asianpaints

GROUP 2
Aman Agarwal
Anjana Venkatesh
Ankit Kumar
Ankita Das
Anurag Gupta
Arpit Parmar
10-Years Financial Analysis

The CAGR Revenue

growth of Asian Paints is
comparatively low from
its top competitor.

Net profit Margin

16 14.42 14.250
Net profit Margin is 14 12.23 12.03 11.7 12.63
11.22 11.39
12
constant over 10 years and 10
10.43
8.03
it is above the industrial 8

average. 6
4
2
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Asian Paints Industry avg

 ROE
60

50
49.73
Asian paints has higher
40.4
40 33.1
39.24 38.52
34.74
ROE with respect to
32.46 31.37 32.18
30 25.940 industry average. But it is
20 showing a declining trend
10 over ten years.
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Asian Paints Industry avg

EPS
Till 2014 EPS of Asian 35
Paints is low 30

comparatively to industry 25
18.800
average. But afterwards it 20
13.84
16.65
15 12.19
is almost same. It shows 10 8.074 8.08
9.99 10.5

that Earnings is increased 5

3.91 3.8

significantly for Asian 0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
paints.
Asian paints Industry AVG
 Current Ratio
Current Ratio is little
2.5
low comparatively.
2
Which shows company
1.5
1.46 1.410 have comparatively less
1.19 1.21 1.18 1.18 1.09
1
1.04
0.92 0.95 funds to settle there
0.5
current Liabilities
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Asian Paints Indusrty Avg

Price/Operating Revenue
9 8.120
8
6.66 6.59
7
Investors are willing to pay 6 5.25 5.03
higher share price for each 5
3.65 3.83 3.9
4 3.2
rupee of operating 3
1.67
revenue for Asian paints 2
1
compared to industry 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
average.
Asian Paints Industry Avg
Peer Comparison

• Asian Paint’s Market Cap is the higher than it’s biggest competitors.
Share price of the company being high attracts more investors and
will be able to grow and earn more profits.
• Net Profit of the company is the highest amongst the top paint
manufacturers.
• Sales Turn Over is the highest and positively indicates the ability of
the company to generate more sales than its competitors.
• High total asset value is a good benchmark indicating that the
company can invest more to generate more profit.
 Operational Strategy:
Decorative Paints:
• Decorative Paints business contributes around
94% in the total paint business.
• The company ranks no. 1, in the country in
this segment with around 8500 colors to offer
to its customers.
• In Decorative paint segment, the Company
operates in 4 main segments i.e. Interior wall
finish, Exterior wall finish, Enamels and Wood
Finishes.
• Besides, the company outsources around 25-
30% of its total production.

Industrial Paints:
• In this business, the company caters to
automotive, powder, protective coatings, road
markings segment, floor coatings and General
Industrial Paints.
• The company ranks second in protective
segment and first in the road-marking
segment. Recently it has entered in floor
coating segment. The total capacity available
for automotive coatings is 14,000 KL.
INVENTORY MANAGEMENT
• The inventory cost for Asian Paints is
lowest in the industry. Asian Paints
average inventory level equals only 28
days sales, while the industry average is
51 days sales.
• This right away provided a 45% edge in
inventory costs to Asian Paints
compared to its competitors.
• Asian Paints stock of finished goods was
just 7% of its net sales while for the
others in the industry it was nearly
twice that level.
• What is particularly striking in this
achievement is that. Asian Paint offered
customers and dealers a high level of
service in product delivery compared to
its competitors and yet kept the
inventory costs down by 45% compared
to the competitors.
DISTRIBUTION STRATEGY
• Asian Paints allowed 15-21 days credit for
dealers located in the major towns and 22-
30 days credit for dealers in upcountry
regions.
• Asian Paints had to pull off a smart credit
control strategy for survival. It resolved the
thorny problem through an innovative
dealer incentive scheme.
• Asian Paints stipulated that each of its
dealers should pay for the supplies within a
specified time norm and offered them as
attractive incentive scheme for doing so.
• A special discount of 3.5%. This was
referred to as the discount for perfection in
payments. A cash discount of 5%. This was
paid for all outright cash purchases. It was
given whenever payments were received
within 24 hours of the supply/invoice.
Lowest cost position and highest
differentiation position
• Asian Paints Apcolite, the largest selling brand of
paint in the country, is available in 151 different
shades and in eight different packs sizes. Being in
the business of colors ,Asian Paints utilized colour
to achieve differentiation, and none of its
competitors could match Asian Paints in this
aspect.

• Simultaneously, AP also achieved the lowest cost

position in the industry. Through its effective
distribution management, inventory management
and control of credit outstanding, in particular,
has managed to retain its inventory size and
inventory costs at the lowest possible level.

• Asian Paints actually saved so much on inventory

carrying costs that it almost earned its promotion
budget through these savings.

• This is again praiseworthy because Asian Paints

spends as much as 10% of its sales on promotion,
the highest in the industry. It has to spend so
much in order to maintain its differentiation
advantage. But strikingly, it has kept its total
marketing costs the lowest in the industry.
PRODUCT DIFFRENTIATION:
Asian Paints differentiated on the basis of form,
feature and customization.
• FORM: The rural sector required paints of
lesser quantity and low price. Asian paints
therefore changed its product form and
introduced 50 ml paint packs at lower prices
to serve the purpose of the rural sector.
• FEATURE: They continuously introduce new
features to differentiate their products by
innovating. Like the case of Royale which is
premium brand and is known for quality and
is known for providing a finishing touch which
is different from other brands.
• CUSTOMIZATION: They added to the value
proposition by offering to customize and
personalize paint colors to suite the
requirement of different individuals with
different tastes.
• DURABILITY: APIL recognized that consumers
spend a lot in repainting their homes, for this
purpose it ensured durability which would be
long lasting and could not be chipped off
easily.
SERVICE DIFFRENTIATION:
• CONSUMER CONSULTATION:
Through introducing Asian paints
home solution where there is a toll
free number and people can dial and
consult expert in paints.
• CUSTOMER LIFETIME VALUE: It
determined the total value of a
customer over years to come
depending on the revenue a
customer will generate over a period
of time, Ads like “Sunil babu …
badhiahai ad” it treat to highlight
how a customer will continue to
derive value out of a product over a
period of time which will ensure
loyalty and these loyal customers will
generate greater revenues over a
period of time.
Positioning strategy Map
• From the perceptual map we can
understand that Asian paints, have wider
range of products for all type of customers
consisting of different income levels.

• It has a product range from Royal Emulsion,

Priced 250-400 which is targeted for up
market buyers. Hpcolilen is a product which
is targeted for high income and upper middle
class people.

• For lowers income group it has UTSAV,

TRACTOR EMLSION which priced vary from
40-100 Rupees. These products are mainly
targeted to Rural customers.

• In Industrial segment companies position is

relatively weak here Werolac paints captured
more than 50% market share
 CORE COMPETENCIES
• Integrated Supply Chain
Management (SCM) and
Enterprise Resource
Planning (ERP)
• I2 technologies - to improve
greater customer satisfaction.
• helped in distribution
planning, material resourcing,
factory scheduling, and
industrial business solutions.
• I2 technologies integrate with
SAP helped in cut inventory.
• Inventory management
• The inventory cost for Asian
Paints is lowest in the industry
• Asian Paints average inventory
level equals only 28 days
sales, while the industry
average is 51 days sales
• Asian Paints being the market leader have
approximately 38% market share in the
organized market.
• Comparing the size of the next best
competition in the market Asian Paints is
nearly twice the size of the competition.
• The wide product range in the market of
Home and Industrial segments.
•Asian paints strategy of quick response
translates into supplying 95% of the order
supply in 48 hrs which is a positive competitive
advantage.
• The forecasting systems MIS and MR are
advanced and help in reducing costs and
ensuring product availability at almost all the
time. The SKUs of the fastest moving stocks are
being tracked on a daily basis to avoid any such
stock out. They are also strong in inventory
control.
Competitive Advantage
• Asian Paints: Overall Market leader
due to cost leadership in decorative
paint market.
USP : Extensive Variety of Interior
and Exterior Paints

• Kansai Nerolac: Market leader in

Automotive Industrial Paint segments,
also into decorative paint.

• Berger Paints: Major revenue from

decorative segment, also into industrial
paints.

• Akzo Nobel: Major revenue from

decorative segment, also into
Automotive segment.

• Shalimar Paints: Mainly into decorative

and non-automobile industrial coatings.
 Sales turnover

SHALIMAR PAINTS 369.27

AKZO NOBEL 2,824.88

BERGER PAINTS 4,121.53

KANSAI NEROLAC 3,999.07

ASIAN PAINTS 12,647.11

0.00 4,000.00 8,000.00 12,000.00

• Highest EPS ratio amongst competitors – generates a significant dividend for investors and
devote more money back into business for growth.
• PE ratio - Second highest amongst its competitors indicating that the value of the company
as perceived by stockholders.
 BCG MATRIX OF INDIAN PAINT INDUSTRY

High
STAR QUESTION MARK
• Asian Paints – Royale • Asian Paints – Wall
• Berger – Exterior Wall Putty
Paints • Berger – Walmasta
• Shalimar – Superlac • Shalimar – Extra
Synthetic Enamel premium
Market Growth

CASH COW DOG

• Asian Paints - Utsav • Asian Paints – Exterior
• Berger – Synthetic • Berger – Consultancy
Resins • Shalimar – Distemper
• Shalimar – Shaktiman
Exterior Emulsion
Low

High Low
Market Share
Low
STRATEGIES GOING AHEAD
• TARGETTING BOTH THE SEGMENTS BY LAUNCHING A NEW
PRODUCT
• INVESTING IN RURAL MAKET VIA CUSTOMER CENTRIC
INVESTMENT APPROACH
• INVESTMENT DECISIONS BASED ON POSITIVE EXTERNALITIES
STRATEGY  HIGH ECONOMIC GROWTH
 FISCAL INCENTIVES BY GOVERNMENT FOR HOUSING SECTOR

• ADVERTISEMENTS FOR HIGHER VISIBILTY

• USING SOCIAL MEDIA SITES
MARKETING • ISSUING PRESS RELEASE
• TEAM UP WITH THE PARTNERS
STRATEGY • LAUNCHING AN E-MAIL MARKETING CAMPAIGN
• CAN CONTINUE TO SPEND SOME PARTS OF COST SAVED FROM
INVESNTORY (45%) ON MARKETING.

DISTRIBUTIONAL • COST CONTROL

• IDENTIFYING DISTRIBUTORS WITH LARGE CUSTMER BASE
STRATEGY

OPERATING • MANAGING HIGH INPUT COSTS IN FUTURE

STRATEGY
 INVESTMENT STRATEGY
• In order to realise its aim of becoming a top 5 decorative paints company,
the company can plan launch new products in line with the market
developments in both decorative paint and industrial coating segments.

• Asian paints can look to tap lower end (rural segment) of the market , as 7
lacs villages and 20,000 Tier 4 and 5 towns were earlier untapped by
organised segment, but nerolac presence in this segment would mean
Asian paints to come up with new product line which is more rural
consumer centric

• Research says Rural segment prefer bright colours with smaller lot of
buying size. Hence, Asian paints can develop a product accordingly.

• Decorative paints segment will witness higher growth . The fiscal

incentives given by the government have immensely benefited the
housing sector. This will benefit key players in paint industry. Asian paints
can capture this opportunity by using its higher capacity plants in
Karnataka.

• With the future economic growth to be 7.5%, consumer spending will

get a huge boost, resulting in higher demand for paints. Asian paints will
again have the opportunity to cash in by continuing its expanding
operations.
MARKETING ,DISTRIBUTION AND
OPERATING STRATEGY
• Apply the emerging market business model : - Introduce new products suited to
local needs - Introduce new technology, accordingly - Focus to improve all areas
of Operations, especially supply chain.

• Can continue to spend some parts of cost saved from inventory (45%) on
marketing.

• As a part of operational strategy, the company can develop new product

innovations and reduce cost by re-engineering of formulation. This can be done
to tackle the rising input costs in future.

• The new product launching in rural segments can be complemented with distinct
distribution channel where brand can be passed on to distributors in regional
area.

• Further, Asian paints can expand their presence in emerging economies like
Middle east, particularly in Saudi Arabia, Iran and UAE which are recovering from
8 year low in 2018 and expected to see higher growth in future. These economies
will ensure large customer base for Asian paints and good distribution
partners.