Bb178917 - Hariesh Kumar

KUVEMPU UNIVERSITY
Project Report on
“A STUDY ON FINANCIAL STATEMENT ANALYSIS
WITH REFERENCE TO ASIAN PAINTS”
Submitted in Partial Fulfillment of the Requirement for the Award of the

Degree In
BACHELOR OF BUSINESS ADMINISTRATION

BY
M HARISH KUMAR
Register No. BB178917
UNDER THE GUIDANCE OF
Mr. MOHAN D
Asst. Professor
Department of Commerce and Management
PESIAMS, SHIVAMOGGA
PES INSTITUTE OF ADVANCED MANAGEMENT STUDIES,

(Affiliated to Kuvempu University)
Recognized by Government of Karnataka
N H 206, Sagar Road, SHIVAMOGGA – 577 204
2020
CERTIFICATE
This is to certify that M HARISH KUMAR bearing the Register No. BB178917 of
VI Semester BBA has carried out the Project Work “A Study on Financial Statement
Analysis with Reference to Asian Paints” under guidance of Mr. MOHAN D as part
of his curriculum activity as per the norms for obtaining Degree in Bachelor of Business
Administration from PES Institute of Advanced Management Studies, Shivamogga
during the Academic year 2019-2020.
Guide HOD Principal
Mr. MOHAN D Dr. G M SUDHARSHAN Dr.K.SAILATHA

Asst. Professor Head of the Department PRINCIPAL
Department of Commerce Department of Commerce Department of Commerce
and Management and Management and Management
PESIAMS, Shivamogga. PESIAMS, Shivamogga. PESIAMS, Shivamogga.
Place: Shivamogga
Date:
DECLARATION
I hereby declare that the project work entitled “A Study on Financial Statement
Analysis with Reference to Asian Paints” is the result of my own study done under
the supervision and guidance of Mr. MOHAN D, Asst. Professor, Department of
Commerce and Management, PES Institute of Advanced Management Studies,
Shivamogga – 577204 and I further declare that the findings in this project report are
independent study done by me and it has not been submitted earlier to any
University/Institution for the award of any other course.
Place: Shivamogga
M HARISH KUMAR
Date: Register No. BB178917
VI Semester BBA
TABLE OF CONTENTS
Chapter No Chapter Name Page No
CHAPTER 1 INTRODUCTION 01-10
INDUSTRY PROFILE & COMPANY

CHAPTER 2 11-41
PROFILE
CHAPTER 3 THEORETICAL BACKGROUND 42-52
DATA ANALYSIS AND

CHAPTER 4 53-79
INTERPRETATION
FINDINGS SUGGESTIONS &

CHAPTER 5 80-83
CONCLUSION
BIBLOGRAPHY 84
A Study on Financial Statement Analysis With Reference to Asian Paints
CHAPTER 1
INTRODUCTION
Dept. of Bachelor of Business Administration, PESIAMS, Shivamogga. 1

INTRODUCTION
1.1 Introduction
India has emerged as the fastest growing major economy in the world and is expected
to be one of the top three economic powers of the world over the next 10-15 years,
backed by its strong democracy and partnerships.
India’s nominal GDP growth rate is estimated at 12 per cent in 2019-20. The estimate
for 2018-19 was 11.5 per cent. During Q2 of 2019-20, GDP (at constant 2011-12
prices), GDP stood at Rs 33.16 lakh crore (US$ 474.46 billion) showing a growth rate
of 4.3 percent over the corresponding quarter of previous year. India has retained its
position as the third largest startup base in the world with over 8,900-9,300 startups,
with about 1,300 new start-ups being founded in 2019, according to a report by
NASSCOM. India also witnessed the addition of 7 unicorns in 2019 till August, taking
the total tally up to 24. India's labor force is expected to touch 160-170 million by 2020,
based on rate of population growth, increased labor force participation, and higher
education enrolment, among other factors, according to a study by ASSOCHAM and
Thought Arbitrage Research Institute. India's foreign exchange reserves were US$
448.59 billion in the week up to November 22, 2019, according to data from the RBI.
Over the past few years, the Indian Paint market has substantially grown and caught the
attention of many international players. The growth in the market is driven by
emergence of the middle class in India, growing infrastructure, increase in the tendency
to spend and growing young population inclined towards lavish lifestyle. The country
continues to enjoy a healthy growth rate compared to other economics, backed by the
increasing level of disposable income, and demand from infrastructure, industrial and
automotive sectors. Indian paint industry had two types: Decorative & Industrial Paints.
Decorative paint market has been further segmented into emulsions, enamel, distemper
and cement paints. Similarly, Industrial paint market is also segmented into automotive
coatings, high performance coating, powder coating and coil coating. The major boost
to the growth in the Indian Paint market has been provided by the decorative paint
segment, which is anticipated to grow at a Compounded Annual Growth Rate (CAGR)
of more than 16% during the period 2013-14 to 2015-16. Under the decorative segment,
the emulsion paint market has witnessed a massive demand over the past few years and

is expected to drive the market in the coming years too. There is a phenomenal growth
on the housing sector front with rapid urbanization and availability of easy to secure
housing loans, which have become the prime drivers of growth in the decorative paint
segment, which comprises 70% of the $2 billion Indian Paint Industry. An average
increase of growth of about 10% in the automobile sector contributes to 50% of the
revenues in the industrial paints segment.
Financial analysis is the process of evaluating businesses, projects, budgets, and other
finance-related transactions to determine their performance and suitability. Typically,
financial analysis is used to analyze whether an entity is stable, solvent, liquid, or
profitable enough to warrant a monetary investment.
Financial analysis is used to evaluate economic trends, set financial policy, build long-
term plans for business activity, and identify projects or companies for investment. This
is done through the synthesis of financial numbers and data. A financial analyst will
thoroughly examine a company's financial statements - The income statement, balance
sheet, and cash flow statement. Financial analysis can be conducted in both corporate
finance and investment finance settings.
One of the most common ways to analyze financial data is to calculate ratios from the
data in the financial statements to compare against those of other companies or against
the company's own historical performance.
In corporate finance, the analysis is conducted internally by the accounting department

and shared with management in order to improve business decision making. This type
of internal analysis may include ratios such as net present value (NPV) and internal rate
of return (IRR) to find projects worth executing.
Many companies extend credit to their customers. As a result, the cash receipt from
sales may be delayed for a period of time. For companies with large receivable balances,
it is useful to track days sales outstanding (DSO), which helps the company identify the
length of time it takes to turn a credit sale into cash. The average collection period is an
important aspect in a company's overall cash conversion cycle.
A key area of corporate financial analysis involves extrapolating a company's past

performance, such as net earnings or profit margin, into an estimate of the company's
future performance. This type of historical trend analysis is beneficial to identify

seasonal trends. financial ratio or accounting ratio is a relative magnitude of two

selected numerical values taken from an enterprise's financial statements. Often used in
accounting, there are many standard ratios used to try to evaluate the overall financial
condition of a corporation or other organization. Financial ratios may be used by
managers within a firm, by current and potential shareholders (owners) of a firm, and
by a firm's creditors. Financial analysts use financial ratios to compare the strengths
and weaknesses in various companies. If shares in a company are traded in a financial
market, the market price of the shares is used in certain financial ratios.
Ratio analysis can provide an early warning of potential improvement or deterioration

in a company’s financial situation or performance. Analysts engage in extensive
number-crunching of the financial data in a company’s quarterly financial reports for
any such hints. Successful companies generally have solid ratios in all areas, and any
hints of weakness in one area may spark a significant sell-off of the stock. Certain ratios
are closely scrutinized because of their relevance to a certain sector, such as inventory
turnover for the retail sector and days sales outstanding (DSOs) for technology
companies.
Using any ratio in any of the categories listed above should only be considered as a
starting point. Further analysis using additional ratios and qualitative analysis should
be incorporated to effectively analyze a company's overall financial position.
Ratios are usually only comparable across companies in the same sector, since an
acceptable ratio in one industry may be regarded as too high to too low in another. For
example, companies in sectors such as utilities typically have a high debt-equity ratio
which is normal for its industry, while a similar ratio for a technology company may be
regarded as unsustainably high.
1.2 Review of Literature

 Gnanavelu.N (1996): in his study entitled “Case Study of Financial Performance
of Sakthi Sugars Limited” has proved the financial performance of the company
passion is good. The borrowing by the company was kept at the minimum level its
profitability was expected to increase further. Being the row material in seasonal
the fluctuation in working capital cannot be avoided.
 Sardeesh Babu (1999): in her study “A Study on Financial Performance of
Fertilizers and Chemicals Travancore Limited”. The cost on various overheads can

be brought down by carefully scrutinizing each item and applying cost cutting
techniques. The profitability of the company can be improved by reducing the
expenses that do not contribute any productive use. The current assets can be
managed efficiently by examining the material holding and stock holding procedure
and pattern. If the company increase its turnover and reduces its cost, the profit will
increase leading to an increase in the growth rate of sales, profit before tax and
profit after tax.
 Karthikeyan (2000): “Financial performance of selected automobile companies,
an analytical Study” tried to identify the relationship between the financial
performance variables and to develop simple financial forecasting performance
variables are analyzed to forecast the financial performance a simple cross-section
regression analysis was made. The financial analysis variables considered were net
sales, total assets, Gross profit, Profit before tax, Dividend, retained earnings, Cash
flows and Net worth. He concluded that the sales have been consistent in all the
four year of study. Total as set have also been consistent in four years under the
study.
 Rajeswari (2000): studied about the Liquidity Management of Tamil Nadu Cement
Corporation Ltd. Alangulam-A Case Study. She concluded from the analysis; the
liquidity position of TANCEM was not stable. After the comparative analysis
regarding liquidity ratios, she has found there was too much of liquidity in the first
two years of the study period and also a very high degree of liquidity was also bad
as idle assets earn nothing and affects profitability. In short, she concluded that the
liquidity management of TANCEM is poor and is not satisfactory.
 Nand Kishore Sharma (2002): in his Study on financial appraisal of cement
industry in India, has found that the liquidity position was decreasing, current ratio
and quick ratio showed a decreasing trend and also these ratios varied from time to
time. On comparing the current ratio and quick ratio of cement industry, six
companies were found higher than the industry average and four companies lower
than industry average. The solvency position in term of debt-equity ratio has
showed a decreasing trend in the first 4 years of study, after that, it registered an
increasing trend. The ratio of fixed assets to total debt always showed more than
100 percent which indicated that the claims of outsiders were covered by the fixed
assets of the cement companies.

 Anshan Lakshmi (2003): made “A Study of The Financial Performance with

Reference to Steel Industries Kerala Ltd”. This study covered from 1977 - 1998 to
2001-2002, the objectives of the study was to analyze and evaluate the working
capital management, to analyze the liquidity position of the company, to evaluate
the receivables, payables and cash management and to suggest ways and means to
improve the present date of working capital. The major tools used for the analysis
say that the working capital management was every author suggested that the
inventory management have to be corrected.
 Ashita Raveendran (2003): presented a survey of the Financial Structure and
Performance of the Engineering Industry in Kerala. In her survey data of four
engineering groups, namely, metal products, machinery, electrical and transport
products were analyzed. She concluded that the liberalized policy should at the
upgradation of the technology, thereby improving the quality and productivity of
the engineering industry. Measures for cost control, modernization, upgradation,
computerization and the like. Will help in strengthening the forward and backward
linkages of the engineering industry within the state.
 Hamsalakshmi and Manickam (2004): has made “A study on financial
performance analysts of selected software companies” The study has been focused
on examining the structure of liquidity position leverage and profitability. The study
has revealed a favorable liquidity position and working capital position. The study
has also pointed out that the companies rely more on internal financing and the
overall profitability has been increasing at a moderate rate.
 Aitken Et (2009): studied “Financial Analysis and Price Discovery”, the bank /
brokerage firm has top-rated financial analysts and high wall street search ranking
for their research was significantly related to that firm’s contribution to price
discovery of the process by which information is incorporated into the stock prices.
This study related to cross-sectional characteristics of the quality of brokerage
research, the asymmetric information environment and order flow volume to a
microstructure measure of price discovery developed by Granger and Gonzalo. It
measured analysis research quality with an industry-specific ranking by
institutional investors, with an opinion survey of trading desk personnel and with
the number of top three analysts across all industries employed by the bank/
brokerage firm.

 Shveta Kapoor (2010): Examines the impact of Corporate Social Responsibility

(CSR)on Corporate Financial Performance (CFP) in terms of profitability and
growth after controlling the effect of other variables on financial performance.
Secondary data on CSR based on 93 companies operating in India have been
analyzed by applying content analysis of annual reports for the year 2005 – 06. For
CFP and control variables, secondary data have been collected for seven-year
period from 1999 – 2000 to 2005 – 06 from Prowess, electronic database developed
by Centre for Monitoring Indian Economy (CMIE), Mumbai. The Statistical tests
namely factor analysis and multiple regression analysis has been applied. The
results indicate that a significant positive impact of CSR on corporate profitability
and insignificant positive impact on corporate growth. The study is helpful for
managers in considering the positive impact of CSR on corporate profitability while
taking decisions about investing in CSR areas.
 Dharmendra S. Mistry (2010): in this study” A Comparison of Financial
Performance of Major Gujarat Pharma” players through value added and economic
value added”. The purpose of this study is to classify major Gujarat pharmacy
players in cohesive categories on the basis of their financial characteristic revealed
by the financial statements. The study also revealed that economic value added has
also positive correlation with firm size, funds of proprietors, and funds of money
lenders and have significant impact on economic value added.
 Shurveer S. Bhanawat (2011): in this study “Impact of Financial Crisis on The
Financial Performance of The Indian Automobile Industry” India a country diverse
in culture and religion, strong in will and manpower, large in size and opportunities
has become a highly wooed automobile market. Despite the impact of the financial
and economic crisis, India’s automobile economy is booming. Due to global
financial crisis various sectors of industries were affected. In this connection here
we tried to judge the impact of financial crisis on Indian Automobile Industries with
the help of statistically significant techniques. On the analyses of the t-Test and
Analysis of Variance, it is found that the impact is not significant which proves that
though the global economies are impacted by recession, the Indian Automobile
Sector showed resilience and was not affected significantly by the recession. It goes
to show that the Indian automobile market, though impacted by export income, did
not crumble under recession, as the volumes were significantly met by local

demand, 47 thereby proving that the Indian economy is a self-sustaining economy,

not significantly impacted by the financial crisis.
 Harshad R. Tandel (2013): Analyzed that the Financial Analysis of selected
Plastic Manufacturing Industrial Units of Gujarat for the period 2000-01 to 2009-
10. The main objective of this study was to analysis and evaluate the financial
performance of selected companies in particular and the plastic industry in general
with the help of composited such ratios like Profitability, Activity, Liquidity and
solvency. He judges the financial performance with the help of Trend Analysis and
Analysis of Variance. He can conclude that the liquidity and profitability
performance was not good, but in terms of activity and solvency performance of
industry was satisfactory.
 Dr. Abdul Ghafoor Awan, Pervaiz Shahid, Jahanzeb Hassan, Waqas Ahmad
(2014): have analyzed the impact of Working Capital Management on performance
of cement sector in Pakistan. The period of the study spanning from 2009 to 2013.
The study is totally depending on secondary data collected from the audited
financial statements of these companies which are listed in Karachi Stock
Exchange. Return on was used as the dependent variable in order to test the impact
of Working Capital Management on firm’s profitability and independent variables
were, Inventory Turnover in Days, Cash Conversion Cycle, Current Ratio, Quick
Ratio, Gross Working Capital, Average Payment, size of firm, and Funds allocated
by government in Public Sector Development Program. Panel Data method is used
to study the impact of Working Capital Management on profitability of Cement
sector of Pakistan. He can conclude that cash conversion cycle, Inventory turnover
in Days and Average Payment Period have negative relation with firm performance
and their probability is significant. Current Ratio has proved statistically
insignificant and has negative impact on Return on Equity in this study.
 John Myer: a renowned authority on Financial Statements Analysis, has referred
that in the initial years of 20th century, the bankers and securities exchange
authorities were extensively relying on the financial statements of the companies
for analysis, monitoring and control of the activities and performance of businesses.
The history, principles and financial statement analysis has been referred by another
authority also: Kennedy and McMullen.4 Literature on Economics also has a
reference to accounting and financial management. The aim of financial

management has been linked with the field of basic economics, and especially micro
economics (use of scarce resource). by examining the many and diverse activities
and decisions which occupy financial managers.
 Kennedy and McMullen: Literature on Economics also has a reference to
accounting and financial management. The aim of financial management has been
linked with the field of basic economics, and especially micro economics (use of
scarce resource). by examining the many and diverse activities and decisions which
occupy financial managers.
 Robert Anthony: Professor of Accounting and Financial Control at Harvard
University has written many authoritative books on accounting 182 and financial
management. He defines Accounting as a means of collecting, summarizing,
analyzing and reporting in monetary terms, information about the business. This
simple definition highlights the importance of accounting and financial information
in the business enterprise. There is a reference to the following accounting
principles and scope of the field of accounting and finance.
1.3 Statement of the Problem
Financial Statement an integral part of overall corporate management and it is one of

the powerful tools of Financial analysis. The analysis of financial statement of Asian
Paints is done in order to know the company financial position, growth rate, etc.
1.4 Objectives of the Study

 To Assessment the Past Performance and the Current Position.
 To evaluate the PROFITABILITY and its change in ratio in the assessment year
and the previous years.
 To ascertain the overall financial performance of Asian Paints.
1.5 Scope of the Study
The scope of the study is to find out financial position, growth rate in profit. It is done
through the balance sheet and income statement of the company for the periods 2017-
18 to 2019-20.
1.6 Methodology
The study is concerned with the 3 year’s data of Asian Paints (2017-18 to 2019-20).
The data is secondary in nature and is obtained from the published annual report of

Asian Paints. Data is analyzed through various Ratio Analysis methods.
1.7 Source of Data Collection
(SECONDARY DATA)
The data used in this study are the annual report of Asian Paints publish (2017-18 to
2019-20). So, these are basically secondary data used for interpreting the end result we
needed.
These 3 year’s data are officially provided in Asian Paints official Website.
https://www.asianpaints.com/
1.8 Period of Study
This study is done for last 3 years that are:
 2017-18
 2018-19
 2019-20
1.9 Limitations of The Study
 The data used in this study is only with the period of 3 years.
 As the data are only secondary, i.e., they are collected from the publish annual
report.
 In this study only selected ratio analysis are used.
 This study is done only on Balance sheet and Profit and Loss account.

CHAPTER 2
INDUSTRY PROFILE & COMPANY PROFILE

INDUSTRY PROFILE & COMPANY PROFILE

2.1 Introduction of Paint Industry
Color has fascinated culture throughout history, every age and every region has
produced dyes and pigment depending on the available resources. Color has been with
us for more than 20,000 years. The evidence can be found in the cave paintings. The
tradition of painting in Indian subcontinent grew and developed overtime, resulting in
a hilly developed and finest style, incorporating the culture and faith of the region and
religion. The history of Indian Paint Industry is as old as the history of the Indian people.
Indian paints always embrace rich colors and clear symbolism, using specific
iconography to make religious figures clearly recognizable. The Indian paint industry
has recently completed l00 years of manufacturing. Manufacturing of Indian paints
started around 1902. The Indian paint industry has seen a gradual shift in the
preferences of people from the traditional white wash to higher quality paints like
emulsions and enamel paints. Growing popularity of new variants providing improved
finishing and textures, increasing per capita income of people and efforts on the part of
manufacturers to introduce improved versions like eco-friendly, odor free and dust and
water-resistant paints, have propelled the growth of the paint market in India. Efforts
on the part of the manufacturers to introduce innovative technologies in the paint market
have led to a growth in demand for paints in India. Paint manufacturers are giving due
attention to consumer’s color preferences. The market is witnessing introduction of
breakthrough technologies to improve the paint quality. Paint companies are also
increasingly investing in their R&D, to carve out a differentiated product in the market.
For instance, paints, which use water in place of solvent, have been introduced in the
market. They are better in performance and not harmful for health as it emits little or
no Volatile Organic Compounds (VOC). The industry has also seen the introduction of
solar reflective coating, which is a roof surface coating that lowers the surface
temperatures of the roof resulting into greater comfort inside the building. New
technologies in the paint market would lead to better performance, cost reduction and
wider applications of paints in India. The Indian Paint Industry is only segment of the
Indian chemical industry that has been sharing a consistent double-digit growth rate in
the last five years. The growth rates recorded over the last few years have been
extremely encountered with upward trend in paint demand and consumption. The large-

scale sector is dominated by four players, namely Asian Paints, Nerolac Paints, Berger
Paint and Deluxe India Paints. The small-scale sector consists of over 5000 players.
This growth has been closely linked with the business and industrial development of
modem India. Performance is anchored today in a wide variety of decorative and
industrial paints. An ISO 9001 company has come a long way in the highly competitive
Indian paints industry and has its own R&D developing, standardizing and ensuring
quality assurance of its products. It is global company in a real sense. Indian housing
sectors are booming and also increasing urbanization has made easy availability of
housing loans. This has been resulted into a shift from semi-permanent to permanent
housing structures. Growth in the decorative paints segment accounts for nearly 65-
70% of the Indian paint industry. Seasons are also involved in the demand for
decorative paints, where consumption peaks around festive time. Over the past few
years, the Indian Paint market has substantially grown and caught the attention of many
international players. The growth in the market is driven by emergence of the middle
class in India, growing infrastructure, increase in the tendency to spend and growing
young population inclined towards lavish lifestyle. The country continues to enjoy a
healthy growth rate compared to other economics, backed by the increasing level of
disposable income, and demand from infrastructure, industrial and automotive sectors.
Indian paint industry had two types: Decorative & Industrial Paints. Decorative paint
market has been further segmented into emulsions, enamel, distemper and cement
paints. Similarly, Industrial paint market is also segmented into automotive coatings,
high performance coating, powder coating and coil coating. The major boost to the
growth in the Indian Paint market has been provided by the decorative paint segment,
which is anticipated to grow at a Compounded Annual Growth Rate (CAGR) of more
than 16% during the period 2013-14 to 2015-16. Under the decorative segment, the
emulsion paint market has witnessed a massive demand over the past few years and is
expected to drive the market in the coming years too. There is a phenomenal growth on
the housing sector front with rapid urbanization and availability of easy to secure
housing loans, which have become the prime drivers of growth in the decorative paint
segment, which comprises 70% of the $2 billion Indian Paint Industry. An average
increase of growth of about 10% in the automobile sector contributes to 50% of the
revenues in the industrial paints segment.
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 liters 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.
2.2 Definition of Paint
The paint is defined as a coating material in liquid or solid which when spread on a
surface adheres and hardens forming a film that protect, decorated or add a specific
feature to the surface on which it is deposited. It is most commonly used to protect,
preserve, decorate or add functionality to an object or surface by covering it with a
pigmented coating.
2.3 Function of Paint
Paint is a fluid that dries to form a continuous solid film when spread over a surface
or substrate. Depending on its type and properties, paint can perform mainly two types
of functions. They are as follow:
• Protection against oxidation, corrosion and degradation of materials.

• Decoration and embellishment of materials and surfaces.
Protection
One major function of the paint is to protect the material or the substrate on which
has been applied, due that once dried and cured, the paint forms an insulating layer
between the external environmental and the material that wants to protect, preventing
the action of external agents such as humidity, salty air, ultraviolet radiation, chemicals
agents, etc. that can induce and cause into the material phenomena such as oxidation,
corrosion or degradation. Depending on the type of protection that it will use a specific
type of paint or other, protective paints are made with the corrosion inhibiting additives,
paints that protect against sunlight are made with a few amounts of additives that absorb
ultraviolet light, etc.
Decoration
Another major function of paint is to decorate and beautify the material, thanks to
the pigments and additives that include paintings; it is now possible to get a wide range
of colours and decorative effects (chameleon effect, mercury effect) which are
enhanced and do more beautiful the surfaces. Besides these two main functions, the
paint can be designed to have specific functions, such as non-stick paint to facilitate
cleaning of the surfaces, antibacterial paints to prevent the growth of bacteria, anti-
deflagrates paints to extinguish and prevent the action of fire, soundproof paint to
absorb noise, dirt repellent paints, luminescent paint for night signaling, anti-fouling
paints for ships, etc.
Special Purposes
Paint can also be formulated for specific uses such as luminous paint that glow in
the dark for emergency signage, anticondensation paint to provide an insulating layer
to minimize condensation, fire retardant paint to enhance the fire resistance of
combustible surfaces such as softboard or hardboard. For application of special paints,
refer to manufacturer’s recommendations.
In short, the main functions of paint are as follows:
> To protect the surface from weathering effects of the atmosphere and actions by
other liquids, fumes, moisture, temperature, bacteria, fungi, gases etc.

> To provide pleasing, colorful and decorative appearance to the surfaces. > To
prevent decay of wooden members.
> To prevent corrosion of metallic surfaces.
> To provide a smooth surface for easy cleaning.
> Aesthetic appearance provided by the paint color and sheen (eggshell, satin or
gloss).
> Providing a desired ability of reflection-absorption of heat and light.
> Changing the surface properties: ant-friction, hardness, electrical conductivity.
> Identification of products according to the color of the paint.
2.4 Classification of Paint
Classification of painting products by their functions
 Paint - colored non-transparent protective coating.
 Varnish - transparent or semi-transparent protective coating. A varnish is

made of binder, solvent and additives. Some varnishes contain small
amounts of pigment.
 Enamel - hard protective coating with glossy finish.
 Primer - the first coating applied to the surface in order to enhance the
adhesion of the final paint (topcoat) and to seal the substrate surface. Primer
may be formulated to impart additional protection to the substrate (e.g.
antirust primer for steel substrates).
The paint is composed of different chemicals substances, natural or artificial, which can
be classified into the following basic compounds:
 Resins and binders- This is the polymer base of the paint and thus is the
basic element. The binder or resin is the actual film forming component of
paint. It is the only component that must be present in paint.
 Pigments - These are solid materials: that provide the tone and color of the
paints and others like anticorrosion, luminescent, etc. Pigments are granular
solids incorporated in the paint to contribute color.

 Fillers- Set of chemicals materials that contribute and improve the

mechanical, chemical and physical properties of paints
 Additives - These are chemicals materials that are added in small amounts,
which are designed to add a specific feature of the paint and improve the
application, examples of additives are wetting agents, film-formation
promoters, levelling agents.
 Solvents are chemicals materials that make the paint a liquid material and
fluid with a specific viscosity. The main purpose of the solvent is to adjust
the viscosity of the paint.
 Thinners - are chemicals materials that allow changing the viscosity of the
paint according to the conditions land means of application, the main
difference is that the solvents do not dissolve to the paint.
 Hardeners - are chemical compounds that react with the resin, producing the
formation of the polymer and hence the solidification of the paint, are paints
which do not require hardener, curing or solidification occurs by the action
of humidity, the application of ultraviolet light, etc.
 Catalyst - are chemical compounds that accelerate the curing or

solidification process of the paints, also called as accelerators or dryers.
The success of a good paint job lies in respecting and select each of the appropriate
techniques in each of the stages of painting, nothing will serve all effort, time and
money invested in a paint application process if the surface preparation not do in
accordance with the requirement to fulfil, due all work is ruined when problems such
as adhesion failure of paint applied on the surface.
2.5 Introduction of 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 favor 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.
2.6 Indian Paint Industry-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 color dispensing
machines supported by all paint companies and sophisticated IT enabled distribution
tools, the situation has eased considerably.
2.7 Indian Paint Industry-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.
Color 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 color-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 analyzes 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.
2.8 Indian Paint Industry-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 installments on color 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 labor 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.
2.9 Indian Paint Industry-Current Trend

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 colors/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 labor 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.
2.10 Indian Paint Industry-Challenges Faced
Today Indian Paints Industry is facing various challenges. They are as follow:
1) Exterior paint is the fastest growing segment in the Indian paint market.
Advertising, sales promotions, brand equity, a wide range of shades, distribution
strength and efficient working capital management are key success factors in the
exterior paints segment It is a raw material- intensive business with cost of material
accounting for 69 per cent of total expenses and 54 per cent of net sales. Demand
for exterior paints is not price-sensitive and unlike other segments it is not cyclical.
Growth is more than proportionate to the economic growth of India. The estimate
is that an eight to nine per cent growth in India on a long-term basis will result in a
15- 20 per cent growth in the exterior paints segment.

2) In the past, a critical challenge in the paints industry was the competition from the
unorganized players; who were not liable for excise as well as other taxes.
Reduction of excise duties over the last few years, from 40 per cent to the present
level of 12 per cent, has helped create a level playing field between the unorganized
and organized segments. As the unorganized sector loses its competitive edge, it is
also losing market share to the organized sector players. The customers too are
demanding quality products from well established brands.
3) The increased purchasing power in India is leading to an increase in repainting

activity. The Indian consumer has shifted from lower quality to premium quality
paints. This segment is not too seasonal and 60 per cent of the demand for exterior
paints stems from repainting. Rising aspirations, redevelopment and refurbishment
of homes leads this market to grow consistently. It is a shift in the perception of
paints, having protective qualities that in addition to decorative one has diminished
the impact of seasonality. Paint units have always been a household name for
premium quality paints so low-cost or project quality paints are no longer a
challenge.
4) Due to globalization, large numbers of projects are managed by international

consultants who recommend "paint specifications" of different types meeting
requirements of specific projects. Paint industry has products within several
segments such as zero-VOC waterproof cement paints, premium low-VOC exterior
emulsions: with solar-reflective properties, with quartz aggregates or with silicone
which address the need of different surfaces and project specifications.
5) A11 paints and products have been water-based, free from lead, mercury and
chromium from inception and the current fashionable trend of green paints has
always been part of the company’s ethos.
6) Boom in the Indian Housing Sector - The increasing availability & easy finance for
houses, driven by faster growth in the incomes of middle- and higher-income
categories, increasing urbanization, and a shift from semi-permanent to permanent
housing structures, have been driving growth in the exterior paints segment.
7) Strong industrial growth and heavy infrastructure spending, new projects pertaining
to roads, ports and industrial segments is a positive sign encouraging international
brands to step into India. This has further put the industry in the spotlight and

increased consumer awareness towards quality products.
8) The retail segment plays an important part in the exterior paints business. Paint
industry has a well-established national distribution chain with other distributors,
dealers and retailers pan-India. Many of these dealers are third generation. To build
such a distribution network would always be a challenge for new entrants and has
been a key competitive strength for paint industry.
9) Distribution reach is important for growth and further more servicing them
consistently and on time will further help speed up the penetration levels. Currently
it main is only timely servicing is the biggest challenge.
2.11 Introduction
Asian Paints Limited is an Indian multinational paint company headquartered

in Mumbai, Maharashtra. 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. Asian Paints is India's largest and Asia's third largest
paints corporation. As of 2015, it has the largest market share with 54.1% in the Indian
paint industry. Asian Paints is the holding company of Berger International.
History
Asian Paints Ltd is India's largest paint company and Asia's third largest paint
company. The company along with their subsidiaries has operations in 22 countries
globally with 27 paint manufacturing facilities servicing consumers in 65 countries
through Berger International SCIB Paints Apco Coatings and Taubman’s. Asian Paints
manufactures a wide range of paints for decorative and industrial use. The products of
the company include ancillaries’ automotive decorative paints and industrial paints. The
company has manufacturing plants in Maharashtra Gujarat Andhra Pradesh Uttar
Pradesh Tamil Nadu and Haryana. In Decorative paints the company is present in all
the four segments namely Interior Wall Finishes Exterior Wall Finishes Enamels and
Wood Finishes. They have also introduced many innovative concepts in the Indian paint
industry like Color Worlds (Dealer Tinting Systems) Home Solutions (painting
solutions Service) Kids World (painting solutions for kid's room) Color Next
(Prediction of color Trends through in-depth research) and Royale Play Special Effect
Paints just to name a few. Asian Paints Ltd was incorporated in the year 1945. In the

year 1965 the name of the company was changed to Asian Paints (India) Pvt Ltd. In the
year 1973 the company was converted into a public limited company. In the year 1972
they undertook a major modernization programmed to streamline the paint production
facilities by improving the layout of machines addition to balancing equipment and
replacement of old machinery to meet the demand. In the year 1985 the Company had
set up a third paint unit at Patancheru a notified backward area near Hyderabad for the
manufacture of 15000 MT of paints and enamels. Also, they entered into a collaboration
agreement with Nippon Paints Company Ltd Japan to obtain technical know-how to
manufacture powder coating and coil coatings. In the year 1987 the company
commissioned a plant for the manufacture of synthetic rubbers lattices with a capacity
of 1200 tons per annum. Also, the company in association with Tamil Nadu Industrial
Development Corporation (TIDCO) promoted a joint sector company under the name
of Pentasia Chemicals Ltd (PCL) for the purpose of manufacture 3000 TPA of
pentaerythritol and 1800 TPA of sodium format. In the year 1990 the company
promoted two joint venture companies namely Asian Paints (South Pacific) Ltd in Fiji
and Asian Paints (Tonga) Ltd. Apart from this the company formulated two more joint
ventures under the names and styles of Asian Paints (Nepal) Pvt Ltd and Asian Paints
(S.I.) Ltd. In May 1991 the company acquired 1910000 equity shares of Pentasia
Chemicals Ltd from TIDCO and thus PCL became a subsidiary of the company. During
the year 1992-93 the company installed and commissioned the manufacturing facilities
for the powder coatings with a capacity of 300 MT at Kasna plant. In the year 1993
they set up a joint venture unit along with their overseas subsidiaries in Queens land
Australia for manufacture of paints enamels and varnishes. In the year 1994 Pentasia
Chemicals Ltd was amalgamated with the company with effect from October 1 1994.
In the year 1995 the company set up a joint venture unit for the manufacture of paints
enamels and varnishes in the Republic of Mauritius. In the year 1996 the company and
PPG Industries Inc. of USA set up a joint venture company namely Asian PPG
Industries Pvt Ltd to market and/or manufacture automotive paints and certain
Industrial products. In the year 1998 they introduced three new products NC range of
wood finishes ACE Exterior Emulsion and Asian wall putty. Also, they launched a new
marketing thrust with the introduction of a one-stop color shop for paints complete with
software for consumers to choose and select their different shade combinations. They
launched their first exclusive showroom in Mumbai. In the year 1999 the company

acquired 76% of equity stake in Sri Lanka-based Delmege Forsyth & Co (Paints) Ltd.
In the year 2000 they launched two variants in polyurethane (PU) wood finish under
the brand name Opal. They opened a manufacturing plant in Oman in partnership with
a local company. Also, they acquired the entire paints business of Pacific Paints
Company based in Australia for over of Rs. 1 crore. In the year 2001 the company
introduced Utsav Enamel for the festival season. In 2002 the company revamped their
international operations and transferred shares in their subsidiaries in Fiji Tonga
Solomon Island Vanuata Australia and the Sultanate of Oman to the Mauritius based
subsidiary Asian Paints International. Also, they acquired controlling stake of 50.1% in
Berger International Singapore for the consideration of Rs. 58 crores. In the year 2003
the company through their Singapore-based subsidiary Berger International signed a
technology and brand licensing agreement with PT Abadi Coatings Solusi an
Indonesian paint company. Also, they acquired Taubman’s Paints (Fiji) Ltd through
their subsidiary Asian Paints (South Pacific) Ltd in Fiji. During the year 2003-04
Pentasia Investments Ltd a wholly owned subsidiary of the company was amalgamated
with the company. In the year 2004 the company launched paint solutions for kids. In
January 2005 they set up a new paint plant at Sriperumbudur in Tamil Nadu and
commenced commercial production. In the year 2006 the company commissioned a
manufacturing facility for powder coatings at Baddi Himachal Pradesh. In September
2007 the company tailored their first exclusive industrial coatings manufacturing
facility at Taloja in Maharashtra with an installed capacity of 14000 KL per annum.
During the year 2007-08 the company commissioned the polymer plant in
Sriperumbudur. Also, they commenced expansion of the Sriperumbudur plant. Also,
Asian Paints (International) Ltd the company's direct subsidiary divested their entire
stake in Asian Paints (Queensland) Pty Ltd Australia. During the year 2008-09 the
company made a tie up with Dupont USA to co-brand the Royale range of Emulsions
with Teflon the product synonymous with toughness and durability. The company
commenced introducing a new chain of 'color ideas' where retail outlets have been
modified to offer slice of the 'Signature Store' thereby providing the same inspiration
to consumers in process of designing their homes. The first two stores have been
inaugurated at Hyderabad and Chennai. During the year the company increased the
capacity of the Sriperumbudur Plant to 100000 KL per annum. Also, they
commissioned the Distribution Centers at Kasna Plant and Ankleshwar Plant. Asian

Paints (International) Ltd the company's direct subsidiary purchased the balance 49%
stake in Asian Paints (Tonga) Ltd for a consideration of TOP 646800 (approx. USD
314000) making it a wholly owned subsidiary. During the year 2009-10 the company
increased the capacity of Sriperumbudur Plant in Tamil Nadu to 140000 KL per annum.
They procured land for setting up a manufacturing facility for Decorative Paint in
Kesurdi Maharashtra. As per the scheme of amalgamation Technical Instruments
Manufacturers (India) Ltd (TIM) a 100% subsidiary of the company was amalgamated
with the company with effect from April 1 2009. In April 12 2010 the company
commissioned the first phase of sixth Decorative paint plat at Rohtak Haryana as a cost
of approx. Rs 500 crore with an initial capacity of 150000 KL per annum. During the
year 2010-11 the company augmented the synthetic resins and polymer capacity by
50000 MT. The company launched a number of new products. Water based wood
finishes launched in North India would be launched across the country in a phased
manner. New textured finishes for the exteriors - Duracast Pebbletex and Crosstex were
launched and met with good response from builders/ contractors for large projects.
During the year the company approved the plans to enhance its 14-year relationship
with PPG Industries Inc. (PPG) to accelerate growth of their non-decorative coatings
businesses in India. As part of this arrangement the company and PPG will expand their
existing non-decorative coatings presence in India by expanding their current 50-50
joint venture relationship Asian PPG Industries Ltd (APPG) and also establish a second
50-50 joint venture. The company decides to increase the installed capacity at the
Rohtak Plant from 150000 KL per annum to 200000 KL per annum. The company
commenced the construction at Khandala near Pune (in Maharashtra) for the seventh
Decorative Paints plant with an initial capacity of 300000 KL per annum of paints with
an investment of around Rs. 1000 crore. The plant will be commissioned sometime
around the last quarter of FY 2012-13. The Khandala plant can be expanded to 400000
KL per annum later. Asian Paints with its intent to enter the Home Improvement and
Decor space in India acquired 51% stake in Sleek International Private Limited (Sleek)
a kitchen solutions provider in August 2013. Mumbai-based Sleek Group is a major
organized player in the modern kitchen space and is engaged in the business of
manufacturing selling and distributing kitchens kitchen components including wire
baskets cabinets appliances accessories etc. with pan India presence. In June 2014
Asian Paints acquired the entire front and sales business including Brands Network and

Sales Infrastructure of Ess Ess Bathroom products Pvt Ltd. Ess Ess is a prominent
player in the bath fittings business. On 3 April 2017 Berger International Private
Limited (BIPL) Singapore an indirect subsidiary of Asian Paints completed the
acquisition of 100% controlling stake in Causeway Paints Lanka (Private) Limited Sri
Lanka (CPLPL) a key player in the Sri Lanka coatings market. On 5 September 2017
PT Asian Paints Indonesia Indonesia (PT API) a wholly owned subsidiary of Berger
International Private Limited Singapore (an indirect subsidiary of the Asian Paints)
commenced manufacturing operations with a capacity of 5000 tons per annum on a
single shift basis in Jawa Barat region in Indonesia. On 11 December 2017 Asian Paints
acquired the entire remaining 49% stake in kitchen solution provider company Sleek
International Private Limited from the Ahuja family thereby making it a wholly-owned
subsidiary of the company.
2.12 Vision, Mission and Quality Policy

Vision
We want to be an innovative, agile, and responsive world class research and
technology organization that’s aligned to future customer needs and catalysis the
growth of the company across existing and future businesses.
Mission
“To provide as per market demand, ensuring desired level and quality of customer
(Dealer) service, continued availability of the right product mix of right quality at a
right time.”
Quality Policy
 We shall comply with all statutory and other applicable requirements.
 We shall provide products and services that meet stated standards on time, every
time.
 We shall continually improve our processes to understand changing stakeholder

needs and preferences including statutory changes and use the same as input for
periodically reviewing and revising performance standards of our products and
services.
 We accept Zero Defect as a quality absolute, and shall design and operate our
quality system accordingly.

 We shall organize our work practices to do a job right the first time, every time.
 We are committed to continual improvement in quality in all business processes and

shall track such improvement through measurable indicators.
2.13 Area of Operation
Corporate Profile
The company has come a long way since its small beginning in 1942. Four friends
who were willing to take on the world's biggest, most famous paint companies
operating in India at that time set it up as a partnership firm. Over the course of 25
years, Asian Paints became a corporate force and India's leading paints company.
Driven by its strong consumer-focus and innovative spirit, the company has been the
market leader in paints since 1967.
Asian Paints is India’s leading paint company with a group turnover of Rs 193.50
billion. The group has an enviable reputation in the corporate world for professionalism,
fast track growth, and building shareholder equity. Asian Paints operates in 15 countries
and has 26 paint manufacturing facilities in the world servicing consumers in over 60
countries. Besides Asian Paints, the group operates around the world through its
subsidiaries Asian Paints Berger, Apco Coatings, SCIB Paints, Taubmans, Causeway
Paints and Kadisco Asian Paints.
Asian Paints manufactures wide range of paints for Decorative and Industrial use.
In Decorative paints, Asian Paints is present in all the four segments viz Interior
Wall Finishes, Exterior Wall Finishes, Enamels and Wood Finishes. It also offers
Water proofing, wall coverings and adhesives in its product portfolio.
Asian Paints also operates through ‘PPG Asian Paints Pvt Ltd’ (50:50 JV between
Asian Paints and PPG Inc, USA, one of the largest automotive coatings manufacturer
in the world) to service the increasing requirements of the Indian automotive coatings
market. The second 50:50 JV with PPG named ‘Asian Paints PPG Pvt Ltd’ services the
protective, industrial powder, industrial containers and light industrial coatings markets
in India.
Vertical integration has seen Asian Paints diversify into chemical products such as
Phthalic Anhydride and Pentaerythritol, which are used in the paint manufacturing

process. The company has discontinued production of Phthalic Anhydride from end of
July 2017.
In the Home Improvement and Décor category, the company is present in the
Kitchen and Bath fittings space and offers various products under Sleek and Ess Ess
brand respectively.
Global Presence
Today, the Asian Paints group operates in 15 countries across the world across four
regions viz. Asia, Middle East, South Pacific and Africa through the eight corporate
brands viz. Asian Paints, Asian Paints Berger, SCIB Paints, Apco Coatings, Taubmans,
Causeway Paints and Kadisco.
 Asian Paints in India, Bangladesh, Nepal, Sri Lanka and Indonesia (Asia)
 Causeway Paints in Sri Lanka (Asia)
 SCIB Paints in Egypt (Africa)
 Asian Paints Berger in UAE, Bahrain and Oman (Middle East);
 Apco Coatings in Fiji, Tonga, Solomon Islands and Vanuatu (South Pacific)
 Kadisco Asian Paints in Ethiopia (Africa)
 Taubmans in Fiji and Samoa (South Pacific)
Home Improvement
Asian Paints with its intent to enter the Home Improvement and Décor space in
India had acquired 51% stake in Sleek group, a kitchen solutions provider in August
2013. Sleek is a major player in the organized modern kitchen space and is engaged in
the business of manufacturing, selling and distribution of modular kitchens as well as
kitchen components including wire baskets, cabinets, appliances, accessories
etc. Recently, the company has launched ‘Smart Kitchen’ range for easy installation
and design under the Sleek brand. Sleek has also introduced wardrobes in its portfolio
since FY17. In December 2017, Asian Paints acquired the balance 49% in sleek from
its erstwhile promoters. Sleek is now a wholly owned subsidiary of the company.
In June 2014, Asian Paints acquired the entire front and sales business including
Brands, Network and Sales Infrastructure of Ess Ess Bathroom products Pvt Ltd. Ess

Ess is a prominent player in the bath segment in India and has high quality products in
this segment. Recently, the company has introduced ‘Royale’ – premium range of bath
fittings as well as ‘Bathsense’ – sanitary ware range of products for the evolving
consumer.
Both, the Kitchen and Bath business have been co-branded with Asian Paints.
2.14 Ownership
I am going to take a deep dive into Asian Paints Limited’s most recent ownership
structure, not a frequent subject of discussion among individual investors. The impact
of a company’s ownership structure affects both its short- and long-term performance.
If an activist institution invests the same amount of capital in a stock as a passive long-
term pension fund, the implications are potentially different for key corporate financing
decisions such as the use of excess cash or the source of financing. While these are
more of a long-term investor’s concern, short-term investors may find the impact of
institutional trading overwhelming enough to lose out on what could be a potential
opportunity. Therefore, it is beneficial for us to examine ASIANPAINT’s ownership
structure in more detail.
Institutional Ownership
With an institutional ownership of 22.40%, ASIANPAINT can face volatile stock

price movements if institutions execute block trades on the open market, more so, when
there are relatively small amounts of shares available on the market to trade Although
ASIANPAINT has a high institutional ownership, such stock moves, in the short-term,
are more commonly linked to a particular type of active institutional investors – hedge
funds. In the case of ASIANPAINT, investors need not worry about such volatility
considering active hedge funds don’t have a significant stake. However, we should dig
deeper into ASIANPAINT’s ownership structure and find out how other key ownership
classes can affect its investment profile.
Insider Ownership
I find insiders are an important group of stakeholders, who are directly involved in
making key decisions related to the use of capital. In essence, insider ownership is more
about the alignment of shareholders’ interests with the management. A major group of
owners of ASIANPAINT is individual insiders, sitting with a hefty 10.62% stake in the

company. Broadly, insider ownership of this level has been found to negatively affect
companies with consistently low PE ratio (underperforming). And a positive impact has
been seen on companies with a high PE ratio (outperforming). Another aspect of insider
ownership is to learn about their recent transactions. Insiders buying company shares
can be a positive indicator of future performance, but a selling decision can simply be
driven by personal financial needs.
General Public Ownership
A big stake of 18.30% in ASIANPAINT is held by the general public. This level of
ownership gives retail investors the power to sway key policy decisions such as board
composition, executive compensation, and potential acquisitions. This is a positive sign
for an investor who wants to be involved in key decision-making of the company.
Private Company Ownership
Another important group of owners for potential investors in ASIANPAINT are

private companies that hold a stake of 38.93% in ASIANPAINT. These are companies
that are mainly invested due to their strategic interests or are incentivized by reaping
capital gains on investments their shareholdings. With this size of ownership in
ASIANPAINT, this ownership class can affect the company’s business strategy. As a
result, potential investors should further explore the company’s business relations with
these companies and find out if they can affect shareholder returns in the long-term.
2.15 Infrastructure Facility
MANUFACTURING FACILITIES
The Sriperumbudur manufacturing facility
PPG Asian Paints has made a substantial difference in the paints industry with its
state-of-the-art OEM automotive coatings manufacturing facility in the SIPCOT
Industrial Park, Sriperumbudur, Tamil Nadu.
Founded on a colossal 10.4-acre plot, the plant’s location has been strategically
Chosen so that it is close to major PPG Asian Paints OEM customers – Hyundai, Ford
and its ancillaries. The key principles of the facility are seamlessly smooth operations
and impeccable manufacturing processes. The major attributes of this plant are:
Ambient and air-conditioned RM storages Bulk storage tanks Petroleum Class

Storage Manufacturing Block housing the QA Lab Engineering Block Utilities section
We, at PPG Asian Paints believe in constant evolution with contemporary times. With
a mass production of up to 500 KL per annum, we are the leading manufacturers of
OEM Automotive Base Coats and Clearcoats. The plant is specifically designed in
collaboration with PPG, keeping in mind the present requirements and an additional
space for future capacity expansion plans of up to 10400 KL per annum.
We have meticulously invested in requirements for smooth operations and effective

problem solving in a manufacturing facility. As a result, PPG Asian Paints has
developed a distinctive feature in this facility – the Electrostatic Bell Applicator. It
enables prompt simulation of application conditions on the customer. Also, the plant is
enabled with a zero-discharge facility. PPG Asian Paints continues to manufacture
through OPC and Asian Paints Manufacturing facilities.
Amenities
Administrative Block – Employees at the plant have access to excellent infrastructure.
Training Room – Well-equipped training rooms to facilitate employee training. Canteen
– A well-furnished canteen with all amenities for employees. Conference room –
Equipped with latest hi-tech instruments, the conference room assists in conducting
training sessions and holding meetings.
Training programs
At PPG Asian Paints ‘Knowledge is Worship’. We have customized training programs

suited to our employees’ specific developmental requirements, which add to their
existing skills and bring out the best in them.
Our training programs include:
Fire Fighting Training First Aid Training High-end IT Solutions – HHT

Implementation
RESEARCH & DEVELOPMENT
PPG Asian Paints has a hi-tech R&D lab situated at Bhandup, Mumbai, that specializes
in color development and troubleshooting. The Mumbai R&D lab is presently spread
across an area of 15,000 square feet. An additional area of 5,000 square feet has now
been added to the Bhandup plant, which may further increase the lab area. In addition
to this main lab, a satellite R&D lab has been developed at the PPG Asian Paints

Chennai plant. This facility hosts a state-of-the-art Bell machine facility for simulating
actual OE line conditions.
PPG Asian Paints’ R&D department is well equipped with latest instruments and
equipment’s for paint testing. Having received recognition from the DST in 2008, PPG
Asian Paints is the first paints company to get the TS 16949 certificate.
At Bhandup, Mumbai, we have dedicated labs for Pre-treatment, Electrocoat, Resins

and Polymers development, color styling, Topcoat – Automotive & Industrial, and
Refinish paint system. The facility is self-sufficient with advanced instruments and
equipment’s for Resin / Polymers and Paint development / testing. Additionally, we are
also supported by the Asian Paints R&D department – which has one of the best paint
libraries, paint testing and a characterization lab with analytical instruments that are
capable of analyzing paints right down to their basic ingredients.
Apart from Asian Paints, we are also globally supported by our other parent partner –
PPG. PPG has facilities all over the world including USA, Europe - Germany, France,
Spain, and Italy, Asia - Japan, Korea, Malaysia, and China, Australia, etc. (Can’t be etc.
Be specific). This vast network enables PPG Asian Paints to boast of the best support
from both the parent companies – Asian Paints and PPG.
Development and maintenance:
Assimilating and Indianizing the Paint & Resin technology received from PPG to make
it conducive for Indian customers and environment.
Undertaking in-house development / modification of existing products / shades /

processes as per customer requirements for quality improvement and cost optimization.
Keeping a track of technology developments in the industry and identifying new

technology requirements.
Developing test methods for product characterization.

Technical services and validations:
We have recently introduced PPG’s way of secure launch – ATSEL (Application

Technology Science Engineering Launch) – first time at the plant and at the customer
end.
Extending routine technical service to our customers – Manufacturing, Supply Chain,

and Marketing, on an ongoing basis.
RESEARCH & DEVELOPMENT ACTIVITIES
"Innovation is a change in the thought process for the useful application of new
inventions or discoveries. It may refer to incremental or radical changes in thinking,
products, processes, or organizations.
The distinction between invention and innovation is that invention is an idea made
evident whereas innovation is an idea applied successfully in practice. In economic
terms, an innovation should increase customer value or producer value. The goal of
innovation is positive change, to make something better. Innovation leading to
increased productivity is the fundamental source of increasing wealth in an economy."
In the organizational context, innovation can be linked to performance and growth

through improvements in efficiency, productivity, quality, competitive positioning,
market share, and of course, profitability.
A key challenge in innovation is maintaining a balance between process and product

innovations, where process innovations tend to develop shareholder satisfaction
through improved efficiencies while product innovations develop customer support but
at the risk of costly R&D that can erode shareholder return.
Though creativity by individuals and teams is a starting point for innovation, it does not
guarantee that innovation can happen. It is well known that innovations that fail are
often potentially good ideas but have been rejected or postponed due to budgetary
constraints, lack of skills or poor fit with current goals. It is, therefore, of utmost
importance to nurture an environment conducive to innovation programmers of
organizational innovation in developed organizations are linked to organizational goals
and objectives, to the business plan, and to market competitive positioning.

Systematic programmers of organizational innovation are most frequently driven by:
 Improved quality
 Creation of new markets
 Extension of the product range
 Reduced labor / process costs
 Improved production processes
 Reduced materials
 Reduced environmental damage
 Replacement of products / services
 Reduced energy consumption
 Conformance to regulations
2.16 Product Profile
Asian Paints offers a wide spectrum of services in the following areas:
 Decorative – under this segment it offers Painting Guide, Painting Solution, Paint
Calculator and Paint Selector as value added decorative service.
 Industrial – Asian Paints offers 4 types of industrial coatings such as:
o Protective Coatings – protects steel and concrete structures from the corrosive
action of harsh climates, pollution, sea spray, acids, oils and solvents.
o Road Markings – are used as road markers for lane as indicator of lane separation
and also as safety markers. They include ordinary road marking paint, hot applied
retro-reflective thermoplastic material and retro-reflective water borne paints.
o Powder Coatings – is used to enhance the performance of Industrial paints.
o Floor Coatings – such paints protect the floor surface and prevents crack formation,
insect nest formation, water seepage etc.
o Automotive – It includes wide range of motor bikes and car paints.
2.17 Organization Structure
 Decorative Coatings
The largest contributor to our group revenues, this business features a comprehensive
portfolio, including paints, painting tools, water-proofing solutions, wall coverings, and
adhesives. Our robust network of 60,000+ dealers, enables us to cater to a wide cross-

section of customers across geographies. Our eight manufacturing plants across

different locations countrywide, with a combined capacity of 1.73 million KL per
annum of decorative paint products, feature state- of-the-art technology. A steady
growth marks our journey, which is furthered by a perception shift as a premium brand
driving innovation. The launch of many new products, backed by research and aimed
at fulfilling consumer expectations adds to this achievement. The resultant increase in
brand equity is helping our global expansion efforts.
 Industrial Coatings
We are present in the industrial coatings space with high-performance, high-quality

offerings that serve to protect surfaces through our two 50:50 Joint Ventures with
PPG Industries Inc., USA. Asian Paints PPG Pvt. Ltd. (AP-PPG) is an ISO 9001
certified company delivering high-value paints and coatings to industrial Original
Equipment Manufacturers (OEMs). The other JV, PPG Asian Paints Pvt. Ltd. (PPG-
AP) is a leading supplier of paint and coatings to customers in automotive OEMs,
automotive refinishes, industrial, marine, and packaging. Both the joint ventures benefit
from the combined strength of both partners in ensuring technological superiority,
quality, and durability. For industrial OEMs, our offerings are categorized under
protective coatings, powder coatings, floor coatings, and road markings. We ensure that
innovative products are delivered in volumes desired by the customers. We are market
leaders in thermoplastic road markings, as well as in auto refinish segment, and second
largest player in the auto OEM segment.
 International Operations
Our international operations span across 15 countries, with significant presence in

South Asia and the Middle East. We are among the top three players in decorative paints
in all these regions except in Singapore, Oman and Indonesia. We continue to expand,
as well as consolidate our position with key focus on Africa and Asia.
 Home Improvement Businesses
Aimed at offering complete décor solutions, we forayed into this space six years ago
and have been stepping up our offerings consistently to help our customers create their
dream homes. Currently operational in the two categories of kitchen and bath fittings
comprising ranges of modular kitchens and sanitaryware. We have recently introduced

wardrobes. This segment is a focus area for our future growth, as India’s real estate
market is slated to grow backed the rising affordable homes segment drive in the
country.
2.18 SWOT Analysis

Strengths
 Strong Growth: Asian Paints has shown a healthy growth of around 8 – 12 % in

the past 5 financial years. This has made sure that the company maintains the top
spot as far as market share is concerned. It is double the size of any other paint
company in India.
 Strong Global Presence: Asian Paints has a wide footprint on a globe operating
in 19 countries and have 26 manufacturing units around the world. Asian Paints
serves in over 65 countries and is the fourth largest paints company in Asia.
 A wide range of Products: The Product portfolio of Asian Paints allows them to
cater to different segments and industries, they are present in the Industrial coatings,
Decorative paints, Ancillaries, Asian Paints Royale etc. This allows them to
penetrate different segments of business and sections of society which helps them
maintain market share.
 Brand Value: Asian Paints was ranked 20th in the Top 20 best brands in Interbrand
report by Economic Times. It also featured in the Top 20 World’s Most Innovative
companies.
 Strong Supply Chain Management: Asian Paints has is a
superior technology driven company which has focused on integrating Supply
Chain Management (SCM) and Enterprise Resource Planning (ERP) solution from
SAP.
 Marketing campaigns – Asian paints has always had good marketing campaigns.
It has continued its association with Saif Ali khan over the years and had also roped
in Soha ali khan for a beautiful campaign. From time to time it has roped in other
personalities for ads but Saif Ali khan has been a constant. Recently, Deepika
padukone has been chosen as their brand ambassador for Asian paints Royale play.
Their brand mascot – GATTU is very famous too and is one of the most popular
brand mascots of India.

 Asian paints royal play – The Royale play was an amazing and breakthrough
concept launched in the market by Asian paints wherein painters from the company
themselves will paint your house using unique designs and colours. These painters
were specially trained and consumers relied on them because they came from the
house of Asian paints. Deepika Padukone is the brand Ambassador for the sub
brand.
Weakness
 Low Market Share in Industrial and Auto Paint: Asian paints has a low market
share in the industrial paint (about 15 percent) and auto sector (about 20 percent)
when compared to Kansai Nerolac and AkzoNobel.
 Slow International Business: Except for Bangladesh, Nepal and UAE, Asian
Paints have been performing below par in other overseas countries.
Opportunities
 Growth in Industrial Sector: It has a chance to acquire market share in the

Industrial as well as automobile sector as well considering the current market
situations.
 Growing Indian Economy: With growth in Indian Economy and developing
infrastructure, Asian Paints has a chance to increase revenue base and venture into
smaller cities, to increase sales.
 Emerging Nations: Asian Paints’ vision is to become one of the top five decorative
coatings companies in the world. This can be achieved by focusing on the emerging
economies of the world.
 Adapting to consumer psyche – Change is always constant. So, although Asian
paints is leading the market due to Royale play, there are other factors which it can
bring in to dazzle its customers and therefore keep the majority market share. Off
course, easier said than done.
Threats
 The threat of Slowdown: Any Economic slowdown will have a direct negative
impact on the construction industry and consequently paint industry will also get
affected.

 Unorganized sector: The unorganized sector still has about 35 percent of the
market share and this can prove out to be a deterrent to the growth of the industry.
 The scarcity of Raw materials: The raw materials required in the Paint industry
control the pricing of paint and scarcity can cause a jump in the prices, which can
be a threat for the Paint Industry.

CHAPTER 3
THEORETICAL BACKGROUND

THEORETICAL BACKGROUND
3.1 INTRODUCTION
Financial statement analysis (or financial analysis) is the process of reviewing and
analyzing a company's financial statements to make better economic decisions to earn
income in future. These statements include the income statement, balance
sheet, statement of cash flows, notes to accounts and a statement of changes in equity (if
applicable). Financial statement analysis is a method or process involving specific
techniques for evaluating risks, performance, financial health, and future prospects of
an organization.
It is used by a variety of stakeholders, such as credit and equity investors, the

government, the public, and decision-makers within the organization. These
stakeholders have different interests and apply a variety of different techniques to meet
their needs. For example, equity investors are interested in the long-term earnings
power of the organization and perhaps the sustainability and growth of dividend
payments. Creditors want to ensure the interest and principal is paid on the
organization’s debt securities (e.g., bonds) when due.
Common methods of financial statement analysis include fundamental

analysis, DuPont analysis, horizontal and vertical analysis and the use of financial
ratios. Historical information combined with a series of assumptions and adjustments
to the financial information may be used to project future performance. The Chartered
Financial Analyst designation is available for professional financial analysts.
History
Benjamin Graham and David Dodd first published their influential book "Security
Analysis" in 1934. A central premise of their book is that the market's pricing
mechanism for financial securities such as stocks and bonds is based upon faulty and
irrational analytical processes performed by many market participants. This results in
the market price of a security only occasionally coinciding with the intrinsic
value around which the price tends to fluctuate. Investor Warren Buffett is a well-
known supporter of Graham and Dodd's philosophy.
The Graham and Dodd approach is referred to as Fundamental analysis and includes:

1) Economic analysis
2) Industry analysis
3) Company analysis.
The latter is the primary realm of financial statement analysis. On the basis of these
three analyses the intrinsic value of the security is determined.
Horizontal and Vertical analysis
Horizontal analysis compares financial information over time, typically from past
quarters or years. Horizontal analysis is performed by comparing financial data from a
past statement, such as the income statement. When comparing this past information,
one will want to look for variations such as higher or lower earnings.
Vertical analysis is a percentage analysis of financial statements. Each line item listed
in the financial statement is listed as the percentage of another line item. For example,
on an income statement each line item will be listed as a percentage of gross sales. This
technique is also referred to as normalization or common-sizing.
Financial Ratio Analysis
Financial ratios are very powerful tools to perform some quick analysis of financial
statements. There are four main categories of ratios: liquidity ratios, profitability ratios,
activity ratios and leverage ratios. These are typically analyzed over time and across
competitors in an industry.
 Liquidity ratios: are used to determine how quickly a company can turn its assets
into cash if it experiences financial difficulties or bankruptcy. It essentially is a
measure of a company's ability to remain in business. A few common liquidity
ratios are the current ratio and the liquidity index. The current ratio is current
assets/current liabilities and measures how much liquidity is available to pay for
liabilities. The liquidity index shows how quickly a company can turn assets into
cash and is calculated by: (Trade receivables x Days to liquidate) + (Inventory x
Days to liquidate)/Trade Receivables + Inventory.
 Profitability ratios: are ratios that demonstrate how profitable a company is. A few
popular profitability ratios are the breakeven point and gross profit ratio. The
breakeven point calculates how much cash a company must generate to break even

with their startup costs. The gross profit ratio is equal to gross profit/revenue. This
ratio shows a quick snapshot of expected revenue.
 Activity ratios: are meant to show how well management is managing the
company's resources. Two common activity ratios are accounts payable turnover
and accounts receivable turnover. These ratios demonstrate how long it takes for a
company to pay off its accounts payable and how long it takes for a company to
receive payments, respectively.
 Leverage ratios: depict how much a company relies upon its debt to fund
operations. A very common leverage ratio used for financial statement analysis is
the debt-to-equity ratio. This ratio shows the extent to which management is willing
to use debt in order to fund operations. This ratio is calculated as: (Long-term debt
+ Short-term debt + Leases)/ Equity.
DuPont analysis uses several financial ratios that multiplied together equal return
on equity, a measure of how much income the firm earns divided by the amount of
funds invested (equity).
A Dividend discount model (DDM) may also be used to value a

company's stock price based on the theory that its stock is worth the sum of all of
its future dividend payments, discounted back to their present value.[8] In other
words, it is used to value stocks based on the net present value of the
future dividends.
Financial statement analyses are typically performed in spreadsheet software and

summarized in a variety of formats.
3.2 USERS OF FINANCIAL STATEMENT ANALYSIS
The objective of accounting is to provide information to users for decision-making. But

who exactly are these "users of financial statements"? What information do they need?
The users of accounting information include: the owners and investors, management,
suppliers, lenders, employees, customers, the government, and the general public.
1. Owners and investors
Stockholders of corporations need financial information to help them make decisions

on what to do with their investments (shares of stock), i.e. hold, sell, or buy more.

Prospective investors need information to assess the company's potential for success
and profitability. In the same way, small business owners need financial information to
determine if the business is profitable and whether to continue, improve or drop it.
2. Management
In small businesses, management may include the owners. In huge organizations,

however, management is usually made up of hired professionals who are entrusted with
the responsibility of operating the business or a part of the business. They act as agents
of the owners.
The managers, whether owners or hired, regularly face economic decisions – How
much supplies will we purchase? Do we have enough cash? How much did we make
last year? Did we meet our targets? All those, and many other questions and business
decisions, require analysis of accounting information.
3. Lenders
Lenders of funds such as banks and other financial institutions are interested in the
company’s ability to pay liabilities upon maturity (solvency).
4. Trade creditors or suppliers
Like lenders, trade creditors or suppliers are interested in the company’s ability to pay
obligations when they become due. They are nonetheless especially interested in the
company's liquidity – its ability to pay short-term obligations.
5. Government
Governing bodies of the state, especially the tax authorities, are interested in an entity's
financial information for taxation and regulatory purposes. Taxes are computed based
on the results of operations and other tax bases. In general, the state would like to know
how much the taxpayer makes to determine the tax due thereon.
6. Employees
Employees are interested in the company’s profitability and stability. They are after the
ability of the company to pay salaries and provide employee benefits. They may also
be interested in its financial position and performance to assess company expansion
possibilities and career development opportunities.

7. Customers
When there is a long-term involvement or contract between the company and its
customers, the customers become interested in the company’s ability to continue its
existence and maintain stability of operations. This need is also heightened in cases
where the customers depend upon the entity.
For example, a distributor (reseller), the customer in this case, is dependent upon the
manufacturing company from which it purchases the items it resells.
8. General Public
Anyone outside the company such as researchers, students, analysts and others are
interested in the financial statements of a company for some valid reason.
Internal and External Users
The users may be classified into internal and external users.
Internal users refer to managers who use accounting information in making decisions
related to the company's operations.
External users, on the other hand, are not involved in the operations of the company but
hold some financial interest. The external users may be classified further into users
with direct financial interest – owners, investors, creditors; and users
with indirect financial interest – government, employees, customers and the others.
3.3 METHOD OF FINANCIAL STATEMENT ANALYSIS
Analyzing financial statements helps company leaders determine the opportunities and
problems the company faces financially. At its core, the financial statement is a pulse
of the financial health of the company, defining whether it is capable of paying
expenditures, overburdened with debt or flush with capital to expand. There are two
primary methods of financial statement analysis: horizontal and vertical. Other methods
are extensions of these.
Horizontal Financial Data Analysis
Horizontal financial data analysis covers the financial information as it changes from
reporting period to reporting period. Comparing line items on the financial statement
such as cost of goods sold or net income from one quarter to another helps the business

leader define progress. The analysis may span over several defined reporting periods,
such as months, quarters or years.
The critical things a business leader looks for in horizontal financial analysis is whether
a specific line item changed significantly. For example, if the cost of goods sold rose
by 20 percent but revenues didn't reflect an increase in sales, something is costing the
company more money. Likewise, if the gross profit rises but the net profit drops, the
business leader must determine if cost-cutting measured are needed.
Vertical Financial Data Analysis
Vertical financial data analysis takes a look at the financial statement independent of
time. This means the statement is reviewed on its own without comparing it to other
months or quarters. The goal of vertical analysis is to find the correlations of various
line items to each other in the financial statement. Business leaders are looking for
overall efficiency in the flow of revenues and expenses. All information is reviewed as
a ratio, comparing one line in the vertical to another line.
For example, the business might want to see how significant expenses are to total
revenues. If total revenues are $100,000 and the cost of goods sold is $25,000, the ratio
is 0.25 or 25 percent. The corresponding ratio then is net income after cost of goods is
equated, or 75 percent. Looking at ratios helps determine how well the company takes
hard costs to produce goods to selling and delivering them to consumers.
Trends and Ratios in Financial Analysis
Because the horizontal analysis is looking at the same line items over time, it is
specifically designed to recognize trends in the company's financial status. The ratios
defined in vertical analysis help clearly show upward and downward trends in gross
and net profits. A business leader is looking for specific metrics over time for the
company to meet. For example, a manufacturer might want to see a 10 percent increase
in cost of goods sold, representing more products on the market annually. He would
then want to see the correlating net profit increase by 20 percent to show that
manufacturing growth is resulting in net revenue growth.
Understanding how the various line items on the financial statement work with each
other and compare over time gives business leaders the information to make strategic
plans. If overhead such as rents and administrative labor start to overwhelm the ability

of the company to improve net profits, it might be time to strategize cost-cutting

measures. Executives would need to determine what roles are necessary to fulfill the
company vision and where they can reduce costs. They might actually choose to
relocate the office to a less expensive location.
Forecasting with Financial Analysis
The use of financial analysis methods provides a great look at what has happened and
what is currently happening for the company. However, it cannot predict the future.
While it identified trends, it cannot foresee market factors that change all variables
affecting total revenues, cost of goods sold or net profits. Business leaders should use
this as a tool but prepare themselves to make adjustments as new information arises
affecting costs and revenues.
3.4 ADVANTAGES AND DISADVANTAGES OF VERTICAL

ANALYSIS
ADVANTAGES
It is one of the popular methods of financial analysis as it is simple to implement and

easy to understand. Also, the method makes it easier to compare the performance (even
line by line) of one company against another, and also across industries.
Moreover, it also helps in comparing the numbers of a company between different time
periods (trend analysis), be it quarterly, half-yearly or annually. For instance, by
expressing several expenses in the income statement as a percentage of sales, one can
analyze if the profitability is improving. Thus, it also helps in keeping a check on the
expenses.
For example, if the selling expenses over the past years have been in the range of 40-
45% of gross sales. For the current year, they suddenly jump to say 50%, this is
something that management should check.
Such a technique also helps in identifying where the company has put the resources.
And, in what proportions have those resources been distributed among the balance
sheet and income statement accounts. Moreover, the analysis also helps in determining
the relative weight of each account, and its share in the revenue generation.
Such an analysis also helps in understanding the percentage/share of the individual

items, and the structural composition of components, such as assets, liabilities, cost,
and expenses. Additionally, it not only helps in spotting spikes but also in determining
expenses that are small enough for management not to focus on them.
DISADVANTAGES
 It does not help take a firm decision owing to a lack of standard percentage or
ratio regarding the components in the balance sheet and income statement.
 Such an analysis does not vigilantly follow accounting concepts and
conventions.
 It does not help in measuring the liquidity.
 Owing to the lack of consistency in the ratio of the elements, it does not provide
a quality analysis of the financial statements.
3.5 KEY FINANCIAL STATEMENT & HOW THEY ARE
ANALYSIS
As mentioned, there are three main financial statements that every company creates and
monitors: the balance sheet, income statement, and cash flow statement. Companies use
these financial statements to manage the operations of their business and also to provide
reporting transparency to their stakeholders. All three statements are interconnected and
create different views of a company’s activities and performance.
Balance Sheet
The balance sheet is a report of a company's financial worth in terms of book value. It
is broken into three parts to include a company’s assets, liabilities, and shareholders'
equity. Short-term assets such as cash and accounts receivable can tell a lot about a
company’s operational efficiency. Liabilities include its expense arrangements and the
debt capital it is paying off. Shareholder’s equity includes details on equity capital
investments and retained earnings from periodic net income. The balance sheet must
balance with assets minus liabilities equaling shareholder’s equity. The resulting
shareholder’s equity is considered a company’s book value. This value is an important
performance metric that increases or decreases with the financial activities of a
company.

Income Statement
The income statement breaks down the revenue a company earns against the expenses
involved in its business to provide a bottom line, net income profit or loss. The income
statement is broken into three parts which help to analyze business efficiency at three
different points. It begins with revenue and the direct costs associated with revenue to
identify gross profit. It then moves to operating profit which subtracts indirect expenses
such as marketing costs, general costs, and depreciation. Finally it ends with net profit
which deducts interest and taxes.
Basic analysis of the income statement usually involves the calculation of gross profit
margin, operating profit margin, and net profit margin which each divide profit by
revenue. Profit margin helps to show where company costs are low or high at different
points of the operations.
Cash Flow Statement
The cash flow statement provides an overview of the company's cash flows from
operating activities, investing activities, and financing activities. Net income is carried
over to the cash flow statement where it is included as the top line item for operating
activities. Like its title, investing activities include cash flows involved with firmwide
investments. The financing activities section includes cash flow from both debt and
equity financing. The bottom line shows how much cash a company has available.
Free Cash Flow and Other Valuation Statements
Companies and analysts also use free cash flow statements and other valuation
statements to analyze the value of a company. Free cash flow statements arrive at a net
present value by discounting the free cash flow a company is estimated to generate over
time. Private companies may keep a valuation statement as they progress toward
potentially going public.
3.6 PROBLEM WITH FINANCIAL STATEMENT ANALYSIS
While financial statement analysis is an excellent tool, there are several issues to
be aware of that can interfere with the interpretation of the analysis results. These
issues are:

 Comparability between periods:
The company preparing the financial statements may have changed the accounts in
which it stores financial information, so that results may differ from period to
period. For example, an expense may appear in the cost of goods sold in one period,
and in administrative expenses in another period.
 Comparability between companies:
An analyst frequently compares the financial ratios of different companies in order

to see how they match up against each other. However, each company may
aggregate financial information differently, so that the results of their ratios are not
really comparable. This can lead an analyst to draw incorrect conclusions about the
results of a company in comparison to its competitors.
 Operational information:
Financial analysis only reviews a company's financial information, not its

operational information, so you cannot see a variety of key indicators of future
performance, such as the size of the order backlog, or changes in warranty claims.
Thus, financial analysis only presents part of the total picture.

CHAPTER 4
DATA ANALYSIS AND INTERPRETATION

DATA ANALYSIS AND INTERPRETATION
 Balance Sheet of Asian Paints

 Profit & Loss Account of Asian Paints


CALCULATION OF DATA
4.1 Current Ratio of the Company from 2018-20
The current ratio is a liquidity ratio that measures whether a firm has enough resources
to meet its short-term obligations. It compares a firm's current assets to its current
liabilities, and is expressed as follows:
Current Ratio = Current Asset / Current Liabilities
The current ratio is an indication of a firm's liquidity. Acceptable current ratios vary
from industry to industry. In many cases, a creditor would consider a high current ratio
to be better than a low current ratio, because a high current ratio indicates that the
company is more likely to pay the creditor back. Large current ratios are not always a
good sign for investors. If the company's current ratio is too high it may indicate that
the company is not efficiently using its current assets or its short-term financing
facilities. If current liabilities exceed current assets the current ratio will be less than 1.
A current ratio of less than 1 indicates that the company may have problems meeting
its short-term obligations. Some types of businesses can operate with a current ratio of
less than one, however. If inventory turns into cash much more rapidly than the accounts
payable become due, then the firm's current ratio can comfortably remain less than one.
Inventory is valued at the cost of acquiring it and the firm intends to sell the inventory
for more than this cost. The sale will therefore generate substantially more cash than
the value of inventory on the balance sheet. Low current ratios can also be justified for
businesses that can collect cash from customers long before they need to pay their
suppliers.
Calculation for last 3 years:
2018
Current Ratio = 5,501.09 / 3,547.96
= 1.55
2019
Current Ratio = 6,053.35 / 3,841.41
= 1.57

2020
Current Ratio = 5,825.70 / 3,195.05
= 1.82
4.2 Quick Ratio of the Company from 2018-20
In finance, the quick ratio, also known as the acid-test ratio is a type of liquidity
ratio, which measures the ability of a company to use its near cash or quick assets to
extinguish or retire its current liabilities immediately. It is defined as the ratio between
quickly available or liquid assets and current liabilities. Quick assets are current
assets that can presumably be quickly converted to cash at close to their book values.
A normal liquid ratio is considered to be 1:1. A company with a quick ratio of less than
1 cannot currently fully pay back its current liabilities.
The quick ratio is similar to the current ratio, but provides a more conservative
assessment of the liquidity position of firms as it excludes inventory, which it does not
consider as sufficiently liquid.
Formula:
Quick Ratio = Current Asset-Inventory / Current Liabilities
Calculation last 3 years:
2018
Quick Ratio = 5,501.09 - 2,178.43 / 3,547.96
= 0.93
2019
Quick Ratio = 6,053.35 - 2,585.1 / 3,841.41
= 0.90
2020
Quick Ratio = 5,825.70 - 2,827.47 / 3,195.05
= 0.93

4.3 Working Capital Turnover Ratio of the Company from 2018-20
Working capital turnover is a ratio that measures how efficiently a company is using its
working capital (current assets minus current liabilities) to support a given level of sales.
Also referred to as net sales to working capital, work capital turnover shows the
relationship between the funds used to finance a company's operations and the revenues
a company generates as a result.
Formula:
Working Capital Turnover Ratio = Sales / (Current Asset – Current Liabilities)
2018
Working Capital Turnover Ratio = 14,329.17 / (5,501.09 - 3,547.96)
= 7.33
2019
= 7.32
2020
= 8.14
4.4 Gross Profit Ratio of the Company from 2018-20
Gross profit ratio (GP ratio) is a profitability ratio that shows the relationship between
gross profit and total net sales revenue. It is a popular tool to evaluate the operational
performance of the business. The ratio is computed by dividing the gross profit figure
by net sales.
Formula:
Gross Profit Ratio = (Gross Profit / Net Sales) *100
The basic components of the formula of gross profit ratio (GP ratio) are gross profit and
net sales. Gross profit is equal to net sales minus cost of goods sold. Net sales are equal
to total gross sales less returns inwards and discount allowed. The information about
gross profit and net sales is normally available from income statement of the company.
2018
Gross Profit Ratio = (3,176.94 / 14,167.86) *100
= 22.42
2019
Gross Profit Ratio = (3,711.02 / 16,391.78) *100
= 22.63
2020
Gross Profit Ratio = (4,103 / 17.194.09) *100
= 23.86
4.5 Net Profit Ratio of the Company from 2018-20
The net profit percentage is the ratio of after-tax profits to net sales. It reveals the
remaining profit after all costs of production, administration, and financing have been
deducted from sales, and income taxes recognized. As such, it is one of the best
measures of the overall results of a firm, especially when combined with an evaluation
of how well it is using its working capital. The measure is commonly reported on a
trend line, to judge performance over time. It is also used to compare the results of a
business with its competitors.
Net profit is not an indicator of cash flows, since net profit incorporates a number of
non-cash expenses, such as accrued expenses, amortization, and depreciation.
The formula for the net profit ratio is to divide net profit by net sales, and then multiply
by 100. The formula is:
Net Profit Ratio = (Net Profit / Net Sales) *100
2018
Net Profit Ratio = (1,894.80 / 14,167.86) *100
= 13.37
2019
Net Profit Ratio = (2,132.17 / 16,391.78) *100
= 13.01
2020
Net Profit Ratio = (2,653.95 / 17,194.09) *100
= 15.43
4.6 Asset Turnover Ratio of the Company from 2018-20

The higher the asset turnover ratio, the more efficient a company is at generating
revenue from its assets. Conversely, if a company has a low asset turnover ratio, it
indicates it is not efficiently using its assets to generate sales.
The higher the asset turnover ratio, the more efficient a company is at generating
revenue from its assets. Conversely, if a company has a low asset turnover ratio, it
indicates it is not efficiently using its assets to generate sales.
Formula:
Asset Turnover Ratio = Net Sales / Average Total Assets
Calculation for last 3 year:
2018
Asset Turnover Ratio = 14,167.86 / 12,014.12
= 1.17
2019
= 1.20
2020
= 1.26
4.7 Fixed Asset Turnover Ratio of the Company from 2018-20
The fixed asset turnover ratio is an efficiency ratio calculated by dividing a company's
net sales by its net property, plant, and equipment (property, plant, and equipment -

depreciation). It measures how well a company generates sales from its property, plant,
and equipment. From an investment standpoint, this ratio helps investors approximate
their return on investment (ROI), especially in the equipment-laden manufacturing
industry. For creditors, this ratio helps to assess how well new machinery can generate
revenue to repay loans.
A high fixed asset turnover ratio often indicates that a firm effectively and efficiently
uses its assets to generate revenues. A low fixed asset turnover ratio generally indicates
the opposite: a firm does not use its assets effectively or to its full potential to generate
revenue. The ratios alone do not confirm how effective a company uses its fixed assets.
Combined with other analysis, it can give a clear picture of operations, performance,
and management of assets.
Formula:
Asset Turnover Ratio = Net Sales / Average Total Fixed Assets
2018
= 2.17
2019
= 2.14
2020
= 2.21
4.8 Current Asset Turnover Ratio of the Company from 2018-20
Current Asset Turnover - an activity ratio measuring firm’s ability of generating sales
through its current assets (cash, inventory, accounts receivable, etc.). It can be
calculated by dividing the firm's net sales by its average current assets, and it shows the
number of turns made by the current assets of the enterprise.

The values may vary between businesses and industries, and the normative value is
absent. However, higher current asset turnover comparing to competitors would
indicate a high intensity of the current assets usage. The increasing trend of this ratio is
a good sign because this means that the company is working on the consistent
improvement of its policies in inventory, accounts receivable, cash and other current
assets management. In fact, increasing current asset turnover leads to the decrease of
the financial resources amount, needed for the company's operations maintenance. This
means that bigger part of the financial resources can be used for current operations
intensification or making investments. The decrease of the current assets turnover
indicates the firm's increasing need of sources of finance. If the access to sources of
finance is limited, this will cause the increase of the company's financial expenses.
Formula:
Asset Turnover Ratio = Net Sales / Average Total Current Assets
2018
= 2.57
2019
= 2.70
2020
= 2.95
4.9 Debt to Equity Ratio of the Company from 2018-20
The debt-to-equity (D/E) ratio is calculated by dividing a company’s total liabilities by

its shareholder equity. These numbers are available on the balance sheet of a company’s
financial statements.
The ratio is used to evaluate a company's financial leverage. The D/E ratio is an
important metric used in corporate finance. It is a measure of the degree to which a
company is financing its operations through debt versus wholly-owned funds. More
specifically, it reflects the ability of shareholder equity to cover all outstanding debts in
the event of a business downturn.
Formula:
Debt to Equity Ratio = Total Liabilities / Total Equity
2018
Debt to Equity Ratio = 12,014.12 / 7,756.15
= 1.54
2019
= 1.54
2020
= 1.43
4.10 Debt to Asset Ratio of the Company from 2018-20
Total debt to total assets is a leverage ratio that defines the total amount of debt relative
to assets owned by a company. Using this metric, analysts can compare one company's
leverage with that of other companies in the same industry. This information can reflect
how financially stable a company is. The higher the ratio, the higher the degree of
leverage (DoL) and, consequently, the higher the risk of investing in that company.
Formula:
Debt to Asset Ratio = Total Debt / Total Assets
2018
Debt to Asset Ratio = 4,257.97/12,014.12
= 0.354

2019
= 0.354
2020
= 0.304
4.11 Equity Multiplier of the Company from 2018-20
The equity multiplier is a financial leverage ratio that measures the amount of a firm’s
assets that are financed by its shareholders by comparing total assets with total
shareholder’s equity. In other words, the equity multiplier shows the percentage of
assets that are financed or owed by the shareholders. Conversely, this ratio also shows
the level of debt financing is used to acquire assets and maintain operations.
Like all liquidity ratios and financial leverage ratios, the equity multiplier is an
indication of company risk to creditors. Companies that rely too heavily on debt
financing will have high debt service costs and will have to raise more cash flows in
order to pay for their operations and obligations.
Both creditors and investors use this ratio to measure how leveraged a company is.
Formula:
Equity Multiplier = Total Asset/Total Equity
2018
Equity Multiplier = 12,014.12/7,756.15
= 1.549
2019
= 1.547

2020
= 1.437
4.12 Return on Asset Ratio of the Company from 2018-20
Return on assets (ROA) is an indicator of how profitable a company is relative to its

total assets. ROA gives a manager, investor, or analyst an idea as to how efficient a
company's management is at using its assets to generate earnings. Return on assets is
displayed as a percentage.
Businesses (at least the ones that survive) are ultimately about efficiency: squeezing the
most out of limited resources. Comparing profits to revenue is a useful operational
metric, but comparing them to the resources a company used to earn them cuts to the
very feasibility of that company's’ existence. Return on assets (ROA) is the simplest of
such corporate bang-for-the-buck measures.
Formula:
Return on Asset = Operating Income/Total Asset
2018
Return on Asset = 3,200.76/12,014.12
= 0.266
2019
Return on Asset = 3,791.75/13,682.96
= 0.277
2020
Return on Asset = 4,183.33/13,587.62
= 0.307

4.13 Return on Equity Ratio of the Company from 2018-20
Return on equity (ROE) is a measure of financial performance calculated by dividing

net income by shareholders' equity. Because shareholders' equity is equal to a
company’s assets minus its debt, ROE is considered the return on net assets. ROE is
considered a measure of how effectively management is using a company’s assets to
create profits.
ROE is expressed as a percentage and can be calculated for any company if net income
and equity are both positive numbers. Net income is calculated before dividends paid
to common shareholders and after dividends to preferred shareholders and interest to
lenders.
Formula:
Return on Equity Ratio = Net Income/Shareholder’s Equity
2018
Return on Equity Ratio = 14,291.24/7,756.15
= 1.842
2019
= 1.913
2020
= 1.878
4.14 Operating Return on Asset Ratio of the Company from 2018-20
The operating return on assets ratio (ROA) is used to calculate the percentage rate of
return a business gets on its assets. The ratio measures the ability of a business to use
its assets to generate operating income.
The formula uses the operating income of the business which is the income the business
generates before interest and tax expenses have been deducted. Excluding the interest

and tax expenses allows comparisons to be made between different businesses

independent of how they are financed and the tax environment they operate in.
Formula:
Operating Return on Asset Ratio = Operating Income/Asset
2018
Operating Return on Asset Ratio = 230.38/12,014.12
= 0.019
2019
= 0.013
2020
= 0.012
4.15 Return on Sale Ratio of the Company from 2018-20
Return on sales (ROS) is a ratio used to evaluate a company's operational efficiency.

This measure provides insight into how much profit is being produced per dollar of
sales. An increasing ROS indicates that a company is growing more efficiently, while
a decreasing ROS could signal impending financial troubles. ROS is very closely
related to a firm's operating profit margin.
When calculating return on sales, investors might notice that some companies report
net sales while others report revenue. Net sales are total revenue minus the credits or
refunds paid to customers for merchandise returns. Net sales will likely be listed for
companies in the retail industry, while others will list revenue.
Formula:
Return on Sales ratio = Operating Profit/Net Sale

2018
Return on Sales ratio = 3,200.76/14,167.86
= 0.225
2019
= 0.231
2020
= 0.243

STATEMENT IN TABULAR FORM
S.No. PARTICULAR 2018 2019 2020
4.01 CURRENT RATIO 1.55 1.57 1.82
4.02 QUICK RATIO 0.93 0.90 0.93
4.03 WORKING CAPITAL 7.33 7.32 8.14

TURNOVER RATIO
4.04 GROSS PROFIT RATIO 22.42 22.63 23.86
4.05 NET PROFIT RATIO 13.37 13.01 15.43
4.06 ASSET TURNOVER RATIO 1.17 1.20 1.26
4.07 FIXED ASSET TURNOVER 2.17 2.14 2.21

RATIO
4.08 CURRENT ASSET TURNOVER 2.57 2.70 2.95

RATIO
4.09 DEBT TO EQUITY RATIO 1.54 1.54 1.43
4.10 DEBT TO ASSET RATIO 0.354 0.354 0.304
4.11 EQUITY MULTIPLIER 1.549 1.547 1.437
4.12 RETURN ON ASSET RATIO 0.266 0.277 0.307
4.13 RETURN ON EQUITY RATIO 1.842 1.913 1.877
4.14 OPERATING RETURN ON 0.019 0.013 0.012

ASSET RATIO
4.15 RETURN ON SALE RATIO 0.225 0.231 0.243

GRAPHICAL PRESENTATION OF DATA
Fig. TITLE
4.01 CURRENT RATIO
4.02 QUICK RATIO
4.03 WORKING CAPITAL TURNOVER RATIO
4.04 GROSS PROFIT RATIO
4.05 NET PROFIT RATIO
4.06 ASSET TURNOVER RATIO
4.07 FIXED ASSET TURNOVER RATIO
4.08 CURRENT ASSET TURNOVER RATIO
4.09 DEBT TO EQUITY RATIO
4.10 DEBT TO ASSET RATIO
4.11 EQUITY MULTIPLIER
4.12 RETURN ON ASSET RATIO
4.13 RETURN ON EQUITY RATIO
4.14 OPERATING RETURN ON ASSET RATIO
4.15 RETURN ON SALE RATIO

CURRENT RATIO
1.85
1.8
1.75
1.7
1.65
1.6
1.55
1.5
1.45
1.4
2018 2019 2020
CURRENT RATIO
FIGURE 4.01
QUICK RATIO
0.935
0.93
0.925
0.92
0.915
0.91
0.905
0.9
0.895
0.89
0.885
2018 2019 2020
QUICK RATIO
FIGURE 4.02

WORKING CAPITAL TURNOVER RATIO

8.4
8.2
7.8
7.6
7.4
7.2
6.8
2018 2019 2020
WORKING CAPITAL TURNOVER RATIO
FIGURE 4.03
GROSS PROFIT RATIO

24
23.5
23
22.5
22
21.5
2018 2019 2020
GROSS PROFIT RATIO
FIGURE 4.04

NET PROFIT RATIO

16
15.5
15
14.5
14
13.5
13
12.5
12
11.5
2018 2019 2020
NET PROFIT RATIO
FIGURE 4.05
ASSET TURNOVER RATIO

1.28
1.26
1.24
1.22
1.2
1.18
1.16
1.14
1.12
2018 2019 2020
ASSET TURNOVER RATIO
FIGURE 4.06

FIXED ASSET TURNOVER RATIO

2.22
2.2
2.18
2.16
2.14
2.12
2.1
2018 2019 2020
FIXED ASSET TURNOVER RATIO
FIGURE 4.07
CURRENT ASSET TURNOVER RATIO

3
2.9
2.8
2.7
2.6
2.5
2.4
2.3
2018 2019 2020
CURRENT ASSET TURNOVER RATIO
FIGURE 4.08

DEBT TO EQUITY RATIO

1.56
1.54
1.52
1.5
1.48
1.46
1.44
1.42
1.4
1.38
1.36
2018 2019 2020
DEBT TO EQUITY RATIO
FIGURE 4.09
DEBT TO ASSET RATIO

0.36
0.35
0.34
0.33
0.32
0.31
0.3
0.29
0.28
0.27
2018 2019 2020
DEBT TO ASSET RATIO
FIGURE 4.10

EQUITY MULTIPLIER
1.56
1.54
1.52
1.5
1.48
1.46
1.44
1.42
1.4
1.38
2018 2019 2020
EQUITY MULTIPLIER
FIGURE 4.11
RETURN ON ASSET RATIO

0.32
0.31
0.3
0.29
0.28
0.27
0.26
0.25
0.24
2018 2019 2020
RETURN ON ASSET RATIO
FIGURE 4.11

RETURN ON EQUITY RATIO

1.92
1.9
1.88
1.86
1.84
1.82
1.8
2018 2019 2020
RETURN ON EQUITY RATIO
FIGURE 4.13
OPERATING RETURN ON ASSET RATIO

0.02
0.018
0.016
0.014
0.012
0.01
0.008
0.006
0.004
0.002
0
2018 2019 2020
OPERATING RETURN ON ASSET RATIO
FIGURE 4.14

RETURN ON SALE
0.245
0.24
0.235
0.23
0.225
0.22
0.215
0.21
0.205
2018 2019 2020
RETURN ON SALE
FIGURE 4.15

Chapter 5
FINDINGS SUGGESTIONS & CONCLUSION

FINDINGS SUGGESTIONS & CONCLUSION

The Researcher has analyzed the performance of the financial statement analysis in
chapter 4, based on the analysis of chapter 1 to 4 the following findings have been
drawn.
5.1 Summary of Finding

 The company has current ratio during these last three year are: 1.55:1.57:1.82 which
are continuously improving.
 The company has quick ratio deficiency during 2017-18 and 2018-19 which has
improved in current year 2019-20. that is: 0.9-0.93
 The company has an increment in the working capital turnover ratio in this year
compare to last year comparison.
 The gross profit shows that there is an improvement in the company.
 The company has shown a positive change in the net profit ratio for the current year.
 The company also have a rise in asset turnover ratio.
 The company has shown a rise in fixed asset turnover ratio that is of 0.07.
 The current asset turnover ratio continuously rises throughout the years.
 The company has shown a decrease in then debt to equity ratio.
 The debt on asset ratio present that the debt has decreased on the asset in this year
statement.
 The company has a rise of debt on equity ratio in the previous year 2018-19, but in
current year it falls down.
 This study represents that operating return on asset ratio is continuously falling
down.
 The company has an upward moving graph for return on sale ratio.

5.2 Suggestion
 In regard to the current ration, it shows the company is having improving, so any
improvement is not required.
 The company should focus on decreasing their inventory by having lots of product
demand by the customer.
 The company have to arrange the part where they mention working capital and try
hard to reduce it.
 The company is having improvement but if they cut off extra cost then they might
have high gross profit.
 The company should focus on their business deals so there should not be more
excessive lose and which result in inefficiency in net profit.
 The company has a positive result with the asset turnover ratio, so no need of
focusing too much and also, they should not reduce their work performance too.
 The company has maintained their fixed asset well this year compare to last year,
so they should go on with how they are doing it.
 The company should now focus on how they are going to reduce their liabilities,
which will gradually improve their leverage in company.
 The company has now able to reduce the ratio so their nothing to do on that matter
for now.
 The company are able to decrease the rate but the change is not too differed. so,
with extra effect the change can be differ in large manner.
 The company has positive reaction in last year and negative in current year it shows
how leglet they behave so the company need to focus now.
 The company is focused on the operating income and profit but not giving any huge
difference and they should check on it

5.3 Conclusion
From all the information and interpretation of all above data, it informs us what is
actually a financial statement. So, through the various calculation of data now we know
that the company is in good position and it doesn’t mean that those data is incredible.
So, they now should start focusing on their field of business for better and positive
result.
All those above interpretation and presentation show us what are the changes occurred
in these last 3 years and on what particular fields they should focus on, so that the
company can have a huge profit earning in the future.
So, at the end of all the presented data, show us where increment and deficiency
occurred through each individual ratio. This present us with the information and detail
idea of the position in which the company is now on.
So, now we have presented a minor set of data from the help of financial statement of
Asian paints and study them on the basis of different ratio method. Most of them are
having positive reaction. And some of them carries negative result too.
With this all the study is complete and we attain the objective toward which this study
is focusing on and this study will help the reader to collect satisficing data.

BIBLOGRAPHY
 Asian Paints website
https://www.asianpaints.com/
 Google
https://www.google.com/
 Wikipedia
https://www.wikipedia.org/

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KUVEMPU UNIVERSITY

Submitted in Partial Fulfillment of the Requirement for the Award of the

BACHELOR OF BUSINESS ADMINISTRATION

UNDER THE GUIDANCE OF

PES INSTITUTE OF ADVANCED MANAGEMENT STUDIES,

Guide HOD Principal

Mr. MOHAN D Dr. G M SUDHARSHAN Dr.K.SAILATHA

Chapter No Chapter Name Page No

CHAPTER 1 INTRODUCTION 01-10

INDUSTRY PROFILE & COMPANY

CHAPTER 3 THEORETICAL BACKGROUND 42-52

DATA ANALYSIS AND

FINDINGS SUGGESTIONS &

Dept. of Bachelor of Business Administration, PESIAMS, Shivamogga. 1

Dept. of Bachelor of Business Administration, PESIAMS, Shivamogga. 2

In corporate finance, the analysis is conducted internally by the accounting department

A key area of corporate financial analysis involves extrapolating a company's past

Dept. of Bachelor of Business Administration, PESIAMS, Shivamogga. 3

seasonal trends. financial ratio or accounting ratio is a relative magnitude of two

Ratio analysis can provide an early warning of potential improvement or deterioration

1.2 Review of Literature

Dept. of Bachelor of Business Administration, PESIAMS, Shivamogga. 4

Dept. of Bachelor of Business Administration, PESIAMS, Shivamogga. 5

 Anshan Lakshmi (2003): made “A Study of The Financial Performance with

Dept. of Bachelor of Business Administration, PESIAMS, Shivamogga. 6

 Shveta Kapoor (2010): Examines the impact of Corporate Social Responsibility

Dept. of Bachelor of Business Administration, PESIAMS, Shivamogga. 7

demand, 47 thereby proving that the Indian economy is a self-sustaining economy,

Dept. of Bachelor of Business Administration, PESIAMS, Shivamogga. 8

Financial Statement an integral part of overall corporate management and it is one of

1.4 Objectives of the Study

Dept. of Bachelor of Business Administration, PESIAMS, Shivamogga. 9

Asian Paints. Data is analyzed through various Ratio Analysis methods.

1.7 Source of Data Collection

1.8 Period of Study

This study is done for last 3 years that are:

Dept. of Bachelor of Business Administration, PESIAMS, Shivamogga. 10

INDUSTRY PROFILE & COMPANY PROFILE

Dept. of Bachelor of Business Administration, PESIAMS, Shivamogga. 11

INDUSTRY PROFILE & COMPANY PROFILE

Dept. of Bachelor of Business Administration, PESIAMS, Shivamogga. 12

Dept. of Bachelor of Business Administration, PESIAMS, Shivamogga. 13

Today India is booming in the field of infrastructure and industrial development.

2.2 Definition of Paint

2.3 Function of Paint

• Protection against oxidation, corrosion and degradation of materials.

Dept. of Bachelor of Business Administration, PESIAMS, Shivamogga. 14

• Decoration and embellishment of materials and surfaces.

In short, the main functions of paint are as follows:

Dept. of Bachelor of Business Administration, PESIAMS, Shivamogga. 15

> To prevent corrosion of metallic surfaces.

> To provide a smooth surface for easy cleaning.

> Providing a desired ability of reflection-absorption of heat and light.

> Changing the surface properties: ant-friction, hardness, electrical conductivity.

> Identification of products according to the color of the paint.

2.4 Classification of Paint

Classification of painting products by their functions

 Paint - colored non-transparent protective coating.

 Varnish - transparent or semi-transparent protective coating. A varnish is

 Enamel - hard protective coating with glossy finish.

Dept. of Bachelor of Business Administration, PESIAMS, Shivamogga. 16

 Fillers- Set of chemicals materials that contribute and improve the