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STM Assignment

Faculty: Prof. Brajraj Mohanty


Industry: Paint
Company: Asian Paints Limited

Submitted To:
Dr. Mousumi Padhi
Asst. Professor,
Human Resource
Management,
Xavier Institute of
Management, Bhubaneswar

Submitted By: Group 10


(Section-B)
Anish Tripathy (UM15066)
Himanshu Dhamija
(UM15081)
Kunal Sharma (UM15089)
Piyush (UM15095)
Soumyasri Roy (UM15113)

Submitted To:
Dr. Mousumi Padhi
Asst. Professor,
Human Resource
Management,
Xavier Institute of
Management, Bhubaneswar

Submitted By: Group 10


(Section-B)
Anish Tripathy (UM15066)
Himanshu Dhamija
(UM15081)
Kunal Sharma (UM15089)
Piyush (UM15095)
Soumyasri Roy (UM15113)

Contents
1

Executive Summary............................................................................................................................................................... 4

Industry Overview.................................................................................................................................................................. 5
2.1

Nature and Size of the Industry....................................................................................................................................... 5

2.2

Key Growth drivers for the industry............................................................................................................................... 12

2.3

Identification of Critical Success Factors (CSF).............................................................................................................. 15

2.4

Market Analysis based on CSFs..................................................................................................................................... 16

2.5

Industry Benchmarks..................................................................................................................................................... 17

2.6

PESTEL Analysis............................................................................................................................................................. 25

2.7

Porters Five Forces Analysis.......................................................................................................................................... 31

2.8

Strategic Group Mapping............................................................................................................................................... 33

2.9

Competitive Landscape................................................................................................................................................. 34

2.10 Market Segmentation.................................................................................................................................................... 37


2.11 Buying Criteria Analysis of the Industry......................................................................................................................... 38
2.12 Key trends and future developments............................................................................................................................. 39
3

Company Overview.............................................................................................................................................................. 40
3.1

Company background.................................................................................................................................................... 40

3.2

Timeline with key milestones and their strategic impact............................................................................................... 41

3.3

Vision, Mission, Goals, and Strategic Themes................................................................................................................ 42

3.4

Key Product and Service Portfolio.................................................................................................................................. 43

3.5

Core Competencies of the firm...................................................................................................................................... 46

3.6

Business Model of the organization............................................................................................................................... 48

3.7

3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map)........................49

3.8

SWOT Analysis............................................................................................................................................................... 50

3.9

Competitor Analysis (identify competitors)................................................................................................................... 52

3.9.1

Based on Critical Success factors............................................................................................................................ 53

3.9.2

Based on Financial indicators.................................................................................................................................. 53

Future Growth Strategy for the organization........................................................................................................................ 54


4.1

Portfolio Analysis........................................................................................................................................................... 54

4.1.1

Based on BCG Matrix............................................................................................................................................... 57

4.2

Companys Strategic Roadmap for future...................................................................................................................... 58

4.3

Product Market Investment Strategy............................................................................................................................. 61

4.4

Re-imagining the Organization with the transformed business model or Use-case based on SMAC and IOE................62

1 Executive Summary
Guidelines

The executive summary should provide a brief overview of the organization and the industry in which it
operates. It should also illustrate the results of the analysis made in the report. It should provide the
future growth prospects in the industry for the organization. It should also highlight on the strategy for
any organization to gain competitive advantage in this industry.

The Indian Paints industry is booming & consumer behaviour to purchase products with a variety of new players & product
flooding the market is rapidly evolving. The Indian market, which is under transition, is also getting more and more competitive
both in terms of consumption and quality consciousness. A booming paints and varnish industry has resulted in innovative
marketing techniques coming into play. All major players like Asian Paints, Modi Paints, Nerolac Paints, Berger Paints and few
other players are trying to strengthen their retailing operations with different marketing strategies/techniques because the
paints and varnish industries now come under the impulse category where factor like supply chain management, The width of
distribution, advertisement, packing & communication make all the difference.
In the background of the above scenario, we decided to study Asian Paints to carry out our research to determine what market
thinks about Asian Paints and Varnish. Does Asian Paints give value for money, total satisfaction and does it have a competitive
growth strategy for the future.
We delved deep to find out the about the image of the product, purchase behaviour of the consumer, their expectations and
reasons of satisfaction and dissatisfaction, the current market practices and future roadmap of the company.

2 Industry Overview
2.1 Nature and Size of the Industry
Guidelines

History and
Evolution of the
industry

Brief Description of the industry segment or sub segment


History and Evolution of the Industry
Position of Industry depending on Industry Life Cycle (Introduction, Growth, maturity, decline)
Size (% of National GDP) of the industry

History of Paint
Paint has been used by mankind since its origin. The evidence can be found in the cave
paintings. The Chinese are considered to be the pioneers of manufacturing paints
thousands of years ago. In modern times paint is made artificially and is used in many
different ways. There are three basic things required to make paint. You need a pigment
to get the exact colour you want, a binder to hold the paint together, a thinner so that
it can be applied easily
Ancient Egyptians, Greeks, and Romans made paint by treating lead with wine or
vinegar. Later painters mixed up white-lead paste, then added linseed oil, turpentine, a
drier, and coloured pigments in oil. Such paint yielded a great result but unfortunately,
it also poisoned people. Today, paint with more than .06 per cent lead by volume is
banned in the U.S.
There's also been a shift away from oil as the base for paint. It began during World War
II, when linseed oil and the solvents that cut it were scarce. By the mid-'5Os, synthetic
replacements were outperforming natural ingredients. Today, practically all paints
consist of some form of synthetic resins or polymers
But the most dramatic shift has been away from solvent-thinned paints in favour of
water-thinned ones. Today, latex is the consumer standard, accounting for nearly 80

per cent of the paint sold.

History of Indian Sector


Before World War: Indian Paint Industry is over 1000 years old. The earliest paint
factory in India dates back to 1902, when Shalimar Paints, color & Varnish Company, A
Pinchin Johnson unit, was established at Calcutta. The industry still consisting of one
lone unit went through a rather prolonged period of infancy, till the World War II
brought in dramatic opportunities.
Period Between the Wars: With the stoppage of imports owing to war conditions, the
domestic market at last became almost the exclusive reserve of the domestic industry.
European manufacturers, hitherto exporting to India, readily saw the advantages of
setting up manufacturing facilities here. The period between the wars thus saw the
greatest ever influx of foreign paint companies into India Till the Second World War the
industry consisted of small producers and two foreign companies.
Period Between the War and Independence: After the war, the imports stopped which
led to the setting up of manufacturing facilities by local entrepreneurs. Still the foreign
companies continued to dominate the market, which in a way is the current scenario as
well. The initial decades saw the complete dominance of British Paint companies such
as Goodlass Walls (now Goodlass Nerolac), ICI, British Paints (now Berger Paints),
Jenson & Nicholson and Blundell & Eomite.
Post Independence: While talking about the post independent development of the Paint
industry in India, mention must be made of Asian Paints, a completely Indian unit which
started on a very small-scale, grew so big and so beyond recognition over the years
that it is today not only the largest unit in India but way ahead of the second largest,
Kansai (Goodlass) Nerolac Paints Ltd., formerly a unit of Goodlass Wall (UK). Demand
for automotive paints picked up with entry of Maruti. The post independence period
witnessed a steady growth in the paint industry. From a mere Rs.200 million turnover in
1950, the paint industry crossed the Rs.14000 million marks in 1990-91.
Post Liberalization: Rapid industrialization and improvements in the infrastructure such
as transport, energy and communication during the last decade gave a further fillip to
the growth of the paint industry. Aided by Governments liberal policy of technology

import, the automotive and consumer durables segments expanded phenomenally,


with a flurry of foreign collaboration. Increased demand for decorative, protective and
functional coatings was a natural fall out, which brought, in its stride, a host of
indigenous developments as well as the injection of new technology
Evolution of the Indian Sector

Key Consumers of
this industry and
their changing
needs

1902 Shalimar Paints, Calcutta

1920-45: Asian Paints, Nerolac started operations in India

1965-91: Paints looked upon as luxury item.

1983: Demand for automotive paints picked up with entry of Maruti.

1991: Reduction in excise duty and many controls on the industry removed.

After 1991: Steady growth, slow disappearance of unorganized sector units and
industry fragments.

Consumers for Industrial Paint Segment

Automotive OEM
Automotive Refinish
Vehicles
Railways
Aircraft
Marine Coatings
Road Marking
Plastic Coatings
Metal Packaging Coatings
General Industrial Coatings

Consumers for Decorative Paint Segment

Commercial
Hotels

Stage in the
Industry Life cycle

Shopping Malls
Offices
Restaurants
Industrial
Warehouses
Manufacturing
Others
Hospitals
Educational Institutes
Government
Recreation
Amenities

Decorative Paint Segment


This segment is in the maturity level. As the basic main components of paints
stay the same and industry is focused on bringing in product differentiation for
keeping the industry afloat and steadily rising. Also, this segment is mainly
considered a luxury segment. So with rising disposable incomes there is a
gradual shift in the preferences of people from the traditional whitewash to
higher quality paints like emulsions and enamel paints

Industrial Paint Segment


This segment of the paint Industry is still in the growth phase. This segment
started evolving late with the entry of Maruti in1983. Industrial paints are
segmented into automotive coating, high performance coating, powder coating
and coil coating. This segment is continuously viewing new developments and

increasing share.
Source: PRODUCT MANAGEMENT IN INDIA By RAMANUJ MAJUMDAR
Total Available
Market Size
(National and
Global)

Global TAM: 121.9 billion USD (FY13)


[source: http://www.business-standard.com/article/companies/indian-paintmarket-set-to-grow-20-cagr-in-two-years-on-rapid-urbanization114090500527_1.html]
National TAM: INR 280 bn (FY13)
[source: https://www.equitymaster.com/research-it/sector-info/paint/PaintsSector-Analysis-Report.asp]

Total Serviceable
Market Size
(National and
Global)

Financial year 2015


for the Industry

Global TSM: 121.9 billion USD


National TSM: INR 182 bn

FY15 had its share of both excitement as well as challenges. The arrival of a new
Government at the centre with a decisive majority raised hopes of a quick
turnaround of the Indian economy. However, it has now dawned that although
many macroeconomic indicators are on the mend, it will take time for the growth
potential of the economy to be fully realized.

On the positive side, softening of international crude and commodity rates has
eased the mounting cost pressures on the industry to some extent. And while
operating margins havent improved much, they can certainly expand in the
forthcoming quarters should things continue to remain the same.
Apart from better than expected economic growth, the boost to demand in FY16
can also come from fall in inflation levels as it will have a positive effect on

Prospects For The


Industry

customers wallet and boost his disposable income.


All the key players are almost done with capacity expansion and have started
production from new plants. Asian Paints plant in Khandala, Maharashtra has
recently got commissioned. Besides, it has initiated a project to double capacity
at Rohtak plant in Haryana. Kansai Nerolacs capacity expansion plans at Jainpur
and Bawal has culminated. Berger Paints has also commissioned its water based
paint plant at Hindupur in Andhra Pradesh. Its powder coating plant at Jejuri has
also been commissioned.

The market for paints in India is expected to grow at 1.5 times to 2 times
GDP in the next five years. With GDP growth expected to be between 67% levels, the top three players are likely to clock above industry growth
rates in the future, considering they have a strong brand and good reach.

The market size of the paint industry in India is estimated at around Rs


350 bn. Industry players expect close to 12% growth in business volume
and 10-12% rise in sales in FY16.

Decorative paints segment is expected to witness higher growth going


forward. The fiscal incentives given by the government to the housing
sector have immensely benefited the housing sector. This will benefit key
players in the long term.
Although the demand for industrial paints is lukewarm it is expected to
increase going forward. This is on account of increasing investments in
infrastructure. Domestic and global auto majors have long term plans for
the Indian market, which augur well for automotive paint manufacturers
like Kansai Nerolac and Asian-PPG. Increased industrial paint demand,
especially powder coatings and high performance coatings will also propel
topline growth of paint majors in the medium term.

Volatility of the Indian currency and international oil prices and worries
about a normal monsoon continue to be major challenges facing the paint

industry.

2.2 Key Growth drivers for the Industry


Key Growth drivers

Rationale
Rapid urbanisation, upwardly mobile lifestyles and increase in disposable income are
the key growth drivers of decorative paints, says Sameer Nagpal, Managing Director &
CEO, Shalimar Paints. Robust manufacturing, industrialisation and infrastructure
growth typically drive demand for industrial coatings.
A comprehensive list of growth drivers on the basis of our research is
1. Increasing level of income and education The increasing proportion of young
population along with increasing disposable incomes is leading to a change in
consumer habits. The Indian economy is shifting from a savings economy to a spending
economy. With more income at their disposal, people are now ready to pay for better

products and paint is no exception.


Educated consumers are more brands conscious and seek value in what they consume.
Thus, paint companies offering value-added features like non-toxicity, weather
protection, texture, eco-friendly production, etc. will attract more demand. These valueadded products enable the manufacturers to earn a better premium as compared to the
regular paints, thus offering higher margins.
Paint industry has witnessed strong growth of 1.5-2x GDP growth since liberalization.
Indian paint industry growth is closely related with the GDP growth rate and has grown
on an average 1.5-2x GDP growth rate since liberalization

2. Increasing Urbanization: Urbanization is leading to a shift from temporary houses to


permanent houses. Urban houses are well-designed in its interior as well as exterior
aspect. This calls for more houses being painted using medium and premium paints.
For urban houses, interior design is becoming a fashion statement and a lot of paint is
used to decorate the interiors. This will lead to an increase in the per capita
consumption of paint which will increase the overall demand of paint. Urbanization also
brings more nuclear families. More nuclear families mean more number of houses even
for the existing population thus further driving the demand.
3. Increasing share of organized sector: Decrease in taxes on key raw materials will
improve the position of the organized players. The Organized sector is expanding its
distribution network and adopting the installation of tinting machines at retail outlets.
These tinting machines offer a wide variety of color shade options to choose from. The

unorganized players are not in a position to offer such facility as it is comparatively


capital intensive. Shift in use, from distemper segment towards premier segment is also
shifting market share from the unorganized sector to the organized sector.
4. Development of the Realty, Automobile and Infrastructure sector: The growth of the
paint industry is largely dependent on the development of the realty and housing
sector, as decorative segment generates about 70% of the total paint demand from this
sector. The Automobile segment generates more than two-third of the demand for
Industrial paints, and hence is the growth driver for Industrial Paints. The Infrastructure
segment creates direct demand for paints as well as creates indirect demand through
supporting the growth of the realty, automobile, FMCG and other industries where paint
is used.
The growth potential in the above 3 sectors is immense, the paint industry being
dependent on these 3 sectors is expected to grow along with them.
5. Availability of financing options: Easier housing finance and auto finance is expected
to favor more people to buy houses and travel in personal vehicles. This will drive the
growth of housing and automobile sector, of which the Paint industry will get its share.
6. Increasing Penetration in the Rural Markets: Paint usage in rural areas is generally in
the distemper segment, hence dominated by the unorganized players. Demand in rural
areas is dependent on agriculture, which is dependent on the monsoons. With the
development of irrigation facility, the dependence of agricultural output on monsoons
will be on a decreasing trend. Also, with the modernization of agriculture and
accompanying development of rural India, consumer preferences are expected to
improve. Paint companies are expanding their distribution network in rural parts of
India, which is a relatively untapped market for the organized players. These factors
supported by the increasing penetration of the paint companies will help drive the
demand for paints.
Source:
www.spasecurities.com/DownloadTechnicalReport.aspx?rid=1165
http://www.business-standard.com/article/companies/indian-paint-market-set-to-grow-

20-cagr-in-two-years-on-rapid-urbanization-114090500527_1.html

2.3 Identification of Critical Success Factors (CSF)


Critical Success
Factor identified
CSF1
Distribution:

CSF2
Cost And Price
Drivers:

Rationale
Marketing of decorative paint requires extensive dealer networks, especially in the
urban and the semi-urban markets. An effective and efficient distribution network is a
key requirement for the success of paint manufacturers. Since paints are in high
demand in virtually all areas of the country, it is pertinent that the end product gets to
the final consumer as at when needed. Distribution therefore remains a key success
factor.
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%.

CSF3
Working Capital
management
CSF4

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 more than half of
sales coming in September November festival season. Debtor levels also tend to be
high in this industry
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

Technology

maintenance coating employs well over 900 raw materials.


This possess 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.
Source: http://www.ipaindia.org/about-paint-industry.aspx
http://www.indianmirror.com/indian-industries/paint.html
https://www.equitymaster.com/research-it/sector-info/paint/Paints-Sector-AnalysisReport.asp

2.4 Market Analysis based on CSFs


Region

CSF 1

CSF 2

CSF 3

CSF 4

Very High

Moderate

High

Low

North

NA

NA

NA

NA

South

High

High

High

High

East

NA

NA

NA

NA

West

High

High

Moderate

Moderate

North-East

Moderate

Moderate

Low

Low

Global

India

Central

NA

NA

NA

NA

Note: Used data for the year 2014-15

2.5 Industry Benchmarks


Size of industry:

Category

Industry Level
(National)

Indicator

Market Size
(crores)
Size as % of
GDP
Inventory
turnover

Activity Ratios

Receivables
turnover
(Days)

Industry Average of Top 5 Firms or


players serving 75-80% of the market

Market Leader

201112

201213

201314

2014-15

201112

2012-13

2013-14

2014-15

13793.3
7

17976.3
4

20549.6
8

23248.26

9,118.9
2

10,462.9
4

12,167.0
2

8,639.47

0.001

0.002

0.002

0.002

6.06

5.98

7.56

6.06

6.26

7.24

30.73

31.11

19.21

15.82

15.48

16.17

5.91

27.44

Payables
turnover
(Days)

53.96

57.29

60.21

51.95

52.82

55.03

57.23

Asset

1.85

1.77

1.77

3.55

3.13

3.11

2.95

Category

Indicator

Industry Average of Top 5 Firms or


players serving 75-80% of the market

Market Leader

201112

201213

201314

2014-15

201112

2012-13

2013-14

2014-15

Current ratio

1.6

1.48

1.27

1.33

1.12

1.12

1.18

1.09

Quick ratio

1.03

0.9

0.74

0.69

0.66

0.83

0.49

Cash ratio

1.03

0.9

0.74

0.69

0.66

0.83

1.09

Debt-toassets ratio

0.06

0.04

0.04

0.039

0.019

0.011

0.009

Debt-tocapital ratio

0.11

0.09

0.07

0.076

0.035

0.020

0.015

Debt-toequity ratio

0.13

0.14

0.14

0.07

0.02

0.01

0.01

Interest
coverage
ratio

42.6

28.96

27.84

59.77

45.68

44.53

72.77

Gross profit
margin

13

12.9

12.77

15.61

15.83

15.02

15.34

turnover
Liquidity Ratios

Solvency Ratios

Source:https://
www.eq

Source http://w
ww.mon

Category

Indicator

Industry Average of Top 5 Firms or


players serving 75-80% of the market
201112

Profitability Ratios

uitymas
ter.com/
researc
hit/comp
are/com
pare_co
mp.asp
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symbol
=ASPNBRGR&
value=
ASIANPAINTSBERGER
PAINTS
&utm_s
ource=
compar
ecompan
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tm_med
ium=we
bsite&u
tm_cam

201213

201314

2014-15

Market Leader
201112

2012-13

2013-14

2014-15
eycontro
l.com/fin
ancials/a
sianpaint
s/ratios/
AP31

Category

Indicator

Industry Average of Top 5 Firms or


players serving 75-80% of the market
201112

Market Leader

201213

201314

2014-15

201112

2012-13

2013-14

2014-15

paign=
compar
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&utm_c
ontent=
change
Operating
profit margin

17%

15%

15%

15%

16.81%

17.24%

17.05%

17.25%

Net profit
margin

9.23

9.99

8.50

11.11

11.38

11.54

11.03

11.39
http://w
ww.mon
eycontro
l.com/fin
ancials/a
sianpaint
s/ratios/
AP31

Return on
assets (ROA)

16.26

15.27

13.69

22.16

20.11

18.97

44.10

Return on
equity (ROE)

31.97

30.68

28.07

38.30

34.74

32.74

31.69

Price to

25.27

33.33

36.43

57.50

32.40

44.89

44.84

61.49

Category

Indicator

Industry Average of Top 5 Firms or


players serving 75-80% of the market

Market Leader

201112

201213

201314

2014-15

201112

2012-13

2013-14

2014-15

PEG Ratio =
(P/E Ratio) /
Projected
Annual
Growth in
Earnings per
Share

1.77

2.07

3.24

5.24

1.17

1.78

1.9

4.54

Price to Cash
Flow

19.10

22.77

25.67

25.2

31.3

30.7

29.85

Price to Book
(P/B)

7.15

9.23

8.68

12.32

12.48

15.60

14.56

18.34

Price to Sales 0.16

0.20

0.17

0.036

0.047

0.045

0.07

Dividend
Yield

1.21

0.91

0.95

0.54

1.24

0.94

0.97

0.66

Dividend
Pay-out Ratio

32.16

29.87

33.35

38.8

39.6

41.7

37.73

Enterprise
value (EV is
market

13.10

20.07

22.04

35.05

30.7

46.69

51.74

76.4

Earnings
(P/E)
Valuation Ratios or
Price Ratios

Category

Indicator

Industry Average of Top 5 Firms or


players serving 75-80% of the market
201112

201213

201314

2014-15

Market Leader
201112

2012-13

2013-14

2014-15

2144yrs 5.00%,
4557yrs2.00%

21-44yrs
- 5.00%,
45-57yrs2.00%

21-44yrs
- 5.00%,
4557yrs2.00%

21-44yrs
- 5.00%,
4557yrs2.00%

Source:
https://www.as
ianpaints.com/
pdfs/companyinfo/investors/
financial_resul
ts/AR1314.pdf - page
70

Source:
https://www.a
sianpaints.co
m/pdfs/compa
nyinfo/investors/
financial_resul
ts/AR
%20201415.pdf page 70

4.8%

5%

5.3%

Source:
https://www.as
ianpaints.com/
pdfs/companyinfo/investors/
financial_result
s/AR13-14.pdf
- page 112

Source:
https://www.as
ianpaints.com/
pdfs/companyinfo/investors/
financial_resul
ts/AR1314.pdf - page
112

67%

67%

62%

Source https://www.as

Source https://www.as

https://www.a
sianpaints.co

capitalisation
plus debt
minus cash
( Thousand
crore)
Staff
Turnover or
Industry
Attrition Rate
Competitive Ratios

Source https://www.
asianpaints.
com/pdfs/co
mpanyinfo/investor
s/financial_r
esults/AR1213.pdf pg.79

Staff Cost/
Salary as
percentage
of Sales

7.19%

Operating
Expenses as

79.13%

4.63%

71.01%

4.69%

70.81%

4.48%

66%

Source https://www.as
ianpaints.com/
pdfs/companyinfo/investors/
financial_result
s/AR12-13.pdf
- pg.79

Source:
https://www.a
sianpaints.co
m/pdfs/compa
nyinfo/investors/
financial_resul
ts/Q3FY15%2
0results.pdf

Category

Indicator

Industry Average of Top 5 Firms or


players serving 75-80% of the market
201112

201213

201314

2014-15

Market Leader
201112

2012-13

2013-14

2014-15

ianpaints.com/
pdfs/companyinfo/investors/
financial_result
s/AR12-13.pdf
- pg.45

ianpaints.com/
pdfs/companyinfo/investors/
financial_resul
ts/AR1213.pdf - pg.45

m/pdfs/compa
nyinfo/investors/
financial_resul
ts/Q3FY15%2
0results.pdf

1.4

1.9

Source https://www.eq
uitymaster.co
m/researchit/companyinfo/detailedfinancialinformation.as
p?
symbol=ASPN
&name=ASIAN
-PAINTSDetailedFinancial-Data

Source https://www.e
quitymaster.co
m/researchit/companyinfo/detailedfinancialinformation.as
p?
symbol=ASPN
&name=ASIA
N-PAINTSDetailedFinancial-Data

SOURCE https://www.a
sianpaints.co
m/pdfs/compa
nyinfo/investors/
financial_resul
ts/Q3FY15%2
0results.pdf

23%

19%

0.23

Source:
https://www.as
ianpaints.com/
pdfs/companyinfo/investors/
financial_result
s/AR13-14.pdf
- page32

Source:
https://www.as
ianpaints.com/
pdfs/companyinfo/investors/
financial_resul
ts/AR1314.pdf page32

https://www.a
sianpaints.co
m/companyinfo/investors/
financialresult.aspx

4%

4%

5%

5.4%

Source https://www.
asianpaints.
com/pdfs/co
mpanyinfo/investor
s/financial_r
esults/AR1213.pdf -

Source:
https://www.as
ianpaints.com/
pdfs/companyinfo/investors/
financial_result
s/AR13-14.pdf
- page 113

Source:
https://www.as
ianpaints.com/
pdfs/companyinfo/investors/
financial_resul
ts/AR1314.pdf - page

Source:
https://www.a
sianpaints.co
m/pdfs/compa
nyinfo/investors/
financial_resul
ts/AR
%202014-

percentage
of Sales

Depreciation
as
percentage
of Sales

1.89

Fixed Assets
to Sales
Revenue

12%

Advertising
as
percentage
of Sales

5%

1.53

20%

5%

1.52

21%

5%

1.87

Category

Indicator

Industry Average of Top 5 Firms or


players serving 75-80% of the market
201112

201213

201314

2014-15

Market Leader
201112
pg.44

*****Data is extracted using Bloomberg Terminal and Ace Equity Software.

2012-13

2013-14

2014-15

113

15.pdfpage 204

2.6 PESTEL Analysis


Category

Description

Key factors for


analysis

Rationale

Political

The political
scenario will
consider some
key factors as
changes in
political
scenario
affects
industry
immensely

a) Democracy

a) India is the largest democracy which is a positive factor for the


industry growth.

b) Stability
c) Taxation Policy
d) Attitude
e) Govt. Influence

b) Government is more or less stable, Especially after the inception of


Modi govt, faith in the Govt. has further elevated, which will lead to
more consumer spending
c) Reduction in excise duty and custom duty on raw material and final
products.
d) Political consensus on economic reforms and higher target of
growth of the economy
e) Less control of Govt. and hence its market oriented.

Economic

Economic
factors could
easily be one
of the most
important
factors. As
70% of the
paint industry
(decorative) is
a luxury item
so the
economic state
of the
environment
will play a
major role.

a) Growth
b) Excise Duties
c) Correlation
with GDP
d) Costs of raw
material
e) Exchange
Rates
f) Inflation rates

a) Over the last ten years, the industry has grown at a compounded
annual growth rate (CAGR) of 12-13% the sector is expected to
post a CAGR of around 16.2% during 2013-14 to 2015-16,
according to a report.
b) The duties for this industry were last impacted in 2012.The Union
Budget, 2012 brought more negative impact than a relief for the
Paint Industry. While the cut in customs duty on Tio2 7.5% will help
in improving margins of the industry, the increase in the excise
duty to 12% on paints will make different paint products dearer. On
the other hand, thrust on infrastructure sector and rural
development will also aid the industry growth
c) There is positive correlation. And this is good thing for the industry
because Indias GDP is on the rise
d) With the current decrease in oil and petroleum prices, the industry
is benefitting substantially. Most of the raw materials are petroleum

based. Thus paint companies benefit when the petrochemical


industry goes into its cyclical downswing
e) Most paint companies are hit by the fact that they do not make the
raw materials themselves, leaving the cost factor vulnerable to
exchange rate fluctuation. For example, phthalic anhydride (PAN) is
manufactured from orthoxylene and which goes into the production
of paints along with titanium dioxide. Asian Paints is the only paint
company that manufactures PAN. The other paint companies have
to import their stock. Since PAN prices generally outpace
international orthoxylene prices by almost 50% paint companies
end up paying a fortune when prices rise. In such a situation Asian
Paints benefits by selling PAN in the open market.
Source: https://www.equitymaster.com/research-it/sector-info/paint/paint-inputs.html

f) For the last two years paint majors had been reeling under the
economic slowdown. The past couple of years have not been very
rosy, but we are expecting a 12% volume growth this fiscal, said
Ramakanth V Akula, president (decorative) at Nippon India.
Mainly driven by high vegetable prices (food prices soared by an
annual 14.72%), the retail inflation rate accelerated to an all-time
high of 11.24% in November (from 10.17% the previous month)
According to him, another price hike may not be on the cards as a
couple of them have happened already during the year. Source:
http://www.business-standard.com/article/companies/inflation-woe-paint-firms-may-not-getto-see-rosy-picture-113121300725_1.html

Social

Social factors
represent the
culture of the
society that an
organization
operates
within.

a) Urban-Rural
distribution
b) Modernization

a) It has been found that while demand remained tepid in the Indian
cities, consumption was rising in rural areas. The rural market has
grown at a rate of around 20 per cent a year (in financial year
2013). The market size of the paint industry in India is estimated at
around Rs 29,000 crore. Industry players expect close to 12%
growth in business volume and 10-12% rise in turnover this
financial year. The rural opportunity combined with easing prices of

They may
include
demographics,
level of
education,
distribution
of wealth and
social classes,
and lifestyle
Technological

Technological
factors refer to
the rate of new
inventions and
development
And it is very
important in
the paint
industry due to
the
continuously
changing
consumer
preferences
and high
competition

Rutile, a key raw material, promises 2014 to be a better year for


Indian paint industry.
b) Modernization of paint like (waterproof paints, Teflon coating,
creating colour shops etc.)

a) Development
on product
side
b) Development
on Usage side
c) Development
on Aesthetics
d) Development
on
environmental
influence
e) R&D facilities

The Indian paint industry has begun to look more like the FMCG
industry where branding, distribution strength and innovative use of
technology have become decisive aspects of growth against a
backdrop of ever changing customer preferences.
In Feb 2014, Asian Paints launched its Nilaya collection that deals with
customizable paints. This existed out India and its introduction to the
Indian industry will take it ahead in leaps and bounds.
There have been innovations in the paint market both at the product
technology and development level while the usage side has seen
some changes. These have been with a view to create better and safer
products, environment friendly paints, cheaper technology and better
aesthetics
Premium products account for less than 25% of the organized
decorative paints market and has grown at more than 15% annually in
the last few years. India Paint Industry Opportunity Analysis 2018
research report by KuicK Research is an intriguing text that gives
detailed facts and analysis on latest developments in the Indian paint
industry.
Asian Paints has one of Asias largest paint research laboratories,
recognized by the Department of Science & Technology, Government
of India. The R & D group is structured to provide separate focus to
Industrial Paint Technology and Decorative Paint Technology. Our

Firsts in the paint industry specialized chemical resistant coatings,


computerized colour matching, thermosetting, acrylic finishes and
economic plastic emulsion paint.

Environment
al

a) Impact of
volatile
organic
compounds
(VOCs)
b) Lead free
paints

a) The potent health effects of paints have made paint companies


reconsider the composition of their products. This has led to the
development of a new range of eco-friendly non-toxic paints. These
eco-friendly paints aim to reinvent conventional paints so that
serious health and environment implications are avoided. The ecofriendly paints available in India can be classified into the following
three types:

c) Manufacturing
processes

Zero-VOC paints: The level of VOCs in these paints is so low that


they can be termed as zero-VOC paints. As per the EPA* standard,
the total VOC content should be less than 5 gram per litre of paint.

d) Season and
climate
changes

Low-VOC paints: As specified by the EPA, these paints can have


VOC concentrations ranging from 5 to 200 gram per litre of paint.
Natural paints: These paints are made of natural compounds
such as tree resins, water, plant oil, essential oil and natural dyes.
They do not contain any VOCs. Water-based paints do not have an
odour, while oil-based paints have a smell.
Source: http://greencleanguide.com/2014/07/17/the-green-shade-of-eco-friendly-paints/

b) Steps by industry leaders in environmental efficiency:


Asian Paints began its journey into non-toxic paints by removing
lead and heavy metals from its paints. The company has also
substantially reduced the VOC content in its paints to comply with
international standards, as specified by the Green Seal Standard for
Paints & Coatings
Berger: Through their Green Horizon endeavour, the company

seeks to protect the environment by producing better products.


Berger Paints has removed lead, mercury and chromium from its
paints, which are toxic to the human body. The company has also
greatly reduced VOCs (8.4 gram per litre in its Breathe Easy
Emulsions) and decreased the content of aromatics so that their
products have zero negative health impact. Berger Paints has also
diversified into water-based paints, custom-made for the
pharmaceutical industry. Their Breathe Easy Emulsions are also
water-based.
Dulux: The company complies with the highest environmental
standards on paints, especially in the area of VOC content. Dulux
promotes water-based substitutes actively through its website and
other promotional activities
Nerolac: All its manufacturing plants are ISO-14001 certified,
which helps the company to achieve sound environmental
performance. Recently, Kansai Nerolac launched a line of waterbased, low-VOC paints that has the National Test House (NTH)
certification.
Source: http://greencleanguide.com/2014/07/17/the-green-shade-of-eco-friendly-paints/

c) Three of the plants of Asian Paints - Bhandup, Ankleshwar and


Patancheru - were awarded the BSC's much sought after "Sword of
Honour", which is considered as the pinnacle of achievement in
safety across the world.
Up gradation of process technology in the same year has resulted
in increased yield and therefore lesser pollution. For instance, the
improved filtration process has resulted in higher filtration rates
and lower losses.
Use of natural gas as fuel - instead of furnace oil or diesel has not

only improved fuel efficiency but also reduced sulphur dioxide


emissions by 77%.
Solvent recovery plants - set up with an investment of Rs.1.8
million, these plants have resulted in almost zero solvent disposals
and have already yielded a direct benefit of Rs.10.4 million.
Rainwater harvesting scheme developed by us has become the
benchmark for industries. Rainwater harvesting has resulted in
around 14.5 million litres being harvested in 2003-04 and used at
the various plants of Asian paints.
Source:http://www.ukessays.com/essays/marketing/business-enviornment-of-asian-paintsmarketing-essay.php#ixzz3SHuuYmNu

Legal

a) Pollution
Control Law
b) Health and
Safety Law
c) Environmental
Law

Since India does not have guidelines on non-toxic paints, it is easier


for the industry to abide with rules but it has still made changes in
the contents of ots paints so as to meet the aware consumers
demands. As of now the standards formulated by the Green Seal
Standard for Paints & Coatings and the US Environment Protection
Agency (EPA) are considered for all comparisons.

2.7 Porters Five Forces Analysis


Porters Five Forces

Description

Key factors for analysis

Rationale

Buyer Power

Medium

Households and Industrial Users are


the main customers of this industry.

Bargaining power of buyers: For housing


requirements, the buyers can be customers
(building contractors who buy in bulk) and
end customers (people who paint/re-paint
their house). Customers are more price

sensitive because for them number of


options are available and decisions are made
based on quality, price and differentiating
factors (like weather protection, environment
friendly paints). The unorganized market has
also have a large chunk of market share
providing many options to lower income
segment.
Whereas, Industrial segment is low margin
high revenue business and buyers of these
segments are knowledgeable about their
needs. Therefore, price comparison is done
effectively by the customers. However, The
leading Industrial paint suppliers have their
expertise in their favour, which limits the
bargaining power of buyers.
Thus, Bargaining power of buyer is Medium.
Supplier Power

Medium

The Indian Paint industry is raw


material intensive industry with more
than 300 products going into the
manufacturing of the final products

The raw material can be divided into


different categories like pigments, additives,
solvents, binders etc. Titanium Dioxide is one
of the key pigment used in the production of
paint and is facing a global supply shortage.
Thus supplier of this material has solid
bargaining power.
Thus, Bargaining power of supplier is
Medium.

Existing Competition

About 80% of organized market is


created to by the four players of
Indian Paint Industry.-Dulux, Nerolac,
Berger, Asian Paints

But the current market growth rate can


provide ample room of opportunity for all the
players of the industry to flourish. However,
competition will keep on increasing as
market will get saturated, but this will take

some time to happen, till then one can keep


satisfy customer need with good margin.
Also, the presence of unorganized market
does provide room for competition. Thus, on
the whole competitive rivalry for the Indian
paint industry is Low to Medium.
Threat to new
entrants

Threat to substitutes

Low to Medium

2.8 Strategic Group Mapping

Brand, distribution network, working capital


efficiency, and technology play a crucial role

As it has been stated earlier that the paint


market in Indian is dominated by few
players, making it difficult for anyone new
entering the industry to compete. Since new
technologies are also available to shorten
production life cycle of paint. Thus, Threat to
new entrant is Medium.

Lime wash, Wall papers etc.

The availability of substitute is very minimal.


In the rural areas lime wash is conventionally
used as a substitute for paints. One
alternative option for decorative walls
available today is Wallpaper. Thus, the
availability of substitutes in the Indian Paint
Industry is Low to Medium.

X-axis: Service
Y-axis: Quality

The map clearly shows that Asian Paints has differentiated from its competitors by service has a
feature.

2.9 Competitive Landscape

Value propositions ( Low Cost, Differentiation, Niche)

Competitive Strength Assessment (Normal and Weighted)


Porter 5 Forces Model
In this context, we applied Porters Five Forces Model to analyse Indian Paint Industry.
The paints and coatings industry is highly dynamic and one which poses several challenges to suppliers in the market.
Strong price sensitivity, rising raw material prices and the resultant squeeze in profit margins are issues paint suppliers
have to deal with on almost an everyday basis.
To understand the competitive landscape of the paint market better, it can be useful to employ Michael Porter's model
of market competition. In this model, one can analyse the paint market from 4 key angles: the buyers, raw material
suppliers, potential new entrants and threats from substitute products being introduced into the market. After looking

at all these factors, this article will finally conclude what the key challenges are in this market and what companies can
do to succeed in it.
Buyers becoming stronger
For any industry, the key factor affecting the competitive scenario in the market is the end-users or the buyers, and the
paints industry is no exception to that. Paints are sold through direct sales as well through distributors. While
architectural paints mainly follow the retail channels, industrial paints are sold directly to end-use companies. It has
been observed that these buyers, both direct end-users and retail channel, are becoming increasing powerful with their
growing bargaining power. End-users are demanding higher quality paint for the same or a lower cost. Paint
manufacturers are continuously being forced to reduce prices, and those who fail to do so are losing out to the closely
fought competition.
In recent years, it has also been seen that, due to economic recession, end-users have lower purchasing power and this
is forcing paint companies to reduce prices in order to keep up their sales volumes.
High raw material prices squeezing paint supplier's margins
To aggravate the situation, the cuts in price of product are being accompanied by increase in the raw material prices.
Resins prices have been rising in the past few years for almost all kind of paints. Thus, paint companies are getting
squeezed from both directions resulting in thinning of their profit margins.
Another challenge on the resin front is that the introduction of newer technologies and newer types of resins are
pushing out few conventionally used resins. Governmental regulations against paints containing volatile organic
compounds (VOC) will be a major factor in throwing out certain kinds of paints from the market. This will definitely
affect the resin situation in the market and would require the paint companies to adjust accordingly. Companies have
to be proactive and cannot sit back and wait for other companies to act because these will be the companies which will
surely lose out in the market in the medium run, if not the short.
Large companies becoming larger
Paint markets in Asia are dominated by multinationals and a few large local companies. These companies are now
looking to expand in the region and almost all of them are looking at the golden goose of the region, China.
Multinationals like Akzo Nobel have already done very well in this direction and have made a significance presence in

the Chinese market. Thai paint giant, TOA, is among the top local companies which are also aggressively looking at the
Chinese market.
Besides China, these large companies are also looking into new unexplored markets like Vietnam and Cambodia as
these countries are showing tremendous growth potential for the paints industry. These countries are slowly opening
up and purchasing power of customers is on the rise. This will encourage the growth of industries like construction and
manufacturing and will correspondingly encourage paints. Besides being a growing market for sale of paints, Vietnam
is also being looked at as an important country for production and export for various kinds of coatings. This is due to
the low cost of labour and other resources making it an ideal manufacturing base.
Paint consumer looking to other alternatives to paint
Last among the key factors of competition in Porter's model is the threat from substitutes and this is one issue which is,
slowly but surely, irking the paint suppliers. As countries in the Asian region become affluent, there is an increasing
demand for more trendy and easy-to-use alternatives to paints. Colourful patterned wallpapers and wall panelling are
being preferred by some for architectural use instead of regular emulsion paints. In terms of industrial use, the use of
coatings for office equipment is decreasing significantly. Equipment suppliers prefer to use metallic finishes and
oxidation process to give a more matt and sleek look to the equipment. Also, these metallic options are considered
more hassle-free as there are no issues of paint chipping, re-painting etc.
In conclusion
Based on the above-stated factors, it can be clearly concluded that the paints & coatings industry is facing challenges
from almost all directions in the competitive landscape. Paint suppliers have to act aggressively and efficiently to stay
abreast in this highly competitive market. The key to success in this market lies in building a strong brand image
through aggressive marketing strategies and gaining customer loyalties.
Paint manufacturers have to be very creative in the way they package and sell their paints. This market, like many
other markets, is moving towards being service-oriented rather than just being product-oriented. Companies need to
sell more than just paint to flourish in this market. Companies have to understand their consumers' needs and
preferences; and package products accordingly. Companies who do so promptly and efficiently are sure to see success
in this market.

2.10 Market Segmentation


Key Products and/or Services
1) Decorative

Regions
The decorative paints account for approximately 75% of the total sales with Asian

Paints being the market leader. This segment caters to the housing sector. It is
price sensitive and is a higher margin business as compared to industrial segment
as it is used in protecting valuable assets. Urbanization has surged the demand for
decorative paints. Easy availability of housing loan, rise in the level of income and
shift in the perception of paints as having a protective value rather than mere
decorative one, have been a few factors that have impacted the housing and
thereby the paint industry positively. There is also seasonality involved in the
demand for decorative paints with demand at its peak around festive time.

2) Industrial paints

Industrial paints cater to the Automobile Original Equipment Manufacturers (OEMs)


for protection against corrosion and rust on steel structures, vehicles, white goods
and appliances. With production and sales of passenger cars expected to grow,
demand for automotive paints will continue to remain healthy. Kansai Nerolac is
the market leader in this segment. The industrial paints segment is far more
technology intensive than the decorative segment. Globally, the industrial paints
segment accounts for a major share but over the next few years, the ratio of
industrial paints to decorative paints is expected to be 50:50, more in line with the
global trend. This industry is raw material intensive. As most of the raw materials
are petroleum based, the industry benefits from softening of crude prices.

2.11 Buying Criteria Analysis of the Industry


Parameter

Details

End-user Segments

Significance Attached (Low,


Medium, High)

Consumption Pattern

Credit Policy

Quality

It describes the consumption


pattern of consumers.
Consumption pattern
depends upon proximity,
demographic and behaviour
of the user
It describes the purchase
policy of customer. In case of
B2B sales this is a
consideration for a number of
companies.
It describes the quality of the
product and service provided
by the vendor to the end
user.

Individual Customers
SMEs
Corporate

Business User

High
Low
Low
High
Low

Retailers
Everyone

Medium

Impact of buying criteria on consumer choices


Listing of key buying criteria for different consumer segments

The impact of the buying criteria is graded on the basis of the intensity and duration of their impact on the current market
landscape. The magnitude of the impact has been categorized as described below:
Low - Negligible or no impact on the market landscape
Medium - Medium-level impact on the market
High - Very high impact with radical influence on the growth of the market

2.12 Key trends and future developments


Trends and Forecasts
The market for paints in India is expected to grow at 1.5 to 2 times GDP growth rate in the next five years. With GDP growth
expected to be over 7%, the top three players are likely to clock above industry growth rate. Demand in the case of industrial
segment is also expected to increase.

The per capita consumption which is at 1.5kg, way below the consumption of the developed countries (20kgs), is expected to
improve with the growing income levels, both in urban as well as rural India on the back of various government initiatives like
NREGS, farm loan waivers, pay commission led salary hikes etc.
Despite the positive figures, the Indian paint makers might see growth slowing in the coming months as a drop in the
demand for homes, offices and cars is seen hurting the industry. A better focus on supply chain or distribution mechanism
backed by aggressive promotion might turn the wheels of fortune and trigger unprecedented growth in the paint industry.
The Indian paint Industry has a wide potential for growth which is demonstrated by the fact that the per capita consumption
of paint in India is merely around 1 kg as compared to about 20 kg in the developed countries or a global average of about
15 kg. So, the absolute consumption of paint in India is definitely expected to rise.
The market share of the organized sector is on an increasing trend. Also, the contribution of industrial segment will increase
with the continuing economic development of the country. With India moving towards becoming a developed economy, the
decorative to industrial paint ratio of 70:50 is expected to move towards the global average of 50:50. Thus the Indian paint
industry is in its growth phase and is expected to grow at a rate faster than that of GDP. The future prospects of the industry
are strong.

3 Company Overview
3.1 Company background
Asian Paints Limited (APL) is involved in the manufacture and sale of industrial and decorative paints. The companys
product portfolio includes ancillaries, automotive and decorative paints. APL owns and operates 23 paint manufacturing
facilities. The company has two operating segments Paints and Other segment. APL, along with its subsidiaries, operates
internationally in 17 countries across South Asia, South East Asia, South Pacific, Middle East and Caribbean region through its

five corporate brands including Asian Paints, Berger International, SCIB Paints, Apco Coatings and Taubmans. The company
has five direct subsidiaries, namely, Asian Paints (Nepal) Pvt. Limited, Asian Paints Industrial Coatings Limited, Asian Paints
(International) Limited, Multifaceted Infrastructure (India) Limited and Maxbhumi Developers Limited. The company is
headquartered at Mumbai in Maharashtra, India.
Asian Paints is the only company in India to have won the prestigious Economic Times - Harvard Business School Association
of India award on two separate occasions, once in the category of Mini-Giants and the other in Private sector Giants. The
company has come a long way since its small beginnings in 1942. Four friends who were willing to take on one of the worlds
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 Indias 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 Specialty products such as Phthalic Anhydride and Pentaerythritol. Not only does Asian Paints offer
customers a wide range of Decorative and industrial paints, it even custom-creates products to meet specific requirements.
To keep abreast of world technology and to protect its competitive edge, Asian Paints has from time to time entered into
technology alliances with world leaders in the paint industry. It has a 50:50 joint venture with Pittsburgh Paints & Glass
Industries (PPG) of USA, the world leader in automotive coatings, to meet the increasing demand of the Indian automotive
industry.
It has also drawn on the worlds latest technology for its manufacturing capabilities in areas like powder coatings and hightech resins - thus ensuring that its product quality lives up to exacting international standards, even in the most sophisticated
product categories. The company places strong emphasis on its own in-house R&D, creating new opportunities by effectively
harnessing indigenous creativity. The Asian Paints Research & Development Centre in Mumbai has acquired the reputation of
being one of the finest in South Asia. With its team of over 125 qualified scientists, it has been responsible for pioneering a
number of new products and creating new categories of paints. The R&D team has developed the entire decorative range of
the company. The company boasts of state-of-the-art manufacturing plants at Bhandup in the state of Maharashtra; at
Ankleshwar in the state of Gujarat; at Patancheru in the state of Andhra Pradesh; and at Kasna in the state of Uttar Pradesh.
All the companys plants have been certified for ISO 9001 -the quality accreditation. All the companys plants have also
received the ISO 14001 certificate for Environment Management Standard. The Phthalic Anhydride plant has been certified
for ISO 9002 and ISO 14001 whereas the Penta plant has been certified for ISO14001.
Asian Paints was one of the first companies in India to extensively computerize its operations. In addition to computerized
manufacturing, computers are used widely in the areas of distribution, inventory control and sophisticated MIS to derive
benefits of faster market analysis for better decision making. It is a continuously evolving company deriving its cutting edge
from the use of innovative IT solutions. All the locations of the company are integrated through the ERP solution.

3.1 Timeline with key milestones and their strategic impact

1st February, 1942

Champaklal H. Choksi, Chimanlal N. Choksi, Suryakant C. Dani and Arvind R. Vakil get together to manufacture paint in a
garage on Foras Road, Bombay. They name their company 'The Asian Oil & Paint Company.

1945

Asian Paints touches a turnover of Rs. 3,50,000, with an innovative marketing strategy "to reach consumers in the outmost
corners of the country with small packs."

1954

Paints mascot, Gattu, the mischievous kid, was born.

1957 - 66

The family-owned company makes the shift to a professionally managed organization.


Asian Paints embark on an ambitious mass marketing campaign, pertaining with thousands of dealers in small towns all over
India.

1967

Asian Paints emerges as India's leading paint company ahead of any international competition.

1973

Asian Paints becomes public ltd company.

2002
Asian Paints was a market leader of Indian Decorative Paints with market share of 44%.

Asian Paints today

Asian Paints becomes Indias largest and Asias third largest paint company. Asian Paints is more than twice the size of its
nearest competitor. It is one of the most admired companies in India. Present in 22 countries with 27 manufacturing locations.
Asian Paints aims to become the 5th largest decorative paint company in the world.

3.2 Vision, Mission, Goals, and Strategic Themes


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.

Mission
To provide paints as per market demand, ensuring desired level and quality of customer (dealer) service. Asian paints aims
to become the largest decorative paint company in the world & to rank among the top five paint manufacturing companies of
the world.

Strategic Theme
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 limecoated - 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 crores 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.

3.3 Key Product and Service Portfolio


ASIAN Paints
Asian Paints manufactures and markets industrial and decorative coatings. Along with that the company also provides home
painting services and solutions.
The company's key products and brands include the following:
Decorative paint:

Interior wall paints

Exterior wall paints

Wood surface paints

Metals surface paints

Industrial coatings:

Protective coatings

Floor coatings

Road markings

Ancillaries:

Wall primer

Acrylic Wall Putty

Exterior Wall Putty

Wood Primer

Asian paints made a foray in automotive paints in the year 1997 with a joint venture with PPG Industries. The joint venture is
called PPG Asian paints. The company manufactures body coatings and plastic coatings.
Paint brands owned by the company are:
Interior products:

Utsav

Tractor Emulsion

Premium Emulsion

Appcolite Advance

Royal Luxury Emulsion

Royal Shine

Royal Lustre

Royal Sensation

Royal Glitter

Royal Aspira

Royal Play

Royal Play Neu

Stucco

Dune

Safari

Textile

Kids World

Magneeto

Exterior products:

Ace

Apex

Apex Ultima

Ultima Protek

Ultima Metalics

Ultima Vibrants

Asian Paints

Colour Next

Wood & Metal Paint & Polish:

Premium Glossy Enamel

Satin Enamil

Touch Wood

Melamine

Pu Aqadur

Pu Polish

3.4 Core Competencies of the firm

Mass Customisation

Integrated Distribution System

1. R&D
Research & Development has played a significant role in the growth of the organization. The company has continuously
invested in R&D. The company has a dedicated Group R&D Centre in India. PPG Asian Paints has a robust R&D lab in Mumbai
that specialises in colour development and troubleshooting.

2. Production
Asian Paints have world class production facilities across the world. The company have 23 manufacturing facilities across the
world.

3. Marketing & Sales


Asian Paints puts forward a unique selling proposition. The Rural Marketing Initiatives started since 1960. Distribution is one
of the main strategies of Asian Paints. Advertising & Promotional started in 1980s. Advertising Methods include Radio, TVCs,
Print, and Internet.

4. Customer Service

Customers - the very core of all the business activities of Asian Paints. 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 our retail
strategies. Asian Paints efforts are continuously on to engage the consumer in the painting process and fulfil all the
requirements related to the world of painting.

Strategic Alliances

The company has technical collaborations with PPG of the US for auto paints and powder coatings.

Asian Paints, via its Singapore-based subsidiary - Berger International - inks a technology and brand licensing
agreement with PT Abadi Coatings Solusi, an Indonesian paint company.

Alliance with Nippon Paints of Japan for auto paints and with Sigma Coating of Holland for marine and anti-corrosion
paints.

The company also have a strategic alliance with Protech Chemicals, Canada.

3.5 Business Model of the organization


Organisation of International Business of Asian Paints

3.6 3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map)
Strategic Linkage Model (Activity System Map)

3.7 SWOT Analysis


SWOT Analysis
1. Comprehensive nationwide coverage of the market - urban,
semi-urban and rural areas.
2. Great investments in fast-growing emerging countries

Strength

3. Widest product range in terms of products, shades, pack sizes different decorative, some in 150 shades, 20 different pack sizes;
are available
4. The pricing strategy is oriented to middle/lower end consumers.
5. High quality MR and MIS;
Paint Industry is quite strong in production-marketing coordination.
Their policy of offering tailor-made products to suit customer need
has resulted in an ever growing product range.
6. In-house production, no outsourcing, high reliability in suppliers,
superior in quality assurance.
7. Leader in profit and operating margins, ROI of PI is 22%.
8. High calibre human resource employs maximum number of
MBAs, as a proportion to total number of employees.

Weakness

1. In industrial paints, AP has only a 14% market share. It is far


behind the leader Goodlass Nerolac, which has a market share of
43%. Since this is going to be the major growth segment in the
future, a lag in this segment will end up as a major weakness.
2. Widening product mix puts strain on production distribution,
accounting and administration.
3. Ever expanding product mix throws some strain on inventory
management.

4. AP has a major weakness on the technology front in industrial


paints. Most paint firms have technology tie-ups with
manufacturers abroad. For example, Goodlass Nerolac has a tie-up
with Kansai paints, which has provided the company with Cathodic
Electro Deposition (CED) technology. Since Kansai is the supplier to
Suzuki, Japan, Goodlass with its Kansai connection finds it easy to
tap Maruti in India. AP has not been able to make any significant
advances either with Maruti or the auto segment in general. Berger
has a technical tie up with Herbets, Germany, for automotive
paints, Valspar Corp, USA for heavy-duty coatings and Teodur NV,
Holland for powder coatings.

Opportunity

1. AP has always encashed on opportunities that have come its


way. It has maintained a product profile keeping the market trends
in picture. It shifted to predominance in industrial paints than
industrial paints than in decorative paints as was evident from the
production figures of 1995-96.
2. The automobile industry accounted for 50% of the industrial
paint market.
1. Domination of few foreign companies

Threats

2. Since both Goodlass Nerolac (43%) and Berger's (14%) have a


higher market share than AP's (14%), it is possible that in the
future, they may capture the entire industrial paint market.
3. Competitors have gone in for hi-tech with instacolour spot
mixing. For example, J&N's instacolour offers 626 shades
4. Competition is catching up fast, hi-tech facilities gives abundant
choices.

3.8 Competitor Analysis (identification of competitors)

3.8.1 Based on Critical Success factors


Asian Paints

Berger Paints

Kansai Nerolac

Critical Success Factors

Weightin
g Factor

Rating

Weighted
Value

Rating

Weighted
Value

Rating

Weighted
Value

Distribution Network

0.1

0.8

0.7

0.6

Cost & Price Drivers

0.2

1.4

1.2

1.6

Technology

0.3

2.4

1.7

1.5

Working Capital Management

0.4

3.2

2.5

1.6

Overall

31

7.8

23

6.1

21

5.3

3.8.2 Based on Financial indicators


Asian
Paints

Berger
Paints
Ratio

Kansai
Nerolac

Asian
Paints

0.2

14.5

7.6

5.04

2.9

1.52

2.52

Debt-to-equity ratio

0.2

0.01

0.22

0.03

0.02

0.04

0.01

Interest coverage ratio

0.1

72.77

12.41

11.39

7.28

1.24

1.14

Net profit margin (%)

0.2

11.39

6.98

7.65

2.28

1.40

1.53

Gross profit margin (%)

0.1

15.34

10.42

10.62

1.53

1.04

1.06

Operating profit margin (%)

0.2

17.25

12.48

12.53

3.45

2.50

2.51

Overall

17.46

7.74

8.77

Financial Indicators

Weightin
g Factor

Earnings per share

Berger
Kansai
Paints
Nerolac
Weighted Value

4 Future Growth Strategy for the organization


4.1 Portfolio Analysis

Decorative paints
Product Width
Interior
Wall

Distemper
Emulsions

Product line
Tractor acrylic
Tractor synthetic
Utsav Acrylic
Utsav synthetic
Royale Play
Tractor Emulsion

Cost Range
Mid-Range
Mid-Range
Economy
Economy
Premium
Economy

Enamels

Exterior wall Emulsions

Wood Surfaces

Apcolite

Premium satin
ApcolitePremium Gloss
Utsav
Apex Ultima
Apex Duracast Rough

Premium
Premium
Economy
Premium

tex

Premium

Apex Duracast Fine tex


Apex
Aprex stretch
Ace
PU Exterior Matt
PU Interior Glossy
PU Interior Matt
Melamyne Glossy
Melamyne Matt
Utsav

Premium
Mid-Range
Mid-Range
Economy
Premium
Premium
Premium
Mid-Range
Mid-Range
Economy

Portfolio Analysis (Contd.)


Asian Paints manufactures as well as markets decorative and industrial coatings and it provides solutions and services for
home paintings. All the products of Asian Paints are of acrylic type with properties such as washable, long-lasting, leak proof
and sunlight protected. Some of the main products of the company are as follows

Industrial coatings include Road markings, floor coatings and protective coatings.

Decorative paints include metal surface paints, wood surface paints, exterior wall paints and interior wall paints.

Ancillaries include wood primer, exterior wall putty, wall primer and acrylic wall putty.

Asian paints Royale An interesting offering by Asian paints where they decorate your house with colors and Asian
paints direct painters are involved in the process.

Along with the above paints, Asian Paints has been in the market of automotive paints. It is a joint venture with another
company called PPG industries under the name PPG Asian Paints. The products include the manufacturing of plastic coatings
and body coatings

Additionally, Asian Paints has acquired a 51% stake in Sleek Group, a leading player in modular kitchen space, for an
undisclosed amount. The acquisition is in line with the companys goal of becoming a complete home solutions provider in
the next few years. Asian Paints is looking at more acquisitions in allied areas such as home furnishings and sanitary ware.
The company is weighing several such opportunities which allow them to get inside a consumers home and sell more
products. Sleek acquisition makes sense as modern kitchen space is at an inflection point with very few organized pan-India
players and rapid growth.

4.1.1 Based on BCG Matrix

4.2 Companys Strategic Roadmap for future


The following data needs to be taken into consideration before Asian Paints lays out a strategic roadmap for the future:-

Market Shares of Companies


Sources Worldwide

Paint Demand

Strategy for Globalization


Asian Paints group operates in 17 countries across the world and is the largest paint company in eleven countries. The group
operates in five regions across the world viz. South Asia, South East Asia, South Pacific, Middle East and Caribbean region
through the five corporate brands.
The strategy followed by Asian Paints for globalization is a mix of both International strategy and Multi domestic/localization
strategy.
The points supporting this claim is as follows:1. International Strategy

All the research and development centers of the company is in India. Asian Paints have a Research & Technology center
at Turbhe on the outskirts of Mumbai. PPG Asian Paints, the subsidiary of Asian Paints Ltd have a R&D center in Mumbai
and Chennai.

Asian Paints have 23 manufacturing facilities around the world. All of these facilities are managed by the corporate
office in India.

2. Multi domestic/localization strategy


The Group operates as:

Asian Paints in South Asia (India, Bangladesh, Nepal and Sri Lanka)

SCIB Paints in Egypt.

Berger in South East Asia (Singapore), Middle East (UAE, Bahrain and Oman), Caribbean (Jamaica, Barbados, Trinidad &
Tobago)

Apco Coatings in South Pacific (Fiji, Tonga, Solomon Islands and Vanuatu)

Taubmans in South Pacific (Fiji and Samoa)

Each of these subsidiaries have their own customized product for the need of that market. Branding and positioning is also
done in different way for different markets.

There are 23 manufacturing facilities for Asian Paint, of which most of them are outside India. Each of these use locally
available raw materials to manufacture the final product.

The Strategic Future Roadmap of Asian Paints

Future IT Developments:

Extend Supply Chain Management (SCM) to sales forces.

Equip territory sales- in charge with mobile communication devices such as PDAs.

To automate and web enable product requests and invoices for better supply chain management.

Use of Single SAP ERP Platform.

4.3 Product Market Investment Strategy


Country of
Investment

Category of
Investment

Industry
Reward to
Risk Ratio (A)

Country
Reward to Risk
Ratio (B)

Risk Adjusted
Rewards
( 0.65A +
0.35B)

Product Market
Investment Strategy

Investment
Rationale

Singapore

Overseas Subsidiary
Investments

1.5/1

1.2/1

1.395

Strategic Alliance

1.2/1

1.395

Acquisitions and
strategic tie ups

Asian Paints
(Internationa
l) Ltd. (APIL),
Mauritius
has
transferred
its entire
holding held
in the
subsidiary
company,
Asian Paints
(Vanuatu)
Ltd. to
Berger
International
Pvt Ltd.
Singapore
Low
operation
costs, lesser
freight

Source:
http://www.eqsis.c
om/asian-paintbullish-target-800/

Ethiopia

Mergers &
Acquisitions

1.5/1
Source:
http://www.eqsis.c
om/asian-paint-

bullish-target-800/

charges and
favourable
policies

Ratio calculations based on reward and risk ratings from Business Monitor International Report March 2015

4.4 Re-imagining the Organization with the transformed business model or Use-case based on SMAC and
IOE
Reimagining Business Models (Digital Disruption)
Asian Paints is reimagining its business with SAP HANA and SAP Simple Finance. CEO of Asian paints is on stage to
share his companys cloud journey. Serving thousands of customers across 60 countries, Asian Paints is using SAP
S/4HANA and SAP Simple Finance to transform its fast-growing business.
Source: http://news.sap.com/bernd-leukert-explains-sap-s4hana-road-map-to-digital-transformation/

Reimagining Business Processes

Reduction in manufacturing process cycle time and advancement in productivity by different practices.
Minimization of waste at the development time and recycling.

Assistance in marketing in USPs for demonstration and pushing of the new products.

Assistance to the Materials department by provision of alternate raw material to the current on. Also, increasing
the negotiation power and elasticity in the supply chain.

Reimagining Customer Segments


Asian Paints is reimagining its customer segment to follow a 5-Tier Customer Target Strategy:

Tier - 1 - On the recipient end there are strategic solution seekers. Company thinks of cost reductions,
performance & productivity improvement for clients, improving customers' & shareholders' profitability.

Tier -2 - Here the customers can be considered as value or brand sensitive. Asian paints targets these
customers with value added VDS integration customer level service.
Tier -3 - These consumers are price sensitive. They are least bothered about the service. These are mainly
middle or low income group people Asian paints have several brand like UTSAV - to serve them.
Tier-4 - Here the company targets the small manufacturing & local companies, which can generate revenue.
Company utilizes its business & telesales technology to address & satisfy their needs.
Tier-5 - This tier is composed of specific targeted companies that although small in size, deserve special
attention because they are highly innovative in nature. Asian paints have a good prospect over here.

Reimagining Products & Services


The key is to adopt a smart knowledge management system that not only caters to existing organizational
requirements but is also scalable for future needs.

Reimagining Workplaces
Paint companies like Asian Paints are quickly shifting from a reactive approach to maintenance, to a preventive one, in
the face of a volatile economic landscape, mounting costs of unplanned maintenance and the risk of environmental
damage caused by operations in increasingly hostile environments

Reimagining Channels
Acquire the assets of or merge with smaller players that have interests in unconventional sources and upstream assets.