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TABLE OF CONTENTS
COMPANY BACKGROUND 3
PRODUCT LINE 3
CAPACITY UTILIZATION 4
HUMAN RESOURCES 5
QUALITY ISSUES 5
SUPPLIER BASE 6
INVENTORY MANAGEMENT 6
LOGISTICS MANAGEMENT 7
ENERGY MANAGEMENT 8
ENVIRONMENTAL MANAGEMENT 10
R&D 11
OTHER INITIATIVES 11
PROFITABILITY 12
FUTURE OUTLOOK 12
EPILOGUE 13
ILLUSTRATIONS 14
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Operational Analysis of Asian Paints
COMPANY BACKGROUND
Asian Paints India Ltd. was founded in 1942 as a small partnership firm & now is
India's largest paint company. It ranks amongst the top ten decorative coatings
companies in the world today, with a turnover of Rs.54.63 billion. Asian Paints
operates in 22 countries and has 28 paint manufacturing facilities in the world
servicing consumers in over 65 countries. Asian Paints product range includes
Decorative Paints, Industrial Paints & Automotive Paints.
Besides, the Company operates around the world through its subsidiaries Berger
International Limited, Apco Coatings and SCIB Chemicals. Asian Paints has its
presence in almost all the segment through its brands Royale in the premium
segment, Apcolite in the mid-segment, Gattu, Tractor, Utsav and 3-Mango etc. in
the lower segment.
PRODUCT LINE
Ancillaries: Decorative Paints:
➢ Asian Paints Decoprime Wall ➢ Exterior Walls
Primer WT ○ Asian Paints Ace
➢ Asian Paints Decoprime Wall ○ Asian Paints Apex Stretch
Primer ST ○ Asian Paints Apex Ultima
➢ Asian Paints Acrylic Wall Putty ➢ Interior Walls
➢ Asian Paints Wood Primer ○ Asian Paints Tractor Acrylic
➢ Asian Paints Exterior Wall Primer Distemper
➢ Asian Paints Knifing Paste Filler ○ Asian Paints Tractor Synthetic
➢ Asian Paints Wood Stains Distemper
➢ Asian Paints Exterior Sealer ○ Asian Paints Utsav Synthetic
➢ Asian Paints Utsav Floor Colour Distemper
➢ Asian Paints Utsav Primer (ST) ➢ Metal Surface
➢ Asian Paints Utsav Primer (WT) ➢ Asian Paints Luxury Ultra Gloss Enamel
➢ Asian Paints Utsav Metal Primer ➢ Asian Paints Premium Semi Gloss
Red Oxide Enamel
➢ Asian Paints Utsav Stainer ➢ Asian Paints Utsav Enamel
➢ Wood Surface
○ Asian Paints Utsav Enamel
Automotive: ○ Asian Paints Luxury Ultra Gloss
Enamel
➢ 2K Nexa Auto color ○ Asian Paints Premium Semi Gloss
➢ Deltron Enamel
➢ Delfleet
➢ Bilux range of Products
➢ Aspa range of Products
Floor Coatings:
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Operational Analysis of Asian Paints
➢ APCOFLOR
Road Markings:
➢ APCOTRAK
➢ APCOTRAK WBR
➢ THERMOLINE
CAPACITY UTILIZATION
Decorative Paints:
Decorative Paints business contributes around 94% in the total paint business. The
company ranks no. 1, in the country in this segment with around 8500 colours to
offer to its customers. It has 5 manufacturing plants operating all over the country,
which is strategically located in-order to cater to the widely spread, market:
Plant Capacity
Patancheru, 80,000 KL
Hyderabad p.a.
Sriperumbudur, 50,000 KL
Chennai p.a.
Kothak 1,50,000 KL
p.a.
Page 4 of 15
Operational Analysis of Asian Paints
Industrial Paint:
In this business, the company caters to automotive, powder, protective coatings,
road markings segment, floor coatings and General Industrial Paints. Most of the
industrial paints business is operated by two companies’ viz. Asian PPG Ltd. and
Asian Paints Industrial Coating Ltd. The company ranks first in the automotive
paints business in domestic market. The company ranks second in protective
segment and first in the road-marking segment. Recently it has entered in floor
coating segment. The company operates through following plants:
Powder Coating
Chemicals:
Chemical business includes manufacturing of Phthalic Anhydride (PAN) and
Pentaerythritol (PENTA). Asian Paints Ltd., has its PAN manufacturing plant at
Gujarat (capacity – 25,200 MT) and PENTA manufacturing facility at Tamil Nadu
(capacity – 3000 MT). The company consumes nearly 50% of its production as
captive consumption and sells the remaining in the open market. This business
contributes around 3% to company’s consolidated revenues.
Of the above mention total capacity of Asian Paint Plants the total utilization of all
the plants is 75 -80% of the total capacity. The plants do not utilize the total
capacity of the plants and the other excess paint is being outsourced from other
companies.
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. It is they who drive growth
and lead to greater heights. At Asian Paints, human resources systems are
designed to create a focused, performance oriented and agile company. A talent
pool of over 4700 employees employed across 23 countries brings in a unique
blend of mindsets and skills.
An open and interactive work culture brings out the best in the people. A sense of
ownership and freedom to experiment at their workplace brings out creativity and
innovation in every individual. Excellent training is provided to develop leaders and
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Operational Analysis of Asian Paints
QUALITY ISSUES
The company has various manufacturing units which are located at Mumbai,
Ankleshwar, Patancheru, Kasna, Cuddalore, Rohtak, Raigad, Buladshahar and
Sriperumbudur. Each plant is headed by the Factory Manager. Bhandup plant is the
oldest plant with an installed capacity of 30000 Tonnes per annum. All plants are
awarded with ISO 9000 & ISO 14000 certification.
Asian Paints has won many awards & recognitions which include:
➢ Forbes rated it under 200 'Best Small Companies of the world' in 2002 and
2003 and amongst the top 200 'Under a Billion Firms' of Asia in 2005, “Best
small company in India” by Asia Money in 2002.
➢ “Golden peacock environment management award” national quality award
by union labour ministry.
➢ “Best supply chain” award by i2 solutions.
➢ “Five star rating” by British safety council in 2003 & 2005.
➢ Awarded the "Sword of Honour" by the British Safety Council for all the paint
plants in India. This award is considered as the pinnacle of achievement in
safety across the world.
➢ Ranked 24th amongst the top paint companies in the world by Coatings
World - Top Companies Report 2006.
➢ The Asset - one of Asia's leading financial magazine ranked Asian Paints
amongst the leading Indian companies in Corporate Governance in 2002 and
2005.
➢ Received the Ernst & Young "Entrepreneur of the Year - Manufacturing"
award in 2003.
SUPPLIER BASE
➢ Mostly the Alkyd resin used in the manufacturing of paints is manufactured
by Asian Paints itself, but as the quantity manufactured by it is not enough,
the company outsources from many other companies one of it is Piyanshu
Resins Pvt. Ltd., Hyderabad
➢ Baba Containers is one of the suppliers of 20lit tins to the company.
➢ Asian Metal Containers is one of the suppliers of the printed tins to the
company.
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Operational Analysis of Asian Paints
But of all the above the majority of Raw Materials for Asian Paints is being imported
from other countries.
INVENTORY MANAGEMENT
Asian Paints have been always on an upper hand when compared to others in
terms of inventory management. The inventory cost for Asian Paints is lowest in
the industry. Asian Paints average inventory level equals only 28 days sales, while
the industry average is 51 days sales. This right away provided a 45 per cent edge
in inventory costs to Asian Paints compared to its competitors. Asian Paints stock
of finished goods was just 7 per cent of its net sales while for the others in the
industry it was nearly twice that level. What is particularly striking in this
achievement is that Asian Paint offered customers and dealers a high level of
service in product delivery compared to its competitors and yet kept the inventory
costs down by 45 per cent compared to the competitors.
But large credit outstanding, running beyond two months or more, was a natural
concomitant of the distribution strategy chosen by Asian Paint. The dealers are
required to maintain stocks of all the SKUs that are on demand in the territory. It
pushes up inventory levels at the outlets. They need credit. Asian Paints allowed
15-21 days credit for dealers located in the major towns and 22-30 days credit for
dealers in upcountry regions.
Asian Paints had to pull off a smart credit control strategy for survival. It resolved
the thorny problem through an innovative dealer incentive scheme. Asian Paints
stipulated that each of its dealers should pay for the supplies within a specified
time norm and offered them as attractive incentive scheme for doing so. It
consisted of two components:
➢ A special discount of 3.5 per cent. This was referred to as the discount for
perfection in payments. It was passed on at the end of the year, provided
each and every payment throughout the year was made within the
stipulated time norms.
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Operational Analysis of Asian Paints
➢ A cash discount of 5 per cent. This was paid for all outright cash purchases.
It was given whenever payments were received within 24 hours of the
supply/invoice. In respect of outstation accounts, the payments have been
made in advance by draft in order to be eligible for the cash discount.
The scheme was a grand success. Asian Paints credit outstanding always stood
below 25 days, while the outstanding of the other major companies were in the
range of 40 days and above. Systematic computerization also helped Asian Paints
maintain the credit outstanding within limits.
Asian Paints ‘Apcolite’, the largest selling brand of paint in the country, is available
in 151 different shades and in eight different pack sizes. Being in the business of
‘colours’, Asian Paints utilized colour to achieve differentiation, and none of its
competitors could match Asian Paints in this aspect. Simultaneously, AP also
achieved the lowest cost position in the industry. Normally, when a firm
consciously opts for the differentiation route with a wide product line, it
automatically points towards higher inventory levels and consequently higher
inventory and other costs. But Asian Paints, through its effective distribution
management, inventory management and control of credit outstanding, in
particular, managed to retain its inventory size and inventory costs at the lowest
possible level.
Asian Paints actually saved so much on inventory carrying costs that it almost
earned its promotion budget through these savings. This is again praiseworthy
because Asian Paints spends as much as 10 per cent of its sales on promotion, the
highest in the industry. It has to spend so much in order to maintain its
differentiation advantage. But strikingly, it has kept its total marketing costs the
lowest in the industry. The two factors together i.e., the lowest cost position as
well as the highest differentiation position has conferred a significant competitive
advantage on Asian Paints.
This are few of the techniques used by the Asian Paints to manage the inventory in
a better way and to decrease the cost of the products manufactured so as to
reduce the price of the goods supplied to the consumers.
LOGISTICS MANAGEMENT
➢ The warehousing facilities are well maintained.
➢ The company specially looks after the environmental aspects and tries to
avoid pollution and pollutants by adapting eco friendly production methods.
➢ The company keeps low inventories in off seasons, and high inventory in
festival seasons.
➢ The company has huge base of raw material suppliers, giving company
bargaining power resulting in higher profit margins than competitors.
➢ The company has succeeded in establishing themselves in rural parts of
India by large distribution network, retail outlets etc.
➢ Asian Paints has around 1,600 stock-keeping units (SKU; one SKU would
mean a product of a particular pack and shade), of which around 300-350
are fast moving with extremely high liquidity at the counter. This puts great
pressure on the demand forecasting and inventory management functions
of the company.
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Operational Analysis of Asian Paints
ENERGY MANAGEMENT
Page 9 of 15
Operational Analysis of Asian Paints
One more product issue is the content of Lead in the paints which is harmful and
can be dangerous for the health of the consumers and also for the environment, so
to overcome this issue the company had come up with the Lead – free paints which
Page 10 of 15
Operational Analysis of Asian Paints
will not harm even the environment and also the consumers thus improving the
quality and thus increasing the sales of the company.
ENVIRONMENTAL MANAGEMENT
➢ Asian Paints approaches the environment issue from the perspective of
waste minimisation and conservation of resources.
➢ It attempt is to reuse, recycle and eliminate waste, which results in less and
less waste being generated. Accordingly, the material losses in
manufacturing have been reduced substantially over the last few years.
➢ It has ISO 14001 certification for environment management standards.
➢ It has achieved 'zero industrial discharge' capability. This has been achieved
by the installation of upgraded effluent treatment facilities and installation of
reverse osmosis plants in conjunction with appropriate recycling and reuse
schemes. Our emulsion manufacturing facility has also achieved 'zero waste'
status. It has adopted the principles of "green productivity".
➢ Some of its innovative schemes which enhance green productivity are dealer
tinting systems which has resulted in large batch sizes ; bulk storage facility
for monomers which reduces wastage; Use of natural gas which is a cleaner
fuel ; solvent recovery plants have been set up which has resulted in zero
reduction of solvent disposal ; Improved incinerating systems and reverse
osmosis.
TECHNOLOGY UPGRADATION –
MANUFACTURING
➢ Screw Compressor with Variable Frequency Drive: Total saving/annum = 7.03
lacs
➢ Hydrofoil Agitators in Medium Tank Yard: Total saving/annum = 1.16 lacs
Page 11 of 15
Operational Analysis of Asian Paints
In India, the company's 140 strong R&D team consisting of 7 doctorates and
around 115 qualified scientists, has always backed the company's business plan
and demands of the market place. Right from the company's inception, all its
decorative products for the Indian market and also in the overseas market have
been developed in-house. In the last few years, company’s R&D efforts have been
focused on developing new exterior finishes, economy emulsions and distempers.
Asian Paints' R&D team has successfully managed to develop High-end exterior
finished and wood finishes in-house, which was earlier imported into the country.
These products are currently marketed under Asian Paints Elastomeric Hi-Stretch
Exterior paint and Asian Paints PU wood finish respectively.
Company is also in the development of the water based wood polish which is a new
product as all the other wood polish are solvent based, and they have odour which
causes irritation. So, company is in the process of developing a polish which is
odourless and is of same quality as of solvent based polish.
The R&D team also provides technological support and develops customized
products for the company's international operations spanning across 19 countries.
The company is also in the process of setting up new a new R&D centre near
Mumbai (India).
OTHER INITIATIVES
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Operational Analysis of Asian Paints
In addition, the Ankleshwar plant has also taken up the cause of improving the
health and hygiene situation of schools in nearby villages. Understanding that
prevention is better than cure, the plant conducts Vaccination and Health camps.
Not only students, but teachers are also briefed on hygiene aspects in such camps.
In Sriperumbudur (South India) also, the plant is treading on similar lines and has
taken up the task of improving facilities in the neighborhood primary schools. It
presented the Pondur primary school with desks, tables, a PA system and even
school bags for the students.
PROFITABILITY
• Operating Ratio
Operating CostNet Sales
• Gross Profit Margin
Gross ProfitNet Sales
• Net Profit Margin
Profit after TaxNet Sales
• Return on Net Worth
Profit after TaxAverage net Worth
Page 13 of 15
Operational Analysis of Asian Paints
Return on Net
39.82 44.86
Worth
FUTURE OUTLOOK
The company plans to consolidate its dominant position in India by launching new
products in line with the market developments in both decorative paint and
industrial coating segments. The company is focusing on further improving the
operations of all of its subsidiaries in India and abroad and has already launched E-
Strides, an ERP initiative through which all the overseas ventures are being
covered for sharing of global knowledge, best practices and better control on
operations. The company’s objective is to be among the top three players in each
market where it is currently operating or plans to operate in the future.
EPILOGUE
Asian Paints is India’s largest and Asia’s third largest paint company. It is a
vertically integrated paint company with in-house manufacturing facility. Its
product portfolio includes wall paints, metal paints, wood finishes, primers and
others. The company’s market segments include decorative and industrial coating
segment. The industrial coating segment consists of automotive coating, powder
coating and protective coating. Besides Asian Paints, the group operates around
Page 14 of 15
Operational Analysis of Asian Paints
the world through its subsidiaries Berger International, Apco Coatings, and SCIB
Chemicals.
One notable aspect that I personally like about Asian Paints is that, it has been able
to expand globally without taking on too much debt. It is able to support its
expansion plan from its internal sources.
Post acquisition of SCIB Chemicals (for Rs245mn) and Berger International (for
Rs576mn), Asian Paints has emerged as a major decorative paint company in the
world with 28 plants spread over 23 countries.
However no substantial gains could be expected from the international operations
in the medium term. BI has an accumulated loss of US$24mn. Of the balance, most
of the international operations are relatively small in size and in the growth phase.
Asian Paints domestic operations, particularly exterior paints, have been driving
volume growth. To cater to rising volumes, Asian Paints is setting up a new
100,000 tpa plant at Pondicherry. Investments in IT have led to a substantial
reduction in working capital cycles. Like it has done in the past, we expect Asian
Paints to exceed industry growth rates.
QUALITATIVE ANALYSIS:
➢ Over the years, Asian Paints has been a very stable and growing corporation.
It has kept growing along with the economy in both real estate and industrial
paints segment. It is also increasing its reach in global markets.
➢ It has had a very favorable dividend strategy in which it consistently shared
its profits with shareholders. The dividends have doubled in last 5 years.
➢ In addition, historically, it has been a very low debt company, with most of
the growth coming from organic sources. I like this aspect of Asian Paints.
➢ Along with slowdown in our countries and global economy, I expect Asian
Paints to shows reduced earnings. This is expected and extrinsic factor
which company does not have any control over. The most recent analyst
presentation shows that management acknowledges this challenge and
presents a realistic picture. It does not hype its positioning and maintains a
firm footing in realities.
➢ I believe company is very well position to navigate this downturn (brand
value, distribution network, negligible debt, excellent management,
presence in different markets).
➢ I like Asian Paints as a company, its brands, and management’s dividend
strategy. I like its market positioning and ability to navigate the current
downturn.
ILLUSTRATIONS
Page 15 of 15