Financial analysis

Of
Asian Paints
&
Berger Paints

Group Assignment
PROGRAMME: MBA + PGPCE

Batch: 2022-2024 Semester -2

Corporate Finance (4529202)

Submitted by:

Chinmay Kavadiya (011)

Shashank Pandy (046)

Anamika Singh (122)

Diya Agarwal (128)

Zahara Bohra (155)

Submitted to:

Mr. Tirthank Anilkumar Shah

 Asian Paints
History

Asian Paints Limited was established way back on February 1,1942 and today stands as India’s
largest and Asia’s third largest paint company. Asian Paints operates in 17 countries and has 25
paint manufacturing facilities in the world servicing consumers in over 65 countries.

The company manufactures paints in the category of Decorative, Automotive and Industrial
segment. Apart from these the company also manufactures various Accessories like, Wall Primer,
Wood Primer, Putty and Stainer's, etc. Driven by its strong consumer–focus and innovative spirit,
the company has been the market leader in paints since 1967.

Besides Asian Paints, the group operates around the world through its subsidiaries Berger
International, Apco Coatings, SCIB Paints and Taubmans, Berger International, SCIB Paints–
Egypt, Asian Paints, Apco Coatings, and Taubmans. Asian Paints operates in 5 regions across the
world viz. South Asia, Southeast Asia, South Pacific, Middle East and Caribbean region through
the five corporate brands viz. Asian Paints, Berger International, SCIB Paints, Apco Coatings, and
Taubmans. In 10 markets, it operates through its subsidiary, Berger International Limited; in Egypt
through SCIB Paints; in 5 markets in the South Pacific, it operates through Apco Coatings and in
Fiji and Samoa it also operates through Taubmans.

The company is having its strategically located Indian plants at Bhandup (Maharashtra), Kasna
(Uttar Pradesh) and Sriperumbudur (Tamil Nadu), Ankleshwar (Gujarat), Patancheru (Andhra
Pradesh) and the newly built plant at Rohtak (Haryana). Asian Paints operates in 17 countries and
has 25 paint manufacturing facilities in the world servicing consumers in over 65 countries. The
company is having state–of–the–art supply chain system using cutting edge technology to integrate
all its plants, regional distribution centres, outside processing centres and branches in India. All
the company’s paints plants in India, two chemical plants, 18 processing centres, 350 raw material
and intermediate goods suppliers, 140 packing material vendors, 6 regional distribution centres,
72 depots are integrated.

The company is having a big and experienced R&D team which has successfully managed to
develop High–end exterior finished and wood finishes in–house, which was earlier imported into
the country. These products are currently marketed under Asian Paints Elastomeric Hi–Stretch
Exterior paint and Asian Paints PU wood finish respectively.

The company is having three subsidiaries viz, Apco Coatings – it is a subsidiary of Asian Paints
in the South Pacific islands. The company operates in Australia, Fiji, Tonga, Solomon Islands and
Vanuatu under the brand name of Apco Coatings.

The other subsidiary of the company is Asian Paints Industrial Coatings Limited which has been
set up to cater to the powder coatings market which is one of the fastest growing segments in the
industrial coatings market.

Berger International Limited in November 2002 became a part of the Asian Paints Group. Today,
the name Berger is synonymous with quality and innovation. BIL has a presence across three
regions viz. Middle East, Caribbean, and Southeastasia. Asian Paints participates in the Industrial
Coatings segment directly, through a 50:50 JV with PPG Inc. of the US as well as through a 100%
subsidiary

On the recommendations of Booz, Allen and Hamilton, Asian Paints restructured itself into
Growth, Decorative and International business units and has adopted SCM and ERP technology.
Asian Paints aims to become the 5th largest decorative paint company in the world
 Introduction

Asian Paints is one of the largest paint companies which provides house painting color
combinations & wall paint.

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 paintings since 1967.

Asian Paints is India’s leading paint company with a group turnover of Rs 202.1 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 a wide range of paints for Decorative and Industrial use. In Decorative
paints, Asian Paints is present in all 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.

In the Industrial coatings space, Asian Paints operates through two 50:50 joint ventures with PPG
Inc, USA., one of the largest automotive coating’s manufacturers in the world.
 Berger Paints
History

Berger Paints was incorporated in 1923. It is the third largest paint manufacturer and second largest
manufacturer in decorative paints. Its headquarters is in Kolkata, it has a distribution network of
75 stock points and 12,000 paint retailers. The company has come a long way to become at one
point of time; a part of the worldwide BERGER group in 1983 and thereby acquiring its present
name Berger Paints India Limited to having subsequently gone through further ups & downs as
well as ownership changes to gain its present status wherein the majority stake is with Delhi based
Dhingra brothers.

The gentleman who took over, as its first managing director was Mr. Alexander Vernon Niblet, an
Englishman who was later on followed by Mr. Alfred Godwin in 1962.Further in the year 1965,
the share capital of British Paints (Holdings) Limited was acquired by Celanese Corporation, USA
and the controlling interest of British Paints (India) Ltd was acquired by CELEURO NV, Holland,
a Celanese subsidiary.

Subsequently in 1969, the Celanese Corporation sold its Indian interests to Berger, Jenson &
Nicholson, U.K. Then onwards the company British Paints (India) Ltd became a member of the
worldwide BERGER group having its operations across oceans in numerous geographies and this
marked the beginning of Lewis Berger's legacy in India – which the company would later take
forward to enviable heights. From 1973 the company entered one of its dynamic phases of business
with introduction of new generation products in the industrial, marine and decorative segments
under the able leadership of its first Indian Managing Director Mr. Dongargaokar Madhukar.

1976 was another turning point in the history of the company when the foreign holding in the
company was diluted to below 40% by the sale of a portion of the shares to the UB Group
controlled by Mr. Vittal Mallya. The reigns of the company were taken over by Mr. Biji K Kurien
as its Chief Executive & Managing Director in the year 1980. Finally, in the year 1983, the British
Paints (India) Limited, changed its name to Berger Paints India Limited.

The entire 80s & 90s saw the launch of many new products from company's stable such as premium
emulsions and high-quality acrylic distempers. The COLOUR BANK tinting system was launched
through which the consumer could select from a range of over 5000 shades.

Again, the fortunes of the company changed hands in 1991 with UB Group's stake in the company
bought over by the Delhi-based Dhingra brothers, Mr. K.S.Dhingra & Mr. G.S.Dhingra and their
associates of the UK Paints Group. Presently Dhingras' control a majority stake of almost 73% in
Berger Paints India Limited, which is a professionally managed organization, headquartered in
Kolkata, with the stewardship resting since 1994 with the current Managing Director Mr. Subir
Bose.

The company’s manufacturing facilities are located in West Bengal, Uttar Pradesh, Pondicherry,
Goa, and Jammu and Kashmir.

It has subsidiaries are Beepee Coatings, Berger Jenson & Nicholson (Nepal), Berger Paints
(Cyprus) and Berger Paints Overseas. It also acquired 100% stake of Motor and Industrial paints
business of ICI India.

It has technical license agreement with DuPont Performance in the area of automotive coating;
Nippon paints for new generation automotive coating, Orica Australia Pty for protective coating,
and TIGERWERK acku.Farbenfabrik GmbH, Australia for specialised powder coating.

It has a wide range of colour bank with over 5000 shades. Lewis Berger ColorBank offers
computerized paint technology through its outlets which mix different shades to create the desired
paint. Headquartered in Kolkata, with 11 strategically located manufacturing units and about 170
sales offices (all including those belonging to the Company’s own division and subsidiaries). The
company also has an international presence in 3 countries.
 Introduction

Berger Paints is one of the largest paint manufacturer companies in India.

The driving forces of Berger Paints - reflect the very spirit of its founder Lewis Berger - who laid
the foundations of the brand Berger way back in 1760 in the UK.

With modest beginnings in India in 1923, today, Berger Paints India Limited is the second largest
paint company in the country with a consistent track record of being one of the fastest growing
paint companies, quarter on quarter, for the past few years.

Undergoing several changes in ownership and nomenclature in its 88-year-old history in India,
the company has come a long way. Starting out as Hadfield's (India) Limited, it had just one factory
in Howrah, West Bengal. By the close of 1947, Hadfield's was acquired by British Paints
(Holdings) Limited, UK and came to be known as British Paints (India) Limited. In 1983, the name
of the Company was changed to Berger Paints India Limited.

Currently, the majority stake is with the Delhi based Dhingra brothers. Berger Paints has
established itself over a long course of time.

Mission: To maximize shareholder value by developing and delivering innovative and best
solutions for our customers, consistently outperforming our peers and providing a Dynamic &
Challenging work environment for our employees.

Vision: To be the most admired Indian Paint & Coating Solutions company with globally
recognized competencies.
 Analysis and conclusion of Asian Paints

Capex Analysis

year 2018-19 2019-20 2020-21 2021-22

Tangible Assets 4580.57 4148.60 3810.94 3689.63
Intangible Assets 35.26 35.26 35.36 35.36

Analysis:

In the year 2021-2022

Tangible assets decreased by 121.31 cr. & Intangible assets are same by 35.36 cr... So, we can
say that CAPEX also decreased by .31%.
 Capex Breakup:

Year: 2020-21

TANGIBLE ASSETS BOOK VALUE BREAK-UP

(In Crs) (in %)
Freehold Land 180.33 4.70
Freehold Building 1138.78 29.71
Plant & Equipment 2301.7 60.05
Scientific Research 111.96 2.92
Furniture & Fixtures 31.2 0.81
Vehicle 1.4 0.04
Office Equipment 24.4 0.64
Leasehold 0.61 0.02
Information Technology 42.67 1.11
Total 3833.05 100.00
Analysis:

This is a table that displays the book value (in crores) and percentage breakdown of tangible
assets for the year 2020-21.

The total book value of all the tangible assets is 3833.05 crores. The most significant category of
assets is plant and equipment, which represents 60.05% of the total book value. Freehold
building is the second-largest category, accounting for 29.71% of the book value. Freehold land
represents only 4.70% of the book value, which is the lowest percentage among all the tables
provided so far.

The remaining categories, including scientific research, furniture and fixtures, vehicles, office
equipment, leasehold, and information technology, collectively account for less than 6% of the
book value. Scientific research has the highest percentage among these categories at 2.92%,
while leasehold has the lowest percentage at 0.02%.

Overall, this table provides a breakdown of the tangible assets of the entity for a specific year,
which could be useful for financial reporting, asset management, or investment analysis.

Year: 2019-20

TANGIBLE ASSETS BOOK VALUE BREAK-UP

(In Crs) (in %)
Freehold Land 180.13 4.34
Freehold Building 1193.07 28.76
Plant & Equipment 2551.33 61.50
Scientific Research 99.62 2.40
Furniture & Fixtures 34.37 0.83
Vehicle 1.86 0.04
Office Equipment 29.18 0.70
Leasehold 2.06 0.05
Information Technology 56.98 1.37
Total 4148.6 100.00
Analysis:

This is a table displaying the book value (in crores) and percentage breakdown of tangible assets
for a particular entity.

The total book value of all the tangible assets is 4148.6 crores. The most significant category of
assets is plant and equipment, representing 61.50% of the total book value. Freehold building is
the second-largest category, accounting for 28.76% of the book value. Freehold land represents
only 4.34% of the book value, which is the lowest percentage among all the tables provided so
far.

The remaining categories, including scientific research, furniture and fixtures, vehicles, office
equipment, leasehold, and information technology, collectively account for less than 6% of the
book value. Scientific research has the highest percentage among these categories at 2.40%,
while vehicles have the lowest percentage at 0.04%.

Overall, this table provides a breakdown of the tangible assets of the entity, which could be
useful for financial reporting, asset management, or investment analysis.
Year: 2018-19

TANGIBLE ASSETS BOOK VALUE BREAK-UP

(In Crs) (in %)
Freehold Land 321.65 17.89918
Freehold Building 1220.77 67.9334
Plant & Equipment 0
Scientific Research 106.71 5.938197
Furniture & Fixtures 38.30 2.131318
Vehicle 0.90 0.050083
Office Equipment 25.91 1.44184
Leasehold 3.98 0.221479
Information Technology 78.79 4.384505
Total 1797.01 100
Analysis:

This is a table displaying the book value (in crores) and percentage breakdown of tangible assets
for a particular entity.

The total book value of all tangible assets is 1797.01 crores. Freehold building is the most
significant category of assets, representing 67.9334% of the total book value. Freehold land is the
second-largest category, accounting for 17.89918% of the book value.

Plant and equipment do not have any book value in this table, which is an unusual observation
compared to the previous tables. Scientific research, furniture and fixtures, information
technology, and office equipment collectively account for less than 14% of the book value, with
scientific research having the highest percentage among these categories at 5.938197%. Vehicles
and leasehold categories have the lowest percentages, accounting for less than 1% of the book
value.

Overall, this table provides a breakdown of the tangible assets of the entity, which could be
useful for financial reporting, asset management, or investment analysis.
 Analysis & Conclusion of Berger Paint

Capex Analysis

Year 18-19 19-20 20-21 21-22

Tangible Assets 996.56 1110.01 1413.61 1263.64
Intangible Assets 7.36 6.93 8.45 9.26

Analysis:

In the year 2021-2022

Tangible assets by 149.96 cr. & Intangible assets also increased by 0.81 cr. So, we can say that
CAPEX also decreased by 10.49%.

Capex Breakup

Year: 2020-21

TANGIBLE ASSETS BOOK VALUE BREAK-UP

(In Crs) (in %)
Freehold Land 95.42 6.75
Freehold Building 518.84 36.70
Plant & Equipment 734.97 51.99
Furniture & Fixtures 21.56 1.53
Computer 15.44 1.09
Office Equipment 10.92 0.77
Vehicle 16.46 1.16
Total 1413.61 100
Analysis:

This appears to be a table displaying the book value (in crores) and percentage breakdown of
tangible assets for a particular entity. The table includes several categories of assets, such as
freehold land, buildings, plants and equipment, furniture and fixtures, computers, office
equipment, and vehicles.

The total book value of all these assets is 1413.61 crores. The most significant category of assets
is plants and equipment, which represents 51.99% of the total book value. This is followed by
freehold building, which makes up 36.70% of the book value. Freehold land, the third-largest
category, represents 6.75% of the book value. The remaining categories, including furniture and
fixtures, computers, office equipment, and vehicles, collectively account for less than 5% of the
book value.

Year: 2019-20

TANGIBLE ASSETS BOOK VALUE BREAK-UP

(In Crs) (in %)
Freehold Land 12.73 1.15
Freehold Building 467.91 42.15
Plant & Equipment 574.52 51.76
Furniture & Fixtures 16.66 1.50
Computer 20.62 1.86
Office Equipment 8.13 0.73
Vehicle 9.44 0.85
Total 1110.01 100
Analysis

This is another table that provides information about tangible assets, displaying the book value
(in crores) and percentage breakdown of different asset categories.

The total book value of all the tangible assets is 1110.01 crores. The most significant category is
plant and equipment, which accounts for 51.76% of the total book value. This is followed by
freehold building, which represents 42.15% of the book value. Freehold land, the third-largest
category, represents only 1.15% of the book value, which is much lower than in the previous
table.

The remaining categories, including furniture and fixtures, computers, office equipment, and
vehicles, collectively account for less than 5% of the book value, similar to the previous table.
The computer category has a slightly higher percentage (1.86%) in this table than in the previous
one, while the vehicle category has a lower percentage (0.85%).

Year: 2018-19

TANGIBLE ASSETS BOOK VALUE BREAK-UP

(In Crs) (in %)
Freehold Land 46.1 4.63
Freehold Building 367.81 36.91
Plant & Equipment 522.66 52.45
Furniture & Fixtures 17.83 1.79
Computer 25.07 2.52
Office Equipment 7.27 0.73
Vehicle 9.82 0.99
Total 996.56 100
Analysis

This is another table displaying the book value (in crores) and percentage breakdown of tangible
assets for a particular entity.

The total book value of all the tangible assets is 996.56 crores. The most significant category of
assets is plant and equipment, representing 52.45% of the total book value. Freehold building is
the second-largest category, accounting for 36.91% of the book value. Freehold land represents
4.63% of the book value, which is also lower than in the first table.

The remaining categories, including furniture and fixtures, computers, office equipment, and
vehicles, collectively account for less than 6% of the book value. The computer category has a
slightly higher percentage (2.52%) than in the previous table, while the vehicle category has a
similar percentage (0.99%).

Overall, this table provides a breakdown of the tangible assets of the entity, which could be
useful for financial reporting, asset management, or investment analysis. It's interesting to note
the changes in the percentage breakdown of asset categories compared to the previous tables,
particularly for freehold land. It appears that plant and equipment is consistently the most
significant category, while the percentages of other categories fluctuate.
 Ratio Analysis

Debt to Equity Ratio

a leverage ratio that determines how much total debt and financial liability against the total
amount of shareholders' equity. The debt-to-assets ratio utilizes total assets as its denominator,
whereas the debt-to-equity ratio uses total equity. This ratio illustrates the tilt of a company's
capital structure towards debt or equity financing.

Debt to Equity Ratio = Total Debt / Shareholders’ Equity

Interest Coverage Ratio

A company's capacity to pay the interest on its outstanding loans is assessed using a financial
ratio is the Interest Coverage Ratio (ICR)

Venders, creditors, and investors frequently use the interest coverage ratio to assess how risky it
is to lend money to a business. The ratio known as the "times interest earned" is another name for
the interest coverage ratio.

Interest Coverage Ratio = EBIT / Interest Expense

EBIT to sales ratio

EBIT margin is a profitability metric that quantifies the amount of earnings a business generates
as a percentage of revenue before interest, taxes, depreciation, and amortization.

Sales revenue plus operating costs, such as cost of goods sold, selling, general, and
administration costs, but not depreciation and amortization, are used to determine earnings.

The effect of the capital structure of the business, non-cash expenses, and income taxes are not
factored into the margin. This ratio can be used to assess a corporation along with other leverage
and profitability factors.

EBIT= EBITDA / Revenue

 Profitability Ratios

Net profit to sales ratios

The net profit ratio, also known as the net profit margin ratio, is a profitability ratio that assesses
how much money is brought into the company relative to its earnings.

Since it is a profitability ratio, it is expressed as a percentage. The net profit ratio is regarded as a
reliable indicator of a company's overall success and is most useful when combined with an
analysis of the company's working capital.

It aids in assessing the general effectiveness of the company, but the net profit ratio is not regarded
as a trustworthy predictor of cash flows because it includes numerous costs such non-cash
expenses, accumulated costs, depreciation, and amortization.

Net Profit Ratio = Net Profit/ Net Sales × 100

Earnings Per Share

EPS is a financial ratio that divides the net earnings available to common shareholders by the
average number of shares outstanding during a specific time period. Indicated by the EPS
formula is a company's capacity to generate net profits for common shareholders. EPS = Net
Income – Preferred Dividend/ Outstanding Shares
 Asian Paints Ratio Analysis

• Debt Paying Capacity

2018-19 2019-20 2020-21

Debt Paying Capacity

Debt to Equity Ratio 0.002 0.003 0.002

Interest Coverage Ratio 107 45 58.1

EBIT to Sales 23.37% 20.50% 22.72%

Debt to Equity Ratio = Total Debt / Shareholders’ Equity

Interest Coverage Ratio = EBIT / Interest Expense

EBIT to sales = EBITDA / Revenue

• Profitability Ratios
2018-19 2019-20 2020-21

Profitability Ratios

Net Profit Ratio 13.00% 15.40% 16.50%

Earnings Per Share 22.23 27.7 31.8

Net Profit Ratio = Net Profit/ Net Sales × 100

EPS = Net Income – Preferred Dividend/ Outstanding Shares

 Berger Paint Ratio Analysis

• Debt Paying Capacity

2018-19 2019-20 2020-21

Debt Paying Capacity

Debt to Equity Ratio 0.09 0.08 0.12

Interest Coverage Ratio 36 28.71 27.1

EBIT to Sales 16.61% 19.48% 19.14%

Debt to Equity Ratio = Total Debt / Shareholders’ Equity

Interest Coverage Ratio = EBIT / Interest Expense

EBIT to sales = EBITDA / Revenue

• Profitability Ratios
2018-19 2019-20 2020-21

Profitability Ratios

Net Profit Ratio 8.00% 12.28% 11.31%

Earnings Per Share 4.49 7.2 7.01

Net Profit Ratio = Net Profit/ Net Sales × 100

EPS = Net Income – Preferred Dividend/ Outstanding Shares

 Conclusion

Asian paints is nearly three times the size of Berger paints in terms of earnings and 4.5 x of
request capitalization. It commands an advanced valuation than its counterpart because of its
sheer size and terrain & product- led diversified earnings. Asian paints has outperformed Berger
paints in nearly all the criteria. It's leading in terms of profit growth, profit perimeters, return to
shareholders, and tips. still, with respect to net profit growth Berger Paints is slightly ahead of
Asian paints. Indeed, in terms of valuations, Berger paints' shares appear to be cheaper when
compared to Asian paints' shares. But Asian paints feel to have a competitive edge over its peers
due to its keen understanding of consumption patterns and a massive and effective force chain.

Given its size and might, Asian paints is well deposited to gain from an increase in optional
spending. On the other hand, the underwhelming performance of its new businesses could reduce
its ROE in the short term. Berger's narrow focus on products and services revolving around
paints could help it grow briskly than any other company but indeed also, it has a lot of ground to
cover. Before you go ahead and pick a multibagger stock for coming 10 times for your
investment portfolio, check the fundamentals and valuations of both the companies completely.

Moving on to shareholding structures the promoters of Asian paints hold a52.6 stake in the
company. In case of Berger Paints the stake stands at75.0. To review how protagonist stakes
have changed over time, and how important of the protagonist stake is pledged, please see the
shareholding pattern of Asian paints and the shareholding pattern of Berger paints.

Eventually, a word on tips. In the most recent fiscal time, Asian paints paid a tip of Rs19.2 per
share. This amounted to a tip Pay-out rate of 60.2. Berger paints paid Rs3.1, and its tip pay out
rate stood at36.1.

Across different criteria, Asian paints appears to be a better company. Whether it be nearly nil
debt to equity rate or short- term current rate. Likewise, the company has demonstrated better
perimeters and return on equity.

Latterly, this is also essential in the 7- time average stock returns of both companies. The
investors of Asian paints have gained more compared to those of Berger paints. The stock has
served from the husbandry of scale, lower threat due to product diversification, briskly profit
growth, and colorful other factors.
 References

https://www.ndtv.com/business/stock/asian-paints-ltd_asianpaint/reports

https://www.ndtv.com/business/stock/berger-paints-india-ltd_bergepaint/reports

https://www.ambitionbox.com/overview/asian-paints-overview

https://www.ambitionbox.com/overview/berger-paints-overview