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A Case Study on Asian Paints Industry by SWOT Analysis

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January, 2022 IS S N 2 4 5 6 -5 5 8 X
Volume-6, Issue-11

HEMCHANDRACHARYA
INTERNATIONAL
E
JOURNAL OF RESEARCH

Chief Editor
Dr. Dinesh R. Chavda
(M.com., B.ed.,GSET.,M.phil.,Ph.D)
Assistant Professor,
(Accountancy)
Department of Commerce & Management,
Bhakt Kavi Narsinh Mehata University,
Junagadh, Gujarat, (India)

Director
http://www.hemchandracharyaejournal.com/ ISSN : 2456-558X

HEMCHANDRACHARYA JANUARY: - 2022,

INTERNATIONAL VOLUME-6, ISSUE-11
E JOURNAL OF RESEARCH

INDEX

Sr. Title Page

1. A Case Study on Asian Paints Industry by SWOT Analysis

- Vinod K. Parghi, Dr. Dineshkumar R. Chavda 01-11

2. ઉમરગામ તા કુ ાની ઉ ચ ર મા યિમક શાળામાં અથશા િવષયમાં અ યયન –

અ યાપનની સમ યાઓનો અ યાસ
- આ હર રમેશભાઇ ડા ાભાઇ 12-18

3. Impact of Financial Leverage on Valuation of Firm of Selected FMCG

Companies of India
- Mr. Amitkumar B. Vegad, Dr. Alok Chakrawal 19-25

4. A Study On Impact Of Digital Marketing On Market Innovation

- Ankita Bhatt 26-30

5. ડાંગ જ લામાં આ દ િત લોકો પર થયેલ જ ંગલ આધા રત ૃિ ની અસરોનો

અ યાસ. (એ.ક.આર.એસ.પી. (આઈ) ના કાયા વત ગામોના સંદભમાં)
- ી ભા યવાન સોલંક , ડૉ. દપકભાઈ ભોયે 31-35

JANUARY-2022 VOLUME-6, ISSUE-11

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1 A Case Study on Asian Paints Industry by SWOT Analysis

Vinod K. Parghi*
Research Scholar,
Dr. Dineshkumar R. Chavda1
Research Guide & Assistant Professor,
Department of Commerce and Management,
Bhakta Kavi Narsinh Mehta University, Junagadh
parghivinod5@gmail.com, dineshchavda@bknmu.edu.in

ABSTRACT

Asian Paints is India's largest and Asia's third-largest paints company, with over 75 years of the
invention. The firm not only manufactures, sells, and distributes paints and coatings, but also has
items in the home décor, bath fittings, and other home-related services categories. Asian Paints is a
multinational company with operations in 15 countries and 26 paint production sites throughout the
world. It has a strong supplier distribution network in India. The corporation selected dealers over
distributors to boost its profits and operational efficiency. Through its distinct colour palettes,
themes, and innovative designs, Asian Paints sparked a revolution in India. It made 'house décor,'
which was previously considered a luxury, affordable to the Indian middle class. The main aim of
the study is to find the financial analysis by SWOT and Michael Porter’s 5 Force Analysis of the
Asian Paints Industry. This study is a performance-based analysis of the Paints Industry.

Keywords: Case study, Paints Industry, SWOT Analysis, Michael Porter’s 5 Force

I. INTRODUCTION

Asian Paints is India's largest and most well-known paint company. We'll look at the principles of
Asian Paints in this study, concentrating on both qualitative and quantitative factors. We will do a
SWOT Analysis of Asian Paints, as well as Michael Porter's 5 Force Analysis and a review of
Asian Paints' major financials.

Asian Paints is the only business in the world to grow revenues by at least 20% per annum every
year for the past 60 years. For the last 30 years. This is remarkable considering that Asian Paints
only has an R&D spend of 0.3% and its panits are not of the highest quality in the market. Asian
Paint’s success lies in the unique business model pioneered by its founder Champaklal Choksi. In
the 1960s paint was sold as an FMCG product. The paint was manufactured from the factory, and
went to the distributor, then to the dealer, and finally to the consumer. Asian Paints used it to collect
data, from every neighborhood they have a presence in within India. The supercomputer keeps track
of what colours, quantities, and sizes are selling for every hour every single day.

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II. ABOUT ASIAN PAINTS AND ITS BUSINESS MODEL

Asian Paints is India's largest paint business, Asia's third largest, and the world's ninth largest. For
the past seven years, it has established a high bar for operational efficiency, management, world-
class innovation, and technical vision.

The paint business is primarily separated into two categories: decorative and industrial. Household
paints (interior wall finishes, external wall finishes, enamels, and wood finishes) make up the
Decorative section, which is indisputably controlled by Asian Paints in India. Asian Paints is ranked
third after Kensai Nerolac and Akzo Nobel in the Industry segment, which comprises industrial
paints, automotive coatings, OEM paints, powder coatings, and so on.

Because the ornamental segment is less technologically reliant, some disorganised competitors
gobble up a tiny portion of the market. The industry segment, on the other hand, is heavily reliant
on technology and is dominated by organised companies.

Asian Paints is a multinational company with operations in 15 countries and 26 paint production
sites throughout the world. It has a strong supplier distribution network in India. The corporation
selected dealers over distributors to boost its profits and operational efficiency.

The company currently employs over 70,000 retailers across the country. For the past 40 years, it
has also been improving its dealers. Asian Paints has a fantastic supply network, with roughly 2.5 to
3 lakh deliveries each day and trucks visiting dealers four times a day.

III. ASIAN PAINTS’ INDUSTRY ANALYSIS

The paint business moves in lockstep with the economy and GDP. As the GDP rises, so does the
people's spending ability, which is referred to as discretionary expenditure. This business has
historically seen double-digit growth in terms of both value and volume, which is why it has always
traded at a premium in emerging markets.

The market share of organised players has been steadily increasing for the past two years. The
organized-unorganized player ratio is now approximately 70:30, but with technological
advancement and appropriate GST implementation, this market share is likely to climb to 85
percent in the next several years.

Given India's recent per capita consumption (of roughly 4kg) in comparison to the rest of the globe,
the paint industry in India is predicted to boom in the future years (15kg.) This information shows
that India's paint business has a lot of room to develop.

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The paint business consumes a lot of raw materials. The majority of raw materials are imported
from foreign nations, particularly in India. With the government implementing import limits and
supporting the self-sufficiency mission, supply is projected to come from within the nation in the
next years, which will be a benefit to the sector and result in a significant increase in operational
margins.

IV. MICHAEL PORTER’S 5 FORCE ANALYSIS OF ASIAN PAINTS

Rivalry Amongst Competitors

The organised sector, which includes four corporations, controls 70% of the paint industry (Asian
Paints, Berger Paints, Kansai Nerolac and Akzo Nobel). Because it is a raw material-intensive
sector, the distribution network is crucial; as a result, there is fierce competition among the rivals.

A Threat by Substitutes

Limewash was formerly considered a viable substitute to paint. However, in the present age, the
focus has switched fully to paints. As a result, the threat of replacements is minimal.

Barriers to Entry

Because of the large R&D spending, the industry segment is completely dominated by technical
improvements, which prevents the entry of unorganised firms. Established companies have a well-
developed and established distribution mechanism that will be tough to disrupt for a newcomer.

Bargaining Power of Suppliers

Paint industry needs around 300 basic ingredients, the majority of which are imported. Titanium
oxide, which accounts for a quarter of all raw materials, is in low supply. Petro-based items account
for 50% of the total, with substantial price volatility. As a result, suppliers in the paint sector have a
lot of negotiation leverage.

Bargaining Power of Customers

When four distinct firms in the same sector offer almost identical items, the industry becomes price
sensitive, and customers have a lot of negotiating power. Consumers in this category do not have
much negotiating power since the industrial segment draws technologically advanced enterprises
with a solid supply chain, which is not supplied by many. As a result, customers in this segment do
not have much bargaining power.

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V. ASIAN PAINTS’ SWOT ANALYSIS

Moving further with our Asian Paints case study, we'll do a SWOT analysis.

1. Strengths

Asian Paints preferred dealers over distributors and wholesalers as soon as they entered the paint
market. This choice has proven to be beneficial to the firm, as distributors had wanted a 20% profit,
but the suppliers now only receive a 3% margin.

Asian Paints has been investing in the field of technological development for decades. In 1970,
Asian Paints purchased a supercomputer for Rs. 8 crore, 10 years before ISRO. It collects nearly
twice as much data as its competitors and anticipates trends with a 97 percent accuracy rate.

2. Weaknesses

Asian Paints' industry penetration is far too low, and it confronts intense competition from Kansai
Nerolac and Akzo Nobel, both of which are already well-established.

Despite being the world's ninth largest paint firm, the company's global business is significantly
below average, with the exception of Bangladesh, Nepal, and the United Arab Emirates.

3. Opportunities

Asian Paints claims to want to be one of the top five paint firms in the world. This might be
accomplished by concentrating on the world's rising economies.

In terms of market share, Asian Paints has a chance to grow its market share in the industrial
segment because it necessitates world-class technology that the firm can easily purchase.

Paint demand will rise as a result of government programmes (such as the extension of CLSS),
rising urbanisation, and the cheap availability of house financing. Asian Paints may profit greatly
from its strong distribution network, innovative products, and comprehensive home solutions.

4. Threats

Asian Paints confronts severe competition from both new and established competitors such as
Indigo Paints. The worldwide market is dominated by world-class technologically inventive
businesses as well.

Because most of the raw ingredients used to make paint are imported, the firm may experience
operational disruptions in the event of a pandemic, nation tensions, or other events.

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VI. ASIAN PAINTS’ MANAGEMENT

Mr. Champaklal Choksi, the company's visionary founder, created the foundation for effective
management. Asian Paints has been establishing standards in managerial skills from its inception,
which is one of the reasons it has been one of India's most successful wealth builders.

Mr. Choksi, being a visionary and realising the value and future of technology, purchased a
supercomputer for Rs 8 crores in 1970, 10 years before ISRO and 21 years before IIT Bombay, to
collect varied data, estimate sales, efficient modifications, and consumer interest. In the firm, this
tradition of pure management still exists.

Mr. Amit Syngle, the company's recently appointed MD and CEO, controls only 600 shares (the
previous one, Mr. KBS Anand owned mere 270 shares). Asian Paints' board of directors has a
diverse range of skills and experience.

VII. FINANCIAL ANALYSIS OF ASIAN PAINTS

The ornamental section accounts for 84 percent of the company's sales. In FY20, the business
introduced a number of value-for-money emulsions that helped it gain market share. The Industrial
Coating Business accounts for 2% of the company's revenue. In the car refinish area, the firm is the
market leader, and in the OEM segment, it ranks second.

Revanue
25000
21712k
20211k
19240k
20000
16824k
15061k
15000

10000

5000

2017 2018 2019 2020 2021

(Source: www.statista.com)

The home improvement business accounts for 2% of overall revenue. Under the name ap royal
bathrooms, the corporation has recently attempted to penetrate comprehensive house solutions such
as sanitary ware, kitchen, and living area. International Business generates 11% of the business's

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overall sales, and in FY20, the company increased the product value proposition in major countries
such as Egypt, Bangladesh, and Sri Lanka.

Market Share Of The Paints Industry Across India

Others
32%
Asian Paints
39%

Arko Noble India

6%
Berger Paints India Kansai Nerolac Paint
12% 11%

(Source: www.statista.com)

Asian Paints has a 39 percent market share in the Indian paints business, making it the industry
leader, followed by Berger Paints (12 percent), Kansai Nerolac (11 percent), Akzo Nobel (6
percent), and Indigo Paints (5 percent). Other small and unorganised firms account for 32% of the
market share. With an NPM of 11.66 percent, Asian Paints outperforms its competitors in terms of
profitability. Kansai Nerolac (10.44 %) and Berger Paints (8.75 %). Despite having break-even cash
flows, the firm has a solid operational cash flow, with a jump of Rs 495.15 crores from Financial
Year 2019-20 (Rs 99.92 crore) to Financial Year 2020-21 (Rs 495.15 crore).

VIII. ASIAN PAINTS’ FINANCIAL RATIOS

Profitability Ratios

Asian Paints has an EBITA Margin of 17.83%, which is constantly rising from the last few years
and it is the highest among its peers. The recent rise from 16.99% in FY 19 to 17.83% in FY20 is
mainly due to falling crude prices. Asian Paints has been constantly delivering a massive RoE of
above 25% for a lot of years. The current RoE stands at 27.79%.

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Return on Equity
27 26.7

26 25.5

25 24.4 24.51

24

23 22.76

22

21

20

2017 2018 2019 2020 2021

(Source: www.moneycontrol.com)

For the FY20 the RoCE is standing at a massive 35.83%. However, there has been a decreasing
trend in RoCE for the last couple of years mainly due to increased competition, additional CAPEX
and investment for future growth.

Return on Capital Employee

35
34.13
34

33 32.76

32
31.3
31 30.42 30.23
30

29

28

2017 2018 2019 2020 2021

(Source: www.moneycontrol.com)

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Profitability Ratio of Paints Industry

80
70
60 15.41
12.15
50
40 30.23 8.2
26.56 9.57 8.73
30
20.05
20 17.14 20.05

10 24.51 21.31
13.07 16.12 12.57
0
Asian Paints Berger Paint Kansai Nerolac Akzo Nobel Indigo Paints

ROE ROCE ROA

(Source: www.moneycontrol.com)

The above chart shows the profitability ratio of the paints industry. The data show the increasing
line of Asian Paints and other paints industries are not above the top of Asian Paints. The Second
highest profitability is Berger Paints and the lowest rate is Indigo Paints.

Leverage Ratios

Current Ratio for the FY20 is 2.03% for the company, which has seen continuous improvement for
the last couple of years. Current Ratio above 1.33% is considered healthy. The Company is almost
debt-free with Debt-to-Equity ratio of a mere 0.03. It means the company is funding additional
projects from the equity. The quick ratio of the company is 1.39 for the latest financial year.
Although liquidity has not improved in the last few years, it has maintained a threshold
requirement.

Interest
Quick Current Coverage
Companies Ratio Ratio Ratio D/E
Asian Paints 1.39 2.03 47.66 0.03
Berger Paint 0.92 1.71 23.32 0.11
Kansai Nerolac 1.6 2.56 31.01 0.04
Akzo Nobel 1.15 1.6 28.01 0
Indigo Paints 1.96 2.37 26.68 0
(Source: www.moneycontrol.com)

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Leverage Ratios
60
47.66
50
40 31.01 28.01 26.68
30 23.32
20
10 1.392.03 0.921.71 1.6 2.56 1.15 1.6 1.962.37
0
Asian Paints Berger Paint Kansai Nerolac Akzo Nobel Indigo Paints

Quick Ratio Current Ratio Interest Coverage Ratio D/E

(Source: www.moneycontrol.com)

Efficiency Ratios

Asset turnover Ratio has seen a continuous fall from FY 16(1.83). Currently, the ratio is 1.44%.
However, there has been a similar fall for the entire peers of the industry and Asian Paints still has a
better figure than the peers.

Turnover Ratios Mar-21 Mar-20 Mar-19 Mar-18 Mar-17

Asset Turnover Ratio (%) 106.59 125.11 118.19 122.06 121.25
Inventory Turnover Ratio
(X) 5.72 5.96 6.11 6.33 5.73
(Source: www.moneycontrol.com)

The inventory turnover Ratio for FY20 is 7.14%, which is the highest among the peers. However,
an entire industry has seen a fall in this ratio from the last few years.

The number of payable days has decreased from the previous fiscal year (52.73 to 50.51), which
shows the supplier’s bargaining power over the company, whereas the receivable days are
continuously increasing from the last few years indicating stiff competition.

IX. SHAREHOLDING PATTERN OF ASIAN PAINTS

Promoters own 52.79 percent of the corporation, with 10.67 percent of the shares pledged. For the
previous few quarters, promoter holdings have been stable, while pledging of shares has decreased
from 12.53 percent in December 2019 to 10.67 percent in December 2020. Nonetheless, pledges of
more than 10% are concerning.

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SHAREHOLDING
Promoter FII DII Public Others

Others
Public 0%
19%

DII
7% Promoter
53%
FII
21%

(Source: www.moneycontrol.com)

For the past several quarters, FII holdings have been steadily expanding, with a shareholding of
17.24 percent in September 2019 rising to 21.13 percent in the most recent quarter. Nearly 7.10
percent of the corporation is owned by DIIs. However, during the past several quarters, the DII's
investment in Asian Paints has been steadily declining. In Asian Paints, the public holding has been
relatively constant at roughly 19-20 percent.

X. CONCLUSION

Although there are many additional opportunities to investigate, this article should have provided a
basic understanding of Asian Paints. Asian Paints is India's largest paint firm, specializing in the
production, sale, and distribution of paints, coatings, and other home décor, bath fittings, and other
items. The company's headquarters are in Mumbai, Maharashtra. It is India's largest paints
company, as well as Asia's third-largest. Asian Paints operates in 15 countries, with total revenue of
INR 202.1 billion, while creating shareholder equity and retaining a reputation for professionalism
and rapid expansion. Every day, since Asian Paints has an already large consumers base, along with
having more points of data collection, it collects 6 to 20 times more data than its nearest consumer,
allowing it to refine its system even further. This ensures that no paint company in India be able to
compete.

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