NAME- ABHINAV BHANDARI

ROLL NO. 174

BATCH - 3

COMPANY ANALYSIS

ASIAN PAINTS LIMITED

SYNOPSIS / THEME:
Asian Paints is India's largest paint company and ranks among the top
ten decorative coatings companies in the world today, with a turnover of
Rs.25.6 billion (around USD 585 million). The company has an enviable
reputation in the corporate world for professionalism, fast track growth,
and building shareholder equity.

Asian Paints operates in 22 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 and SCIB
Chemicals.

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. One of the
country's leading business magazine 'Business Today' in Feb 2001
ranked Asian Paints as the Ninth Best Employer in India. A survey
carried out by 'Economic Times' in January 2000, ranked Asian Paints
as the Fourth most admired company across industries in India.

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. Vertical integration has seen it
diversify into products such as Phthalic Anhydride and Pentaerythritol.
To keep abreast of world technology and to protect its competitive edge,
Asian Paints has a 50:50 joint venture with Pittsburgh Paints and Glass
Industries (PPG) of USA, the world leader in automotive coatings, to
meet the increasing demand of the Indian automotive industry -
www.asianppg.com. Another wholly owned subsidiary, Asian Paints
Industrial Coatings Limited has been set up to cater to the powder
coatings market which is one of the fastest growing segments in the
industrial coatings market. This wholly owned subsidiary of Asian Paints
has entered into a tie-up with Canada-based Protech Chemicals which
is one of the top ten powder coatings companies in the world for
technological know-how for powder coatings and service customers with
a wider coatings in this segment.

VISION:
"Asian Paints aims to become one of the top five Decorative coatings
companies world-wide by leveraging its expertise in the higher growth
emerging markets. Simultaneously, the company intends to build long
term value in the Industrial coatings business through alliances with
established global partners."

ABOUT THE COMPNAY:

THE SUPPLY CHAIN- Asian Paints has harnessed the powers of
state-of-the-art supply chain system using cutting edge technology to
integrate all its plants, regional distribution centres, outside processing
centres and branches in India. Four of the company's paints plants in
India, two chemical plants, 18 processing centres, 350 raw material and
intermediate goods suppliers, 140 packing material vendors, 6 regional
distribution centres, 72 depots are integrated.

The supply chain runs through a wide spectrum of functions right from
materials planning to procurement to primary distribution. It has played
a pivotal role in improving operational efficiencies and creating agile
procurement, production and delivery systems. It has also enhanced the
flexibility of operations, lowered output time and reduced delivery costs,
while improving customer-servicing levels and profitability.

THE IT DEPARTMENT
The Supply Chain Management is backed by IT efforts that help the
company in demand forecasting, deriving optimal plant, depot and SKU
combinations, streamlining vendor relationships, reducing procurement
costs, and scheduling production processes for individual factories.

HUMAN RESOURCE
Asian Paints believes that people are its strongest assets. For a
company can go only as high as its people aim. It is people who
innovate and invent, and who engineer the efficiencies that make a
business succeed. At Asian Paints, human resources systems are
designed to create a vision focus performance oriented, and agile
company. A talent pool of over 4700 employees employed across
twenty-three countries brings in a unique blend of mindsets and skills.

FULFILING RESPONSIBILITIES
Asian Paints approaches the environment issue from the perspective of
waste minimisation and conservation of resources. Thus, the continued
attempt is to reuse, recycle and eliminate waste, which results in less
and less waste being generated. Accordingly material losses in
manufacturing have been reduced substantially over the last few years.
Further, the company's four paint plants and the two chemical plants in
India have the ISO 14001 certification for environment management
standards. The company uses the latest technologies like solvent
recovery plants, reverse osmosis, and rainwater harvesting for keeping
the environment clean and minimising wastages.

CUSTOMERS
The very core of all business activities. From the beginning, Asian
Paints has fostered a customer-centric approach to business. A simple
but unbeatable concept of "going where the customer is" drives all retail
strategies. Asian Paints efforts are continuously on to engage the
consumer in the painting process and fulfill all the requirements related
to the world of painting.

Asian Paints has launched a supplier portal that includes an automated

digital document exchange facility that will improve the efficiency and
effectiveness of interaction with suppliers. An employee portal has also
been set up. Customer Relations Management (CRM) tools are being
used in Asian Paints Helpline and Home Solutions initiatives.The
successful deployment of ERP, CRM, Business Intelligence and Portal
software from leading solution providers and integrated SCM systems
has helped improve efficiency in the business as well as increase the
transparency and accuracy of information across the company. In order
to affect 24x7 availability of the IT infrastructure, a disaster recovery site
in South India is also being set up.

THE FINANCIAL STATUS

The financial position of the company is quiet sound, and taking a look
at its financial reports(attaced at the end), over the years speaks for the
progress made by the company in itself.

A brief look at the market capitilization ratios of the company depicts a

relatively stable growth of the company in the market.
Asian Paints Ltd. Finance year : Mar 2005
 Trading date : 17-Oct-05

Share price performance

Market price (Rs.) : 505.05 Face value (Rs.) : 10

EPS (Rs.) : 19.22 Beta : 0.22

CPS (Rs.) : 24.09 P/E (times) : 26.27

BV per share (Rs.) : 64.28 P/B (times) : 7.86

Turnover : 28.59 Market capitalisation : 4844.43

(Rs. Crore) (Rs. Crore)

Financial indicators (Rs. Crore)

Net worth : 572.22 Total assets : 1225.11

Equity capital : 95.92 Sales : 2366.16

Borrowing : 85.65 PAT : 173.48

GFA : 686.43 PAT/Sales (%) : 7.33

Capitalisation ratios

Bonus equity/eq. cap (%) : 97.99 Mkt. cap/ent. val (%) : 98.26

Free reserves/eq. cap (%) : 496.04 Capital gearing ratio : 0.15

Mkt. cap/eq. cap+prem (%) : 5050.49 Debt equity ratio : 0.15

Enterprise value : 4930.08 Current ratio : 1.08

(Rs. Crore)

Yield analysis

Dividend rate (%) : 95 Dividend cover : 1.67

Yield (%) : 1.88 Div./Net worth (%) : 18.12

Pay out ratio (%) : 59.75

Stock returns & volatility

1 Month 3 Months 6 Months 12 Months

Returns (%) 0.35 13.97 30.93 71.6

Volatility (%) 3.35 2.11 2.04 1.8

High price (Rs.) 532.8 532.8 532.8 532.8

High price date 07/10/2005 07/10/2005 07/10/2005 07/10/2005

Low price (Rs.) 467 443 362.2 289

Low price date 22/09/2005 25/07/2005 28/04/2005 09/11/2004

PRODUCTS MANUFACTURED/TRADED
The major products of the company can be categorised as-

1. Paints, Enamels, Varnishes and Blacks

2. Synthetic Resins
3. Phthalic Anhydride
4. Pentaerythritol
5. Sodium Formate
6. Formaldehyde
7. Other miscellaneous items

THE COMPANY STRATEGY

The company follows a three-pronged growth strategy - market
expansion, acquisition and outsourcing.
By taking the above steps, the industry leader in the decorative paints
segment (market share: 35-37 per cent), and number two in the
industrial segment (20 per cent share), plans to emerge frontrunners in
the paint sector.
Asian Paints’ present focus is on smaller cities and towns, even villages,
where walls, interiors and exteriors are mostly lime-coated - and in the
coming years most of them would be paint-coated, making them a major
potential market for paint companies. The company will be investing
around Rs 100 crore to expand its dealer-tinting line called Colour
World, by adding another 2,000 systems as the demand for acrylic
paints in smaller towns and cities is increasing and wood polish is
another area where the focus is currently on.

As part of market expansion and brand-building plans, the company has

formed a consumer services division. A prospective customer can call
the division’s helpline and check out all about paints and even get a
quotation to paint his house or shop - a novel way to reduce the
influence of painters over the customers’ choice of brands.
The company intends to augment its production by debottlenecking its
plant. This is expected to increase production by 80,000 tonne per
annum (tpa) to 2.4 lakh tpa.The company is also on the lookout for
acquisitions - both domestic and overseas.

So far, the industry hasn’t seen any mega mergers as there are very
few [but large] players and because of low-entry barriers. So, this will be
a major change. Asian Paints, in fact, has a considerable presence
abroad, with 10 international joint ventures to its credit.

AREAS OF ACHIEVEMENT
One of the major factors contributing to the success of Asian paints is
the adoption of 'Mass Customization Strategy'.

'Mass customisation' is the ability of an organisation to offer individually

tailored products or services on a large scale. It means that the
consumer can get only and exactly what he wants, at a price he is
willing to pay.

This has been effectively used by Asian Paints in gaining market

leadership position (more than 40% of Decorative Pain Segment). It has
reengineered all its systems from raw material sourcing and bulk
manufacturing all the way down the chain to the retail end, with one
well-defined aim: to put the company in synchrony with market demand.
This has helped the company to enjoy the economies of mass
production combined with the flexibility of customisation. However the
company could not succeed in its attempte to mass customize the
product in the late sixties and early eighties. This is more due to the lack
of synchronisation in the information flow of the customisation cycle,
especially in the manufacturing planning configuration and product
assembly which were found to be uneconomical. In the mid-90’s, Asian
Paints, successfully mass customised paints to meet the consumer
demand. The flexibility in the production process helped the customer to
choose his own colour/shade of paint unlike the earlier mass produced
shelf products. More significantly the break through in the IT sector
since 1990’s enabled APL to introduce SCM and ERP in effectively
synchronising the elements of mass customisation. Thus APL is
utiltising mass customisation as an effective competitive strategy so far.
ANALYSIS/OBSERVATION
The Company's Performance
The performance has always been superior to the industry's. The latest
half-yearly results show revenues rose 12.4 per cent to Rs 273 crore.
That's better than the industry average. The company has implemented
Booz Allen & Hamilton's recommendations for restructuring to improve
further in future.

Asian Paints' overseas operations

As an emerging global Indian company, Asian Paints is prepared to
meet global challenges. In 1977, Asian Paints created a joint venture in
Fiji with local participation and commenced operations. Asian Paints
(South Pacific) Ltd was commissioned in 1979.

After Fiji, five more joint ventures have been set up -- in Tonga, Nepal,
Solomon Islands, Vanuatu and Australia. All the overseas operations
are running profitably and repatriating dividends. The company also
export to over 20 countries. The units in Mauritius and Oman are
serving as a hub in building and promoting exports to several countries
in Africa and the Middle East.

The acquisition of Delmege Forsyth & Company, the second largest

paint company in Sri Lanka, is a major step towards achieving the goal
of becoming an important global player.

Asian Paints' market leadership in India

Asian Paints has been the market leader in the Indian paint industry for
over three decades. Today the company has a very high market share.
The nearest competitor is half our size. Yet, despite the dominant
position in the market, Asian Paints has been able to consistently record
an increase in market share. The company's market share has
increased over 3 per cent in the past seven years.

An excellent cadre of professional managers and strong entrepreneurial

orientation has provided a significant competitive edge to the company.
The company's strengths are in its human resources, especially in
marketing.
Achieving greater rural penetration
The company has a very good penetration in most rural markets. The
field offices deal with dealers directly even in towns with population up
to 10,000. Wholesalers dealing with the products are able to reach even
smaller towns more effectively.

Marketing paints calls for an FMCG kind of strategy. The company is

focusing on towns with clusters of villages around them to achieve
better rural penetration.

Apart from the company's existing brands for the rural markets, such as
'Utsav' and 'Tractor', they have plans for new products and business
propositions to cater to the needs of these markets. Asian Paints is well
poised to take maximum advantage of the concessions given to the
housing sector and of the growing disposable incomes in rural India.

Business restructuring
Asian Paints has recently been reorganised into three strategic
business units -- decorative (India), decorative (international), and
industrial phthalic anhydride and pentaerythritol. This will ensure greater
focus and help them better respond to new challenges and
opportunities.

CONCLUSION

In spite of difficult conditions, Asian Paints has done well.The compnay

currently has a 45 per cent share of the decorative segment of the
organised sector paint industry. They want this to grow to 60 per cent in
the next seven years. Two thirds of this expansion should come
organically and a third from acquisitions. That's how they can achieve
growth that's higher than the industry average.

In the paint industry, they have to go by alliances as it is observed that

domestic companies virtually rule the roost. For example, Shervin
Williams, the largest American company, has no place outside the US.
In house paints, technology does not play a major role. It is governed
more by distribution efficiencies and marketing logistics. That is where
the core competence of Asian Paints lies.

The paint industry the world over is undergoing consolidation. Change is

the operative word here. It is a fact that large paint companies are
growing at a much faster pace. They are virtually dominating the scene.
Nearly three fourths of the American paint market is shared by the 10
largest paint companies. In Europe, the big companies have a 35 per
cent share and in Asia the big firms control 26 per cent.

In India too, the scene is much the same. Of the seven major paint
companies, one has gone out of business and two are weak. So, the
major players like Asian Paints are expected to consolidate their
positions and increase their market shares in the coming future.

REFERENCES

1. Search.epnet.com
2. Indiainfoline.com
3. CMIE
4. Domain-b.com