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AMITY COLLEGE OF COMMERCE & FINANCE, RANCHI


AMITY UNIVERSITY JHARKHAND, RANCHI

NTCC PROJECT REPORT


Company Report
(Asian Paints)

by

ASHUTOSH SINGH
(ROLL NO-A35904616016)

Amity college of Commerce and Finance


Amity University Jharkhand
Ranchi
Month & Year
MARCH, 2018
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Declaration

This is to declare that this report has been written by me. No part of the report
is plagiarized from other sources. All information included from other sources
have been duly acknowledged. I aver that if any part of the report is found to
be plagiarized, I shall take full responsibility for it.

Ashutosh Singh

A35904616016

Place : Ranchi
Date : 09-03-2018
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CERTIFICATE

This is to certify that this project report entitled “COMPANY REPORT (ASIAN
PAINTS) FY: 206-17” submitted to Amity University Jharkhand, is a bonafide
record of work done by “ASHUTOSH SINGH” under my supervision from “ 19TH
FEB” to “ 9TH MARCH”

Signature of the Supervisor

Prof. Shovona Coudhury

Prof. Shovona Coudhury

Industry Guide’s Designation

Place : Ranchi

Date : 09-03-2018
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ACKNOWLEDGEMENT

“It is not possible to prepare a project report without the assistance & encouragement of other
people. This one is certainly no exception.”

On the very outset of this report, we would like to extend my sincere & heartfelt obligation
towards all the personages who have helped us in this endeavour. Without their active
guidance, help, cooperation & encouragement, we would not have made headway in the
project.

We are extremely thankful and pay our gratitude to our faculty Prof. Soovana Choudhry, for
his outstanding teaching, his valuable guidance and his support in completing this project.

We extend our gratitude to Amity University Ranchi, Jharkhand for giving us this wonderful
opportunity to learn about the need for Financial Analysis & complexities in an investment
decision making.

Any omission in this brief acknowledgement does not mean lack of gratitude.

Thank You
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INDEX
Sr No. Particulars Page No.
1. Introduction 6
Objectives
Analysis methodology
2. CONSILADETED BALANCE SHEET OF FY 7
2016 & 2017

3. Statement Of Profit and Loss 9

4. Cash Flow Statement 11

5. Income Statement 13
6. Analysis of Asian Paints: Trend 15

7. Ratio Analysis of Asian Paints 17

8. Various Ratio Analysis 23

9. Graph on the basis of Ratio 25


Analysis
10. Conclusion 34
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INTRODUCTION

Asian Paints Limited is a leading Indian chemicals company headquartered in


Mumbai, India. With a turnover of Rs 140 billion, it is India's largest and Asia's
third largest paint company.
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 making it the only paint company in the world to
receive this recognition. Asian Paints manufactures and markets industrial and
decorative coatings. Along with that the company also provides home painting
services and solutions.

Objectives Achieved

Through this financial accounting project we


Had a first hand experience of analyzing financial statements.
Critically examined the performance of Asian Paints with its closest
competitor i.e. Berger Paints.
Observed
the level of consistency in the financial performance of Asian Paints.
Understood the roles of the various heads of the accounts which are part of
financial statements of the company.

Analysis methodology

Done Trend analysis, Vertical analysis, and Ratio analysis of both Asian Paints
and Berger Paints and compared each other. We also did the forecasting for
Sales and Net Profit of Asian Paints for the next financial year.
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CONSILADETED BALANCE SHEET OF FY 2016 & 2017


Particuars 31.03.2017 31.03.2016
ASSETS
NON-CURRENT ASSETS
Property, Plant and Equipment 2956.65 3056.15
Capital work-in-progress 257.54 106.59
Goodwill 191.89 198.99
Other Intangible Assets 153.61 161.21
Financial Assets
Investments
Investment in Associate 319.83 274.83
Other Investments 980.82 852
Loans 72.62 64.81
Trade Receivables 4.84
Other Financial Assets 199.42 31.85
Deferred Tax Assets (Net) 16.16 1.83
Current Tax Assets (Net) 84.01 17.93
Other Non-Current Assets 221.53 54.81
5454.08 4825.84
CURRENT ASSETS
Inventories 2626.94 1998.24
Financial Assets
Investments 1351.34 1585.3
Trade Receivables 1446.6 1186.84
Cash and Cash Equivalents 582.08 337.42
Other Balances with Banks 219.13 86.78
Loans 17.88 20.13
Other Financial Assets 421.66 252.29
Assets classified as Held for Sale 14.99 4.45
Other Current Assets 285.06 263.57
6965.68 5735.02
TOTAL ASSETS 12,419.76 10,560.86

LIABILITIES
NON-CURRENT LIABILITIES
Financial Liabilities
Borrowings 41.07 72.63
Other Financial Liabilities 7.02 10.62
Provisions 146.03 121.37
Deferred Tax Laibilities (Net) 359.19 296.83
Other Non-Current Liabilities 3.65 1.82
557.14 503.27
CURRENT LIABILITIES
Financial Liabilties
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Borrowings 504.43 231.08


Trade Payables
Due to Micro and Small
Enterprises 30.38 21.23
Due to Others 1892.45 1543.84
Other Financial Liabilities 1039.79 980.71
Other Current Liabilities 227.14 218.81
Provisions 49.13 56.9
Current Tax Liabilities (Net) 141.55 96.51
3884.87 3149.08
TOTAL EQUITY AND LIABILITIES 12,419.76 10,560.86
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Statement Of Profit and Loss


As on As on
Particulars 31.03.2017 31.03.2016
Revenue from sale of products (including Excise Duty) 16,848.12 15,627.13
Revenue from sale of services 47.17 34.63
Other Operating Revenues 189.47 179.93
Other Income 262.6 213.39
17,34

TOTAL INCOME (I) 7.36 16,055.08


EXPENSES
Cost of Materials Consumed 8,109.96 7,194.80
Purchases of Stock-in-Trade 851.75 655.52
Changes in inventories of finished goods, stock-in-trade and work-in-
progress 531.07 199.33
Excise Duty 1,794.56 1,570.20
Employee Benefits Expences 1,086.29 989.51
Other Expenses 2,751.84 2,463.18
TOTAL (II) 14,063.33 13,072.54
EARNING BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION 3,284.03 2,982.54
Finance Costs 30.58 40.66
Depreciation and Amortisation Expense 338.84 275.58
PROFIT BEFORE EXCEPTIONAL ITEMS AND TAX 2,914.61 2,666.30
Exceptional Items 52.45
PROFIT BEFORE TAX 2,914.61 2,613.85
Tax Expense
(1) Current Tax 895.32 801.68
(2) Minimum Alternate Tax (MAT) credit utilised/paid 0.53 1.32
(3) MAT Credit entitlement of earlier years -1.32
(4) Short/(Excess) tax provision for earlier years 2.80 2.8 -4.46
(5) Deferred Tax 49.33 47.27
Total tax expense 947.98 844.49
PROFIT AFTER TAX BEFORE SHARE OF PROFIT OF ASSOCIATE 1,966.63 1,769.36
SHARE OF PROFIT OF ASSOCIATE 49.61 33.42
PROFIT FOR THE YEAR 2,016.24 1,802.78
OTHER COMPREHENSIVE INCOME (OCI)
(A) Items that will not be reclassified to Statement of Profit and Loss
(a) (i) Remeasurement of defined benefit plans 15.39 -0.7
(ii) Income tax relating to remeasurement of defined benefit plans -4.36 -0.09
(b) Net fair value gain/(loss) on investment in equity instruments through
OCI 130.76 -19.85
(c) Share of OCI in associate -0.57 -0.73
(B) Items that will be reclassified to Statement of Profit and Loss
(a) (i) Net fair value gain on investment in debt instruments through OCI 2.73 0.53
(ii) Income tax benefit on net fair value gain on investment in debt
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instruments through OCI 0.17 0.34


18.19
(b) Exchange difference arising on translation of foreign operations -136.44 18.19
TOTAL OTHER COMPREHENSIVE INCOME (A+B) 7.68 18.19
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 2,023.92 18.19
PROFIT FOR THE YEAR ATTRIBUTABLE TO: 18.19
Owners of the company 1939.42 18.19
Non-controlling interest 76.82 18.19
2,016.24 18.19
OTHER COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO: 18.19
Owners of the Company 58.98 18.19
Non-controlling interest -51.3 18.19
7.68 18.19
TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO: 18.19
Owners of the Company 1,998.40 18.19
Non-controlling interest 25.52 18.19
2023.92 18.19
Earnings per equity share (Face value of ` 1 each) 41 18.19
(1) Basic in Rs 20.22 18.19
(2) Diluted in Rs 18.19 18.19
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Cash Flow Statement


Year Year
Particulars 2016-17 2015-16
(A) Cash Flow From Operating Activities
Profit Before Tax8 2,914.61 2,613.85
Adjustments for:
Depreciation and amortisation expense 338.84 275.58
Gain on sale of financial assets measured at fair value through profit or loss
(FVTPL) 15.6 8.6
Gain on sale of property, plant and equipment (net) 1.42 11.23
Finance costs 30.58 40.66
Allowances for doubtful debts and advances (net) 14.81 11.09
Bad debts written off 0.32 2.53
Interest income 33.14 22.43
Dividend income 73.9 69.13
Other Non-cash items 52.45
Net gain arising on financial assets measured at fair value through profit or loss
(FVTPL) 49.4 43.81
Income on prepayment of loan 3.54
Deferred income arising from government grant 0.62
Net unrealised foreign exchange loss/(gain) 1.84 10.98
Effect of exchange rates on translation of operating cashflows 67.84 17.54
Operating Profit before workng capital changes 3,055.54 2,847.52
Adjustments for:
(Increase) / Decrease in Inventories 628.7 201.66
(Increase) in Trade and Other Receivables 474.7 145.84
Increase in Trade and Other Payables 500.59 141.97
Cash generated from Operating activities 2,452.73 3,045.31
Income Tax paid (net of refund) 925.4 802.36
Net Cash generated from operating activities 1,527.33 2,242.95
(B) Cash Flow from Investing Activities
Purchase of Property, plant and equipment 684.13 817.11
Sale of Property, plant and equipment 16.92 14.91
Purchase of investments 152.75 282.33
Sale of non-current investments 209.54 204.85
Proceeds from sale of current Investments (net) 147.14
Net investment in bank/term deposits (having original maturity more than three
months) 298.73 70.28
Interest received 32.01 14.77
Dividend received 73.9 68.9
Net Cash used in investing activities 656.1 866.29
(C) Cash Flow from Financing Activities
Proceeds from non-current borrowings 31.1 6.77
Repayment of non-current borrowings 57.65 1.63
Proceeds from current borrowings 269.24 1.69
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Repayment of current borrowings 29.27 117.16


Acceptances - Net 13.16 65.75
Finance costs paid 35.68 40.17
Dividend and Dividend tax paid (including dividend paid to Minority
Shareholders) 947.33 764.23
Net cash used in financing activities 756.43 848.98
(D) Net Increase in cash and cash equivalents [A+B+C] 114.8 527.68
Add : Cash and cash equivalents as at 1st April 1,577.73 1,049.97
Net effect of exchange (loss) / gain on cash and cash equivalents 25.01 0.08
Cash and cash equivalents as at 31st March 1,667.52 1,577.73
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Income Statement
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Analysis of Asian Paints: Trend

For the period 2016-17

 Inventories, Trade Receivables, Cost of Materials Consumed, Net Sales and


Operating Expenses show a continuous increase over the 5 year period, showing
that the company’s strategy is to increase its market share by increasing the scale
of its operations. So far the strategy is working well as there is a continuous rise in
the Profit After Tax (PAT) and Reserves and Surplus as well, showing that the
profitability of the business has increased.

 Finance Costs have decreased over the 5 year period, along with Short Term
Borrowings. This signifies a decrease in the amount of interest payments the
 company has to make for its borrowings.

 Non-Current Investments have risen continuously over the period


 The Loans and Advances of the company, both Long and Short Term have shown an
irregular trend over the period.
 Employee Benefit Expenses have increased continuously over the period, showing
that the company is willing to share the benefits of increased revenues with its
employees. This also sheds light on the HR practices of the company, telling us that
the company believes in the philosophy: Happy employees are productive
employees.

 Company’s Tangible Fixed Assets show an irregular growth during the period and
the Intangible Fixed Assets show a high growth during period. It signifies that the
company has acquired a lot of Patents and Exclusive Rights during the period. It
may also signify a sharp increase in the company’s Goodwill, though a Goodwill
revaluation looks unlikely. This increase in assets over the period of time.

 The Net Revenue from Sales has shown a steady decline when expressed as a
percentage of Sales Revenue, even though the Revenue in absolute terms has increased.
This declining percentage can be directly attributed to an increase in the excise duty over
the years. This implies that the company has increased its scale of operations.

 Other Incomes of the company have also increased over the years, albeit
irregularly. Much of this income can be attributed to Interest Income Received from
Investments as the Investments of the company show a similar trend.

 The Cost of Materials Consumed, though increased in 2011-12, declined
continuously after that during the period. This implies the company has increased its cost
efficiency. It can also be implied that the inputs cost have decreased.
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 The company’s Purchases of Stock-in-Trade has risen continuously over the years,
solidifying
 the ground for our assumption that the scale of operations has increased.

 The EBITDA, Profit Before Exceptional Items and Taxes, Profit Before Tax and Profit
After Tax

as a percentage of sales have continuously decreased over the year.This implies
that the input costs have been reduced during the year 2016-17.

 The Finance Costs of the company increased during the year 2011-12. This can be
directly attributed to Interest on Short Term Borrowings, which increased almost 35 times
during one year. After that the Finance Costs have declined continuously as a result of
continuous decline in the Long Term Borrowings and Redemption of the Short Term
Borrowings.

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Ratio Analysis of Asian Paints

Working Capital:

 Generally, companies that maintain a comfortable amount of working


capital are more attractive to conservative investors. A company’s
ability to meet obligations, expand volume and take advantage of
opportunities is often determined by its working capital. Year-to-year
increases in working capital are a positive sign of a company’s growth
and health.

 In the case of Asian Paints, we observed that barring 2015, it
consistently increased its working capital 2016-17. This underlined
the improved financial health of Asian paints.
Analysing Liquidity of Asian Paints:

Current Ratio:

 What is a comfortable amount of workingcapital? We use several


methods to judge whether a company has adequate working capital. To
interpret the current position of a company being considered as a
possible investment, the current ratio may be more useful than just the
figure of working capital.

 Generally, companies that have a small inventory and accounts
receivable that are quickly collectible can operate safely with a lower
current ratio than companies having a greater proportion of their
current assets in inventory and that sell their products on longer credit
period. So, in this case though the value of current ratio is less than
the rule of thumb, we concluded that 1.5 is good level considering its
low trade receivable account.

Quick Ratio (aka Acid Test Ratio):

 In addition to working capital and the current ratio, another way to


 test the adequacy of working capital is to look at quick assets.
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 Quick assets are those current assets that are quickly convertible into
cash. They excludes merchandise inventories ,because such
inventories have yet to be sold and are not quickly convertible into
 cash.

 It is very important for an investor to find out the ability of the


 company to pay the upcoming bills.

 The quick ratio of Asian paints in 2016 is 0.91. Some conclude that a
quick ratio less than 1:1 is of poor quality but considering the very fact
that higher quick ratio is mainly necessary for those companies which
face difficulty in borrowing, and not for the companies like Asian paints,
who consistently perform well, we conclude that this .19 difference
from the benchmark is not a highly damaging point.

Analysing Debt of Asian Paints:

Debt ratios show the extent to which a firm is relying on debt to finance its
investments and operations, and how well it can manage the debt
obligation. If the company does not manage its debt properly, it may
bankrupt like in the case of Kingfisher Airlines. On the other hand, if it uses
borrowings efficiently it can build business by exploring and expanding to
new frontiers. There are various ratios which test the debt repaying ability.
They are:

Debt to Equity Ratio:

 A certain level of debt is acceptable and necessary, but too much is a


sign for investors to be cautious. Debt to Equity ratio shows exactly that
 part.

 The Debt to Equity ratio explains us how much the company is


 dependent on the borrowings for its financing.

 In the case of Asian paints, the company showed an outstanding


progress by reducing its debt to equity ratio from 0.05 to 0.07 in 2016.
 Most interesting observation is it has consistently reduced the ratio.
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 It is a brilliant sign of managing finances because in an industry that is


highly dependent on real estate and construction sector, and
 maintaining high debt is not advisable.

 In fact, it is the real estate sector that bought the 2008 subprime crisis
and key reason is it exponentially high debt to equity ratio and high
debt to asset ratio.

Interest Coverage (or Times Interest Earned) Ratio:

 This ratio shows the firm’s ability to pay the fixed interest charges (on
 both short-term and long-term debt) with current earnings.
 Higher is the ratio, more is the capacity of the firm to meet the interest
 payments.
 Generally if the ratio is above 1.5 it is considered to be able to pay its
interest.

Analysing Profitability:

Operating Margin:

 Operating margin is used to measure company's pricing strategy and


operating efficiency. It gives an idea of how much a company makes
 (before interest and taxes) on each rupee of sales.

 The decrease in sales can be attributed to the inflationary environment
during the period.

 In fact, its competitors and other sector’s operating margin decreased


much more and this shows the general trend in the economy.

Net Profit Margin:


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 Net Profit Margin ratio has along-term significance because it


provideuseful information about the company’s fundamental
 economic condition.

 The increase in excise duty, employee benefit expenses, and other
expenses disproportional to the net sales income impacted the PAT and
 are the reasons for the reduction in Net Profit Margin.

 However, the industry average is Net Profit Margin is much lower


than Asian Paints, from which we concluded that its performance is
better compared to its peers.

Return on Assets:

 Return on Assets ratio gives an idea of how efficient management is


 at using its assets to generate profit.

 Any rational investor will be interested only in those companies which


 are efficient in this aspect.
 Here, the ROA reduced from 20.1% to 18.25% and it has been consistent
 in decrease.

Return on Equity:

 The main objective of any business is to deliver the returns to the


 investors for the capital they invested.

 Return on equity measures a company’s profitability by revealing


how much profit a company generates with the money
 shareholders have invested.

 This shows the management is efficiently using the share
capital and is delivering progressive results day by day.

Earnings per share:


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 EPS is generally considered to be the single most important variable in


 determining a share's price.
 It shows the efficiency with which a company generates income per
 share.

EPS of Asian Paints increased spectacularly in 2016-2017.

Inventory Turnover Ratio:

 Inventory Turnover Ratio measures company's efficiency in turning its


inventory into sales. Its purpose is to measure the liquidity of the
 inventory.

 The increase in inventory can be attributed to the efficient forecasting


 and planning of the organization.
 Asian Paints Inventory Turnover Ratio increased from 6.25, in 2015-16 to
6.63, in 2016-17.

 This value shows that the efficiency improved in a good way, though its
best was in 2016-17, when this ratio was 6.78.

Days in Inventory:

 Days in Inventory measures the average number of days it takes a


 company to turn its inventory into sales.

 Days in Inventory estimates also the number of days the average


 inventory balance will be sufficient.

 It is the symbol of efficiency and effectiveness of market


 intelligence, planning, and forecasting.

Total Asset Turnover Ratio:

 The value of a company’s sales generated relative to the value of its


 assets is total Asset Turnover Ratio.

 The Asset Turnover ratio can often be used as an indicator of the


efficiency with which a company is deploying its assets in generating
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revenue. So a higher ratio is always more favourable. Higher


turnover ratios mean the company is using its assets more efficiently.

 This ratio of Asian Paints reduced from 2.64, in 2015-16 to 1.87, in 2016-
 17. Unfortunately it is not a very good thing.

 This shows that though they have increased the assets hugely, there is
a further scope for improvement as far as sales is concerned. Asian
Paints can utilize their resources more efficiently. The reduced ROA
 also underlined the same signal.

 Having said the above, it may not be fair on our part if we don’t consider
the very fact that the market slowdown may have interrupted their
investment plans and the demand in the market, than they expected.

 
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Various Ratio Analysis


Ratio Pref 2016-17 2016-172 2015-16 2015-16
Asian
Asian Paints Berger
Paints Berger
Liquidity Ratio
Current
1.4 1.23 1.08 0.64
Ratio High

Quick Ratio 0.91 0.63 0.7


High 0.64
Leverage Ratios
Debt Equity
0.07 0.05
Ratio
High 0.06 0.04
Interest
96.31 67.18 32.22
Cover High 82.92
Profitability Ratios
Operating
Profit 19.76 14.69 18.08 16.08
Margin(%) High
Net Profit
12.68 10.83 11.11 8.58
Margin(%) High

Return on
Assets
83.17 19.8 61.5 21.77
Excluding
Revaluations
High
Management Efficiency Ratios
Inventory
Turnover 6.5 5.21 8.31 6.66
Ratio High
Debtors
Turnover 11.35 8.75 12.8 9.23
Ratio High

Investments
Turnover 6.5 5.21 8.31 6.66
Ratio
High

Fixed Assets
Turnover 4.35 3.96 3.35 3.52
Ratio
High

Total Assets
Turnover 1.87 2.09 2.64 2.72
Ratio
High
24

Asset
Turnover 2.08 2.35 2.67 2.66
Ratio High

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Graph of different Financial Ratio between Asian


Paints and Berger Paints


Graph Current Ratio


1.6

1.4

1.2

0.8

0.6

0.4

0.2

0
2015-16 2016-17

Asian Berger


Graph Quick Ratio


1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2015-16 2016-17

Asian Berger
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Debt Equity Ratio


0.08

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0
2015-16 2016-17

Asian Berger


Graph Intrest Cover Ratio


120

100

80

60

40

20

0
2015-16 2016-17

Asian Berger
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Operating Profit Margin


25

20

15

10

0
2015-16 2016-17

Asian Berger


Net Profit Margin %


14

12

10

0
2015-16 2016-17

Asian Berger
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Return on Asset Excluding Revaluations


90

80

70

60

50

40

30

20

10

0
2015-16 2016-17

Asian Berger

Inventory Turnover Ratio


9

0
2015-16 2016-17

Asian Berger
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Debtors Turnover Ratio

14

12

10

0
2015-16 2016-17

Asian Berger


Investment Turnover Period


9

0
2015-16 2016-17

Asian Berger

j
30

Fixed Asset Turnover Ratio


5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
2015-16 2016-17

Asian Berger

Total Asset Turnover Ratio


3

2.5

1.5

0.5

0
2015-16 2016-17

Asian Berger



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Asset Turnover Ratio


3

2.5

1.5

0.5

0
2015-16 2016-17

Asian Berger
32

SWOT Analysis of Asian paints


Market Share:

Asian Paints is the leading Paint manufacturing company in India with a market
share of over 54 percent.

Strength
Strong Growth: Asian Paints has shown a healthy growth of around 8 – 12 % in the past 5
financial years. This has made sure that the company maintains the top spot as far as market
share is concerned. It is double the size of any other paint company in India. Strong Global
Presence: Asian Paints has a wide footprint on a globe operating in 19 countries and have 26
manufacturing units around the world. Asian Paints serves in over 65 countries and is the fourth
largest paints company in Asia.

A wide range of Products: The Product portfolio of Asian Paints allows them to cater to
different segments and industries, they are present in the Industrial coatings, Decorative paints,
Ancillaries, Asian Paints Royale etc. This allows them to penetrate different segments of
business and sections of society which helps them maintain market share.

Brand Value: Asian Paints was ranked 20th in the Top 20 best brands in Interbrand report
by Economic Times. It also featured in the Top 20 World’s Most Innovative companies.

Strong Supply Chain Management: Asian Paints has is a superior technology driven
company which has focused on integrating Supply Chain Management (SCM) and Enterprise
Resource Planning (ERP) solution from SAP.

Marketing campaigns – Asian paints has always had good marketing campaigns. It has
continued its association with Saif Ali khan over the years and had also roped in Soha ali khan
for a beautiful campaign. From time to time it has roped in other personalities for ads but Saif
Ali khan has been a constant. Recently, Deepika padukone has been chosen as their brand
ambassador for Asian paints Royale play. Their brand mascot – GATTU is very famous too
and is one of the most popular brand mascots of India.

Asian paints royale play – The Royale play was an amazing and breakthrough concept
launched in the market by Asian paints wherein painters from the company themselves will
paint your house using unique designs and colours. These painters were specially trained and
consumers relied on them because they came from the house of Asian paints. Deepika
Padukone is the brand Ambassador for the sub brand.

Weakness
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Low Market Share in Industrial and Auto Paint: Asian paints has a low market share in the
industrial paint (about 15 percent) and auto sector (about 20 percent) when compared to Kansai
Nerolac and AkzoNobel.

Slow International Business: Except for Bangladesh, Nepal and UAE, Asian Paints have been
performing below par in other overseas countries.

Opportunity

Growth in Industrial Sector: It has a chance to acquire market share in the Industrial as well
as automobile sector as well considering the current market situations.

Growing Indian Economy: With growth in Indian Economy and developing infrastructure,
Asian Paints has a chance to increase revenue base and venture into smaller cities, to increase
sales.

Emerging Nations: Asian Paints’ vision is to become one of the top five decorative coatings
companies in the world. This can be achieved by focusing on the emerging economies of the
world.

Adapting to consumer psyche – Change is always constant. So although Asian paints is


leading the market due to Royale play, there are other factors which it can bring in to dazzle its
customers and therefore keep the majority market share. Off course, easier said then done.

Threats
The threat of Slowdown: Any Economic slowdown will have a direct negative impact on the
construction industry and consequently paint industry will also get affected.

Unorganised sector: The unorganised sector still has about 35 percent of the market share and
this can prove out to be a deterrent to the growth of the industry.

The scarcity of Raw materials: The raw materials required in the Paint industry control
the pricingof paint and scarcity can cause a jump in the prices, which can be a threat for the
Paint Industry.
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Conclusion:

According to the Trend, Vertical, and Ratio analysis we did for the Asian Paints and its
competitor, Berger Paints, we conclude that Asian Paints managed their business
better compared to the Berger Paints.

The analysis included comparision of different financial parameters like Working


Capital, Liquidity Ratios, Leverage Ratios, Profitability Ratios, and Efficiency Ratios of
both the companies, for 2016-17. In my analysis I found that both the companies tried
their level best to improve their financial performances and in a way succeeded. Having
said that, it would be injustice if we do not appreciate Asian paints for its spectacular
performance despite poor macro economic conditions.

Any investor will expect a comparatively a better choice among the given options. He/She
may choose the company if that company performs better in majority of the crucial 16
parameters those are analysed. What if a company clean sweeps all the 16 parameters?
Asian Paints did the same. Though its latest performance in some parameters like Interest
Coverage Ratio, Operating Margin, Net Profit Margin, and ROA decreased compared to the
previous years, it did well in comparision to its peers.

We understood that subprime crisis, economic downturn, high inflation, real estate bubbles,
and slow construction sector are some of the reasons for the reduced performance.

Despite all the hurdles it faced, Asian Paints performed fairly well and that is the reason
for increase in its share price by 3 times, in a short span of 5 years, while Berger Paints
share increased only 2.2 times.

In a nutshell, Asian Paints deserves its first place in the market and should be the first
investment option for any investor, who is interested in Paint industry.
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