INTRODUCTION

Paint is a generic term for a range of chemical substances that help protect
surface a keep them looking good.Paint is defined as a group of emulsion,
consisting of pigment suspended in a liquid medium, for use as decorative or
protective coating. Today, contemporary paints and coatings consist of
countless compounds uniquely formulated to fulfill the varied requirements of
hundreds of thousands of application. paint ranges from the broad group of
environmentally-sound latex paint that many consumers use to decorate and
protect their homes and the translucent coating that line the interior of food
containers, to the chemically-complex, multi-components finishes that
automobile manufacturers apply on assembly line.

Though there are different types of paint for different surface, all paints are
mixture of four elements- solvent which gives it its flow and enable it to brush
on the surfaces, binders for cohesion as well as adhesion to the surfaces,
pigments for colour and capacity, and additives which give paint certain special
characteristics such as resistance to fungus, algae and rust.

A variety of paint exist fir different purpose. Emulsion, Distempers, Lustre and
matt finished and exterior finishes for walls; melanine based polyurethane
metal and wood. This large number of paint type combine with the range of
products manufactured within each type by any company constitutes a rather
complex market.

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 INDUSTRY STRUCTURE

The Indian paint industry worth Rs 43 billion has been consolidated over the
past four years with the organized sector taking away share from unorganized
segment. The paint market is expected to grow 8-10%p.a over the next few
years. The growth could be higher if the industrial sector picks up as the
industrial paint segment is gaining more importance. Asian paints offer the best
exposure being the market leader and an innovative company.

PER CAPITA CONSUMPTION OF PAINTS (KG):

While high excise duties hindered the growth of the industry in the early
1990s, growth picked up after 1992, mainly due to reduction of duties and
acceleration of industrial growth. The growth of the paint industry is mainly
attributed to urban markets. Consolidation is taking place in favor of large
players; an increasing cost and intense competition afflict smaller companies.

PER CAPITA CONSUMPTION (KG)

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 MAJOR PLAYERS

1. ASIAN PAINTS LTD :

Asian paints are the largest player in India, and also the market leader in
decorative paint, with a 41%market share. It has a domestic installed capacity
of 1, 62,700 tpa for paint. With the government planning thrust in the housing
sector, players like Asian paints stand for the benefit, as the demand for
decorative paints will grow.

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 Taking advantage of the increase in the automatic approval of overseas
investment, Asian paints recently acquired the entire paint business pf pacific
paints company pvt ltd. Australia for Aus $ 375000. Last year Asian paints had
acquired the largest paint company in Sri-lanka. Asian paints vision is to be
among the top five decorative paint companies in the world by 2007.

2. GOODLASS NEROLAC PAINTS LTD:

Goodlass nerolac paint is the leader in the industrial paint segment. Earlier this
year, kansai paint of Japan brought out the tatas stake in goodlass nerolac
paints, to raise its stake in the company to 65%. Goodlass nerolac paint
manufacturing capacity is 88,140 TPA.

3. BERGER PAINTS LTD:

Berger paint ltd acquired Rajdoot paints ltd in FY 1999. Thus, it has
consolidated its position within the decorative segments. Installed capacity is
56,420 TPA. In addition to focus on its existing industrial paints/protective
coating business, the company is entering into a 50:50 joint venture with ICI
India ltd, exclusively for automobile and industrial paints. Both companies will
have equal representation of board of joint ventures.

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4. ICI INDIA LTD:
ICI India, is a subsidiary of ICI plc of UK, has hived of its explosive division
and is concentrating on the paints and rubber chemical business.

MAJOR FOREIGN COLLABORATION OF PAINT COMPANIES:

company collaboration Areas Of

collaboration
Asian paints PPG Ind.Inc Automotive Paints
Sigma coatings Electro deposition
Nippon paints Primers; high
performance coatings
Powder coating
Good lass Kansai Paints Auto and industrial
coatings

BERGER Herberstone gmbh Auto coatings;

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 PAINTS Val spar corp. Inc Heavy duty coatings
Teodur bv Powder coating
J&N HerHerberstone gmbh Auto coating
ICI (INDIA) ICI Plc Auto refinish

MARKET SEGMENTATION:
Paint can be broadly be classified as decorative and industrial on the basis of
end use.

INDUSTRIAL PAINTS:
This material can be further divided into following four sub-segments
depending on end user profile.
Automotive paints
Marine paints
Powder coating
High performance coating
Other general industrial finishes
Coil coating

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 DECORATIVE/ARCHITECTURE FINISH PAINTS:

This market can be further segmented on the basis of the following:

Customers type : institutional/retail or domestic use.
Product Features/Categories: Distempers, enamels, emulsion.
Price: Premium, medium, economy.

The Indian market is dominated by decorative segment, which comprises of

almost 70% of consumption as compared to developed countries where the
industrial segment is more dominant. The ratio in India is also more likely to
shift towards industrial segments, especially with growth in the auto and white
goods industry.

The unorganized sector has historically been dominant by high excise

structure. Over the last five years the excise rates have come down drastically
from 40% to 18% resulting in erosion of unorganized sectors share.

The paint industry is charatererised by low fixed asset intensity (as essentially
it is a mixing process) but high working capital intensity (as the number of
shades is large and there is seasonal demand). The investments are in brand
building and distribution infrastructure.

New trends are emerging in technology and marketing. Introduction of tinting

machine at the dealer/retailer level will bring down working capital cost. Also
new technology is being used to increase the utility and lifespan of paints.
Indian industry will have to keep pace with global technological changes to
maintain their competitiveness. Already a few alliances have entered and the
number is likely to increase in future. Asian paint is a market leader with 41%
market share followed by Goodlass nerolac and ICI respectively. However,
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APL is primarily present in decorative segment. It has entered into joint
venture with PPG of US to cater to fast growing industrial segment.

The outlook for the industry is positive especially given the good prospect for
automotive and white goods Industry. Moreover, housing is expected to grow
rapidly on the back of rising incomes and government incentives. The supply
situation remains a cause for concern and will keep prices under check. The
key to success will be innovative marketing. Thus, we prefer Asian paints
within the sector, which has proven track record in innovation and is
indomitable in the decorative segments.

RAW MATERIALS AND MANUFACTURING FACILITIES:

The companies paint manufacturing facilities are located at Bhandup

(Mumbai), Ankleshwar (Gujarat), Patancheru (Andhra Pradesh) and Kasna
(near Delhi).and Taloja (Thane).

The companys plant at Bhandup was, till the fire in 1996, the largest single
paint manufacturing facility in south Asia. Located on a 34000 sq. meter plot,
its production capacity was 30000 metric tones per annum. The second plant at
ankleshwar has a production capacity of 80,000 M.T annually. The plant makes
most products in company consumer range and also sophisticated automotive
finished based on indigenous technology. The third plat set up at Hyderabad
has a production capacity of 90,000 M.T.annually. The fourth paint plant set up
at kasna (in U.P) has a production capacity of 45000 M.T>annually. The
Bhandup plant has been resurrected with a production capacity of 20,000 M.T
and production capacity at Ankleshwar, Patancheru and kasna are being scaled.
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 There are two chemical factories producing phallic and penta two essential raw
materials for paints. These factories are situated at Ankleshwar and Cuddalore
respectively.

INDUSTRY CHARACTERSTICS

Raw material shortage:

Till sometime ago, the bete-noire of the Indian paint industry was the high
excise duty. When the government was finally convinced that paints were a
necessity and not a luxury, excise duty was slashed across the board from high of
60% excise duty reduced to around 20%of the benefits were passed on to the
customers and there was a temporary surge in demand. But all this stopped when
raw material prices took an upward sprint. Pthalic anhydride (PAN) prices all over
the world started increasing. This has resulted in high input cost. The other raw
material in short supply in titanium dioxide. This has prompted many large
players to integrate backward to hedge uncertainty of raw material costs.

Working capital intensive:

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The number of shades is very large and a sufficient stock of every shades has
to be matained at all levels of the distribution channel, the working capital
cycle is very high. The extent can be gauged from the fact that has a 12000
stronger dealer network selling more than 1500 shades through Dealer Tinting
Systems. Also, the number of raw materials required can stretch upto 300, as
majority of these raw material are either imported or sourced from small
chemical manufacturers. A large stock pile needs to be maintained.

Low fixed asset requirement:

A plant for manufacture of decorative paint can be set up with small capital
investment. However major investment is in setting up distribution channels
and building up a brand.

Seasonal Nature of demand:

The demand peak during festival season is very high especially for decorative
paints, while is very lean during monsoons. Thus, a major part of the sales are
achieved in the second half of the fiscal year

Entry Barriers:
Huge investments are required for capacity creation and also to maintain the
strong distribution network which is a critical success factor.

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 With the reduction in excise duties, the price advantage of unorganized sector
is being eroded. This has meant the reduction in the market share of
unorganized sector.

The reputed paint companies have invariably collaborated with foreign

companies for technology support. For example, Asian Paints with Devoe
marine (USA) and Nippon (JAPAN) Berger paints with Valspan Corporation
(USA), Goodlass Nerolac with Kansai paints (JAPAN).

Critical Success Factors in the Industry

1. Cost And Price Drivers:

The paint industry costs and prices are driven by raw material costs which
constitutes about 57% of the costs of sales, and government levies which
constitutes 38% of the cost of paints. There are more than 300 inputs going
into the manufacturing of paints and about 70% of them are based on
petroleum. The petroleum prices are therefore one of the most important cost
drivers. The paint industry includes the extent of concentration in the paint
industry which is very high. This lead to very low margin at each level with the
final retailer as little as 4-5%.

2. Working Capital management:

The industry has high raw material content; the number of finished product is
also large with varying pack sizes. Sales in decorative paint are seasonal with
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 more than half of sales coming in September November festival season.
Debtor levels also rend to be high in this industry.

Distribution:
Marketing of decorative paint requires extensive dealer networks, especially in
the urban and the semi-urban markets.

Plant Location:
Plant location helps service distribution network and bulk consumers.

Technology:
Paint is highly raw material intensive commodity, which have protective
functions in addition to decorative one. An average range of trade sale,
industrial, automotive and maintenance coating employs well over 900 raw
materials. This posses a constant challenge for research and development
efforts in formulating and reformulating products for better performance, cost
reduction, new application, shade development and exploitation of new
materials. As the environment in which paint is used, keeps on changing with
expanding problem of industrialization and attendant pollution, the expectation
of paint performance keeps on changing , demanding evolution in paint
technology.

At a time the Indian paint industry was dominated by foreign paint companies
of mostly British origin, Asian paint started operation as a wholly Indian
company in small way with its own in house technology. Over the years, based
upon its R&D efforts, the company has made tremendous progress and
achieved leadership position in the country, which it has consistently
maintained for over the years.

Asian paint has one of Indias largest paint research laboratories, recognized by
the department of science &technology, Government of India. The R&D group
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 is structured to provide separate focus to industrial paint technology and
decorative paint technology. Our firsts in the paint industry include
specialized chemical resistant coating, computerized colour matching,
thermosetting acrylic finishes and economic plastic emulsion paint.

Naturally the company has always placed very high emphasis on its in house
R&Dand built both, manpower resources and facilities commensurate with its
requirements. The dependence on his R&D efforts has paid rich dividends, as
the company was able to meet the market challenges with expansion of
available market and penetration of new markets segments with the new
products.

Five Forces in Present Paint Industry

1. Supply:
Supply exceeds demand in both decorative as well as the industrial paint.

2. Demand:
Demand for decorative paints depends on housing sector and good monsoon.
Industrial paint demand is linked to users industries like auto, engineering and
consumer durables.

3. Barriers to Entry:
Brand, distribution network, working capital efficiency and technology play a
crucial role.

4. Bargaining Power of Suppliers:

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 Price increase constrained with the presence of the unorganized sector for the
decorative segment. Sophisticated buyers of industrial paint also limit the
bargaining powers of the suppliers. It is therefore that margin is better in
decorative segments.

5. Bargaining Power of Customers:

Bargaining power of customers of paint products is high due to availability of
wide choice.

6. Competition:
In both the categories, companies in the organized sector focus on brand
building. Higher prices through product differentiation are also followed as a
competitive strategy.

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15
 DEMAND-SUPPLY SCENARIO

Paint demand is intrinsically related to economic development. The demand

for decorative paint in India mainly arises from two segments viz construction
of new building and retail demand for refurbishment. While the demand for
industrial paint comes from industries like automobile, consumer durable,
shipping engineering etc. the demand for paint has grown at 10% for last five
years. After the sluggish growth in late 80s and early 90s, industry grew at
rapid pace of more than 12% from 1992-96.
High excise duties and lack luster industrial growth resulted in low growth of
2-4% during 1987-92. After 1992, the industry picked up aided by improving
economic condition and rationalization of excise structure. Almost the entire
growth can be attributed to volume increase as price realization has increase at
less than 5%p.a. over the last two years demand slows down due to economic
slow down.
According to Indian Paint Association, demand will rise from current 0.6mn
tones per annum to 1mn tpa by 2003.demand from decorative paint will be led
by the household construction industry which is expected to grow almost 8%
over the next five years considering the extreme shortage of housing and the
government thrust on encouraging the housing activity are also likely to shift
more towards rural areas. The industrial segment will grow faster due to the
lower base and fast growth in major users like consumer durable and
automobile.

INTERNATIONAL SCENARIO

The global demand for paint is estimated at over 21mtpa. At valued at about
$60 bn. The industry is expected to grow at 3% over the next few years. The
high growth regions are the developing countries of Southeast Asia and Latin
America. While the mature markets of North America and Western Europe are
likely to witness very low growth.

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The share of industrial paint is 70% and rest is accounted by decorative
segment. Also, almost 60% of the world market. The largest player is ICI of
UK with a share of around 10% followed by Akzo-Nobel (Netherlands), PPG
(US), NIPPON (JAPAN), BASF (GERMANY), KANSAI (JAPAN). Over the
last few years the industry has been consolidating with an objective to
strengthen the product lines and distribution chains. This has led to series of
mergers and acquisitions. Indias market is only 0.65 mn tones, roughly 2.7%
of world demand, but is growing at annual clip of 10%.

THE WORLD COATING SCENARIO

The total output of the world paint and manufacturing industry was valued at
$54 billion in 1996. The industry supported some 12,250 active firms. This
industry is expand to forecast 3.5 percent annually to nearly 26 million tones.
By the year 2002 the valued will be $72 billion. Tonnage gains in the industrial
coating segment will be constrained by a shift in trend towards higher solid
coatings (such as powder coatings), which often weigh less per kilo than
solvent brone coatings, and require generally fewer, thinner coats. On the other
hand, the architectural segment is seeing a continuous shift towards water-
based paints, which weigh more than their solvent-brone counter parts, and
will promote stronger tonnage gains. These trends have evident around the
world but have had the most impact in more mature markets.

Most of developed world has already effected such as switch to water-based

formulations for most architectural applications. The developing world is also
experiencing this trend- India included. The world paint and coatings industry
is becoming increasingly dominated by a small group of highly focused,
globally positioned firms. For many of these companies (E.g. Sherwin
Williams, Kansai Paints, and Nippon Paints) coating represents the primary
line of business. In other cases (e.g.; AKZO NOBEL, ICI, HOECHST

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DUPONT and COURTALDS) the firm strong position has arisen from
involvement in various upstream petro chemical activities, including
production of many of basic raw material used in coating production. The
most rapid gain in paints and coatings production will be registered in the
developing regions of Latin America and Asia-Pacific. Although the Asia
Pacific region hold the long term prospects as a market for paints and coating,
regional production has been lower, primarily due to financial crises has hit
this region. However, India was not severely affected by this crisis.

The wave of currency devaluation and shape rise in interest rate will seriously
dram pen spending in key paint sector such as construction and durable in short
term, particularly in Indonesia, South Korea and Thailand. India, in a earlier
budget have announce a new housing policy, which should result in boom for
the construction sector, which will boost demand for architectural coatings.

A very interesting trend is emerging in the architectural coatings segment, we

are experiencing a shift from solvent based coating to water based coatings.
Water based coatings now account for most of house-hold paint demand in
developed countries and is gaining ground in developing countries too. During
1990s, the drive has spread to industrial and specialty coatings segment. The
higher performance standards for industrial coatings have necessitated intense
product reformulation efforts, leading to a number of alternatives technologies.

Meeting environmental regulation is another challenge for paint companies in

developed world. Even companies in developed regions should be prepared in
this area, as paint product as soon adopting global standards, hence all paint
companies will have to comply the environmental regulations. Global trend
towards free trade will have an impact on product mix, since exported goods
must meet the environmental codes of the target market. The formation of
trading blocks like NAFTA will involve the establishment of more
environmental regulation of member nations.

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Global production of paint and coatings can be divided in two broad sectors:
Architectural Paint and Industrial Coatings. In 1996 Architectural Paint
accounted for 58% of the total output with the industrial coatings accounting
for the remainder. However, the industrial coating segment is slightly larger in
value (Dollar) terms because industrial coating trends to cost significantly
more than architectural paint. In 1998, the worlds top ten Paint and coatings
suppliers accounted for nearly 42 percent pf the market. The next ten producers
accounted to additional 13 percent of sales, which gives a top 20 firms a
collective market share of over 50 percent.
The most basic division is between architectural coating and industrial coating.
AKZO NOBEL, the worlds top player has a strong presence in both the
segments. (60:40 in favor of industrial coating) Sherwin William, ICI, Asian
Paints, and Benjamin Moore focus primarily on architectural paint. Whereas
PPG, KANSAI Paint, courtyards, NIPPON Paint and RPM focus heavily on
the industrial segment. BASF, DUPOINT, LILY industries and DAI NIPPON
focus entirely on industrial coatings.

Globally Industrial paint are the major segment accounting for around 70% of
the market, global trade is overall sparse, due relatively simple technology, and
especially to maintain high inventory and the dealer level and high
transportation cost. Per capita consumption is 26 kg in the USA, 4 kg in
Philippines and 16 kg in Taiwan.

Emerging Trends and Opportunities

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1) Technology:-The introduction of tinting machine has changed significantly
changed marketing technology. These machines each costing approximately Rs 60mn
are installed at dealer outlets and enable the customers to choose between any of
several hundreds shades. These are then generated by mixing colourants with the base
paint, and delivered almost instantly. The two major implications of these machines
are differentiation on color ranges is reduced; prior to this technology, a major
competitive advantage of a company was the range of color it offered. For instance,
Asian Paints offered almost 150 shades in its synthetic enamel range, unmatched in the
industry. This now stands changed as almost 2000 shades can be created in seven
minutes through these machines.
Simplified logistics management: with the machines generating shades instantly,
dealer can now stock only the base material and thus save almost 20-25% in the
working capital cycle.

2) Expansion of product profile:- The lowering of excise has opened the high
volume but low value market is semi urban and rural areas, which is currently
dominated by the unorganized sector.

3) Niche marketing: - By concentrating on certain niches, some companies have

earned good result. For instance, good lass Nerolac paint found a lot of its in
automotive paints for maruti.Nerolac has a lions share in the industrial market segment
and virtual monopoly over the automotive paints.
This however, does not mean that niche strategy is bound to succeed. ICL ended up
raid in the faces with its niche marketing strategy with natural hints, a paint with a
suitable fragrance. This brand received no more than lukewarm response in the
market. This was sold along with a roller for the Venetian glass look. ICL is also
hoping the duette will be used instead of wallpaper. The future of this brand is yet
uncertain.

4) Increased thrust on brand creation and distribution : - The increase

share of organized sector implies that brand awareness will be a thrust area. Also,

20
strong brands are emerging as the most important entry barrier. The opening of rural
market has also necessitated the expansion of distribution reach.

5) Industry consolidation: - The small scale industry is expected to witness a

shake out as the share of organized sector increases. Also, outsourcing requirements
are likely to be reduced as new capacities go on stream in the organized sector.

Fifty Two Week High Low

ExchangeName FiftyTwoWeekHigh HighDate FiftyTwoWeekLow LowDate
NSE 1,334.00 07/05/2008 903.00 22/01/2008
BSE 1,319.95 31/01/2008 875.00 22/01/2008

Yearly High Low : BSE

Year Ending High HighDate Low LowDate
14/08/2008 1,319.95 31/01/2008 875.00 22/01/2008
31/12/2007 1,125.00 31/12/2007 642.00 05/03/2007
29/12/2006 790.00 07/02/2006 501.10 02/06/2006
03/10/2005 520.00 28/09/2005 302.60 06/01/2005
31/12/2004 352.00 23/01/2004 245.00 17/05/2004
31/12/2003 472.35 19/08/2003 257.00 22/08/2003
31/12/2002 399.00 25/07/2002 250.10 04/01/2002
31/12/2001 289.95 26/11/2001 229.00 12/04/2001
31/12/2000 501.00 27/01/2000 205.00 13/10/2000
31/12/1999 451.25 30/08/1999 195.00 26/04/1999
31/12/1998 370.00 22/04/1998 198.00 23/06/1998
31/12/1997 378.50 01/08/1997 265.00 25/11/1997
31/12/1996 480.00 17/06/1996 250.00 04/12/1996
31/12/1995 690.00 26/07/1995 256.00 23/11/1995
31/12/1994 640.00 01/08/1994 340.00 06/01/1994
31/12/1993 420.00 02/12/1993 245.00 10/03/1993
31/12/1992 515.00 09/06/1992 255.00 20/11/1992

FY 2007 Annual Results of Asian paints:

Presentation structure
21
 Results: Q4 FY 2007
Results: FY 2007
Outlook: FY 2008

Highlights: Q4 FY2007
Consolidated Net sales and operating income. Increased by 25.4 % to Rs. 9,589
million. Good growth witnessed by all business units. Volume growth has been
impressive for the Quarter.
-Net Profit has risen by 43 % to Rs. 666 mn.
Good performance by the Decorative Business Unit
Improved performance by International operations
Material costs have risen during the quarter
Operating margins have improved due toimpressive volume growth

Consolidated P&L Q4 FY07:

Standalone P&L Q4 FY07:
EOI (Extra Ordinary Item) Provision for diminution in value of Investment.

Presentation structure
Results: Q4 FY 2007
Results: FY 2007
Outlook: FY 2008
7. Highlights - Consolidated results FY2007:
Paint volumes for the year including international increased by 18.7 % to 481,976
KL.
All three business units registered in excess of 15% volume growth.
Value Sales have grown by 21.5 % driven by
Good growth registered by Paints-India business and theMiddle East region
Material costs as a percentage to sales have gone up marginally
HR costs have risen by 17.4 % to Rs. 2621 mn
However operating margins have been maintained due to control on other overheads.

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8 .Consolidated P&L FY 2007

9 .50 % of Asian PPG Industries sales are included

Consolidated Sales breakup:
FY 2007 & Q4 FY 07
10 Asian Paints Consolidated Results FY2007
Asian Paints Standalone Results
Decorative Business India
Industrial Operations India
International Operations
11 Asian Paints - Standalone P&L :
FY2007

EOI (Extra Ordinary Item) Provision for diminution in value of Investment.

12 Net Sales grew by 21.7 % due to strong growth by all segments of the paints
business
Net profit has increased by 45.7% to Rs. 2720 mn
Due to the performance of the Decorative India business
In FY2006 results, Rs. 336 million was provided towards diminution in the value of
investments in overseas units
Adjusting for EOI, Net profit has risen by 23.5 %
Chemicals business registered revenue growth of 12.9% to Rs. 961.5 mn (adjusting
for inter segment revenue)
PBIT for this business increased by 105.9 % to Rs. 246.3million
Asian Paints - Standalone P&L :
FY2007
Environment FY2007
India
GDP growth at 9.0 % for FY07
Estimated at 9.2 % for FY 08 aided by a surge in industry
and services sector

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 Higher growth than FY07 predicted for services and
industrial sector
Inflation and rising interest rates are a cause for
concern
Manufacturing, Capital goods, consumer goods,construction, cement, automobiles
all have
registered good growth for FY2007
14 .Paint Industry India : FY 2007
Paints industry estimated between Rs. 112 and Rs.
115 billion for FY2007
Value growth is estimated at around 18% in FY2007
Decorative paints estimated to have grown by
around 19 % in value
Industrial Paints is estimated to have grown by
around 17 % in value
Demand conditions have been good in most
segments of the paint industry
Input costs continued its upward trend during the year putting pressure on operating
margins of paint companies.

15.Asian Paints Consolidated Results FY2007

Asian Paints Standalone Results
Decorative Business India
Industrial Operations India
International Operations
16. Demand for decorative paints was good nearly throughout the year and in most
parts of the country.
While Southern region of the country continues to do very
well, the exceptions were Delhi and North East region
All segments for Decorative India registered
double digit growth.

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 Excellent growth in all wall finish products
Impressive growth recorded by interior and exterior
emulsions
8500 Colour Worlds now installed in the country
Penetration into small towns continues.
Paints : Decoratives India
17. Pricing FY 2006
Four price increases effected during the year.
Overall prince increase in the year was around 4.25%
All price increases have been absorbed well by the market
New Products
Royale Play range expanded
Luxury Ultra Gloss enamel launched in many markets
Colour Next 2007 launched
The company is beginning to be recognised as an authority in
forecasting colour trends.

18.Paints : Decoratives India

Asian Paints Home Solutions
Added 2 cities in FY2007 i.e. Jaipur and Baroda
APHS is now present in 12 cities in the country
Manufacturing facility
Ankleshwar plant has received environmental
clearance for 100,000 kl from 80,000 kl.

19. Paints : Decoratives India

Price of TiO2 have been fairly stable during the year
Prices of raw materials increased sharply in 2nd and 3rd
quarter in FY 2007
Major increases were in Xylene, Phthalic Anhydride and vegetableoil.

25
 COMPANY PROFILE

Asian Paints Limited

Company Analysis 17thJuly2007 Price target-1,150
Shareholding Pattern (as on 31 March07)
Key Statistics (as on 16 July07)

COMPANY OVERVIEW
Asian Paints is India's largest paint company and the third largest paint company in
Asia today, with a turnover of Rs 36.7 billion(around USD 851 million). The company
has an enviable reputation in the corporate world for professionalism, fast track
growth, and building shareholder equity. Asian Paints operates in 21 countries and has
29 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 Tubmans.

INVESTMENT RATIONALE

26
The first phase of the Greenfield industrial liquid paints facility at Taloja, Maharashtra
was commissioned during last quarter of FY06-07.The production is being ramped up
at the facility and it is expected to reach the installed capacity of 14,000 KL by the
month of September 2007.This will help the company to improve its service levels to
Industrial customers and also bring about cost efficiencies Associated with
manufacturing the bulk of industrial Products at a single location.

The Company in order to meet market requirements is Planning to enhance the

capacity of the plant at Sarigam. Plans are being drawn up and work on the civil
structure is Expected to commence from October, 2007. The enhanced capacity will be
available during the second quarter of the FY08-09. With these capacities at Baddi and
Sarigam, APICL will be placed to service the powder coating requirements. During
last year, the capacity of the Sriperumbudur plantwas raised to 50,000 KL per annum
early in 2006-07. This capacity came in handy as emulsion paints sales grew well.
The company is adding a polymer plant at Sriperumbudur which is expected to be
commissioned in the first quarter of 2007-08. The plant at Ankleshwar has received
environmental and other clearances to produce up to 1,00,000 KL, per annum. Some
additional facilities, especially storage and handling, need to be installed at
Ankleshwar as well as Patancheru and Kasna plant so as to produce at the rated
capacity on consistent basis.

COMPANY OVERVIEW
Rolta India Limited is an Indian Information Technology company with its corporate
headquarter in Mumbaithe company operates through a network of 42 regional offices
across India combined with its seven subsidiaries,located in USA, Canada, UK,
Netherland, Germany, Saudi Arabia and the United Arab Emirates. Rolta is todaya
market leader in Geospatial and Engineering segments with a unique combination of
IT-based solutions and
services, with wide array of multi-million dollar projects in over 35 countries. This
combination of Geospatial,Engineering design, e-security services and solution is
unique to Rolta because no other company is providingsimilar combination anywhere

27
in the world. This combination provides Rolta with competitive advantage overother
companies by being able to combine its domain knowledge to tailor solutions more
precisely to itscustomer needs.

ROLTA TO SET UP IT PARK IN KOLKATA

Rolta India Limited has announced the setting up of Information Technology Park at
Kolkata as a part of its expansion plan. This IT park will have facilities for delivery of
Information Technology based Geospatial services, Engineering design services,
Software development and ERP implementation services worldwide. This facility once
completed will be providing employment to 5,000 technical professionals and domain
experts from talent available in West Bengal. This facility will be set-up in phases with
an investment of about Rs 2,500million. This Information Technology park will add
another milestone to the success story of the Rolta India Limited and will intensify its
competitive edge.

JOINT VENTURES
Rolta India Limited joint venture with Thales, France, will be providing a broad
spectrum of cutting-edge technologies, systems and solutions for developing state-of-
the-art Command, Control Communications, Computers, Intelligence, Surveillance,
Target Acquisition and Reconnaissance Information Systems (C4ISTAR) for the
defense and homeland security sectors, both in the domestic and international markets.
Rolta is a leader with a market share of over 85% in the Engineering Design
Automation segment in India and one of the major Plant Information Management
Services providers worldwide. Rolta provides a complete range of advanced
engineering design services, encompassing the entire product, plant lifecycle
designing, modeling, detailing, analysis, tooling, manufacturing, operations,
maintenance and simulation. Taking this leadership further, Rolta's strategic joint
venture with Stone & Webster, Inc., provides high-quality cost-effective engineering,
design and procurement management (EPCM) services to power, refinery and
petrochemical projects worldwide. This partnership has evolved into an independent
full service engineering and procurement operation, pursuing large contracts business.

28
 FINANCIAL STATEMENT ANALYSIS
Rs. mn

Revenues 17424.62 19415.15 23191.55 28212.93

Growth (%) 11.42 19.45 21.65

Total Expenditure 14729.24 16477.39 19672.35 23995.37

Operating Profit 2695.38 2937.76 3519.2 4217.56

Growth (%) 8.99 19.79 19.84

OPM 15.47 15.13 15.17 14.95

29
Other Income 216.77 316.14 359.26 359.26
EBIDT 2912.15 3253.90 3878.46 4622.07

Interest 52.65 27.54 38.31 68.73

Depreciation 480.1 476.05 455.28 454.15

PBT 2379.40 2750.31 3384.87 4099.19

Tax 835.54 969.84 1170.82 1399.94

Adjusted PAT 1543.86 1780.47 2214.05 2699.25

Growth (%) 15.33 24.35 21.91

Adjusted NPM 8.86 9.17 9.55

2005 2005-06 2006-07
For the financial year ended 2006-07 company has displayed good financial
performance. The revenues for the Company stood at Rs 28,212.93 mn for the FY06-
07 in comparison to the FY05-06 revenues of Rs 23,191.55 mn with the growth rate of
21.65%. The company reported the operating profit of Rs 4,217.56 mn for the FY06-
07 Compounding at the growth rate of 19.84% against the operating profit of Rs
3,519.20 for the FY05-06. The EBITDA for the company rose to Rs 4,622.07 mn with
the growth rate of 19% in comparison to FY05-06
EBITDA of Rs 3,878.46 mn. The company net profit is up by 22% to stand at Rs
2,720.48 mn for the FY06-07 in comparison to FY05-06 net profit of Rs 1,867.80 mn.

Research
The company has reported the EPS of Rs 28.10 for the FY06-07 in comparison to
FY05-06 EPS of Rs 23.10 with the growth rate of 22%. This has been followed by
rising return on net worth .of the company. The company has reported the 36% return
on net worth for the FY06-07 in comparison to FY05-06 return of 34% on the net

30
worth. Therefore company has been consistently generating good return for its
shareholders and in future it is likely to add more to the wealth.

VALUATION
The stock of Asian Paints appears to be a good addition to the portfolio for
conservative investors. Strong growth prospects for decorative paints arising from the
higher pace of construction activity and a ramp-up in revenues from international
operations could aid sales growth over the next couple of years. Profit margins may
receive help from moderating input prices and an appreciation in the rupee. At the
current market price of Rs 872, the stock trades at a price earnings multiple of about
25 times expected FY08 earnings. Therefore, we recommend the stock for the long
term investment with price target of Rs 1,150.

Disclaimer: This document is prepared on the basis of publicly available information

and other sources believed to be reliable. Whilst we are not soliciting any action based
on this information, all care has been taken to ensure that the facts are accurate and
opinions given fair and reasonable. This information is not intended as an offer or
solicitation for the purchase or sell of any financial instrument. Hem Securities
Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited and
any of its employees shall not be responsible for the content. The companies and its
affiliates, officers, directors, and employees, including persons involved in the
preparation or issuance of this material may from time to time, have long or short
positions in, and buy or sell the securities there of, company (ies) mentioned here in
and the same have acted upon or used the information prior to, or immediately
following the publication.

31
 GOODLASS NEROLAC PAINT LTD

1. Background:
GNPL was established in 1920, by Tata steel in collaboration with goodlass, of UK, a
part of cookson group. The tatas had 40% stake in the company through group
company Forbes Gokak ltd. In 1983, the company entered into technical cum financial
collaboration with kansai paints, Japan. Kansai who currently has a stake of 40% is the
other major shareholder. Manufacturing activities began with the establishment of
paint unit at parel in 1920. In 1971 another plant was established at Thane. The Thane
plant had also facilities of manufacturing pigments, one of the indegredents in paint
manufacture. In FY92 the company made a right issue for funding its new Kanpur
plant, which was commissioned in august 1993. Last year Kansai brought over stake
of Tatas, thus making GNPL its subsidiary.

KANSAI PAINT COMPANY:

32
Kansai Paint Company is the largest company in Japan and among the top ten in the
world with 1991 consolidated sales of $2bn. It has 21 subsidiaries in 12 countries.
Kansai has its 45% sales coming from automotive coating, 26% from decorative paint
and 29% from containers, marine, metal, and heavy duty coatings. Last year company
spends close to Rs 2.4bn on R&D with the thrust being on high technology,
environment friendly products. India accounts for 40% of kansai investment
subsidiaries.

BUSINESS:
GNPL one of the oldest paint manufacturing companies, has concentrated on the
industrial paint segment. Its product range also includes decorative paints and organic
and inorganic paint. GNPL has technical collaboration with a number of
manufacturers that gives it a competitive edge over the competitors in the industrial
paint segment. Its collaboration with different companies to cater to different segment
as follows.Kansai paint co ltd, Japan for all automotive coatings.Nihon Parkerizing
co ltd, Japan- sealands and underbody compounds. Nihon tokushue toryo, Japan- for
pretreatment chemicals. Valspar Corporation, USA- powder coating. Ameron coating
Inc, USA- high performanance coating.

INDUSTRIAL PAINT:
GNPL is the market leader in the industrial paint. With a 43% share. GNPL dominates
the OEM share with the 70% of share of passenger cars OEM market, a 40% share of
two wheeler and 20% share of commercial vechicles OEM market. It has a major
share of alkyd and amino paints, which are rapidly replacing NC lacquers,
traditionally used for automotive coatings.

GNPL has almost all the major automotive OEM as its customers except the Korean
ones. Other key accounts are Bajaj Auto, Whirlpool, Hero Honda etc. suppliers to
maruti 70% of marutis paint requirements account for 12% of sales. In the automotive

33
segment, GNPL has launched low brake ED primers and common base coats to
remove body and lumper colour mismatch. GNPL is also trying to regain its market
supremacy in markets like General industries and Auto ancillaries, which it had exited
due capacity constraints.

DECORATIVE PAINTS:
GNPL has a stronger presence in distempers and emulsions. Emulsions are the fastest
growing segment in the decorative paints. It has alls capes as a premium segment
product. Its super acrylic distemper is claimed to be the first water-based, any-surface,
environment friendly painting segment. It has recently launched acrylic system. It has
recently launched paint excel to counter competition in exterior paint segment. GNPL
has launched three technology led products namely Zola coat (multi-colour designer
finish paint) satin emulsion (acrylic emulsion for premium silky finish) and nerosign
(colour specifically for sign board painting). However, it is a distant #2 in the
decorative paint segment, way behind industry.

MANUFACTURING FACILITIES:
GNPL has plants at Lower Parel (MUMBAI), lote Parshuram (RATNAGIRI), and
Dehat (KANPUR). Last year GNPL has expanded capacity at two its plants and set up
new plant. All this has taken the total capacity to 101000 TPA from 57500TPA. For
FY06/07. GNPL achieved sales of 61000 tonnes, up from 52057 tonnes.

It also has two more plants through 100% subsidiaries at Madras (capacity 27,000
TPA) and vatva in Gujarat (9000 TPA). It has 62 sales offices and depots and more
than 7000 dedicated dealers. Its paints are sold under brand name of Nerolac. The
company has introduced VRS to employees of kavesar plant at Thane.

THRUST ON IT:
GNPL is planning a major push in the IT segment; in fact a major portion of its apex
plan of Rs 400 mn is earned market towards IT. This includes implementing ERP
program to improve it operational efficiencies and integrating all of its 60 odd depots.
34
 3. Further Plan of Action:

- Development of eco-friendly coating products.

- Development of UV curable plastic coatings.
- Development of water borne tile coatings.
- Development of Waterborne Exterior Metallic finish Paint

ICI IANDIA LTD

BACKGROUND:
ICIS presence to India dates back to 1911, when brwnner mond &co. one of the four
companies that combined to form ici in uk in 1926, opened a trading office to sell
alkyls and dyes in Calcutta. In 1929 companies name was changed to Imperial
chemical industry (INDIA) ltd. ICI began with manufacturing chlorine and caustic
soda at Rishra, West Bengal. The site was later expanded to manufacture paints and
rubber chemicals and fibers of India ltd. (CAFI) were incorporated to manufacture
polyester operations in panki at Kanpur. In the early 1970s IcI established additional
manufacturing capacity for paints at Hyderabad and in 1978, ici diversified into crop
protection chemicals and pharmaceuticals at Ennore near Chennai. In 1976 a research
facility was established at Thane, now known as ICI India research and technology
centre. In 1984, the ici companies in Indian merged. In 1987, ICI formed Nalco
chemical ltd. With Nalco company USA with each holding 40% of the equity. In 1989
35
specialty chemical plant was commissioned at Thane. In 1993, the first phase of ICI
Indias restructuring was completed with the disinvestment of the fibers, fertilizers and
seed business. In 1995 agrochemical business was transferred to a joint venture with
Zeneca limited in UK. In1996, ICI established a joint venture called initiating
explosive system India ltd. In 1997 the new paint plant and polyurethanes systems
house were commissioned at Thane. In 1998 ICI acquired the nitrocellulose business
of asha nitrochem industry ltd at valaspar, Gujarat. Another paint plant was
commissioned at mohali near chandigharh and the surfactants innovation centre
opened at Thane. IcI also exited from its joint venture with Nalco chemical company,
USA and Zeneca, UK. Plant locations are;

LOCATION PRODUCT MANUFACTURED

ROURKELA, ORRISA Bulk explosive
SINGRAUIL, MO Bulk explosive
GOMIA, BIHAR Bulk explosive
VALSAD, GUJARAT Catalysts
HYDERABAD, AP Nitrocelluse
MOHALI, CHANDIGARH Paints
ENNORE, CHENNAI Paints

BUSINESS:
ICIs main business is of paints, specialty chemicals and materials.Paints ICI has
around 35% of its turnover from paints. Of these Decorative paints contributes 55%,
Auto-refinish 30%, Motors and Industrial 15%. ICI major brands in decorative paints
are Terrene, Deluxe. ICI launched new products Wasr Swear and Supercote
Textured finish and also expanded its colour solution to 200 outlets.Honda and Tafe.
Major brands are Duco for automotive refinish and In industrial paints segment the
36
client list include Fiat, Daewoo, Perspex for acrylic sheets. The newly commissioned
plant at Mohali has pioneered the movable mixer manufacturing technology for
Refinish paints and has also developed and implemented ACS Market mix system for
Autocolour in India. Under its ICI has Permosel brand in solid and metallic colours.
With the commissioning of the Chandigarh facility the total paint capacity has gone up
to 6000 KL, ICI has four plans strategically located in four different regions Situated
at Calcutta, Mumbai, Hyderabad and Chandigarh with the Addition of 1500 outlets.
The total number of retail network hasBeen expanded to more than 6500.

Rubber Chemicals
ICI India is a market leader in the rubber chemical in India at the new state of the art
an horizontal plant set up in technical collaboration with sumita chemicals of Japan, at
rishra, West Bengal. ICI manufactures a wide range of rubber chemicals acceletors,
antioxidants, peptisers, retanders etc. used in wide variety of end products with around
50% consumed by tyre industry with other based products accounting for the rest. In
year 2005 sales decline due to recession in automobile segment. The plant near
Calcutta has been recently expanded and modernized at a cost of Rs 50 mn to
manufacture products for domestic market and experts.

SURFACTANTS: (UNIQUEMA)
The division has started operating by the name of uniquema. Starting with textile
auxiliaries the surfactants business has developed and diversified portfolio for supply
of products of textile, cosmetic and pharmaceuticals companies, pesticides industry
and general industry sector. With its manufacturing unit and research and technology
centre focused on textile auxiliaries has been put up at thane near Mumbai. ICI
launched 200 new products in surfactants. Last year catalyst syntax is the new name of

37
ICIs expanded catalyst business formed by the merger of ICI katalca, unichema,
crossfield, htc, and ICI tracerco. The manufacturing plant at Kanpur caters the supply
of catalyst to the Indian customers and some of the catalyst. The Indian operations are
covered under the global operations of ISO 9001 certification. The major customers
are refiners and fertilizers

POLYURETHANE
ICI India set up the polyurethane business at Ennore, Chennai with the establishment
of a 1000 TPA blending operation. Subsequently the main office was moved from
Ennore to Thane. The appliances, automotive, footwears, construction, furniture,
CASE and eco-blinders sector offers major opportunities for the polyurethane business
in India.
ICI has set up plant at Thane to enhance value addition through tailor made products.

PHARMACEUTICALS
While the pharmaceuticals business of ICI worldwide has been hived off into another
company called Zeneca. In India it still operates under ICI banners. The
pharmaceutical business is amongst the fastest growing and profitable one. The
business portfolio includes both human and veterinary pharmaceuticals. In human
pharmaceuticals there are three major portfolios cardiac, anesthetic and antiseptic.
Most of the product being marketed is original ICI research product. ICI has a state art
manufacturing plant at Ennore near Madras. In cardiac vascular main brands are
tenormiu, Inderal and tetmosal. ICI India also exports to Europe and Middle East. It
also acquires the businee of nitrrocellouse business of Asha ntrochem last year.
Industrial nitrocellulose finds application into auto-refinish paints, wood lacquers,
printing inks, leather finish lacquers, foil coatings, artificial jewelry etc. ICI acrylics
are the worlds largest acrylic company with 55% of world volumes.ICI India mainly
import product from the parent and market it. For this it has tied up with GSFC. ICI is
the trading group of ICI India offering a wide variety of chemicals for import and
export with the main focus on chlorine chemical and titanium dioxide. It sold up its
49%stake in Zeneca Agrochemical for Rs 194.7 mn. It receives Rs 911 mn net of its

38
 investments of Rs 76.4 as equity. It has also sold properties in Delhi and kolkatta for a
total sum of Rs 840 mn.

May 7, 2008

Financial highlights *

Q1 2007
In millions Q1 2008 % change
**
Revenue 3,506 3,486 1
EBITDA 398 403 (1)
EBITDA margin (in %) 11.4 11.6
EBIT 257 254 1
EBIT margin (in %) 7.3 7.3
Earnings per share (in
0.52 0.49 6
)
Net income 136 142 (4)

* Continuing operations before incidentals Pro forma.

Operational highlights for the quarter

Ongoing trend of underlying growth, in local currencies, in most businesses

Autonomous growth of 6 percent offset by currency headwind
ICI integration and synergies on track
Earnings per share of continuing operations up 6 percent
Total net income 118 million, up 40 million

AkzoNobel today reported 6 percent autonomous growth for the first quarter of
2008, indicating a strong underlying trend. However, this was offset by a similar
negative currency impact. Operational margins of continuing operations were
flat. Although net income from continuing operations of 136 million was down 4
percent, earnings per share increased 6 percent, due to the share buyback programs
.The company achieved underlying growth in local currencies in most of its
39
businesses, reaching double digit levels in emerging markets. Autonomous top line
growth of 6 percent was reduced to a positive benefit of just 1 percent due to the
currency translation impact.

AkzoNobel CFO Keith Nichols commented: I am pleased with the stable performance
which demonstrates the strength of our transformed company. The testing environment
continued in the first quarter, as expected. However, I remain confident for the
remainder of the year that we will deliver on our promises of outgrowing our markets,
and continuing with the successful integration of ICI .Looking at the results in more
detail, Specialty Chemicals realized strong autonomous growth of 11 percent,
supported by almost all businesses. Growth at Performance Coatings was offset by
currency pressure, although Marine & Protective Coatings produced another strong
quarter.

There was double digit revenue growth at Decorative Paints in the emerging markets,
but due to negative currency effects, total revenue was down 4 percent. The first
quarter is not traditionally strong within the decorative sector. This seasonality was
compounded by the poor weather conditions and an early Easter holiday.

Total revenue developed as follows:

In % versus
Acquisitions/
Q1 2007 Total Volume Price Currency
divestments
pro forma
Decorative
(4) (2) 3 (6) 1
Paints
Performance
1 2 2 (6) 2
Coatings
Specialty
5 4 7 (6)
Chemicals
AkzoNobel 1 2 4 (6) 1

40
Decorative Pain
The year began well, but adverse weather conditions in Europe and eastern Canada
towards the end of the quarter resulted in a delay in market demand. Performance was
strong in the emerging markets, with double digit growth in Asia and Latin America.
Growth was also healthy in most Central and East European countries. In the US, the
trading environment continued to be soft. In most mature markets, the trade business
performed well, while the retail segment faced weaker market conditions. Despite the
significant currency impact on the top line, EBITDA and EBIT margins improved
compared with the first quarter of 2007, benefiting from changes in product mix and a
continuing focus on cost control.

Performance Coating

Although the achievement of 4 percent autonomous growth was encouraging, this was
offset by the currency headwind of 6 percent, which was felt by all businesses.
Acquisitions added 2 percent to revenue, resulting in flat total first quarter revenue.
Despite the tough currency conditions, Marine & Protective Coatings delivered
another strong quarter, with all activities contributing. Industrial Activities
performance was impacted by currencies and the soft economic conditions in the US.
EBITDA and EBIT margins were down compared with last year, mainly due to the
impact of currencies.

Specialty Chemicals
It was another good quarter, with revenue up 5 percent on last year. Autonomous
growth was 11 percent, indicating that most businesses have continuing high asset
utilization. Higher raw material and energy prices were compensated by price
increases of 7 percent. Before incidentals, EBITDA increased to 205 million (up 1
percent), while the EBITDA margin amounted to 17.1 percent, slightly below the first
quarter of 2007. The Surface Chemistry, Polymer Chemicals and Chemicals Pakistan
businesses in particular are operating at a clearly improved level.

41
 Net Income
Net income from continuing operations before incidentals amounted to 136
million, down 4 percent compared with last year. During the quarter there were
incidental charges of 151 million (2007: 90 million), largely related to ICI
integration costs (84 million), and an amortization of the step-up of acquired
inventories totaling 42 million. Net income including incidentals from continuing
operations was 36 million (2007: 78 million). Discontinued operations realized
a net income of 82 million. Total net income for the first quarter of 2008 was
118 million, up 40 million compared with the previous year.

Cash Position and strong financial position

On January 2, 2008, ICI was acquired for a gross price of 11.5 billion, of which
5 billion related to assets and liabilities held for sale. Prior to the Henkel on sale at the
beginning of April for cash proceeds of 4 billion AkzoNobel concluded a legal
restructuring of National Starch. This explains a relatively high cash and short-term
borrowing position at the end of the first quarter of 2008. Invested capital increased due
to the ICI acquisition and the related goodwill and intangibles of 8.1 billion. In mid-
March, AkzoNobel embarked on a new 1 billion share buyback program as a first
tranche of a 3 billion program. It is expected that the full 3 billion programs will be
completed in approximately 12 months.

Trading condition

Despite softer economic conditions in the mature markets and the negative impact of
currencies, AkzoNobel remains confident of outgrowing its markets and at least
maintaining results in line with 2007.

42
 BERGER PAINT INDIA LTD

Profile
Berger Paints is the third largest paint manufacturer in India with an overall market share of 19%.
It is India's second largest decorative paint manufacturer (11% share) and also the third largest
industrial paint manufacturer (14%). Over two-thirds of its turnover comes from decorative
paints and the balance from industrial paints.

1923

The Company was incorporated on 17th December, in West Bengal. The Company manufacture and
sell paints, varnishes, dry colours, enamels, pastes, distemper, ships paints, boiler components and
various other kinds of paints to meet the requirements of trade, commerce and industry. Some
of the brands manufactured are Castle, Parrot, Duroglaze, Luxol, Murisan, Synthetic, Soligum,
Apexior, etc.

2000
The Company proposes to expand its operation through acquisitions, both internally and externally,
and strategic partnership, preferably with foreign firms. Crisil has upgraded the fixed deposit
43
programme of Berger Paints from FAA to FAA+.

2001
Berger Paints India Ltd. has unveiled a new brand promotion Strategy which it claims to be the first
of its kind in the industry. Despite a slight increase in sales, the net profit of Berger Paints India Ltd
has dropped by around 10 per cent for the half-year ended September 30, 2001. Berger Paints Ltd and
ICI Ltd, have formed a 50:50 joint venture to manufacture auto and industrial coatings at Rishra
in West Bengal.

2002
Board decides to pay interim dividend @25% on the ordinary shares.Acquires 50% stake in Berger
Auto & Industrial Coating Ltd. Signs term sheet for acquiring the entire paint business(including
the entire intellectual property rights ) of Snowcem India Ltd. inducts Jalal Dani as the Chairman
of the company , after buying out50.1% stake in the Singapore based paints company.

2003
-BOD decided not to amalgamate Berger Auto & Industrial Coatings Ltd with the company.Board
recommends a dividend @ 60% on equity capital of the company.Posts 54% growth in the net
profit to Rs.14.14cr for the second quarter end.

2004
Delhi based Punjab National Bank (PNB) and Bangalore-based Vijaya Bank enter into a four-way
partnership with Principal Financial of the US and Berger Paints to set up an insurance broking company

2006
Berger Paints India Ltd has entered into a Joint Venture Agreement (JV) with Nippon Bee Chemical
Co Ltd of Japan for the purpose of formation of a Company for manufacture and sale of coatings
for plastic substrates used in automobiles and parts thereof in India.

2007

44
Berger Paints India Ltd has entered into a Joint Venture Agreement (JV) with Nippon Bee Chemical
Co Ltd of Japan for the purpose of formation of a Company for manufacture and sale of coatings
for plastic substrates used in automobiles and parts thereof in India.

BERGER PAINTS INDIA LIMITED (BRGR)

Price History
Top

Rs 30.3 P/E X 10.4
Price
%
% 0.0 P/CF X 8.5
ch

Mkt Rs
9,647.3 EPS (31/03/2008 Rs 2.9
Cap m
)
Vol '000 3.1 Shares O/S m 318.92
%
% -1.3 % ch 1-month % -5.9
ch week
%
ch 12- % -36.8 52 week H/L Rs 68.6/25.8
month
(Price History as on 05/12/08)
Top

45
Interim Results
No. of Months 3 3 3
Year Ending 31/03/2008 30/06/2008 30/09/2008
NET SALES Rs m 3,363 3,782 4,238
Other income Rs m 34 70 24
Turnover Rs m 3,397 3,852 4,262
Expenses Rs m 3,006 3,466 3,832
Gross profit Rs m 357 317 406
Depreciation Rs m 49 50 47
Interest Rs m 40 22 33
Profit before
Rs m 302 315 350
tax
Tax Rs m 61 83 59
Profit after
Rs m 241 232 291
tax
Gross profit
% 10.6 8.4 9.6
margin
Effective tax
% 20.2 26.3 16.9
rate
Net profit
% 7.2 6.1 6.9
margin

* Results Consolidated | Interim results exclude extraordinary /

exceptional items | Historical Quarterly Results

46
 IMPACT ON BUDGET

Market size of the Indian paint industry Rs 5000crore.While the organize sector
accounts for Rs 3500 Crore, the unorganized sector accounts for the balance of
rs1500crore.
In terms of volume, the unorganized sector accounts a major portion of supply.
Decorative paints and industrial paints accounts for around 70% and 30%of the total
demand respectively.
In decorative paints, enamels accounts for the maximum share followed by wall
finishes, primers and wood finishes.
In industrial paints, while automotive paints accounts for around 30 to 35%.General
engineering paints accounts for balance.
While Asian paints is the market leader in decorative paints, Goodlass Nerolac is the
market leader in the industrial paint.
Raw materials accost account for around 50%of the total cost of production.
Demand is seasonal. Most of the demand comes during the October to March period.
Industry is working capital intensive.
Technology, distribution network, product innovation, service, brand recall, and
geographical reach are the key success factor.

47
Budget paints 2008-09
Given that the growth of the Indian paints industry to a large extent hinges on GDP
growth, the performance of the paints industry last year was healthy on the back of a
robust growth in the Indian GDP. Demand especially for decorative paints was strong
led by increased construction activity and in the industrial paints business, powder and
protective coatings logged in healthy growth rates. In the next five years, the industry
is expected to grow at a CAGR of around 11% to 12% and paint companies are
expected to clock strong growth rates backed by capacity additions undertaken by
them. Having said that, rising crude prices will have a major bearing on the operating
margins going forward.

Budget measures
Customs duty exemption to be withdrawn on naphtha for use in the manufacture of
polymers in order to correct price distortions and revenue losses.
Naphtha for use in the manufacture of polymers will be subjected to normal rate of
5%.
Increased emphasis on Bharat Nirman and improving infrastructure.

48
 Budget Impact
Reduction in excise duty on small cars, two wheelers and three wheelers will
benefit paint companies, as the prices of cars will decline thereby boosting volumes.
Increased emphasis on bolstering infrastructure in the country is a positive for
companies, as it will enhance the performance of powder and protective coatings.

Company Impact
Reduction in excise duty on small cars, two wheelers and three wheelers will benefit
Kansai Nerolac and Asian Paints given their strong presence in the automotive paints
segment.
Emphasis on improving infrastructure such as roads, capital goods and power will be
beneficial to Asian Paints, which has been witnessing strong growth in its powder and
protective coatings businesses.
Reduction of duty on import of raw materials used in the paints industry. All raw
materials imports to attract a common duty.

Budget 2005-06
Construction of residential complexes having more than twelve residential houses or
apartments together with common areas and other appurtenances. Exemption on tax
deductible housing loan to continue. Under the rural development programme, 6 m
additional houses to be constructed for the poor.Peak customs duty reduced from 20%
to 15% The new income tax brackets, the change in exemption and deductions
available to individuals and the increase in exemption for women. IT to generate
around 7 m jobs till 2009.

Budget 2006-07
Peak rate of customs duty reduced from 15% to 12.5%. Basic inorganic chemicals
reduced from 15% to 10%. Excise duty is being reduced from 24% to 16% on small
motor vehicles. Duty to be reduced on major bulk plastics like PVC, LDPE and PP
from 10% to 5%; on naphtha for plastics to nil; on styrene, EDC and VCM which are
49
 raw materials for plastics to 2%. Emphasis on the Bharat Nirman project and its timely
completion.

Budget 2007-08
Hike in allocation for rural and urban housing infrastructure development. Reduction
in custom duty on chemicals from 12.5% to 7.5%.Dividend distribution tax to be
hiked from 12.5% to 15%.Additional education cess of 1% to fund secondary and
higher education.

Key Positives
Steady growth: The Indian paint industry has very low consumption levels
as compared to the other developing economies. While the decorative segment is
growing at 1% per annum, the industrial paint segment (led by powder and protective
coatings) is also expected to record strong growth rates going forward.
A mixed bag: A robust housing sector is likely to boost demand in the decorative
segment. Long-term growth potential of the auto sector is also a big positive.
Structural shift: Continuous fall in excise duty in the past has benefited
organised players and the impending consolidation will add to the pricing power.
Capex cycle booster: With investment cycle showing signs of momentum,
industrial paint demand could grow at a much higher rate than the last five years.

Key Negatives
Raw material worries: Since the paint sector is highly raw material
intensive, rise in crude and petrochemical prices affects performance and the reliance
is unlikely to reduce going forward.
Monsoon blues: The performance of the decorative division also hinges on
rainfall. In the last six years, the country has witnessed three years of poor rainfall,
which has impacted paint demand.

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 Conclusions

1. There exists a healthy and vibrant culture in the organization .

2. There is a hih level of trust among the employees and proactiveness in the
organization.
3. Productivity is the higher organizational goal and the employees strive
hard to achieve the goal.
4. Employees are a little conservative about experiment but they welcome
change as and when required.
5. The employees do not mind working in teams, thus trust, and learn from
each others experiences.
6. BERGER PAINTS LTD. Has a strong customer focus and majority of the
employees feel that they have bright prospects in the organization as a
whole.
7. It has found that the employees are not satisfied with the compensation
package offered by the organization.

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 Webliography

http://en.wikipedia.org/wiki/Berger_Paints_India.
http://money.rediff.com/companies/Berger-Paints-India-Ltd/11580002.
http://economictimes.indiatimes.com/berger-paints-india-ltd/stocks/companyid-
13971.cms
http://www.bergerpaints.com/

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