2012

FA Project on ASIAN PAINTS

Submitted by: Varun jindal (211161) Ravindra mohan Shreshtha gupta Pooja (211146)

(211136)

(211177)

Anurag gupta(211131)

FA Project on ASIAN PAINTS

Chapter 1
(Introduction on company/company profile: its name, line of business, board of directors, shareholding pattern,)

FA Project on ASIAN PAINTS

Company profile:
Company name Type Industry Founded Head quarter Asian paints Public LTD PAINT 1942 MUMBAI

Asian Paints is India's largest paint company and Asia's third largest paint company, with a turnover of Rs 96.32 billion. The group has an enviable reputation in the corporate world for professionalism, fast track growth, and building shareholder equity. Asian Paints operates in 17 countries and has 24 paint manufacturing facilities in the world servicing consumers in over 65 countries. Besides Asian Paints, the group operates around the world through its subsidiaries Berger International Limited, Apco Coatings, SCIB Paints and Taubmans. Forbes Global magazine USA ranked Asian Paints among the 200 Best Small Companies in the World for 2002 and 2003 and presented the 'Best under a Billion' award, to the company. Asian Paints is the only paint company in the world to receive this recognition. Forbes has also ranked Asian Paints among the Best under a Billion companies in Asia In 2005, 06 and 07, The company has come a long way since its small beginnings in 1942. Four friends who were willing to take on the world's biggest, most famous paint companies operating in India at that time set it up as a partnership firm. Over the course of 25 years Asian Paints became a corporate force and India's leading paints company. Driven by its strong consumer-focus and innovative spirit, the company has been the market leader in paints since 1968. Today it is double the size of any other paint company in India. Asian Paints manufactures a wide range of paints for Decorative and Industrial use. In Decorative paints, Asian Paints is present in all the four segments v.i.z Interior Wall Finishes, Exterior Wall Finishes, Enamels and Wood Finishes. It also introduced many innovative concepts in the Indian paint industry like Colour Worlds (Dealer Tinting Systems), Home Solutions (painting solutions Service), Kids World (painting solutions for

FA Project on ASIAN PAINTS

kid's room), Colour Next (Prediction of Colour Trends through in-depth research) and Royale Play Special Effect Paints, just to name a few. Asian Paints has always been ahead when it comes to providing consumer experience. It has set up a Signature Store in Mumbai & Delhi in India, where consumers are educated on colours and how it can change their homes. Vertical integration has seen it diversify into products such as Phthalic Anhydride and Pentaerythritol, which are used in the paint manufacturing process. Asian Paints also operates through APPG (50:50 JV between Asian Paints and PPG Inc, USA, one of the largest automotive coatings manufacturer in the world) to service the increasing requirements of the Indian automotive coatings market. Another 50:50 JV with PPG has been proposed which will service the protective, industrial powder, industrial containers and light industrial coatings market.

International Presence: Today the Asian Paints group operates in 17 countries across the world. It has manufacturing facilities in each of these countries and is the largest paint company in eleven countries. The group operates in five regions across the world viz. South Asia, South East Asia, South Pacific, Middle East and Caribbean region through the five corporate brands viz. Asian Paints, Berger International, SCIB Paints, Apco Coatings and Taubmans. The Group operates as: Asian Paints in South Asia (India, Bangladesh, Nepal and Sri Lanka) SCIB Paints in Egypt Berger in South East Asia (Singapore), Middle East (UAE, Bahrain and Oman), Caribbean (Jamaica, Barbados, Trinidad & Tobago) Apco Coatings in South Pacific (Fiji, Tonga, Solomon Islands and Vanuatu) Taubmans in South Pacific (Fiji and Samoa)

FA Project on ASIAN PAINTS

The company has a dedicated Group R&D Centre in India and has been one of the pioneering companies in India for effectively harnessing Information Technology solutions to maximize efficiency in operations.

Board of Directors
ASHWIN CHOKSI (Chairman) ASHWIN DANI (Vice Chairman) ABHAY VAKIL, P.M. MURTY (Managing Director & CEO(up to 31st March, 2012)) K.B.S. ANAND (Managing Director & CEO(w.e.f. 1st April, 2012)) MAHENDRA CHOKSI AMAR VAKIL Mrs. INA DANI Ms. TARJANI VAKIL DIPANKAR BASU MAHENDRA SHAH DEEPAK SATWALEKAR R.A. SHAH DR. S. SIVARAM S. RAMADORAI

FA Project on ASIAN PAINTS

Distribution of shareholder holding:
NO. OF SHARES SHARES in % 11.09 41.7 52.79

A) share holding promoter and promoter group

Individual undivided family Bodies corporate Total shareholding of promoters and promoters group 10635701 40000978 50636679

B) Public shareholding
Mutual funds Fin inst /banks Insurance companies FII Bodies corporate Individual(<1 lakh) Individual(>1 lakh) Non-resident individual 1612603 5889 6861288 17143330 5424151 11863378 865091 1507370 95919779 1.68 0.01 7.15 17.87 5.66 12.37 0.9 1.57 100

TOTAL
SHARES in %

Individual undivided family Bodies corporate Mutual funds Fin inst /banks Insurance companies FII Bodies corporate

FA Project on ASIAN PAINTS

Line of Business
Asian Paints manufactures and markets industrial and decorative coatings. The company's key products and brands include the following: Products: Decorative paints Interior wall paints Exterior wall paints Wood surface paints Metals surface paints Industrial coatings: Protective coatings Floor coatings Road markings Automotive: Body coatings Plastic coatings Ancillaries

IN VE NT O R Y VAL U AT I O N PO L I C Y
Raw materials, work in progress, finished goods, packing materials, stores, spares, traded goods and consumables are carried at the lower of cost and net realizable value. Cost of inventory comprises all costs of purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and all other costs incurred in bringing the inventory to their present location and condition Cost of finished goods and work-in-process includes the cost of raw materials, packing materials, an appropriate share of fixed and variable production overheads, excise duty as applicable and other costs incurred in bringing the inventories to their present location and condition. We feel that the inventory valuation policy has more or less remained same over the last4 years. It has been consistent with the policies prescribed by the regulator (AS 2).

REVENUE RECOGNITION POLICY

Revenue from sale of goods is recognized on transfer of all significant risks and rewards of ownership to the buyer which is on dispatch of goods. Sales are stated gross of excise duty as well as net of excise duty; excise duty being the amount included in the amount of gross turnover. The excise duty related to the difference between the closing stock and opening stock is recognized separately as part of Material Cost. Dividend income is recognized when the right to receive payment is established. Interest income is recognized on the time proportion basis

FA Project on ASIAN PAINTS

DEPRECIATION POLICY
Asian Paints uses Written down Value / Straight Line Method depending on the type of asset. Depreciation on fixed assets is provided at rates permissible under applicable local laws or at such rates so as to write off the value of assets over their useful life. If the managements estimate of the useful life of a fixed asset at the time of acquisition of the asset or of the remaining useful life on a subsequent review is shorter than that envisaged in the aforesaid schedule, depreciation is provided at a higher rate based on the managements estimate of the useful life/remaining useful life. Asian paints provide depreciation on following assets at rates which are higher than the corresponding prescribed rates. Information Technology Assets: 4 years Scientific Research Equipment: 8 years Furniture and Fixtures: 8 years Office Equipment and Vehicles: 5 years The depreciation policy used by Asian Paints remained consistent for the last four years. The policy appears to be more conservative as they estimate the life of their assets to be lesser than that is prescribed in companies act. This on the other hand gives the company to show more expenses and decrease the tax amount paid by the company. On the whole, though the company appears to have chosen a more conservative approach, there may be an advantage of reduced taxes on account of this policy.

FA Project on ASIAN PAINTS

Chapter 2
(Operating performance: analysis of sales mix, pee comparison, whether company is having export sales, importing raw material)

FA Project on ASIAN PAINTS

Peer comparisons
W e have compared Asian Paints with its closest peer in the same industry. Kansai Nerolac Paints Limited (KNPL) is Indias second largest paints company anda leader in the Industrial Coating segment. The company is the Indian subsidiary of Japan's Kansai Paint Company Ltd. KNPL with a total capacity of 2 lakhs tones is present in the decorative and the industrial segment. Established as Gahagan Paints and Varnish Co. Ltd. in 1920, it became a public limited company as Goodlass Nerolac Paints in 1968.
Name Asian Paints Kansai Nerolac Share Price 3,758.00 897.70 Market Cap. 36,046.65 4,837.88 Sales Turnover 7,964.16 2,600.60 Net Profit 958.39 215.90 Total Assets 2,656.00 1,132.15

40,000.00 35,000.00 30,000.00 25,000.00 20,000.00 15,000.00 10,000.00 5,000.00 0.00 Share price Market cap Sales turnover Net profit

Asian paints Nerolac Nerolac Asian paints Net asset

Decorative paints segment: KNPL has a market share of 13 per cent to 14 per cent in the decorative paints segment of the country. Asian Paints is a leader in this segment with market ratio of 65 percent. Industrial paints segment: KNPL is a leader in this segment in India with an overall market share of around 45 per cent. It has a market share of over 60 per cent in the automotive coating segment and around 27 per cent market share in the powder coating segment Competitor Analysis Asian Paints is a market leader with market capital almost 9 times its nearest competitor and 3 times the sales turn over. Asian paints constitute 55 percent of the market with a profit of 958.39 crore that is 4.44 times Nerolac.

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Asian paints have almost 8 times the market cap in comparison with Kansai Nerolac. Sales turnover is also three times. Net profit of Asian Paints is almost 4 times than compared with Kansai. Hence from the above data we can see that Asian Paints is the market leader in all the segments apart from industrial paints.

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FA Project on ASIAN PAINTS

Export and import
Import values as on 31th march 2012
CIF value of imports Value in crore Rs.

Raw materials Stores and spares capital goods

957.94 6.22 143.45

import

Raw materials Stores and spares capital goods

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Export: Your Company also exports items to its overseas units and licensees. Specific products or special products which are of low volume for domestic manufacture by the overseas units are also produced and exported to the units from India. Support is extended to overseas units through export of marketing materials and machinery parts. An export query received in India from countries where your Company has operations is routed through respective overseas units. Sale of product (export) = 156.07 cr Total sale of product =10377.86 cr

Sales (in crores)

Export Home market

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FA Project on ASIAN PAINTS

Chapter 3
(Financial statement analysis: ratio analysis, trends, profit and loss and balance sheet)

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FA Project on ASIAN PAINTS RATIO ANALYSIS

1. Liquidity ratios

a) Current ratios :
Column1 2007-08 2008-09 2009-10 2010-11 2011-12 Current Ratio 0.99 1.13 0.89 0.93 1.07

1.2 1 0.8 0.6 0.4 0.2 0

Current Ratio

Current Ratio

2007-08 2008-09 2009-10 2010-11 2011-12

In the varnishes sector, this ratio varies from 1.07 to 2.14. The company has maintained 1:1 ratio. There is a dip in the ratio as observed from above; this is due to the increase in amounts due to creditors.

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b) Quick ratio:

Quick Ratio 2007-08 2008-09 2009-10 2010-11 2011-12 0.47 0.59 0.38 0.34 0.57

Quick Ratio
0.8 0.6 0.4 0.2 0 2007-08 2008-09 2009-10 2010-11 2011-12 Quick Ratio

The quick ratio is very low due to which the company may find it difficult to cover its liabilities. There is a significant change in quick ratio as compared to current ratio. This signifies that majority of the pie of the current assets is given to inventories. But inventories holding major amount of funds in current assets is quite normal across this sector.

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c) Inventory turnover ratio:
Inventory turnover ratio 2007-08 2008-09 2009-10 2010-11 2011-12 8.03 9.8 7.95 7.08 7.56

Inventory turnover ratio

12 10 8 6 4 2 0 2007-08 2008-09 2009-10 2010-11 2011-12

Inventory turnover ratio

Inventory turnover ratio is varying from 7 to 10 times, which is moderate in any industry. This gives the average inventory holding period around 36-45 days, which is not so high so inventory costs are not very high.

Liquidity Position
Though the company is maintaining a current ratio 1:1, quick ratio 0.5, and inventory holding period is 35-45 days. The net cash from operations is positive and good, so the liquidity position of the Asian paints is stable.

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2. Solvency ratios:

a) Debt equity ratio

Debt equity Ratio 2007-08 2008-09 2009-10 2010-11 2011-12 0.08 0.06 0.04 0.03 0.07

Debt equity Ratio

0.1 0.08 0.06 0.04

0.02
0

Debt equity Ratio

Debt equity ratio is low and compared to peers, it is very low. The standard ratio across the varnishes companies varies from 0.5 to 1.15. This tells the debt raised is very low compared to capital raised by equity in this sector.

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b) Interest coverage ratio:
Interest coverage ratio(times) 2007-08 2008-09 2009-10 2010-11 2011-12 69.73 55.04 74.27 74.05 50.66

Interest coverage ratio(times)

80 60 40 20 0 Interest coverage ratio(times)

The interest coverage ratio of Asian paints is very good, so the company can repay the interest expense comfortably. As compared to its peers, Asian paints ratio is 10 times better than others. This is due to the high operating profit of Asian paints as compared to others.

Solvency Position
The financial leverage used by the company is very low degree as the debt equity ratio indicates, which suggests that the company is conservative. The solvency position of the company is strong and thus can raise funds easily at lower interest rates due to the high interest coverage ratio for long term investments.

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Profitability ratio

a) Return on investment:
Return on investment(percentage) 2007-08 2008-09 2009-10 2010-11 2011-12 57.32 49.35 62.94 55.73 52.24

Return on investment(percentage)
80 60 40 20 0 Return on investment(perce ntage)

The return on investment for Asian company is very high around 50-60%. The return on investment across the sector is 15% which indicates that the company is highly profitable for the owners.

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b) Earnings per share:
Earnings per share(RUPEES) 2007-08 2008-09 2009-10 2010-11 2011-12 39.12 37.78 80.74 80.81 99.92

Earnings per share(RUPEES)

150 100 50 0 Earnings per share(RUPEES)

EPS of Asian paints had increased over years though there is no new raise of capital through public issues; this suggests that the company had sustained profits through the years. EPS of peers varied from Rs 5 to Rs. 50, but there are no sustained Earnings as seen in Asian paints.

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c) Net profit margin:

Net profit margin(percentage) 2007-08 2008-09 2009-10 2010-11 2011-12 10.28 7.97 14.29 11.61 11.38

1.

Net profit margin(percentage)

20 15 10 5 0 Net profit margin(percen tage)

Net profit margin had a dip in the year 2008-09, as the income from other sources had decreased and extra-ordinary items have increased. There is similar trend observed across all the companies operating in the sector due to the recession.

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d) Operating profit margin:

Operating profit margin(%) 2007-08 2008-09 2009-10 2010-11 2011-12 15.83 13.16 19.24 17.57 16.81

Operating profit margin(%)

25 20 15 10 5 0 Operating profit margin(%)

Due to marginal increase in the operating expenses as compared to the operating income, there is a dip in operating profit margin in year 2008-09. The operating profit margin of Asian paints is decent and well above the sector average of 7.5%.

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e) Asset turnover ratio:
Asset turnover ratio 2007-08 2008-09 2009-10 2010-11 2011-12 3.97 4.18 4.68 4.25 5.23

Asset turnover ratio

6 5 4 3 2 1 0 2007-08 2008-09 2009-10 2010-11 2011-12 Asset turnover ratio

Asset turnover shows the firm's efficiency at using its assets in generating
revenues. The ratio is almost the same for the competitors too, which indicates that turnover on assets is low in the sector.

Profitability
High EPS, ROI, Net profit margin% clearly suggests that the firm is highly profitable for both the investors and the owners. Even though the firm has high net profit margin over others, it had generated more sales than any other firm. The profitability of the firm is very high.

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Trend analysis
ITEM Inventory Property & equipment Current liabilities Sales Net income (loss) Investment Reserves 2012-11 234.6 209.1 211.3 231.6 255.43 128.29 287.29 2011-10 198.85 210.62 164.32 183.72 206.48 244.7 225.72 2010-09 141.59 146.25 137.21 149.28 206.41 166.4 175.52 2009-08 101.4 138.85 103.27 125.44 96.58 55.52 119.94 2008-07 100 100 100 100 100 100 100

Chart Title
350

300

250

200

150

100

50

0 2011-12 Inventory Sales Reserves 2010-11 2009-10 Property & equipment Net income (loss) 2008-09 2007-08 Current liabilities Investment

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FA Project on ASIAN PAINTS

The significance of a trend analysis of ratios lies in the fact that the analysis can know the direction of movement, that is, whether the movement is favorable or unfavorable. Trend analysis involves comparison of a firm over a period of time, that is present ratios are compared with past ratios for the same firm. It indicates the direction of change in the performance-improvement, deterioration or constancy- over the years. The important points to note in the trend analysis are given below: The inventories remain constant in 2007-08 to 2008-08 which reflects in the sales also. The inventories in the past three years have been increasing with a rate of 30%. The properties have also increased almost constantly in the previous years. The sales of the company have increased more than 200% in the past five years, which is tremendous. Investment have decreased in 2011-12 as about 100 crore of investment were sold in the year. The reserves and surplus have also increased more than twice in the past five which after increasing the dividend paid is a very good indicator for the company.

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Chapter 4
(Cash flow analysis)

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Cash flow analysis

Cash from operating activities:
Cash from operating activities(in crore rupees) 2007-08 2008-09 2009-10 2010-11 2011-12 457.29 325.21 847.41 743.25 753.67

Cash from operating activities(in crore rupees)

1000 800 600 400 200 0 2007-08 2008-09 2009-10 2010-11 2011-12 Cash from operating activities(in crore rupees)

Cash flow from operations has increased in 2009 due to increase in the sales which nearly doubled in the year. From 2009 to 20011 cash flow from operations in nearly constant.

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Cash used in investing activities:
Cash used in investing (in crore rupees) 2007-08 2008-09 2009-10 2010-11 2011-12 -331.91 -16.69 -241.81 -410.23 -464.87

Cash used in investing (in crore rupees)

0 -100 -200 -300 -400 -500 2007-08 2008-09 2009-10 2010-11 2011-12 Cash used in investing (in crore rupees)

The cash flow into investing activity in 2008-09 is very low because of huge sale of investment of around 197 crores. Looking in the cash flow in investing activity we can say that company is increasing its investment in the past four years and want to consolidate its current market position.

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Cash used in financing activities:
Financing activities(in crore rupees) 2007-08 2008-09 2009-10 2010-11 2011-12 -126.52 -221.62 -237.99 -321.15 -297.06

Financing activities(in crore rupees)

0 -50 -100 -150 -200 -250 -300 -350 Financing activities(in crore rupees) 2007-08 2008-09 2009-10 2010-11 2011-12

Cash flow in financing activity has consistently increased in the past years excluding 2011-12. Cash flow in financing activity in 2011-12 have decreased because there is huge inflow of short borrowing which increased from 2 crore rupees to 109 crore rupees.

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Net increase/decrease in cash:
Column1 2007-08 2008-09 2009-10 2010-11 2011-12 Net change in chash in crore rupees -1.4 -110.75 367.61 11.87 -8.26

Net change in chash in crore rupees

400

300
200 100 0 2007-08 -100 -200 2008-09 2009-10 2010-11 2011-12 Net change in chash in crore rupees

Net change in cash is positive in 2009-10 because the sales get doubled in this year. The cash change in the years following 2009-10 is near to zero because of not much increase in sales, and also any major change in investment was missing.

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Chapter 5
(SWOT analysis of company)

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SWOT ANALYSIS OF ASIAN PAINTS

SWOT analysis is a basic, straightforward model that provides direction and serves as a basis for the development of marketing plans. It accomplishes this by assessing an organizations strengths (what an organization can do) and weaknesses (what an organization cannot do) in addition to opportunities (potential favourable conditions for an organization) and threats (potential unfavourable conditions for an organization).

Strengths: 1. Market leaders with 37% market share in the organized sector, the closest competitor does not have even half of Asian Paints share. 2. Comprehensive nationwide coverage of the market urban, semi-urban and rural areas. They have quite a number of brands, covering all segments and filling all gaps. For example, they have brands in different price slots like Utsav for rural lower-end markets and Apcolite for high end-markets. 3. Asian Paints logo Gattu, an impish boy with the paint tin and brush, is most popular and easily recognized; 4. Widest product range in terms of products, shades, pack sizes - 40 different decorative, some in 150 shades, 8 different pack sizes; 5. Unlike its competitors who concentrate only in urban areas, it is found everywhere. It has a country wide distribution. 6. A network of 13,000 dealers spread all over the country. The nearest competitor has less than 8,000. For this, they have large network of regional offices and company depots and sales personnel to service the nationwide dealer network; 7. Strong in inventory control. APs average inventory level is 28 days sales against 51 days for the industry. AP has 45% edge in inventory carrying costs; 8. The pricing strategy is oriented to middle/lower end consumers; 9. AP is quite strong in production-marketing coordination. Their policy of offering tailormade products to suit customer need has resulted in an ever growing product range; 10. In-house production, no outsourcing, high reliability in suppliers, superior in quality assurance;

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11. Leader in profit and operating margins, ROI of AP is 40% while ROI of the rest of the industry is 22%, Net worth of Rs 204 crores against Rs 58 crores of Goodlass Nerolac and Rs 41 crores of Berger. 13. Corporate reputation has been a major strength for AP. The image is that of a successful and well-managed company. They have won many accolades and awards.

Weaknesses: 1. In industrial paints, AP has only a 15% market share. It is far behind the leader Goodlass Nerolac, which has a market share of 43%. Since this is going to be the major growth segment in the future, a lag in this segment will end up as a major weakness; 2. Widening product mix puts strain on production distribution, accounting and administration; 3. Innovation in developing new products is adequate; 5. Ever expanding product mix throws some strain on inventory management; 6. Seasonal demand and hence in off seasons it can lead to cash flow problems; 7. No tie up with foreign manufactures .Though it has operation in several countries.

Opportunities: 1. Acquiring/ increasing market share in Industrial paint sector. 2. Developing market in automobile industry, which accounts for 50% of Industrial paint market. 3. It has always encashed on opportunities that have come its way. It has maintained a product profile keeping the market trends in picture. It shifted to predominance in industrial paints than industrial paints than in decorative paints as was evident from the production figures of 1995-96; 4. The automobile industry accounted for 50% of the industrial paint market.

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Threats: 1. Domination of few foreign companies; 2.Since both Goodlass Nerolac (43%) and Bergers (14%) have a higher market share than APs (14%), it is possible that in the future, they may capture the entire industrial paint market; 3. Competitors have gone in for hi-tech with instacolour spot mixing. For example, J&Ns instacolour offers 626 shades; 4. Automated paint blending in retail points already there. ICIs Touch Colour and Bergers Colour Bank are indicative of this; 5. Competition is catching up fast, hi-tech facilities gives abundant choices. The study of this SWOT analysis shows that the strengths and opportunities far outweigh weaknesses and threats.

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