Asian Paints Ltd

Table of Contents

Executive Summary

1. Company History

2. Industry Structure

3. Environment

4. Products

5. Price

6. Distribution Network

7. Promotion

8. Financial Analysis

9. Customer Survey Analysis

10. Suggestions

11. Appendix

a. Sample Customer Questionnaire

b. Sample Dealer Questionnaire

c. Financial Statements

d. Bibliography

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Executive Summary

The purpose and scope of document is to study, analyze and understand the business and
marketing practices of Asian Paints Limited. In order to achieve this objective, two stages
were identified – Data collection stage and the Analysis stage. The first stage includes the
data collected from various sources regarding the following:
1. The Origin, History of the company, its growth, The board of Directors,
Operation units in India and abroad
2. The three closest competitors in the paint industry – Goodlass Nerolac, Berger
Paints, ICI , their origin and growth
3. Financial statements of the Company
4. Information about the 4 P’s of marketing – Product, Price, Place and Promotion in
the Orissa market
5. A customer and dealer survey in Orissa to understand their decision making
process
The analysis stage includes understanding the implications and relevance of the data
collected and drawing conclusions about the company’s business and marketing
decisions.
Asian Paints (AP) Limited is an out-an-out Indian firm in the paint industry that
manufactures and markets a wide spectrum of decorative as well as industrial paints.
Though it had a corporate position of a focused national paint company by catering to
industrial and household customers in Indian market in the past, it has been
systematically repositioning itself in the recent years to become a global player by
entering into a number of other country markets.
The Indian Paint industry is mainly divided into two segments – decorative paints
segment and industrial paints segment. Asian Paints is the market leader in the decorative
paints segment with a market share of 44 % followed by Berger Paints (17 %), Goodlass
Nerolac (15 %) and ICI (12 %). However in the Industrial Paints, Goodlass Nerolac is
the leader followed by ICI, Berger Paints and Asian paints.
Known for its innovative marketing and distribution strength, Asian Paints is one
of the consistent performers in the Indian corporate scene. The company has a track
record of profitability, transparency in operations and strong balance sheet. Factors that
have been given emphasis here include the low per capita consumption of paints (1.0
kilogram), growth in construction sector (it is being offered industry status) & growth in
the auto/white goods market respectively spurring demand for decorative & industrial
paints. The impact of recent issues & trends (like raw material costs, excise duty
rationalizations, quality consciousness in user segments) on the industry dynamics can
also be seen. The industry has also witnessed increased activity in the industrial variety of
paints with the entry of Multi-National Companies in auto, consumer durables etc, which
has been gaining steadily over decorative paints in the last one decade. With the industry
to grow at a CAGR of 8-9 % for the next five years with growth level of 27.4 % for cars
and 8.9 % for two wheelers we see a lot of opportunity in the automobile sector for the
paint industry. Moreover housing industry is also likely to do well in the current year
with the growth rate for the last year being 35 %. So the expected rate of growth for paint
industry for the next five years is around 9-10 %.

3
 At present industry requires highest efficiency in physical distribution as
companies not working on operational efficiency business models have been losing. On
account of this, companies need to invest in sophisticated Supply-Chain Management
tools. Companies need to work on improving internal efficiencies to retain profits which
are under pressure on account of dropping prices. The customer (retailer for the
company) is seen to be dictating terms so companies have no choice but to lure more
customers through incentives. At the same time, companies also need to attract final
consumers by offering value-added services.
So we came up with the following recommendations: To take up trade
promotions, to build up relations with the intermediaries, a need to improve current
inventory levels to cut down costs, a need to promote sub brands so as to increase sub-
brand awareness among the customers, improve advertising strategies for targeting
female customers who have assumed a greater role in decision-making and a need to
expand in industrial segment by forming strategic partnerships to take advantage of the
upcoming industrial growth at national and regional levels.

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 Asian Paints Limited
1. Company History

In 1942, four partners got together to manufacture paint in a garage in Bombay. The
company was named Asian Oil and Paint Company; a name picked at random from a
telephone directory. Up against giant international paint companies, Asian Paints hit on
the innovative marketing strategy of reaching consumers in the remotest corners of the
country with its small, conveniently sized packs. During the 1950’s the company grew
from being a family-managed, small-time paint manufacturer to a professionally
managed organization competing with the best companies in the world. By 1967, through
innovative R&D and ambitious grass-roots marketing, forming strong relationships with
thousands of paint dealers in small towns all over India, the company jolted its
multinational competitors by emerging as India’s number one paint company.
For the next thirty years they maintained their position as market leader through
i. Excellent marketing
ii. Intensive distribution, and
iii. Leadership in Information Technology

In 1996-97 the total sales of Asian Paints reached $175 million, almost double that of
Goodlass Nerolac Paints, (1996-97 sales $94 million) the number two paint company in
the country and Asian Paints continues to be a market leader in the decorative paints
segment till date. In 1998, the company embarked on a major restructuring strategy
under the guidance of management consultants, Booz Allen & Hamilton. The
restructuring was done to bring greater focus to its business, improve efficiencies, control
cost and strengthen its leadership position. After the completion of the restructuring, the
vision for the company was stated. The company is committed to realizing its vision and
has chartered a complete plan of action for realizing its vision.

At present, Asian Paints is one of the ten largest decorative paint companies in the world,
and is largest exporter exporting directly to 20 countries. Recently, it changed its name to
Asian Paints Limited as a part of its global strategy.

Board of Directors
Mr. Ashwin C. Choksi (Chairman)
Mr. Ashwin S. Dani (Vice-Chairman and MD)
Mr. Abhay A. Vakil (Managing Director)
Mr. Mahendra C. Choksi
Mr. Amar A. Vakil
Ms. Tarjani Vakil
Mr. Deepak M. Satwalekar
Mr. Dipankar Basu
Mr. Rajendra A. Shah
Dr. Swaminathan Sivaram
Mr. Mahendra M. Shah
Mr. Hasit A. Dani

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Group Subsidiaries
Apco Coatings
Asian Paints Industrial Coatings Limited
Asian PPG Industries Limited
Berger International Limited
Taubmans Paints
Scib Paints Limited.

Asian Paints is one of top 10 decorative coating companies in the world. Along with its
subsidiaries, it now has 29 paint manufacturing facilities in 22 countries, spread across
the world. The distribution of its operations in the world is given as below:

Regions Countries Operating Companies

South Pacific Australia , Fiji, Solomon islands, Asian Paints and its subsidiaries
Samoa, Tonga, Vanuatu

South East China , Malaysia ,Myanmar, Berger International and its

Asia Singapore, Thailand subsidiaries
South Asia India, Bangladesh, Nepal, Sri Lanka Asian Paints and its subsidiaries
West Asia Bahrain ,UAE Berger International Limited and
its subsidiaries

Oman Asian Paints and its subsidiaries

Caribbean Barbados, Jamaica ,Trinidad Berger International and its
and Tobago subsidiaries
Africa and Egypt SCIB paints
others
Table-1

Berger International Ltd. has no operations in India.

The shareholding pattern of Asian paints as on March 31, 2005 is as follows:

Directors ,relatives and associates 42.86%

Individuals 17.51%
Domestic companies 0.88%
Financial institutions 12.98%
Non-resident Indians 2.26%
FII’s and OCB’s 21.15%
Mutual funds and Banks 2.36%
Table-2

At present the total equity paid up capital of the company is Rs. 959.20 million

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2. Industry Structure

Indian Paint Industry is over 1000 years old. Its beginning can be traced back to the
setting up of a factory by Shalimar paints in Calcutta back in 1902. Till the Second World
War the industry consisted of small producers and two foreign companies. After the war,
the imports stopped which led to the setting up of manufacturing facilities by local
entrepreneurs. Still the foreign companies continued to dominate the market, which in a
way is the current scenario as well. The initial decades saw the complete dominance of
British Paint companies such as Goodlass Walls (now Goodlass Nerolac), ICI, British
Paints (now Berger Paints), Jenson & Nicholson and Blundell & Eomite.

The Indian Paints sector is valued at Rs 6,800 crores in value terms and is very
fragmented. The current demand is estimated to be around 650,000 tonnes per annum and
is seasonal in nature. The per capita consumption of paints in India stands at 1.0-kg p.a.
as compared to 1.6 kg in China and 22 kg in the developed economies. India's share in
the world paint market is just 0.6%.

The Indian Paint industry can be divided as:

Ø the organized sector comprising of large and medium size units
Ø the unorganized or the small scale sector.

There are now twelve players in the organized sector with a market share of 70%. This is
in contrast to the 55% share that the sector commanded a few years back. Major
companies in this segment include Asian Paints (44% market share), Berger Paints (17%
market share), ICI (12% market share), Goodlass Nerolac (15% market share), Jenson
Nicholson (6% market share), Shalimar Paints and Rajdoot Paints. The organized sector
has grown at a CAGR of 11.5% in the last five years. The unorganized sector comprising
of over 2000 units has a combined market share of around 30%.

The major players are Asian Paints, Goodlass Nerolac, Berger, ICI and Shalimar.
Recently, world leaders like Akzo Noble, PPG, Dupont and BASF have set up base in
India with product ranges such as auto refinishes, powders and industrial coatings. Kansai
Paints of Japan, which entered into collaboration with Goodlass Nerolac in 1984, is now
the holding company for Goodlass Nerolac with 64.52 % equity holding. PPG has a joint
venture with Asian Paints to manufacture industrial coatings. Jenson & Nicholson and
Snowcem India are no longer active players because of dwindling sales in recent years.

In the 1990s, helped by a growing economy, the paint industry had recorded a healthy
growth of 12-13 % annually. This was mainly due to a drastic reduction in excise from a
staggering 40% to 16%. However, the growth was restricted in 2000-03 to single digits.
There was a revival in 2003-2004 with a robust growth of 13%.

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The per capita consumption of paint in India is 700 grams against 19 kg in the U.S., and
2.7 kg and 5.8 kg in other developing countries like China and Brazil. As the
consumption goes with affordability, the low Indian figure is not a surprise.

High excise duties, low technology and low capital costs for production led to the
incidence of a high number of units in the small scale sector. However, since 1992 the
government has been consistently lowering duties from 40.5% in 1992 to around 16%
currently. This has led to lowering of price differential between the organized and
unorganized sector. Moreover the paints sector was also allowed to claim MODVAT
credit on petro-based products, thus lowering the excise incidence further.

Products
The products of the paint industry can be classified into two major segments - decorative
(architectural) paints and industrial paints. While the decorative paints are used in
protecting valuable assets like buildings, the industrial paints are used for protection
against corrosion and rust to steel structures, on vehicles, white goods and appliances.

Decorative paints: The decorative paint segment can be classified into interior paints
and exterior or cement paints. 80% of the decorative paint segment (about Rs. 3640
crores in the organized sector) accounts for interior paints, which consists of premium,
medium and economy categories. The premium category consists of plastic emulsions,
the medium-priced category consists of synthetic enamels and the economy category
consists of distempers.

Fig-1

The products under the decorative finishes can be limestone coatings, primers,
distempers, cement paints, matt/lustre finishes, enamels, emulsions (first quality), and
premium emulsions. Within the decorative segment, the exterior category, particularly
exterior emulsions, is the fastest growing segment 20 % for the last three years.

Consumption of paints is skewed towards decorative paints which account for 70% of
paints sold in India. This is in a sharp contrast to the trend in developed countries, where
the ratio is skewed towards the industrial segment. This segment is marked by the
presence of a large number of players from the organized as well as unorganized sector.

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Competition is high and margins tend to be low in this segment. Products of this segment
are relatively price sensitive. Asian Paints is the market leader in this segment.

Demand for decorative paints is seasonal with bulk of sales taking place during the
festival seasons from September to December. Besides, sales remain slack during the
monsoon months from June to August.

Entry barriers in terms of technological and funds requirements are relatively lower in the
paints sector. It is estimated that a plant of 1 m tpa will cost around Rs 120 m. However
decorative paints are marketing-savvy products and backed by large advertisement
campaigns and dealership networks. These serve as high cost entry barriers for new
companies in this business. The huge investments required in setting up a vast marketing
and dealership network, to advertise and develop a brand over a period of time can only
be afforded by companies in the organized sector. It is for this reason that smaller
companies and small scale sector units are slowly losing market share to the organized
sector.

Industrial Paints: Industrial paints comprising 30% of the market include automotive
paints, high performance coatings, coil coatings, powder coatings, marine paints and
general industrial coatings. The automotive segment is further bifurcated into OEMs and
auto refinishes. The automotive and general industrial coatings occupy top slot in terms
of production. Goodlass Nerolac is the market leader in this segment.

Fig-2
Demand for these paints is relatively price inelastic, but is prone to business cycles and
depends on industrial and economic growth. Major end user industries include shipping,
capital goods, white goods and heavy industries.

The industrial paints segment due to specialized technology and high capital expenditure
attracts fewer players. Most Indian companies have tied up with or are in the process of
tying up with international paint majors to have access to the latest technology. A tie-up
with a global paint manufacturer also enables the domestic company to supply to local
customers of its partner. For example, Goodlass Nerolac is a major supplier to Maruti
Suzuki because of Kansai, its Japanese collaborator and Suzuki relations. It is for the
same reason that Asian Paints (tie-up with PPG Industries, USA) is a major supplier of
paints to Opel Astra.

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 Table-3

Raw Materials: The paint industry is raw material intensive. Paint involves the mixing
of various raw materials in various proportions. The raw materials are of a wide variety.
On an average, raw materials account for 60% of net sales (industry average). In case of
small-scale units it forms up to 70% of the net sales. High cost and erratic availability of
raw materials mark the Indian paint industry. Around 300-400 raw materials are required
to manufacture different kinds of paints. The high number of raw materials and finished
goods highlights the working capital intensity of the sector. Most of the raw materials are
petroleum based. Thus paint companies benefit when the petrochemical industry goes
into its cyclical downswing. A hike in the price of petroleum products raises input costs
negating the impact of a cut in import tariffs on raw materials. Raw materials frequently
run into short supply, resulting in high inventory cost. The shortage of one specific
material could result in severe manufacturing problems It is estimated that 18-20% of the
total raw materials used the industry are imported. Most paint companies are hit by the
fact that they do not make the raw materials themselves. For example, phthalic anhydride
(PAN) is manufactured from orthoxylene and which goes into the production of paints
along with titanium dioxide. Asian Paints is the only paint company that manufactures
PAN. The other paint companies have to import their stock. Since PAN prices generally
outpace international orthoxylene prices by almost 50% paint companies end up paying a
fortune when prices rise. In such a situation Asian Paints benefits by selling PAN in the
open market.

Raw materials are divided into three major groups, namely, pigments (titanium dioxide,
zinc oxide etc.), solvents (mineral turpentine) and resins and additives.

Pigments are finely ground solids of different shades to give colour, durability,
consistency and other properties to paint. It is also one of the major raw materials,
accounting for one-third of the total raw materials cost. Amongst the vital pigments used
in the process of paint manufacture is Titanium dioxide (TiO2) and the industry
consumes around 60% of TiO2. This pigment is available in two grades: anatase and

10
rutile, of which anatase is exclusively used in interiors while rutile is preferred in
exteriors. India has abundant raw materials for the manufacture of TiO2, especially
ilmenite of which it has 12% of the world’s deposits. It is ironical that the paint industry
presently imports TiO2 in excess of Rs.1 bn - a figure that may touch Rs 2 bn by the turn
of the century. TiO2 is responsible for the demand-supply gap. If the strong demand
growth boosts domestic production of TiO2, there will be an increased usage in various
sectors. If the raw materials are properly utilized, India has the potential to emerge as a
net exporter of TiO2 in the next five years.

Solvents are volatile organic compounds (VOC) used to dissolve, suspend or change the
physical properties of other materials. They are generally used to bring down the
viscosity of paints to the desired level, which also reduces the cost of paint formation.
They constitute 70%-75% of the paint liquid and ultimately escape into the atmosphere
when the fluid dries. Solvents such as ethylene glycols and alcohols are finding wider use
as co-solvents in new water-borne formulations.

Binders are generally oils, resins and plasticisers that give paint its protective property.
Most resin manufacturers make alkyds, polyesters, emulsion polymers, epoxy resins,
amino resins, powder coating resins etc.

Additives are added in small proportion to the paint to improve its performance
characteristics in various ways. Skinning inhibitors, fungicides, wetting agents, driers are
included in this category.

Current trends

The industry is riding high on the growth in the automobile industry, hectic constructions
in the housing segment, improving infrastructure and overall feel good factor in industry.
30% of the paint business is contributed by painting of new construction area. GDP
growth projections of 6-6.5 % in the current year mean a growth of 9-10 % in the paint
business. The growth will be about 12-13 % in the industrials and 8-9 % in the
decoratives.

3. Environment
The chief competitors to Asian Paints are – Goodlass Nerolac, Berger Paints, ICI and
Shalimar. In order to understand the environment, we need to look at each of the
competitors.

Goodlass Nerolac

This company’s paint decors every third car in the country. It is the market leader in the
industrial paint segment supplying over 90% of the requirements and has planned to
increase its presence in the decorative segment through aggressive new product
development and brand building. They are the second largest company in India in the

11
decorative segment with a market share of around 20%. They are the leaders in powder
coatings.

Goodlass Nerolac Paints Ltd is a subsidiary of Kansai Paint Company Limited, which is
the largest paint manufacturing company in Japan and among the top ten coating
companies of the world, with a human asset of over 1900 professionals and a sales
turnover of Rs. 925 crores.

This company started in 1920 as Gahagan Paints and Varnish Co. Ltd. at Lower Parel in
Bombay. In 1930, three British companies merged to formulate Lead Industries Group
Ltd. In 1933, Lead Industries Group Ltd. acquired entire share capital of Gahagan Paints
in 1933 and thus, Goodlass Wall (India) Ltd. was born. Subsequently, by 1946, Goodlass
Wall (India) Ltd. was known as Goodlass Wall Pvt. Ltd. In 1957, Goodlass Wall Pvt.
Ltd. grew popular as Goodlass Nerolac Paints (Pvt.) Ltd. Also, it went public in the same
year and established itself as Goodlass Nerolac Paints Ltd. In 1976, Goodlass Nerolac
Paints Ltd. became a part of the Tata Forbes Group on acquisition of a part of the foreign
shareholdings by Forbes Gokak. In 1983, Goodlass Nerolac Paints Ltd. strengthened
itself by entering in technical collaboration agreements with Kansai Paints Co. Ltd.,
Japan and Nihon Tokushu Toryo Co. Ltd., Japan. In 1986, Goodlass Nerolac Paints Ltd.
turned into a joint venture of the Tata Forbes and the Kansai Paints with the latter
acquiring 36% of its share capital. In 1999, Kansai Paints Company Ltd., Japan took over
the entire stake of Tata Forbes group.

During this journey, Nerolac has entered into technical collaborations with other industry
leaders such as E.I. Du-Pont de Nemours & Company Inc., USA and Oshima Kogya
Company Ltd., Japan for different products.

Berger Paints

This company started in 1947 as British Paints when it acquired Hadfield's (India)
Limited, a paint company that produced 150 tonnes of ready mixed stiff paints, varnishes
and distempers.

Sales offices were opened in Delhi and Mumbai and in 1951 a depot was started in
Guwahati. Sales rose to Rs.60 lakhs in 1952. The Company declared its first dividend and
shifted the H.O. to 32, Chowringhee Road, Calcutta. By 1959, modernization of the
Howrah Factory was completed and the first Resin Plant commissioned. With that, the
Company entered the Synthetics Paints market.

By 1965 British Paints (Holdings) Limited, UK. was acquired by Celanese Corporation,
U. S.A. As a result, the controlling interest of British Paints (India) Limited passed on to
Cel. Euro N.V., Holland. In 1969 Celanese Corporation sold their interest in the Indian
Company to Berger Jenson Nicholson Limited, UK. In 1975, the foreign holding of the
Company was reduced from 60% to 45% through a Public issue. A year later the foreign
holding was diluted to below 40% by sale of a portion of the shares to the UB Group.

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In 1983, the name of the Company was changed to Berger Paints India Limited (BPIL)
and by this time the Berger's operations were divisionalized into the Retail Business Line
(RBL) and the Industrial Business Line (IBL) in order to better cater to the needs of the
customers. During this period many new products were launched like "Luxol Silk" the
first premium emulsion in India, Viton Refinish for cars, Bison Acrylic Distemper and
Rangoli Acrylic Emulsion.

In 1990’s, ‘Berger Pro Links’, a service aimed at providing paint and application related
information to professionals, was introduced marking one of the first steps into painting
related services. In 1991, the stake of the UB Group in the Company was purchased, by
Mr K S Dhingra, Mr G S Dhingra and their associates. The sales of the company touched
276 crores by 1995-96.

The latter half of the nineties saw Berger attain the ISO - 9000 ceritification (1996) and
establishment of Berger's Quality Management System. Color Bank tinting system was
also launched through which the consumer can select from a range of over 5000 colors
and which are then made available in minutes.

As part of its expansion program, a new paint-manufacturing unit at Pondicherry was

commissioned in early 1997. Berger Paints Home Decor a complete painting solution
service was launched making painting a hassle free activity for consumers. Illusions multi
chrome finishes was also introduced as "designer finishes for walls" allowing consumers
to transform their walls into fashion statements. This is a first for the Indian paint
industry.

ICI

ICI India was the subsidiary of the $15 billion British multinational company ICI Plc.
Brunner Mond & Co., one of the four Companies that combined to form ICI in UK in
1926, opened a trading office to sell alkalis and dyes in Calcutta. In 1923, Brunner Mond
& Co. (India) was incorporated and the company's name was subsequently changed to
Imperial Chemical Industries (India) Ltd., in 1929. During its 70 years in India, ICI had
created six subsidiary companies in businesses such as research, chlorine, caustic soda,
paints, rubber chemicals, explosives, polyester fiber, urea, agro-chemicals, seeds,
pharmaceuticals, specialty chemicals, polyurethane, nitrocellulose, and surfactants. In
1984, all ICI companies consolidated in one of the largest mergers in Indian corporate
history. By 1997, as a part of a restructuring exercise ICI had exited or was planning to
exit from several non-core businesses. The 1996 sales break up was as follows: Paints
43%, Explosives 28%, Rubber chemicals 17%, Pharmaceuticals 8%, and Other Products
4%.

ICI (India) ranked No. 4 in the paint business, after Asian Paints, Goodlass Nerolac
Paints and Berger Paints. Unlike the other paint companies ICI (India) was a diversified
unit and paint constituted 43% of its net sales. ICI (India)’s turnover in 1996-97 was $180
million and paint amounted to $77.4 million.

13
ICI identified paints as a thrust area and was aggressively moving to improve their
position. They invested $11 million in a new decorative paints plant near Bombay and
were constructing a $16.7 million plant for industrial paints near Chandigarh in North
India. ICI (India) intends to go on an offensive with a target of achieving ten-fold growth
in 10 years. The ‘10X Plan’, as it was called, envisaged a strategy based on acquisitions,
take-overs and alliances.

4. Products
Paints can be generally divided into decorative paints and industrial paints. Industrial
paints consist of the automotive category also. Decorative paints can be further divided
into interior and exterior wall paints, wood and metal enamels. Each of these products has
a range of products varying from the premium segment to the economy segment.

Decorative Segment

Interior Wall Paints

Product Asian Berger Goodlass Jenson ICI Shalimar

Segment Paints Nerolac Nicholson

Exquisite Royale Luxol silk Pearl Special Dulux Hussain

emulsion Luxury Luster Effects Designer Collection
paint with Emulsion Silk
luxurious
finish and
silky
glowing
appearance
Emulsion Premium Rangoli All Robbaliac Dulux -
with rich Emulsion Scapes 24 acrylic Designer
and matt carat Silk
finish and Low
superior Sheen
quality
Acrylic Tractor Bison Nerolac - Dulux Superlac
emulsion at Emulsion Emulsion Premium Wash & Acrylic
the similar Acrylic Wear Emulsion
price as emulsion
distemper
Water Tractor Bison Nerolac Jensolin Dulux Shalimar
based Acrylic & Distemper Acrylic Acrylic Wash & No 1
paint, long Synthetic Distemper Distemper Wear
lasting & Distemper
value for
money

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Water Utsav - - - - -
based paint Acrylic
at Distemper
affordable
prices
Table-4

Exterior Wall Paints

Product Asian Berger Goodlass Jenson ICI Shalimar
Segment Paints Nerolac Nicholso
n
Technologi Elastomer Weather Excel Special Dulux
cally high ic-Hi- Coat 100% Effects Weather
end Performa Acrylic exterior shield
product nce Garden
Exterior Shades
Paint Low
Sheen
Premium Apex Walmasta Nerotex Armour Dulux Xtra
Textured Textured Matt Quartz Tuscan Premium
Segment Exterior Effects, Acrylic
Emulsion Dulux finish
Render
Effects
Non Ace Duracem Suraksha Robbiace Dulux Premium
Textured Exterior Plastic m Super Weather Acrylic
Segment Emulsion Cement shield Distemper
Paint Low
Sheen
Economy Ustav - Nerocem - - -
Segment Exterior
Distempe
r
Table-5

Enamels

Product Asian Berger Goodlass Jenson ICI

Segment Paints Nerolac Nicholson

Premium Apco Premium Luxol - Brolac Dulux Super

Segment Gloss Enamel, Luster Polyurethane Enamel High
Apcolite Enamel Gloss
Premium Satin

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 Medium Gattu Synthetic Luxol Hi- Nerolac Umbrella Dulux Super
Segment Enamel Gloss, Synthetic Synthetic Enamel Semi
Luxol Enamel Enamel Gloss
Satin

Economy Utsav Enamel Goody - -

Segment Synthetic
Enamel
Table-6

Apart from these there a certain speciality paints produced by these brands which are not
produced by all the brands and cannot be categorized.
Asian paints has an umbrella brand by the name of Utsav that covers the economy
segment in all paint categories. The Utsav sub-brand is aimed at the Indian rural populace
who are on the lookout for cheap but durable and beautiful paints.

Apart from these all the paint brands also make some miscellaneous products like surface
primers , stainers, varnishes, thinners, aluminum paints, etc.

Industrial Segment

All the paint brands produce industrial paints like epoxy based paints, metal primers,
polyurethane coatings, etc. In the Orissa market Shalimar paints is the leader in this
segment.

5. Price

In the paints industry price is the used only as a differentiator between the various
segments in the same product line. The prices of different brands in the same segment
remain more or less similar, with just a difference of 30 to 40 paise per square feet. Some
of the speciality products, which are not produced by all brands, may be priced at a
higher price.

Pricing decisions in the paint industry largely depend on the price of the inputs like petro-
products, other raw materials, excise duties and taxes and the general operating profits.
Generally increase or decrease of prices is effected across all brands in the market.

Most of the paint companies offer a 5% margin to the dealer. Due to internal competition,
the dealers pass on this advantage to the customers by reducing their own margins to 2-
3%. This is a cause of concern for the paint companies because they have to keep a
constant check on the prices offered in the market. The dealers offer more of discounts
and the companies are not able to firm up the prices. Paint companies offer a lot of
discounts like cash discounts, volume discounts, seasonal discounts and allowances. The
dealers take advantage of these discounts to gather more business.

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6. Distribution network
Asian Paints has six manufacturing locations all over India and 70 sales branches. Each
of the manufacturing plants makes different products. The distribution system is taken
care by area sales managers and executives. The executives keep canvassing the market
and meeting the dealers to get the orders. Asian paints has around 15000 dealers who are
catered to by the sales executives. The orders are collected by the sales executives and
passed on to the nearest depot. The depots are fed by regional warehouses. These depots
maintain a minimum order quantity which is arrived at from the monthly demand
forecast. The material is dispatched from the depot in the name of the dealer. Generally
some orders of the same region are clubbed together and dispatched in trucks. Finally the
truck is unloaded and the small orders of the dealers are dispatched to them. The

The sales executives are also responsible for the collection of outstandings. Generally
paint companies allow a maximum outstanding of 2-3 lakhs for 45 days. Other jobs of the
sales team consist of grievance redressal and customer feedback.

Manufacturing Units

Regional Depots

Dealers

fig-3
7. Promotion
The paint industry until 1999 was concentrated mostly on increasing sales by intensive
trade promotion wherein the dealers, contractors and other components of the supply
chain. There was little emphasis on theme advertising directed towards the customer. a
recent trend that is emerging in the Indian paint market is that the major brands have all
identified the importance of reaching out to the common man instead of just limiting
themselves to the intermediaries.

17
 Fig-4

Asian Paint’s advertising has created brand awareness, highlighted what the brand has to
offer and has consistently brought all of it top-of-the-mind for the customer. But the
outreach effort does not end there. Asian Paints has recognized the importance of
communicating to and involving key players who influence the final brand choice. These
include channel partners, contractors and painters, on whom Asian Paints focuses by
initiating and developing innovative activities and promotions. This helps build the Asian
Paints family so that customers get a high degree of personalized service and professional
guidance to facilitate their final decision.

Advertisements: Asian Paints has had several memorable advertising campaigns. There
are two current favorites. One for their exterior paints where they show the man, his wife,
his car, in fact everything, except the exterior paint ageing. People absolutely adore that
advertisement. In fact, when you start seeing take-offs on a creative effort, you know it
has really caught the imagination of people. A couple of take-offs have been noticed on
this TVC.

The colourful, almost lyrical Har ghar kuch kehta hai... campaign, which was launched
nationally in February, is essentially about the relationship people have with their homes.
Specifically, the spots look at the effort and the strong emotions that go into doing up a
home. The ads are a reflection of the fact that people are a lot more involved in doing up
their homes now. But while the choice of paints forms an important part of the process, it
is not the highlight; instead, there are glimpses of hand-picked furniture, treasured
pictures, the intimacy of the family and the pride that comes at the end of the process.
The creative idea behind the campaign is that a home speaks volumes about the people
who live in it. This is expressed through a montage of visuals of the family interacting
with the home -painting it, decorating it and simply living in it. The visuals are
complemented by a voice-over that is really a poem that expresses the home's thoughts
about its residents.

18
One of their most successful campaigns has been the “mera wala green”. It has a very
subtle way of telling the people that all possible colors in all possible shades are available
with them. The performer in the katthakali make-up symbolizes a wide range of colors.
The lady looking at all those colors take a long time to choose her color. This symbolizes
the idea that Asian Paints has the color range to satisfy even the most selective of
customers.

Pneumonic: The company’s mascot ‘Gattu’ (designed by R.K. Laxman in 1954), an

impish boy with the paint tin and brush, is most popular and easily recognized, one of the
epitomes of the ideal mascot.

19
However, in line with the new branding strategy, the brand has gotten a facelift, with new
packaging, a contemporary logo and corporate colours. Hence, Gattu has been dropped
from the communication except as an inch-high pneumonic on the back and lids of the
paint tins.

The new look (Asian Paints is the logo, in yellow and red, with the vertical of the ‘p’
converted into a brushstroke), gives all the company’s products a uniform look which is
very much more contemporary, urban and up market. This has been incorporated in the
advertisement.

Services: Asian paints offer a number of services to the customers. The aim of these
services is to provide the customer with a way to make an informed judgment as to which
product would be the most suited to their particular needs.

Color world: Asian Paints provides the color mixing facility which is known as the
“color world”. It features a visual array of Asian Paints shades to help one make the right
shade decision. It features 8 color families of purples, blues, greens, greys, creams,
beiges, peaches and pinks. Each color family features a collection of popular Asian Paints
shades in that color family... these colors are then manufactured on the spot by mixing
various colours. This provides the customer with virtually indefinite number (around
1500) of shades to choose from.

Asian Paints Screen Test service: through this service the customer is able to identify
whether a particular shade will suit their rooms. In this facility the customer can send a
picture of his room and the company using computer techniques identifies the color most
suited to the room

Asian Paints Color Genie: 'Asian Paints Color Genie' is a concept that can get the shade
of any sample in the paint to be applied on the wall. It is based on the use of an
instrument known as the 'Spectrophotometer' which can read the color of the sample and
convert it into a formulation to arrive at the same color for the paint on the walls. This
service can be availed very easily. Asian Paints Samplers are 200 ml paint tins which can
be used to sample shades on the wall. These come in a range of shades that are available
through an Asian Paints Color World outlet. It is currently available in Asian Paints
Royale Luxury Emulsion. Thus, all one need's to do is pick up these sampler tins at a
nominal price from any of the select Asian Paints Color World retail stores and
experiment in one's own house.

Asian Paints Trufinish: Asian Paints Trufinish is a unique paint finishes' display palette
that allows you to touch and feel the finishes' of popular Asian Paints products. This is
available in select stores of the Asian Paints Color World Stores. Thus, you can get a first

20
hand feel of the final finish that paint would deliver on the walls at the paint store itself.
Further product features for each of these products is also available in the form of
information panels.

Sales Promotion:

The company has been concentrating more on sales promotion than on advertising. On
analyzing the customer survey data it becomes evident that since the customer is
returning to the store after an average of about three years it is better to concentrate more
on the dealers who are in the business through out the year. Keeping this in mind the
company’s decision of doing more sales promotion than advertising stands justified.
Sales promotion can broadly be divided into two categories:
1) Customer promotion – this section includes all the sales promotion activities
directed towards the customers. Scratch cards that are provided with specific size of
packages are examples. The company comes out with many different sales promotion
schemes during the festival season, especially the durga pooja festival in Orissa and West
Bengal.

Fig-5

There are a number of gifts and schemes on the larger packs. Coupons and free gifts are
offered on packs of more than 10 kgs. The company also offers a large number of
services to the customers to assist them in their buying decisions. These services are
offered on the company’s website to make it accessible to a very wide range of
customers.
2) Trade promotion – As part of the company’s policy, huge emphasis is given on
trade promotion. The dealers and contractors who are a part of the distribution chain are
given special attention. The company comes up with several incentive schemes for the
dealers. The most popular schemes include cash discounts, foreign trips, gifts such as

21
refrigerators etc for dealers who succeed in meeting or exceeding pre-determined sales
targets. The company also organizes regional dealer meets regularly. Here the dealers are
briefed about the company’s new products and the technical details and application
procedures of these products. The company also aims at building and retaining dealer
loyalty through these meetings.

8. Financial Analysis

The Indian paint industry has come a long way from the days when paints were
considered a luxury item. Today the awareness level on preventing corrosion through
paints is relatively high, a development that should be a huge boost to the paint industry.
The Indian paints industry offers lucrative scope for stable revenue streams to
manufacturers of both decorative & industrial paints. Known for its innovative marketing
and distribution strength, Asian Paints is one of the consistent performers in the Indian
corporate scene.

We have analyzed the financial statements of Asian Paints for the last six years and those
of the competitors in order to come up with some implications of the data represented.
The company has a track record of profitability, transparency in operations and strong
balance sheet.

Factors that have been given emphasis here include the low per capita consumption of
paints (1.0 kilogram), growth in construction sector (it is being offered industry status) &
growth in the auto/white goods market respectively spurring demand for decorative &
industrial paints. The impact of recent issues & trends (like excise duty rationalizations,
quality consciousness in user segments) on the industry dynamics can also be seen. The
industry has also witnessed increased activity in the industrial variety of paints with the
entry of Multi-National Companies in auto, consumer durables etc, which has been
gaining steadily over decorative paints in the last one decade.

Traditionally, Asian Paints has been the Market Leader in the Decorative Paints Segment.
This segment however has been characterized by stagnant growth rates. The fiscal is
expected to grow at around 8 per cent. Traditionally, margins have also been lower in this
segment. But an important characteristic is the lower volatility of cash flows. The
demand for decorative paints is a function of the growth in construction activity and the
demand for re-painting. The growth in the construction activity leads to first-time
demand for the new structures coming up. The re-painting, or replacement, demand arises
usually during festivals, when people paint their homes. Therefore, the wider dispersion
of consumers reduces the overall risk, leading to lower volatility of cash flows.

Housing Loan disbursements, tax incentives and lower levels of interest rates would
encourage the customers to invest in homes and thereby a growth in the construction
activity. However, the propensity to re-paint houses seems to have dropped over the last
few quarters because of the deceleration in economic activity. Consumers seem to have
decided to postpone their re-painting decisions, affecting off-take.

22
Given that the growth rates are likely to be modest in the near term, profitability can be
driven by pushing volumes and by entering new markets. The ability to innovate and
enter new markets or unveil new products would also be crucial. One such sub-segment
in the decorative segment is the fast-growing exterior emulsion paints. It is a high-end
product but volumes have been improving and margins are also high. This should help
the company to some extent in maintaining margins. Growth in exterior paints is
expected to be around 40 per cent, which is significant for the decorative segment.
Keeping this in mind, the company has adopted the strategy of increasing its ad-spend.
Paints have taken on some of the traits of FMCG products. Therefore, to push volumes
companies have to make sure that their products are visible. Rising competition means
customers now have access to a wider range of products. Therefore, keeping both these
factors in mind sales promotion through advertisement should play a crucial role in
maintaining growth rates.

Raw Material is the major cost-driver in the paint industry. The company has undertaken
aggressive cost cutting measures, whereby raw materials consumed as a percentage of net
sales has come down from 62.2% in FY97 to 58.2% in FY01 and is still decreasing.

Considering the Cash Flow Statement of Asian Paints over the past 6 years given in the
appendix, we can observe that the Cash from Operating Activities (CFO) is positive
whereas the general trend of Cash from Financing (CFF) and Cash from Investing
Activities (CFI) is negative. CFI is negative as the company is paying off the loans which
improves the cash flows as the interest becomes lower and lower with the payment of the
loans.

Over the last few years, Asian Paints has been increasing its sales and promotional
expenses. For instance, sales and administrative expenses as a percentage of total sales
have risen from around 10 per cent in 1993 to around 14 per cent in 2001. In the same
time span, the share of expenditure on advertisement rose from around 9 per cent to
around 21 per cent. Given the current slowdown in demand, the company is likely to put
more pressure on the advertising effort to try and at least maintain its current growth
rates.

In the recent past most major paint manufacturers, including Asian Paints, have reduced
prices of their products. The prevailing over-capacity situation in the world markets for
titanium dioxide, a major raw material for the paint sector, and the subsequent fall in
input prices have led to the reduction in prices. The decision by the main players to pass
on to customers the gains of the falling costs clearly indicates a demand squeeze. Though
demand is constrained, the company does not foresee this situation to continue for long.
The company has initiated steps to increase capacity, and acquisitions cannot be ruled
out. Therefore, in the medium- to long-term, the outlook continues to be positive.

23
Ratio Analysis:

Liquidity Ratios:
Liquidity ratios (times) Mar 2000 Mar 2001 Mar 2002 Mar 2003 Mar 2004 Mar 2005
Long term debt / equity 0.308 0.338 0.251 0.166 0.135 0.119
Total debt / equity 0.462 0.556 0.273 0.217 0.135 0.15
Current ratio 1.272 1.332 1.321 1.212 1.1 1.075
Interest cover 8 8 13.32 17.92 22.29 29.29
Avg. days of debtors 22 25 27 23 22 22
Avg. days of creditors 15 21 26 35 45 53
Table-7

Current Ratio (= current assets / current liabilities): It is the ability of the company to
pay its short term liabilities. Hence it is also a measure of the company’s financial
strength. There is a declining trend in the current ratio in Asian Paints over the six years.
A ratio of 1.075 in 2005 is too close for comfort. Some ways to improve this could be:

• Paying some debts

• Increasing your current assets from loans or other borrowings with a maturity of
more than one year
• Converting non-current assets into current assets
• Increasing your current assets from new equity contributions
• Putting profits back into the business

Interest Cover (= net profit before interest/interest paid): It indicates the safety
margin that the business has in terms of being able to meet its interest obligations. As can
be seen from the ratios in the appendix, the interest cover shows a considerable increase
in the past six years. A high interest cover ratio means that the business is easily able to
meet its interest obligations from profits. Due to the increase in the profits Asian Paints is
able to meet its interest obligations.

Average Number of Debtor Days (= Average no of Debtors/ Average Sales): This is

an indication of the number of days of sales reflected in the Balance Sheet as Debtors.
The trends in the past six years show almost a consistent value of debtor days. Since the
sales have been increasing in the past few years, the debtors also must be increasing in
order for the ratio to remain the same.

Average Number of Creditor Days (= Average number of Creditors/Purchases per

day): It indicates how many days on average it takes the company to pay its creditors.
This has consistently been increasing in the past six years. It says that the business is
taking full advantage of the trade credit available to it.

Debt Equity Ratio (= total liabilities/shareholder’s equity): A measure of the

company's financial leverage calculated by dividing long-term debt by shareholders
equity. It indicates what proportion of equity and debt the company is using to finance its
assets. From the table, one can conclude that the D/E is well below 1:1 and has been

24
reducing over the past few years, and hence the company is chiefly financing itself using
equity rather than debt. This could also mean too little which means that the company is
not realizing the full potential of its business and may actually hurt your overall
profitability as in such a large company, shareholders want a higher reward (dividend
rate) than lenders (interest rate).

To reduce its operational risk profile, Asian Paints has opted to go the global route. It
now has access to some of the deficit markets such as Bangladesh, Sri Lanka and Russia
among others where market penetration is relatively low and expected growth rates quite
high. Asian Paints (AP) has recently obtained permission from the Registrar of
Companies, Maharashtra to change its name from Asian Paints India Ltd. to Asian Paints
Ltd as a part of its ‘Think Global’ strategy.

The industrial segment which also includes the automobile segment is the fast growth
segment where Goodlass Nerolac is the market leader. Asian Paints has a presence in the
form of AsianPPG, a joint venture with PPG, a world leader in industrial paints. But the
industrial paints segment constitutes only around 4 per cent of the turnover. Hence, its
impact on the valuation is unlikely to be significant

The unorganized sector is a strong force and controls almost 35 per cent of the industry
involving estimated 2,500-3,000 players. A decade earlier, the unorganized segment used
to have a much higher share of the market but this is slowly changing. Today's consumer
is evolving and has become quality and brand conscious. In addition, the reduction of
excise duties from a high of 40 per cent to 16 per cent in the last decade has reduced the
advantage of the unorganized segment. Increase in raw material costs will equally affect
both the organized and the unorganized sector.

2004-2005

There were some significant events in 2004-2005 which have impacted the company’s
financial position during the year. Inflation and shortage of raw materials, growth of the
housing finance sector supported by government policies, a longer painting season (with
Diwali occurring in mid-November as opposed to October in 2003) and introduction of
VAT were some of the reasons for the fluctuations observed.

On the raw material front, the prices of crude oil were extremely volatile throughout the
year. Because of this, the prices of many raw materials and packing materials used by the
company witnessed a large unexpected surge. Some of the effect of this price hike in
Crude oil and raw materials is alleviated by the proposal in the Budget that has reduced
peak Customs duty from 20 per cent to 15 per cent and the appreciating rupee.

On the demand side, with the Budget announcing a deduction of up to Rs 1 lakh from the
taxable income, housing loans have become a compelling proposition. The fillip this
would provide to housing demand was a substantial plus for Asian Paints, as it derives a
significant portion of its revenues from the decorative paints space.

25
9. Customer Survey Analysis:

The objective of this survey is to understand the consumer’s decision making process.
We approached 40 customers and analyzed their purchase behavior. This is a very sample
small size and covers customers in the state of Orissa only. We cannot vouch that the
responses of customers all over the country will be the same. As we found that customer
had little awareness and say in the final purchase of a particular product, we met about
ten dealers to understand the customers’ perceived behavior and their influence on the
final decision making by the customer. The generic buying process of a consumer is
given below. However, all these stages do not occur in every purchase as the customer
skips some of them.

Fig-6

The buying process starts with need or problem recognition. At this stage, the customer
recognizes a problem or need and in this case for example: I have to paint the house so I
need to buy some paint. How often does this need arise?

Question: How often do you paint?

The analysis of the surveyed data suggests that there is an interval of around 2.7 years
between any 2 consecutive purchases by the same customer.

26
 Frequency of Usage

25

20

No.of customers 15
Series1
10

0
1 Year 3 Years 5 Years
No. of years interval

Fig-7

An “aroused” customer then needs to decide how much information (if any) is required.
If the need is strong and there is a product or service that meets the need close to hand,
then a purchase decision is likely to be made there and then. If there is a deficiency in
information, the customer is likely to start a process of information gathering.

He/she can gather information from several sources:

• Personal sources: family, friends, neighbors etc
• Commercial sources: advertising; salespeople; retailers; dealers; packaging; point-of-
purchase displays
• Public sources: newspapers, radio, television, consumer organizations; specialist
magazines
• Experiential sources: handling, examining, using the product
We found that the commercial sources play the major role in the customer decision
making process. The painters were found to be the most dominant.
Decision-Influencers

30
25
No. of customers

20
15 No.of customers
10
5
0
s

rs
cts

er

ale
tor
int
ite

ac

De
Pa
ch

ntr
Ar

Co

Categories

27
 Fig-8

Public sources also play a significant role in “pull” strategy for the consumer. Of the
public sources, Television plays the most influential role as is shown below. Many
customers identified, Television as the most effective media in influencing buyer’s
decisions for the purchase of paints. It scores much higher than the other audio-visual
sources of media.

Media Advantage

45

40

35
No. of customers

30

25 No. of customers of
20 Asian Paints

15

10

0
TV New s Hoardings Word of
Papers mouth
Media

Fig-9

In the evaluation stage, the customer must choose between the alternative brands,
products and services. An important consideration in this is the degree of involvement of
customer in the purchase. Since this involves high expenditure and risk, it is a high-
involvement purchase and the customer is likely to conduct an extensive evaluation.
Hence the marketer would need to provide extensive information regarding the positive
effects of buying the product. This evaluation can be influenced by the TOMA. The
results of our TOMA analysis are given below.

When you think of paints what are the brand names that come to your mind?
When customers were surveyed for naming any 4 brands in the paint industry that first
came to their mind, majority of the respondents gave Asian Paints as their first preferred
choice. Asian Paints had the best brand recall.

28
 Brand Appeal

45

No of Customers
40
35
30
25 No. of customers
20
15
10
5
0

ICI(Dulux)
Berger
paints

Nerolac
Asian

Jenson &
Nicholson
Brand

fig-10

We need to also look at the importance the customer gives to particular attributes of a
product and its comparison with the competitor’s products. We have looked at the
following attributes: Price, Durability, Color variety, Availability and Coverage.

Price:

PRICE

12% 26% Asian paints

15% Nerolac
Berger
ICI(Dulux)
17% Shalimaar
30%

fig-11

From our experience in the marketing survey, we came to the conclusion that prices do
not play a significant role in evaluating different brands because the prices are more or
less the same for a particular product category across different brands. From the survey
that we have conducted on a limited sample, Nerolac was found to have the highest
preference by a customer who evaluated different brands based on price.

29
Durability:

Durability

16% Asian paints

28%
16% Nerolac
Berger
ICI(Dulux)
17% 23% Shalimaar

fig-12

From the survey, we found that the durability of Asian Paints and Nerolac as perceived
by the consumer was more or less the same and the other brands were perceived to have a
lower durability.
Color Variety:

Range of Colours

10%
30% Asian paints
15%
Nerolac
Berger
ICI(Dulux)
22% Shalimaar
23%

Fig-13
Asian Paints was perceived as a brand which offers the highest range of colors/ shades
for the customer, followed by Nerolac and Berger. We also found that color is an
important driver of purchasing behavior and many buying decisions are based on color
alone.

30
Availability:

Asian Paints is perceived to be readily available by consumers in the market which

indeed is so. The easy availability of paint is one of the reasons of consumers higher
demand for the product.
Availability

15% Asian paints

31%
14% Nerolac
Berger
ICI(Dulux)
19% 21% Shalimaar

Fig-14

Coverage:

Coverage

10% Asian paints

28%
14%
Nerolac
Berger
ICI(Dulux)
23%
25% Shalimaar

Fig-15
We found that coverage did not play a significant role in the decision process and it
depended mostly on the application of the paint – interior or exterior. The interior of a
house for example underwent a very little wear and tear but exterior was affected by
external factors such as sun resistance, rains etc.

The final Stage is the post-purchase evaluation of the decision. It is common for
customers to experience concerns after making a purchase decision. This arises from a
concept that is known as “cognitive dissonance”. The customer, having bought a product,
may feel that an alternative would have been preferable. In these circumstances that

31
customer will not repurchase immediately, but is likely to switch brands next time.
However, in this case the repurchase decisions do not occur immediately and the paint is
evaluated for its durability over time. Customer responses suggest that Asian Paints
scores highest on durability and this leads to repurchases by the customer.

Dealer questionnaire analysis :

Since dealers turned out to be the major influencers in the decision making process, we
questioned all the Asian Paints dealers in Bhubaneshwar. The objective was to
understand the dealers perception of Asian Paints and the competing brands.These are the
responses from the dealers.

Market Pull: On being asked, how they decide which brand to sell, most of them replied
that customer demand for the brand was the major deciding factor. Some of them were
also induced by profit margins and availability of shades.

Prerequisites for becoming a dealer: Earlier the company used to give dealership to
only a select few depending on the monetary might of the businessman. But this is not a
consideration now a days because the company wants to capture the market by increasing
its distribution network.

Prevalence of the brand: Most dealers responded that Asian Paints is the most prevalent
brand because its brand awareness is the highest. Their advertisements are the most
effective and stay with the audience. The dealers also said that people perceive that Asian
Paints provides best quality and the widest color range.

Services provided by dealers: Most dealers provide the services like painter references,
cost calculation, color mix selection and application of product.

Incentives given to dealers: Incentives include cash discounts on bulk buys, foreign
trips and expensive gifts on surpassing sales targets. This is indicative of the companies
aggressive trade promotion.

Collection of customer feedback: Most of the dealers did not collect customer feedback.
Successive purchases by the customers were taken to be the customer’s approval of the
brand.

Who is the influencer of the customer decision: It was observed that customers are
mostly influenced by dealers, painters and contractors. This shows that the customers are
not informed themselves and depend more or less on advice from the above. One more
observation was that many of the customers were brand loyal and therefore did not switch
brands.

Best marketing strategy: Most dealers were of the opinion that Asian Paints has the best
marketing strategy because of more efficient sales-force, more effective TV promos and
wider color range.

32
Dealer feedback: The dealer is not taken into consideration for marketing decisions.
Since the intermediaries play a very vital role in the value chain of Asian Paints the
company should devise methods to map the views of the dealers.

Supply to the industrial segment: Asian Paints has a minimal presence in the industrial
segment. The dealer perception is that Shalimar paints is the leader in the industrial
segment in the Orissa market.

10. Suggestions
After analyzing the data obtained from the consumers and the dealers it was evident that
Asian Paints is the market leader. It enjoys the largest customer base in the Orissa
market. Our group came up with the following suggestions for improving upon the
current customer base and expanding into other high potential sectors besides the
decorative segment

1. Since the intermediaries play a very important role in the marketing of the brand,
the company should take initiatives like painter training programme with Asian
Paints certificates. This will increase the creditability of the painters in the market
and they will become brand loyal.
2. The inventories as a proportion of net working capital are increasing from around
200 in the year 2000 to more than 800 in the year 2005. Moreover with larger
product diversification inventory management becomes costlier and tedious.
Though Asian Paints is the first company to employ eBPO for inventory
management, still it needs to take initiatives to reduce its inventory levels.
3. As per the feedback obtained the customers were unable to associate sub brands
like Apex, Tractor, Apcolite and Utsav with the parent brand. Therefore the
company needs to emphasise more on the promotion of sub-brands.
4. More and more women can be found perusing the shelves at paint stalls in search
of the right type of paint for their homes. So the company can target this new set
of interested customers by increased advertising in women magazines.
5. The services provided by the company on the website are not being used because
of the low penetration of internet in India. So we recommend that these facilities
should be made available at the point of purchase.
6. For decorative range of products it is difficult for international companies to set
up shop on a standalone basis because of existing barriers like strong network of
existing players, brand image and distribution logistics. But this may not apply on
the basis of industrial products in which tie-ups in home countries and their OEM
customers, the required stock can be made and sold. In the face of cut-throat
competition and new technology, Asian Paints requires new associations and
strategic partnerships to move ahead in the industry segment which contributes to
30% of the paint business.
7. Asian Paints has a marginal presence in the industrial segment particularly in
Orissa. This decision was justified till now because there were very few industries
in Orissa. Recently Orissa has signed a lot of MoUs for FDI and this will bring in
a lot of industries into the state. So Asian Paints should start focusing on this

33
 segment and take the first mover advantage. This segment is highly paying
because of the low distribution cost and bulk orders.
8. Efficient working capital management has been the strength of the company for
years. However recently towards the end of 2004-05 there has been increase in
level of inventory due to VAT uncertainties and in anticipation of higher material
prices. Increased working capitals lead to diversion from productive investments.
Though Asian Paints has employed i2 SCM to cut costs, the present scenario still
requires unifying the planning down to the plant level.

34
 Appendix

Customer Questionnaire

Name of the customer:______________________________________________

1. How often do you paint your house/ office?

a) 1 yr b) 3 yrs c) 5 yrs or more

2. When you think of paints what are the brand names that come to your mind?

List any four_____________________________________________________

3. How did you get to know about these brands?

a) Newspapers b) TV c) Hoardings d) Friends/Family

e) Dealer

4. Which of these medium is most effective?

5. Which brand advertisement has the greatest appeal?

a) Asian paints b) Nerolac c) Dulux d) Shalimar

6. Given here are some product attributes and some paint brands. Arrange these

brands on the basis of the order of preference for each product attribute.

Asian Paints-AP; Nerolac-N; Berger-B, ICI (Dulux) -D; Shalimar-S

Price

35
 Durability

Coverage

Colour variety

Availability

Low High

7. Whom do you consult while taking painting decisions?

a) architects b) painters c) contractors d) dealers

8. What are the services offered by paint companies that you know of?

a. Colour mixing machine b. consultancy services

c. cost calculators d. online services

9. Which company do you associate these products with?

a. Royale (Asian/Nerolac/ICI)

b. Utsav

c. Tractor

d. Apex

e. Dulux

36
 Questionnaire for Asian Paints Dealer

Dealer: M/S __________________________________

1. How do you decide which brand you sell?

2. Which brand do you think is most prevalent and why?

3. What services do you provide to promote your brand?

4. What are the schemes that paint companies offer for sales?

5. What do you do to collect feedback from the customers?

6. How do consumers make their final selection?

7. According to you which company has the best marketing strategy?

8. Is dealer feedback taken into consideration while taking marketing decisions?

9. What are prerequisites for becoming a dealer of Asian Paints?

10. Do you supply paints in the industrial segment?

37
 Audited Result for the years 2000-2005

Asian Paints Ltd. Mar 2000 Mar 2001 Mar 2002 Mar 2003 Mar 2004 Mar 2005
Rs. Crore (Non-Annualised) 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths
-
Gross sales 1383.55 1526.01 1662.33 1887.7 2111.08 2366.16
Net sales 1194.03 1322.38 1450.71 1641.27 1841.92 2037.55
VOP 1214.37 1333.15 1412.56 1672.87 1847.79 2111.91
Other income 7.68 7.07 11.32 9.01 14.09 21.58
Cost of production 780.29 855.47 970.65 1083.67 1206.71 1414.31
Selling & marketing expenses 177.49 176.26 192.49 216.58 249.29 269.16
Distribution expenses 40.96 50.62 0 60.9 69.73 83.69
PBDIT (NNRT) 190.15 208.55 236.15 287.98 292.33 325.55
PBDT (NNRT) 169.86 186.43 221.56 274.62 281.37 316.06
PBT (NNRT) 142.02 154.85 179.78 226.1 233.36 268.45
PAT (NNRT) 96.27 105.35 113.69 141.6 145.36 169.65
-
Exports 14.05 12.36 8.83 7.18 10.26 13.73
Imports 119.24 118.68 120.78 140.9 129.52 158.43
-
Gross fixed assets (excl. reval. & WIP) 468.17 544.85 594.89 617 633.77 691.28
Current assets 388.18 443.95 337.5 402.95 442.96 586.29
Net worth (net of reval. & DRE) 351.5 407.1 405.42 476.63 531.54 572.22
Equity capital 40.12 64.19 64.19 64.19 95.92 95.92
Long term borrowings 108.39 137.74 101.73 78.97 71.94 67.96
Capital employed 459.89 544.84 507.15 555.6 603.48 640.18
Current liabilities & provisions 305.26 333.23 255.55 332.41 402.56 545.21
-
Total assets / liabilities (excl. reval. & DRE) 718.45 823.06 829.33 943.51 1064.36 1225.11
-
Growth (%)
Gross sales 19.7 10.48 9.09 13.25 12.09 15.02
Cost of production 17.06 9.63 13.46 11.64 11.35 17.2
PBDIT 38.65 9.68 13.23 21.95 1.51 11.36
PAT 41.32 9.43 7.92 24.55 2.66 16.71
GFA 14.02 16.38 7.18 3.71 3.29 9.74
Total assets 9.63 14.56 0.76 13.77 12.81 15.1
-
Margins ratios (%)
PBDIT (NNRT) / sales 13.74 13.67 14.21 15.26 13.85 13.76
PBDT (NNRT) / sales 12.28 12.22 13.33 14.55 13.33 13.36
PAT (NNRT) / sales 6.96 6.9 6.84 7.5 6.89 7.17
PBDIT (NNRT) / net sales 15.93 15.77 16.28 17.55 15.87 15.98
PBDT (NNRT) / net sales 14.23 14.1 15.27 16.73 15.28 15.51
PAT (NNRT) / net sales 8.06 7.97 7.84 8.63 7.89 8.33
-
Returns ratios (%)
PAT (NNRT) / net worth 29.35 27.77 27.98 32.11 28.84 30.74
PAT (NNRT) / total assets 14.02 13.67 13.76 15.97 14.48 14.82
PBIT (NNRT) / capital employed 35.55 35.23 36.95 45.06 42.16 44.7
PAT (NNRT) / capital employed 21.09 20.97 21.61 26.65 25.08 27.28
-
Liquidity ratios (times)
Long term debt / equity 0.308 0.338 0.251 0.166 0.135 0.119
Total debt / equity 0.462 0.556 0.273 0.217 0.135 0.15
Current ratio 1.272 1.332 1.321 1.212 1.1 1.075
Interest cover 8 8 13.32 17.92 22.29 29.29
-

38
 Gross working capital cycle (days) 99 103 93 83 83 89
Net working capital cycle (days) 84 82 66 48 38 36
Avg. days of debtors 22 25 27 23 22 22
Avg. days of creditors 15 21 26 35 45 53
-
Asset utilisation ratios (times)
VOP / total assets 1.77 1.73 1.71 1.89 1.84 1.84
VOP / GFA 2.76 2.63 2.5 2.81 3 3.22

d. Bibliography

1. www.asianpaints.com

2. www.bergerpaints.com

3. www.dulux.com

4. www.jensonnicholson.com

5. www.nerolac.com

6. www.adfags.com

7. www.tutor2u.com

8. www.superbrandsindia.com

9. www.myiris.com

10. ISI emerging markets database

11. CMIE database

12. The Hindu-Survey of Indian Industry,2005

13. Marketing Management – Philip Kotler

14. Strategic Market Management- David Aakar

39
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