MEANING OF FINANCIAL STATEMENTS

Financial Statement generally consists of three basic statements the income statement, the profits and loss
account and the Balance sheet. The statement of the earnings and sources and uses o funds statements
financial statement taken to gather, give the financial statement, taken to gather, give accounting picture at
the first operation and financial position. The package of finance statement includes such schedules as the
relating to fixed assets, long term investment long term debts. Accrued liabilities. Cost of goods
manufactured, selling expresses and administrative and general expenses. There schedules mainly
supplement the information contained in the financial statement and are considered essential for the purpose
at analysis. In addition, explanatory from notes are also given as an integral past at financial statements when
the information given in the financial statement and schedules are inadequate. The inventory valuation and at
depreciation, description at contingent liabilities etc.
DEFINITION OF FINANCIAL STATEMENTS

John N. Myres defines that “Financial statement analysis is largely a study of relationships among the
various financial factors in a business, as disclosed by a single set of statements and a study of the trends of
these factors as shown in a series of statements.”

CONCEPTS FO FINANCIAL STATEMENTS

One at the most important functions at the accounting process is to accumulate and report historical
accounting information the most prominent examples at such reports are the general-purpose financial
statement showing an organizational financial position and results of its operation. These financial
statements are the end results at its operations. These financial statements are the end result at the process at
financial accounting. In the words at Hampton,” A financial statement is an organized collection at data
organized according to logical and insistent accounting procedure”1 Therefore, all the statements and
accounting reports which the accountants prepare the end at t period for a business enterprise may be taken
as financial statements. But the principal financial statements, But the principal financial statements are the
‘balance sheet’ and the profit and loss account.

In the word at Howard and Upton” although any formal financial statements expressed in only values meant
be thought at as financial statements, The term has come to be limited sheet’ and the ‘ profit and loss
statements’ The balance sheet states the assets, liabilities and capital of the business profit and loss
statements shows the results of reparations achieved during a certain period These financial statement may
be of various types, but according to the financial statement may be broadly classified in the following
manner:

1. The audited statement

2. The interim statement

3. The unedited year-end statement

4. The “estimated” statement Accounting which is the process at evolution has three phases: (1) the
recording at transaction in the books at original entry. (2) The classification at these rams’ action in ledges
and (3) the summarization of the records. The construction at the financial statement is a part at the third
phase at accounting techniques. Thus, financial statements summarized periodical reports at financial and
operating data accumulated by an enterprise in its books at accounts financial statements are periodical
statement and the period for which they relate is knows as accounting period, usually at one years’ duration.

OBJECTIVES OF FINANCIAL STATEMENTS

The accounting principles board of America mentions the objectives of financial statement as follows:

1. To provide reliable financial information about economic resources and obligations at a business
enterprise

2. To Provide reliable information about in net resources at on enterprise that results from it activates

3. To provide financial information that assist in estimating the earning potentials at a business.

4. To provide others needed information about changes in economic resources of obligation

5. To disclose, to the extent possible, others information related to the financial statements that is relevant to
the needs at the users at these statements.

The above objectives and to suit the needs at the varied users, the accountant entrusted with the task of
compiling and presenting financial statements must follow a set at guidelines to ensure consistency,
completeness and fairness of the statements. This guideline is called statement. These guidelines use called
“generally accepted accounting principles” in absence of these’ generally accepted accounting principles’ the
statement prepared may be un-understandable and misleading for the various groups at users.

FINANCIAL ANALYSIS OF ASIAN PAINTS

INTRODUCTION TO ASIAN PAINTS

Asian Paints Limited is a paint company. The Company is engaged in the business of manufacturing, selling
and distribution of paints, coatings, products related to home decor, bath fittings and providing of related
services. The Company's business segments are Paints and Home Improvement. The Home Improvement
segment includes its bath fittings business. Its geographical segments are Domestic and International
operations. The Domestic segment includes operations of the Company and its Indian subsidiaries, and joint
ventures. It manufactures a range of paints for decorative and industrial use. Its products include special
effects, plain finishes and distempers for interior walls; textures finish, plain finishes and design for exteriors
for exterior walls; wall papers; wood finishes; metal finishes; water proofing solutions; adhesives, and
painting tools and implements. It operates in over 20 countries and has over 30 manufacturing facilities,
servicing consumers in over 65 countries.

HISTORY OF ASIAN PAINTS

The company was started in a garage in Gaiwadi, Girgaum - Mumbai by four friends Champaklal Choksey,
Chimanlal Choksi, Suryakant Dani and Arvind Vakil all four belongs to Jain Bania Family, founded the
company in February 1945. During World War II and the Quit India Movement of 1942, a temporary ban on
paint imports left only foreign companies and Shalimar Paints in the market. Asian Paints took up the market
and reported annual turnover of ₹23 crore in 1952 but with only 2% PBT margin. By 1967, it became the
leading paints manufacturer in the country.

The four families together held the majority shares of the company. But disputes started over the global
rights in 1990s when the company expanded beyond India. The disputes resulted in Choksey selling their
13.7% shares and exiting in 1997. Champaklal died in July 1997 and his son Atul took over. After failed
collaboration talks with the British company Imperial Chemical Industries, Choksey's shares were mutually
bought by the remainder three family and Unit Trust of India. As of 2008, the Choksi, Dani and Vakil
families hold a share of 47.81%.

The Indian Paint Industry

The Indian paint industry is over 100 years old. Its beginning can be traced back to the setting up of a factory
by Shalimar Paints in Calcutta (now Kolkata) in 1902. Until World War II, the industry consisted of small
producers and two foreign companies. 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. Initially British paint companies such as Goodlass Walls (now Goodlass Nerolac), ICI, British Paints
(now Berger Paints), Jenson & Nicholson and Blundell & Eomite dominated the market.

There are now twelve players in the organized sector of India's paint and coatings market and over 2,000 in
the unorganized sector. In 2003-04, the organized sector held 70% share of the approximately $1.5 billion
(Rs 6,800 crore) industry, while the balance was made up of the unorganized units.

The major players are Asian Paints, Goodlass Nerolac, Berger, ICI and Shalimar. Recently, world leaders
like Akzo Nobel, PPG, DuPont and BASF have set up base in India with product ranges such as auto
refinishes, powder coatings and industrial coatings. Kansai Paints of Japan, which entered into collaboration
with Goodlass Nerolac in 1984, is now the holding company for Goodlass Nerolac with 64.52%equity
holding. PPG has a joint venture with Asian Paints to manufacture industrial coatings. Jenson & Nicholson
and Snowcem India are no longer active players because of dwindling sales in recent years.

In the 1990s, helped by a growing economy, the Indian paint industry recorded a healthy growth of 12-13%
annually. This was mainly due to a drastic reduction in excise from a staggering 40% to 16%. However, the
growth was restricted in 2002-03 to single digits. There was a revival in 2003-04 with a robust growth of
13%.

The Indian paint industry has two main market segments-industrial and decorative paints. While industrial
paints are used for protection against corrosion and rust on steel structures, vehicles, white goods and
appliances, decorative paints are used in protecting valuable assets like buildings.
The Indian decorative business has a share of approximately 77% in total sales. In foreign countries 50-70%
of the business is from the industrial segment.

The trends are likely to shift in India too, but at a slower pace, in favour of industrial paints. The per capita
consumption of paint in India is 700 grams versus 19 kg in the U.S. and 2.7 kg and 5.8 kg in other
developing countries like China and Brazil. Because consumption relates to affordability, the low Indian
figure is not a surprise.

Within the decorative segment, the share of exterior paints is 21%, interior emulsions 11%, distempers 30%,
solvent-based enamel paint 36% and wood finishes two percent.

The exterior category, particularly exterior emulsions, is the fastest growing segment at 20% for the last
three years.

The industrial coatings segment includes high performance coatings with 30% market share, powder
coatings with ten percent, coil coatings with five percent, marine coatings five percent and automotive
coatings 50%.

While Asian Paints was a clear market leader with a turnover of approximately $420 million (Rs 1,943
crores) in 2003-04, Goodlass Nerolac was second with approximately $220 million (Rs 1,010 crores) during
the same period.

Organization System

Most of the organized companies in India's paint and coatings market have a nationwide presence with
multilocation manufacturing facilities. The companies in the unorganized sector are mostly regional, spread
in and around their manufacturing facilities and deal in low value products.

Asian Paints has created a nationwide marketing campaign focusing on all small interior markets. Not only
was the company able to establish itself in interior markets, the demand percolated to main towns allowing
the company to enlist support of large customers.

Being restrained by FERA (Foreign Exchange Regulations Act) and MRTP (Monopolies & Restrictive
Trade Practices Act), most players were not allowed to increase production capacities until the Nineties.
With liberalization, these shackles were removed and other companies have expanded, though the gap
between Asian Paints, which could expand continually and others has widened.

Another winning point for Asian Paints was its strategy to focus on smaller packs while others were focusing
on larger packs. Asian Paints has also been introducing new product categories, which helped in expanding
the market.
This made distribution still more complex as precise forecasts for more than 3,000 SKUs became a challenge
for every organization. With the advent of colour dispensing machines supported by all paint companies and
sophisticated IT enabled distribution tools, the situation has eased considerably.

Business Reengineering

With the industry business becoming complex, most companies have restructured and have used information
technology as the key driver for reengineering. They have aligned their organized structures on the basis of
expanding business and its complexities. This was essential in order to tighten controls. Today, companies
have divided their sales organizations into decorative, industrial and high-performance coatings business
units. The national level organization structure is split into zones, regions and branches.

Colour dispensing machines, both computerized and manual, have transformed the business, particularly on
the manufacturing and distribution sides. Earlier, paint companies were required to manufacture all the
shades (30-50 depending on a product line) in all the packs (five to eight packs).

The demand pattern was difficult to predict even with the support of historical data/trends as consumer
preferences were changing fast. The machines altered the production pattern from shades to producing bases
thus providing economies of scale, reduced inventory levels and eliminated redundancy of stocks. It has cut
down the new products introduction cycle considerably. This has helped expand the range of shades for each
product category, offering a choice of shades to consumers in the hundreds. For the retailers also, it
eliminated the sales loss for want of range/desired shade. The machines have brought a total change in the
way business is transacted and revolutionized business processes as well.

There are approximately 11,000 colour-tinting machines installed at the dealers' end including multiple
machines on some counters. Also popular are the gear mixers for 2K finishes in auto refinishes, which are
installed at the dealers' end and at leading garages.

The dependence on information technology has increased remarkably from a corner room EDP operation to
playing a pivotal role in the way business in transacted. While Asian Paints has invested in i2 technology,
Goodlass Nerolac has backed up IBM enabled APO and has upgraded to the latest 3.1 version to improve its
distribution and optimize production scheduling. Both companies are operating on an ERP (SAP R3)
operating system through full connectivity across the factories and branches via V-SATS, thus virtually
working on live data for sales, accounting and purchasing.

Goodlass Nerolac has moved one step further by launching its intranet-employee portal to capture
knowledge sitting in the minds/desktops of individuals to a common platform, which can be accessed by all
employees. It has also invested in advanced business plan performance measurement tools like balanced
score cards to track, review and align performance.

Most companies in the Indian paint industry are functioning on multi-division models with individual
functions controlled by business heads. Some manage their business through sub-committees. As in the case
of Goodlass Nerolac there are two levels of teams managing/guiding business.
While all the policy and major decisions are looked at by the management committee (MC), which reviews
operations on a monthly basis, there is a parallel team-business analyst team (BAT)-which analyses the
businesses and discusses new initiatives, working as the think-tank for the company. Recently CAT
(Creative Analysis Team) has been created to work on new long-term initiatives.

Product Culture

Most companies have an identical range of products for the decorative paint market. In the industrial
segment, the range of products is more customized and guided by the technology support provided by the
collaborators. In the case of decorative products, the technology has been mostly indigenously perfected
over the years and the products can be divided on the basis of interior and exterior application or in
categories like water-based and solvent-based. Moreover, most companies have been advertising their
products in the exterior emulsion’s category, which has expanded the market and triggered a shift from
cement paint.

While solvent-based enamels are still popular in India, outside India there is a clear shift visible from
solvent- to water-based glossy enamels. India will take some time before this change is accepted on account
of three hurdles currently faced including cost (water-based is expensive), low level of gloss in water-based
enamels and the psychological barrier that water-based coatings cannot be superior to solvent-based coatings
for protecting wood or metal surfaces.

Companies not working on operational efficiency business models have been losing. Asian Paints and
Goodlass Nerolac have been aggressively working on cutting costs/operating expenses. Berger has been
managing well with economical yet acceptable formulations and low operating costs.

The industry is not capital intensive and depreciation charges are not significant. Working capital
requirements are moderate. However, most companies in the lower rungs are unaware about the realization
of debtors. Added to this has been the problem related to collection of instalments on colour dispensing
machines, which are mostly purchased on lease.

The highest efficiency required is in physical distribution. The poor forecasts of demand result in poor
distribution. As a result, companies are investing in sophisticated supply chain management tools. Margins
have remained under pressure due to dropping prices, which have been more strategic and forced by the
market leader. Companies have been working on improving internal efficiencies to retain profits. The
pressure from OEMs to reduce prices has also been a cause for low profits for paint companies. Even with
the turnaround of the Indian economy, the pressure has not relented. The customer, or retailer, has also been
dictating his terms as most companies have common counters to meet their objectives. So, they have no
choice but to lure more customers through incentives. Lower productivity of high cost labour in the old units
has been another problem. This in totality has increased operating pressures.

Some of the international players are already present in India's paint and coatings market, but mostly for
industrial coatings. They include Akzo Nobel, BASF, Henkel (pre-treatment chemicals), PPG, ICI
(decorative) and DuPont (auto refinishes). A few others are present through collaborations like Kansai and
Nippon.

For the decorative range of products, it is difficult for international companies to set up shop on a stand-
alone basis because of existing barriers such as the strong network of established players, brand image, range
of products (Indian context) and required distribution logistics. Therefore, the safer route has been and will
be to tag along with existing companies. For industrial products, however, this may not apply and based on
their tie-ups in home countries and their OEM customers, the required range can be made and sold.

There is however room for niche players, with radical and unique ranges of products properly conceived and
marketed in the Indian context and supported with machines.

Current Trends

The Indian paint and coatings industry are riding high on the growth in the Indian automobile industry, new
construction in the housing segment and improving infrastructure throughout the country. Thirty percent of
the paint business is comprised of new construction projects. GDP growth projections of six to 6.5% in the
current year mean a growth of nine to ten percent in Indian paint business. The growth will be 12-13% in the
industrial segment and eight to nine percent for decorative paint. The Indian automobile industry has been
performing remarkably well and will benefit the market leader in the segment, Goodlass Nerolac.

As for the future, the industry has predicted a CAGR of eight to nine percent for the next five years
compared to last year's growth levels of 27.4% for cars and 8.9% for two wheelers. The Indian housing
industry is likely to do well in the current year as well, recording a growth rate of 35% last year. As a result
of the overall health of India's economy, it is safe to predict a nine to ten percent growth rate for the Indian
paint industry in the next five years.

Consumers can look forward to new product launches, some for application in special areas. Companies will
be increasing the value-added services available to customers by offering a variety of finishes through
specialized and trained applicators. There will be more options like ranges of colours/finishes for wood
applications through the tinting machines. Additionally, the trend towards water-based coatings is likely to
set in both for industrial and decorative applications. While India has not yet embraced the DIY concept as
cheap labour is still available, exclusive retail chain stores sponsored and run by Indian paint companies will
become a reality.

The Indian paint industry has progressed well and moving ahead is likely to be influenced by several factors
including new technologies, new innovative products, new associations, consolidation of industry and poor
performers getting out of the market. Ultimately, in the years ahead there will be only four or five key
players operating in the Indian paint market.

Basic Information of Paint Industry

Today manufacturers in India hardly face any threat from the foreign players. Most of them have deals with
global players in terms of latest technology and market accessibility. A large number of Paint outlet or shops
have automated/manual dealer tinting systems. Today India has more than 20,000 outlets in operation,
probably the highest for any country. There are only approximately 7,000 tinting systems in China for a
market two and half times of India’s size. 30% to the paint industry revenue in India is accumulated from
Industrial Paints. The size of the Indian Paint Industry is around 940 million litres and is valued at
approximately $2 billion. The organized sector comprises 54% of the total volume and 65% of the value. In
the last ten years, the Indian Paint Industry has grown at a compounded annual growth rate (CAGR) of 12-
13%.

Today India is booming in the field of infrastructure and industrial development. 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. So, the demand of paint industry is relatively more. Aided
by Government’s liberal policy of technology import, the automotive and consumer durable 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 development
as well as the injection of new technology. Indian Paint Industry makes great changes in the rapid industrial
development as well as country development. Therefore, paint industry is of crucial importance to India.

TOP & MAJOR MANUFACTURERS IN PAINT INDUSTRY

1. PPG

2. The Sherwin-Williams Co.

3. AkzoNobel

4. Nippon Paint Holdings Co.

5. RPM International Inc.

6. Axalta Coating Systems

7. BASF Coatings

8. Kansai Paint Co. Ltd.

9. Asian Paints Ltd.

10. Jotun

SHOWCASE:

BERGER PAINTS INDIA LTD. (BERGEPAINT) –

INTRODUCTION
Berger Paints India Ltd is an Indian paint company based in India. The company is headquartered at Kolkata
and has 14 manufacturing units in India, 2 in Nepal, 1 each in Poland and Russia. It has manufacturing units
at Howrah and Rishra, Arinso, Taloja, Naltoli, Goa, Devla, Hindupur, Jejuri, Jammu, Puducherry and
Udyognagar.

The company has presence in 5 countries – India, Russia, Poland, Nepal and Bangladesh. They have an
employee strength of over 3,500 and a countrywide distribution network of 25,000+ dealers.

COMPANY HISTORY

In 1770, Louis Steigenberger shifted from Frankfurt to London to sell a Prussian blue colour, which was
made using his own formula. He then changed his name to Lewis Berger. By 1870, Berger Paints was selling
19 different pigments such as black lead, sulphur, sealing wax and mustard. After his demise, his sons took
over the business. [citation needed] In the 1900s, Sherwin-Williams, an American company took control of
the company. On 17 December 1923, Mr. Hadfield set up Hadfield's (India) Ltd., a small paint company in
Calcutta. Towards the end of 1947, British Paints acquired Hadfield's (India) Ltd and thus British Paints
(India) Ltd was incorporated in the State of West Bengal. In 1951, sales offices were opened in Delhi and
Mumbai and a depot was started in Guwahati. In 1969, Berger Jenson Nicholson Limited, UK bought British
Paints (India) Ltd. This marked the beginning of Lewis Berger’s legacy in India. In the year 1973, D.
Madhukar took over as the Managing Director. Sales figures reached over Rs. 160 million by 1978.The 80s
and the 90s saw the launch of many new products such as emulsions and distempers. In 1991, UB group sold
the company to Kuldip Singh Dhingra (Chairman) and Gurbachan Singh Dhingra (Vice Chairman). Subir
Bose took over as Managing Director on 1 July 1994.Bose retired on 30 June 2012, handing over the
company to Abhijit Roy, the current managing director.

KANSAI NEROLAC PAINTS LTD. (KANSAINER) –

INTRODUCTION

Kansai Nerolac Paints Limited (formerly known as goodlass Nerolac Paints Ltd) is the largest industrial
paints and third largest decorative paints company of Indian based in Mumbai. It is a subsidiary of Kansai
Paint of Japan. As of 2015, it has the third largest market share with 15.4% in the Indian paint industry. It is
engaged in the industrial, automotive and powder coating business. It develops and supplies paint systems
used on the finishing lines of electrical components, cycle, and material handling equipment, bus bodies,
containers and furniture industries.

COMPANY HISTORY

1920: It started as Gahagan Paints & Varnish Co. Ltd. at Lower Parel in Mumbai.

1957: Goodlass Wall Pvt. Ltd. grew popular as Goodlass Nerolac Paints (Pvt.) Ltd. Also, it went public in
the same year and established itself as Goodlass Nerolac Paints Ltd.
1976: Goodlass Nerolac Paints Ltd. became a part of Tata Forbes Group on acquisition of a part of the
foreign shareholdings by Forbes Gokak.

1983: Goodlass Nerolac Paints Ltd. strengthened itself by entering in technical collaboration agreement by
Kansai Paint Co. Ltd., Japan and Nihon Tokushu Tokyo Co. Ltd., Japan.

1999: Kansai Paint Co. Ltd., Japan took over the entire stake of Tata Forbes group and thus Goodlass
Nerolac Paints became wholly owned subsidiary of Kansai Paint Company Ltd.

2006: On 11 July, Goodlass Paint Ltd. name has been changed to Kansai Nerolac Paints Ltd.

SHALIMAR PAINTS LTD. (SHALPAINTS) –

Introduction

Shalimar Paints is an Indian paints manufacturing company. The company is engaged in manufacturing and
marketing of decorative paints and industrial coatings. Some of India’s buildings and structures such as the
Howrah Bridge, Rashtrapati Bhawan, Salt Lake Stadium, All India Institute of Medical Sciences, and many
others, continue to be painted with Shalimar Paints.

COMPANY HISTORY

Shalimar Paints was founded in 1902 by two British entrepreneurs AN Turner and AC Wright as Shalimar
Paints Colour & Varnish Ltd. In the same year, the company set up a large scale manufacturing plant in
Howrah, West Bengal, the first such plant in entire South East Asia. In 1928, Pinchin Johnson & Associates
of UK bought control from the British entrepreneurs AN Turner and AC Wright. In 1963, the company's
name was changed to Shalimar Paints Ltd. after Turner Morisson & Co stepped in as new management.

With access to high-end technology, the company introduced many firsts in the industrial coatings segment
such as high build zinc coatings, radiation resistant coatings for nuclear power plants, polyurethane paint for
fighter aircraft and railway coaches, among others. Shalimar was the first company to paint a fighter aircraft
for the Indian Army.

In 1972 Shalimar went public and in 1989, the company was acquired by the O.P. Jindal Group and the
Hong-Kong based S.S. Jhunjhnuwala Group. From May’2015 affair of the company are managed by Mr.
Surender Bhatia as whole time director.

AKZO NOBEL INDIA LTD. (AKZOINDIA) –

INTRODUCTION

Akzo Nobel N.V., trading as AkzoNobel, is a Dutch multinational company which creates paints and
performance coatings for both industry and consumers worldwide. Headquartered in Amsterdam, the
company has activities in more than 80 countries, and employs approximately 46,000 people. Sales in 2016
were EUR 14.2 billion.

COMPANY HISTORY

AkzoNobel has a long history of mergers and divestments. Parts of the current company can be traced back
to 17th-century companies. The milestone mergers and divestments are the formation of AKZO in 1969, the
merger with Nobel Industries in 1994 forming Akzo Nobel, and the divestment of its pharmaceutical
business and the merger with ICI in 2007/2008 resulting in current-day AkzoNobel.