of paint industries are

 Asian Paints Limited (APL)

 Kansai Nerolac Paints Limited (Kansai),
 Berger Paints India Limited (Berger)
 Akzo Nobel India Limited (Akzo)

These companies are holding majority of market share, they which together account for about 70%
of the market share.

The raw materials majorly used are resins (binders), pigments, solvents and additives. One of the
key pigments widely used is titanium dioxide (TiO2) which is mostly imported. This along with
other raw materials like phthalic anhydride, pentaerythritol, methyl methacrylate, aromatics, etc,
which act as binders, solvents and additives, are derivatives of crude oil.

5
 Fig 1. Cost structure of Organised Companies in the industry

The above graph reflects a volatile trend in the raw materials cost as a percentage of total
operating income over the previous three years which is mainly due to raw material price linkage
with movement in crude oil prices as well as foreign exchange fluctuation. Given that input cost
as a percentage of sales accounts for about 50-55%, it is inevitable that any price hikes in the
mentioned commodities will have a major impact on the profitability and the resilience of paint
and coatings companies. Titanium dioxide pigment, forming around 25% of the total content of
paint, is by far the most important material used by the paints industry due to its whiteness, opacity
and refractive index ability i.e. its ability to bend and scatter light. Further, it would be interesting
to note the impact of movement in crude oil prices on RMC of paint companies. Given that nearly
50% of raw materials used by paint companies are crude oil derivatives and account for about 30-
35% of the total raw material cost of the sector, the volatile raw material costs pose a risk to the
profitability of paint and coatings manufacturers. As can be seen in the graph below, there is
negative correlation between Operating Profit Margins of major players in the industry and the
price of Brent Crude Oil. Most of the large paint manufacturers, in a bid to offset the increasing
costs announce price increase in paints but the same generally happens with a time lag. It has been
observed that there is generally a lag of about a quarter when paint prices follow the movement in
raw material prices.

Also there’s a growing tendency among the paint companies to incline towards manufacturing
water based paints which are less sensitive to movement in crude oil prices. Besides, the preference

6
for these paints over solvent paints is also rising among customers because of ease to clean walls
and increasing demand of these paints from building & construction and automotive sector owing
to their good corrosion protection and high gloss properties, over other types. This has led to
focus by most of the paint companies to consistently increase the share of water-based paints in
their portfolio which is expected to aid margin growth in the long term. Having said that the
demand for oil/solvent based paints will always remain, hence exposure to price fluctuations in
crude oil cannot be eliminated completely.

Asian Paints and its Business Model

Asian Paints is India’s 1st largest, Asia’s 3rd largest and the world’s 9th largest paint company.
It has been setting a high standard of operational efficiency, management, world-class innovation
and technological vision for the last 7 years.

The paint industry is divided mainly into two segments viz. Decorative and Industry. The
Decorative segment includes household paints (interior wall finishes, exterior wall finishes,
enamels and wood finishes) and is undeniably dominated by Asian Paints in India. The Industry
segment includes industrial paints, automotive coatings, OEM paints, powder coatings etc., in
which Asian Paints comes at 3rd place after KensaiNerolac and Akzo Nobel.

The decorative segment is less technology-dependent due to which some unorganized players
also eat up a small fraction of the market share. However, the industry segment is highly
technology-dependent and entirely have organized players.

Asian Paints holds a global presence by operating in 15 different countries and owning 26 paint
manufacturing plants across the globe. In India, it has a robust distribution network of suppliers.
To improve its margins and operational efficiency, the company chose dealers over distributors.

Currently, the company has 70,000+ shopkeepers across the nation. It has also been enhancing
its dealers for the past 40 years. Asian Paints has a phenomenal supply chain as it carries out
around 2.5 – 3 lakh deliveries per day and its trucks visit the dealers around 4 times a day.

7
2.2 MARKET DEMAND AND SUPPLY– CONTRIBUTION TO
GDP– REVENUE GENERATION

Demand for decorative paints depends on the housing sector and good monsoons. Industrial paint
demand is linked to user industries like auto, engineering and consumer durables. Supply exceeds
demand in both the decorative as well as the industrial paints segments.

Global demand for paint and coatings is forecast to increase 2.7% per year to 63.7 million metric
tons valued at $230 billion in 2024. Market advances will be driven by:

 rising personal incomes and improving housing conditions in the Asia/Pacific region 
 significant growth in manufacturing and construction activity in India 
 increasing DIY activity in developed countries, particularly in the US

The Indian paint industry grew at ~12% CAGR in FY09-19 to ~Rs.55000 crore led by decorative
paint segment (grew at 13% CAGR). Decorative paint comprises 75% of total paint demand in
India while industrial paint category (includes automotive, performance coatings/general industrial
and powder coating) comprises the remaining ~25%. The decorative paint demand would be
largely driven by shortening of repainting cycle, growing urbanisation and increased distribution
reach of organised players. The strong fundamentals of organised players and rising tax
compliance in India would help increase market share gain in the coming future from
unorganised/regional players. On the other hand, the industrial paint category is expected likely
to grow at a rate of 5% in FY19-22E on a favourable base with a gradual recovery in automotive
and industrials due to slow recovery in industrial output and automotive industry, going forward.
Increasing urbanisation in India coupled with rising income levels have resulted in progressively
increasing demand for housing, particularly quality housing, across Indian cities. This growing
demand for quality housing will drive demand for decorative paint demand.

A slowdown in industrial activity (IIP growth declined from 4.6% in FY17 to 3.8% in FY19 and
0.9% in April-February 2020) impacted industrial paint demand in the recent past. However,
various government measures, undertaken during the Covid-19 pandemic, such as low interest
rate, tax rate cut, etc, would fuel private capex in the coming period. This would help drive demand
for industrial paint in the coming future.

8
High correlation to GDP indicates robust future growth

Paint consumption is linked to the GDP of the country. Increased growth momentum in Indiawill
result in an increase in GDP, which, in turn, will result in an increase in consumption of paint.
There is high correlation between paint industry’s growth and GDP growth rate — paint industry
volumes grow at 1.5‐2.0x India’s GDP. As per calculations, the correlation between Berger’s
volume growth and India’s GDP growth rate is a strong 0.66x. With GDP expected to surge to
7.4%, 7.9% and 8.3% in FY16, FY17 and FY18, expect painting sector growth to be robust in turn
lending fillip to Asian paints volumes.

Relation between Paint Industry and GDP

 Income Level
Increase in GDP will accelerating standard of living. With rise in income level,
consumers will increase consumption which in turn will help the decorative segment.
 Housing Sector
Growth in housing sector will increase urbanisation, provide cheaper loans and
shift from semi – permanent to permanent housing structures will increase spending in
the decorative segment.
 Industrial Segment
The industrial segment can be further broken down into protective, general
industrial, automotive powder and marine coatings. This segment accounts for ~20% of
the paint industry's revenue.
 Infrastructure Investment
New projects in roads, buildings ,ports etc will increase revenues of paint industry
and drive the industrial segment.

9
 Fig 2. Paint sector sales have high correlation to GDP growth

Positive correlation between Paint industry and GDP

The paint industry runs parallel to the GDP and economy. Considered as discretionary spending,
as the GDP increases so does the spending capacity of the people. In the past, this industry has
seen double-digit growth in terms of both, value and volume, and this is why it has always traded
at premium valuations in emerging economies.

For the last two years, there has been a constant rise in the market share by organised players.
Currently, the ratio is around 70:30 between organised and unorganised players, and with the
technological innovation and proper GST implementation, this market share is expected to rise to
85% in the next couple of years.

The paint industry of India is expected to witness a phenomenal rise in the coming years
considering India’s latest per capita consumption (of around 4kg) as compared to that of the
world (15kg.) This data provides a vast scope for the paint industry to grow in India.

The paint industry is a raw material intensive industry. Especially in the case of India, most of
the raw materials are imported from other countries. With the government imposing import bans
and promoting the self-reliant mission, the supply is expected to come from within the country in
the coming years, which will be a boon to this industry and it will see a tremendous rise in
operational margins.

10
 CHAPTER 3
METHODOLOGY OF THE STUDY

11
3.1 RESEARCH APPROACH AND DESIGN

.Research design

The research design used in this project is analytical in nature. The study is primarily based on the
internal records and the annual records of the company. The researcher has to use facts or
information already available, and analyse these to make a critical evaluation of the performance.

3.2 SOURCES OF DATA

 Websites
 Books
 Magazines
 Articles and Journals
 Annual reports of the company
 Theoretical part from the reference books

3.3 DATA ANALYSIS TOOLS

 Ratio Analysis
 Trend Analysis
 Comparative Analysis:
 Common Size Statement:

3.4 REPORT STRUCTURE

This project work is divided into the following chapters:
 Chapter 1- Introduction.
 Chapter 2- profile Paint Industry
 Chapter 3- Review of Literature
 Chapter 4- Methodology of the study
12
  Chapter 5- Analysis of the financial Statements of Asian Paints
 Chapter 6- Findings of the Study
 Chapter 7- Conclusion.

3.5 LIMITATIONS OF THE STUDY

The study was conducted with the following limitations;

 The study has been based on secondary data sources, namely published financial
statements of the company. Therefore, the reliability of the ratios is linked to the
accuracy of information in these statements.
 The study is for a period of five years only. I.e. FY 2016-17 to 20-21.
 The study involves the use of various financial tools, which itself is having its own
limitations
 The ratio is calculated from past financial statements and these are not indicators
of the future.

13
 CHAPTER 4
DATA ANALYSIS, INTERPRETATION & INFERENCE

14
TOOLS USED FOR ANALYSIS

1. RATIO ANALYSIS

A. LIQUIDITY RATIO

4.1.1 CURRENT RATIO

Current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations.
In a sound business a current ratio of 2:1 is considered an ideal one. High ratio indicates sound
solvency and low ratio indicates inadequate working capital. Current ratio is an index of the firm’s
financial stability.

Current ratio = Current Assets/Current liabilities

Current Ratio = Current Asset/Current Liabilities

TABLE 4.1.1 CURRENT RATIO

YEAR CURRENT CURRENT CURRENT RATIO

ASSETS LIABILITIES
2016-17 5430.20 2875.93 1.89
2017-18 5501.09 3398.96 1.61
2018-19 6053.35 3841.41 1.57
2019-20 5825.70 3195.05 1.82
2020- 21 10089.38 4575.33 2.20
Average 1.81

Interpretation:

15
The above table shows that the current ratio in the year 2016-17 was 1.89,then decrease to 1.61 in
the following year, and then decreases and increases following years and finally it moves forward
to 2.20 in the last year. The ideal current ratio is 2:1. The above table shows that the current ratio
of the firm is lower than 2 % in all five years. But 2020-21 year it was 2.20

4.1.2 QUICK RATIO

This ratio is also known as Acid test ratio or Liquid ratio. It is the best measure of the liquidity of
the company. It shows the ability of business to meet its immediate financial commitments. Quick
ratio is more conservative than the current ratio. The quick asset is computed by adjusting current
asset to eliminate those assets which are not in cash.

Quick ratio /Acid Test Ratio = Quick Assets/Current liabilities

TABLE 4.1.2 QUICK RATIO

YEAR QUICK ASSET CURRENT QUICK RATIO

(Cr.) LIABILITY
(Cr.)
2016-17 3236.11 2875.93 1.12
2017-18 3322.66 3398.96 0.977
2018-19 3468.25 3841.41 0.902
2019-20 2998.23 3195.05 0.938
2020- 21 6964.77 4575.33 1.52
Average 1.09

Interpretation:

Quick ratio is the test of business solvency. The standard quick ratio is 1:1. A higher ratio indicates
sound financial position, here the ratios are 1.12,.00.97,.90,.93,1.52and the average ratio is 1.09.
In 2020 -21 and 2016-17 company has in sound financial position.

16
4.1.3 ABSOLUTE LIQUIDITY RATIO
This is also known as super quick ratio or cash ratio. In calculating this ratio, both inventories and
receivables are deducted from the current assets to arrive at absolute liquid asset such as cash, bank
and easily marketable investments in securities. The ideal Absolute liquidity ratio is 1:2 Higher
the ratio, the higher is the cash liquidity.

Absolute Liquidity Ratio = Cash + Marketable securities

Current Liabilities

TABLE 4.1.3 ABSOLUTE LIQUIDITY RATIO

YEAR ABSOLUTE CURRENT ABSOLUTE
LIQUID ASSET LIABILITY LIQUIDITY
(Cr.) (Cr.) RATIO
2016-17 1521.34 2875.93 .528
2017-18 1150.85 3398.96 .338
2018-19 1314.15 3841.41 .342
2019-20 808.41 3195.05 .253
2020- 21 3313.72 4575.33 .724
Average 0.437

Interpretation:

The acceptable norm for this ratio is 2:1 to attain liquidity position. Liquidity ratio is low from
2016-2021. When ratios are less than required number company fails to manage day to day cash
management progression

17
B) SOLVENCY RATIO

4.1.4 DEBT EQUITY RATIO

This ratio indicate the relative proportion of debt and equity in financing the assets of a firm. An
acceptable norm for this ratio is considered to be 2:1. A high ratio shows that the claim of creditors
are greater those of owners. From the point of view of the company, the lower this ratio, the less
company has to worry in meeting its fixed obligations.

Debt equity ratio = Outsider Funds (Total Debts)/Shareholder Funds or

Equity

TABLE 4.1.4 DEBT-EQUITY RATIO

YEAR DEBT EQUITY DEBT-EQUITY

(Cr.) (Cr.) RATIO

2016-17 387.35 95.92 0.247

2017-18 390.81 95.92 0.245
2018-19 998.52 95.92 0.096
2019-20 939.28 95.92 0.102
2020- 21 916.24 95.92 0.104
Average 0.158

Interpretation:

An acceptable norm for this ratio is considered to be 2:1. A high ratio shows that the claims of
creditors are greater those of owners. A very high ratio is unfavourable from the point of view of
the firm.

18
 4.1.5 PROPRIETARY RATIO

The proprietary ratio relates to the shareholders’ fund to total assets. This ratio shows the long-
term solvency of the business. The total assets include all assets including goodwill (excluding
fictitious assets). The acceptable norm of the ratio is 1:3. A high proprietary ratio indicates a strong
financial position of the company and greater security for creditors. A low ratio indicates that the
company is already heavily dependent on debts for its operations.

Proprietary Ratio = Shareholders Fund / Total Assets

TABLE 4.1.5 PROPRIETARY RATIO

YEAR SHAREHOLDERS TOTAL ASSET PROPRIETARY

FUND RATIO

2016-17 7094.75 10358.03 0.684

2017-18 7798.16 11587.93 0.672
2018-19 8842.96 13682.89 0.646
2019-20 9453.29 13587.62 0.695
2020- 21 12091.10 17582.67 0.687
Average 0.676

Interpretation:

The proprietary ratio is computed for the purpose of knowing how much funds have been
provided by the shareholder towards the total asset. A high ratio indicates safety to the creditors
and low ratio shows greater risk to the creditors. The acceptable norm of the ratio is 1:3. But the
company shows the proprietary ratio less than that of the general ratio, and the average ratio of
the company is 0.676.

19
 4.1.6 FIXED ASSET TO NET WORTH RATIO
This ratio shows the relationship between fixed assets and shareholders fund. The purpose of this
ratio is to find out the percentage of the owners fund is invested in fixed assets such as property,
plant and equipment, and the extent to which funds are available for the company’s operation. If
the ratio is greater than 1, it means that creditor’s funds have been used to acquire a part of the
fixed assets.

Fixed assets to net worth ratio = Fixed Assets / Shareholders fund

Table 4.1.6 FIXED ASSETS TO NET WORTH RATIO

YEAR FIXED ASSET SHAREHOLDERS RATIO

(Cr.) FUND (Cr.)

2016-17 2824.44 7094.75 0.398

2017-18 3960.37 7798.16 0.507
2018-19 5400.51 8842.96 0.610
2019-20 5068.95 9453.29 0.536
2020- 21 4712.72 12091.10 0.389
Average 0.488

Interpretation:

If the ratio is greater than one, it means that creditors fund have been used to acquire a part of
fixed asset. The average ratio of the company is 0.488, here the ratios are not satisfactory.

20
C) ACTIVITY RATIO

4.1.7 FIXED ASSET TURNOVER RATIO

This ratio measures a company’ ability to generate sales from its investments in fixed assets such
as plant and machinery, land and building etc. Generally, a high ratio indicates efficient utilization
of fixed assetsin generating sales and low ratio may signify that the firm has an excessive
investment in the fixed assets.

Fixed assets turnover ratio = Net sales/ Fixed asset

TABLE 4.1.7 FIXED ASSET TURNOVER RATIO

YEAR NET SALES FIXED ASSET RATIO

(Cr.) (Cr.)

2016-17 12488.81 2824.44 4.421

2017-18 13937.48 3960.37 3.519
2018-19 16209.44 5400.51 3.001
2019-20 17025.61 5068.95 3.358
2020- 21 18516.86 4712.72 3.329
Average 3.525

Interpretation:

Fixed asset are used in the business for producing goods to be sold. The effective utilization of
fixed asset will result in increased production and reduced cost. And average ratio of company is
3.525which means firm effectively and efficiently uses its assets to generate revenue.

21
 4.1.8 CURRENT ASSET TURNOVER RATIO

Current assets ratios indicate the efficiency with which current assets turns into sales. A high
ratio implies that the current assets are being utilized efficiently by the firm and also indicates
reduced lock up of funds in current assets. An analysis of this firm over a period of time reflects
working capital management of the firm.

Current Asset Turnover Ratio = Net Sales/ Current assets

TABLE 4.1.8 CURRENT ASSET TURNOVER RATIO

YEAR NET SALES CURRENT ASSET RATIO

(Cr.) (Cr.)

2016-17 12488.81 5430.20 2.292

2017-18 13937.48 5501.09 2.533
2018-19 16209.44 6053.35 2.677
2019-20 17025.61 5825.70 2.922
2020- 21 18516.86 10089.38 1.835
Average 2.450

Interpretation:

It shows the overall sale of the company was higher than the current asset of the company.

22
 4.1.9 WORKING CAPITAL TURNOVER RATIO
This ratio reflects the turnover of the firm’s net working capital in the year. It is a good measure
of over - trading and under – trading.

Working capital Turnover Ratio = Net Sales / Income

Working Capital

TABLE 4.1.9 WORKING CAPITAL TURNOVER RATIO

YEAR NET SALES WORKING RATIO

(Cr.) CAPITAL
(Cr.)
2016-17 12488.81 2554.27 4.889
2017-18 13937.48 2102.13 6.630
2018-19 16209.44 2211.94 7.328
2019-20 17025.61 2630.65 6.472
2020- 21 18516.86 5514.05 3.358
Average 5.734

Interpretation:

Fluctuation in the working capital due to the variation of net working capital shows that the need
of consistent working capital management policy. The highest working capital is 7.702 in 2018-
19 and lowest is 3.358 in last year and average Woking capital turnover ratio is 6.354.

23
4.1.10 CAPITAL TURNOVER RATIO
Capital turnover ratio shows how much sales are entertained from the capital.A high capital
turnover ratio indicates the capability of the organization to achieve maximum sales with minimum
amount of capital employed.

Capital Turnover Ratio = Net sales / Shareholders fund

4.1.10 CAPITAL TURNOVER RATIO

YEAR NET SALES SHAREHOLDERS RATIO
(Cr.) FUND
(Cr.)
2016-17 12488.81 7094.75 1.760
2017-18 13937.48 7798.16 1.787
2018-19 16209.44 8842.96 1.833
2019-20 17025.61 9453.29 1.801
2020- 21 18516.86 12091.10 1.531
Average 1.742

Interpretation:

The above table shows the relationship between the sales and proprietors funds. During 2018-19
the capital turnover ratio is high 1.833 and it indicates the capability of the organization to achieve
maximum sales with minimum amount of capital employed.

24
 PROFITABILITY RATIOS

4.1.11 GROSS PROFIT RATIO

The gross profit ratio plays an important role in two management areas. In the area of financial
management, the ratio serves as a valuable indicator of the firm ability to utilize effectively
outside source of funds. The ratio expected the relation between the gross profit and sales

Gross Profit Ratio = Gross Profit /Net sales *100

TABLE 4.1.11 GROSS PROFIT RATIO

YEAR GROSS PROFIT NET SALES / GROSS PROFIT

INCOME RATIO
2016-17 14162.13 12488.81 113.39
2017-18 14329.17 13937.48 102.81
2018-19 16209.44 16209.44 100
2019-20 17025.61 17025.61 100
2020- 21 18516.86 18516.86 100
Average 103.24

Interpretation:

Mostly higher gross profit ratio is considered better. The above table shows the relationship
between the gross profit and net sales in percentage. The gross profit is high at the year of 2016-
17 the ratio is 113.39

25
 4.1.12 NET PROFIT RATIO

Net profit ratio is a measure of the overall profitability. A firm with a high net profit ratio is in an
advantageous position to survive in the face of rising cost of production and falling selling prices.

Net profit margin or ratio = Net Profit / Net Sales

TABLE 4.1.12 NET PROFIT RATIO

YEAR NET PROFIT NET SALES RATIO

(Cr.) (Cr.)
2016-17 2656.72 12488.81 0.212
2017-18 2865.83 13937.48 0.205
2018-19 3170.25 16209.44 0.195
2019-20 3413.03 17025.61 0.200
2020- 21 4090.38 18516.86 0.220
Average 0.206

Interpretation:

This ratio is used to measure the overall profitability and hence it is very useful to proprietors.
Company earned a high net profitability at the time of 2020-21 the ratio is 0.220

26
 4.2 TREND ANALYSIS
Trend signifies tendency. Trend ratio is also an important tool of horizontal financial analysis.
Under this technique of financial analysis, the ratios of different items for various periods are
calculated and then a comparison is made.
TABLE 1 TREND ANANLYSIS

YEAR X Y XY X2

2016-17 1 2656.72 2656.72 1

2017-18 2 2865.83 5731.66 4
2018-19 3 3170.25 9510.75 9
2019-20 4 3413.03 13652.12 16
2020- 21 5 4090.38 20451.9 25
Total 15 16196.21 52003.15 55

Net Profit
5000

4000

3000

2000

1000

0
2016-17 2017-18 2018-19 2019-20 2020- 21

Net Profit Series 2 Series 3

Fig. 4. Net profit trend from 2017 to 2021

Interpretation: The net profit shows a gradual increase from 2016-2017 and reaches the
maximum in the year 2020-2021

Estimated Profit

Y= a + bX
27
Where,
b= 𝑁Σ𝑥𝑦 − Σ𝑥Σ𝑦
N ∑x2 - ∑ (x)2
b= 5*52003.15-15*16196.21
5*55-15*15

b= 341.45

a=
a = ∑Y - b (∑X)
N
= 16196.21-341.45*15
5
=2214.90

Estimated profit of next five years are:

 2021-2022

Y= a+bX

= 2214.90 + 341.45*6
= 4263.6

 2022- 2023

Y= 2214.90 + 341.45*7
= 4605.05

 2023- 2024

28
Y = 2214.90 + 341.45*8
=4946.5

 2024-2025
Y= 2214.90 + 341.45*9
=5287.95

 2025-2026

Y= 2214.90 + 341.45*10
= 5629.4

Table 4.1.1
Estimated profit from 2021-2022 to 2025-2026

Year Profit

2021-2022 4263.6
2022-2023 4605.05
2023-2024 4946.5
2024-2025 5287.95
2025-2026 5629.4

29
 6000 Profit

4000

2000

0
2021-2022 2022-2023 2023-2024 2024-2025 2025-2026
Profit

Fig 5.Estimated profit from 2021-2022 to 2025-2026

Interpretation
The graph shows that the movement of net profit has a positive trend in the future.

30
 COMPARATIVE BALANCE SHEET OF 2016-17 and 2017-18

Particulars 2016-17 2017-18 Decrease / % in change

Increase

Liabilites

Total share 95.92 95.92 0 0

capital

Reserve and 6998.83 7702.24 703.41 10.05

surplus

Non current 387.35 390.81 3.46 0.89

liabilities

Current 2875.93 3398.96 523.03 18.18

liabilities

Total 10358.03 11587.93 1229.9 11.87

Assets

Fixed asset 2824.44 3960.37 1135.93 40.21

Non current 4927.83 6086.84 1159.01 23.51

asset
Current assets 5430.20 5501.09 70.89 1.30

Total 10358.03 11587.93 1229.9 11.87

31
 COMPARATIVE BALANCE SHEET OF 2017-18 AND 2018-19

Particulars 2017- 2018-19 Decrease / % in

2018 Increase change
Liabilites

Total 95.92 95.92 0 0

sharecapital
Reserve 7702.24 8747.04 1044.8 13.56
and surplus
Noncurrent 390.81 998.52 607.71 155.50
liabilities
Current 3398.96 3841.41 442.45 13.01
liabilities
Total 11587.93 13682.89 2094.96 18.07

Assets

Fixed asset 3960.37 5400.51 1440.14 36.36

Noncurrent 6086.84 7629.54 1542.7 25.34

asset
Current assets 5501.09 6053.35 552.26 10.03

Total 11587.93 13682.89 2094.96 18.07

32
 COMPARATIVE BALANCE SHEET OF 2018-19 AND 2019-20

Particulars 2018-19 2019- Decrease / % in

2020 Increase change
Liabilites

Total 95.92 95.92 0 0

sharecapital
Reserve 8747.04 9357.37 610.33 6.97
and surplus
Noncurrent 998.52 939.28 -59.24 -5.93
liabilities
Current 3841.41 3195.05 -646.36 -16.82
liabilities
Total 13682.89 13587.62 -95.29 -.69

Assets

Fixed asset 5400.51 5068.95 -331.56 -6.13

Noncurrent 7629.54 7761.92 132.38 1.73

asset
Current assets 6053.35 5825.70 -227.65 -3.76

Total 13682.89 13587.62 -95.29 -.69

33
 COMPARATIVE BALANCE SHEET OF 2019-20 AND 2020-21

Particulars 2019-2020 2020-2021 Decrease / % in

Increase change
Liabilites

Total 95.92 95.92 0 0

sharecapital
Reserve 9357.37 11995.18 2637.81 28.18
and surplus
Noncurrent 939.28 916.24 -23.04 2.45
liabilities
Current 3195.05 4575.33 1380.28 43.20
liabilities
Total 13587.62 17582.67 4035.05 29.69

Assets

Fixed asset 5068.95 4712.72 -356.23 -7.02

Noncurrent 7761.92 7493.29 -268.68 3.46

asset
Current assets 5825.70 10089.38 4263.68 73.18

Total 13587.62 17582.67 4035.05 29.69

34
 CHAPTER 5
FINDINGS OF THE STUDY

35
FINDINGS

 The current ratio of Asian paints India Ltd is not adequate. The average ratio for the period
2016-21 is 1.81. It is found that the liquidity position of the company is not satisfactory.
 The company has been obtained an average of 1.09, hence the quick ratio is satisfactory
 The average absolute liquidity ratio of the company is .437. It is found that the company
fails to manage its day to day cash management progression.
 The average debt-equity ratio is .158. This indicate that the claim of creditors are not
greater those of owners. A low debt-equity ratio is favourable to the company.
 The Proprietary ratio of the firm in very low, the average ratio is 0.676.This indicate that
the creditors will have no guarantee for their money
 Fixed assets to net worth ratio of the firm is below one. Here the rations are very much
satisfactory. We can conclude that company does not need to use creditors fund for
acquiring fixed asset
 Fixed assets to net worth ratio of the firm is below one. Here the rations are very much
satisfactory. We can conclude that company does not need to use creditors fund for
acquiring fixed asset
 The firm was able to maintain a good level fixed assets turnover ratio. The ideal ratio is
0.75:1 and the firm achieved an average of 3.525 , this ratio better for company
 Working capital ratio is 5.734, it is satisfactory for company. The working capital is the
difference between current assets and current liabilities
 Due to the pandemic the effective use of own capital fund is not well. The ratio of 2020-
21 is decreased from other year capital turnover ratios
 The net profit ratio measures the overall profitability and hence it is very useful to
proprietors. Here the ratio shows increasing trend, so operational efficiency of the concern
is good.

36
CHAPTER 6
CONCLUSION

37
CONCLUSIONS
Financial performance analysis is the process of identifying the financial strengths and weaknesses
of the firm by properly establishing the relationship between the items of balance sheet and profit
and loss account. A financial statement is an organized collection of data according to logical and
consist accounting procedures. An analysis of financial performance shows that the company’s
ability to meet its current obligation is not satisfactory. The study has been undertaken to the
objective of evaluating the financial performance of Asian Paints India Ltd. Specific objectives
has been set for the study and secondary data for the period of 5 years from 2016 to 2021 were
analysed. The findings of the study revealed that liquidity position of the company is poor and the
solvency position of the company is good. The trend shows positive growth for future period. The
points noted in the findings are important factors regarding the firm. The study came to the
conclusion that, the overall financial performance of the company is good.

38
BIBLIOGRAPHY

 Books
 Maheshwari S N, Financial Management, Eleventh Edition 2006, Sultan Chand and Sons,
Educational Publishers, New Delhi.

 Pandey I M, Financial Management, 9th Edition Vikas Publications House Pvt Ltd.

Reports

Annual accounts & reports of ASIAN PAINTS INDIA Ltd. from 2015-2016 to 2019-2020.
(money control.com.

 Websites and Journals

• www.paintsindia.com

• www.capitalmarket.com

• www moneycontrol.com

39
ANNEXURE

40
 BALANCE SHEET ON ASIAN PAINTS 2017 to 2021
Mar 21 Mar 20 Mar 19 Mar 18 Mar 17
EQUITIES AND LIABILITIES SHAREHOLDER'S FUNDS
Equity Share Capital 95.92 95.92 95.92 95.92 95.92
Total Share Capital 95.92 95.92 95.92 95.92 95.92
Reserves and Surplus 11,995.18 9, 357.37 8, 747.04 7, 702.24 6, 998.83
Total Reserves and 11,995.18 9 357.37 8, 747.04 7, 702.24 6, 998.83
Surplus
Total Shareholders’ 12,091.10 9, 453.29 8, 842.96 7, 798.16 7, 094.75
Funds

BALANCE SHEET ON ASIAN PAINTS 2017 to 2021

Mar 21 Mar 20 Mar 19 Mar 18 Mar 17
EQUITIES AND LIABILITIES SHAREHOLDER'S FUNDS
Equity Share Capital 95.92 95.92 95.92 95.92 95.92
Total Share Capital 95.92 95.92 95.92 95.92 95.92
Reserves and Surplus 11,995.18 9, 357.37 8, 747.04 7, 702.24 6, 998.83
Total Reserves and Surplus 11,995.18 9 357.37 8, 747.04 7, 702.24 6, 998.83
Total Shareholders’ Funds 12,091.10 9, 453.29 8, 842.96 7, 798.16 7, 094.75
NON-CURRENT LIABILITIES
Long Term Borrowings 14.31 18.50 10.89 9.87 10.38
Deferred Tax Liabilities [Net] 265.19 282.68 392.39 270.33 261.17

Other Long Term Liabilities 473.23 501.32 476.76 3.26 5.96

Long Term Provisions 163.51 136.78 118.48 107.35 109.84

Total Non-Current Liabilities 916.24 939.28 998.52 390.81 387.35

CURRENT LIABILITIES
Short Term Borrowings 0.00 0.00 4.35 0.00 26.84

41
 Trade Payable 2,814.30 1,760.08 2,062.29 1,851.50 1,671.26
Other Current Liabilities 1,703.12 1,390.8 1,722.50 1,504.61 1,141.63
Short Term Provisions 57.91 44.14 52.27 42.85 36.20
Total Current Liabilities 4,575.33 3,195.05 3,841.41 3,398.96 2,875.9
Total Capital And Liabilities 17,582.67 13,587.62 13,682.89 11,587.93 10,358.03
ASSETS NON-CURRENT ASSETS
Tangible Assets 4,712.72 4,875.23 2,477.44 2,512.01
5,131.23
Intangible Assets 0.00 85.63 89.97 91.09 92.67
Capital Work-In-Progress 0.00 108.09 179.31 1,391.84 219.76
Fixed Assets 4,712.72 5,068.95 5,400.51 3,960.37 2,824.44
Non-Current Investments 2,161.94 2,225.58 1,817.37 1,547.33 1,598.20
Long Term Loans and Advances 57.02 64.11 76.00 79.08 70.27
Other Non-Current Assets 561.61 403.28 335.66 500.06 434.92
Total Non-Current Assets 7,493.29 7,761.92 7,629.54 6,086.84 4,927.83
CURRENT ASSETS
Current Investments 3,178.81 432.35 1,146.63 1,030.01 1,315.40
Inventories 3,124.61 2,827.47 2,585.10 2,178.43 2,194.09
Trade Receivables 1,809.75 1,109.22 1,244.95 1,138.20 994.63
Cash And Cash Equivalents 134.91 376.06 167.52 120.84 205.94
Short Term Loans And 24.55 21.31 13.98 12.17 13.55
Advances
Other Current Assets 1,816.75 1,059.29 895.17 1,021.44 706.59
Total Current Assets 10,089.38 5,825.70 6,053.35 5,500.17 5,430.20

PROFIT AND LOSS OF ACCOUNT OF ASIAN PAINT OF 2016 TO 2021

Mar 21 Mar 20 Mar 19 Mar 18 Mar 17
INCOME Revenue
From Operations [Gross] 18,516.86 17,025.61 6,209.44 14,329.17 14,162.13
1

42
 Less: Excise/Service 0.00 0.00 0.00 391.69 1,713.32
Tax/Other Levies
Revenue From Operations 18,516.86 17,025.61 16,209.44 13,937.48 12,448.81
[Net]
Other Operating Revenues 0.00 168.48 182.34 230.38 198.30
Total Operating Revenues 18,516.86 17,194.09 16,391.78 14,167.86 12,647.11
Other Income 366.32 357.54 284.81 277.50 300.17
Total Revenue 18,883.18 17,551.63 16,676.59 14,445.36 12,947.28
EXPENSES
Cost Of Materials Consumed 8,524.17 8,432.51 8,647.82 7,100.16 6,737.45
Purchase Of Stock-In Trade 1,649.06 1,283.88 1,010.66 742.57 646.53
Changes In Inventories Of -90.70 -210.21 -247.86 154.12 -515.58
FG,WIP And Stock-In Trade
Employee Benefit Expenses 1,128.66 985.43 900.14 791.08 742.83
Finance Costs 71.66 78.38 78.60 21.06 18.86
Depreciation And 697.47 689.97 540.77 311.11 295.43
Amortisation Expenses
Other Expenses 2,812.48 2,845.44 2,576.21 2,459.43 2,365.04
Total Expenses 14,792.80 14,105.40 13,506.34 11,579.53 10,290.56
Profit/Loss Before Exceptional 4,090.38 3,446.23 3,170.25 2,865.83 2,656.72
Extraordinary Items and Tax
Exceptional Items 00 -33.20 0.00 0.00 0.00
Profit/Loss Before Tax 4,090.38 3,413.03 3,170.25 2,865.83 2,656.72
Tax Expenses-Continued 1,037.87 871.15 881.64 968.87 817.27
Operations Current Tax
Deferred Tax 0.00 -117.73 158.61 2.57 41.33
Tax For Earlier Years 0.00 5.66 -2.17 -0.41 -3.60
Total Tax Expenses 1,037.87 759.08 1,038.08 971.03 855.00
Profit/Loss After Tax 3,052.51 2,653.95 2,132.17 1,894.80 1,801.72
And Before Extraordinary Items

43
Profit/Loss for The Period 3,052.51 2,653.95 2,132.17 1,894.80 1,801.72

44