Overview

Asian Paints Limited (NSE:ASIANPAINT) is an Indian multinational paint company established in 1942 headquartered in Mumbai, Maharashtra. The company has been the market leader in paints since 1967. Today, it is double the size of any other paint company in India. Asian Paints manufactures a wide range of paints for decorative and industrial use.

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.1

Asian Paints manufactures wide range of paints for Decorative and Industrial use.

In Decorative paints, Asian Paints is present in all the four segments v.i.z 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.

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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)

Business segments

Decorative Coatings

The largest contributor to its group revenues, this business features a comprehensive portfolio, including paints, painting tools, water-proofing solutions, wall coverings, and adhesives. The company's robust network of 60,000+ dealers, enables it to cater to a wide cross-section of customers across geographies.2

The company's 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 its journey, which is furthered by a perception shift as a premium brand driving innovations. 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 its global expansion efforts.

Industrial Coatings

Asian Paints is present in the industrial coatings space with high-performance, high-quality offerings that serve to protect surfaces through its 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, its offerings are categorised under protective coatings, powder coatings, floor coatings, and road markings. The company ensure that innovative products are delivered in volumes desired by the customers. Asian Paints is market leaders in thermoplastic road markings, as well as in auto refinish segment, and second largest player in the auto OEM segment.

International Operations

The company's international operations span across 15 countries, with significant presence in South Asia and the Middle East. Asian Paints is among the top three players in decorative paints in all these regions except in Singapore, Oman and Indonesia. The company continue to expand, as well as consolidate its position with key focus on Africa and Asia.

Home Improvement Businesses

Aimed at offering complete décor solutions, the company forayed into this space six years ago and have been stepping up its offerings consistently to help its customers create their dream homes. Currently operational in the two categories of kitchen and bath fittings comprising ranges of modular kitchens and sanitaryware. Asian Paints has recently introduced wardrobes. This segment is a focus area for its future growth, as India’s real estate market is slated to grow backed the rising affordable homes segment drive in the country.

Industry update

Paint Industry

Industry overview

The domestic paint industry is estimated to be a Rs 50,000 Crores industry with the decorative paint category constituting almost 75% of this market. The decorative paint market includes multiple categories depending on the nature of the surface like exterior wall paints, interior wall paints, wood finishes, enamels as well as ancillary products like primers, putties, etc. The industrial paint category constitutes the balance 25% of the paint market and includes a broad array of segments like automotive coatings, marine coatings, packaging coatings, powder coatings, protective coatings and other general industrial coatings. The domestic paint industry still continues to have a sizeable 30-35% share of unorganised players which primarily cater to the low end of the product basket. The paint industry continues to see the emergence of small to medium level new paint players who continue to put pressure at the low-end emulsions.

Industry trends

Over the second half of the previous financial year, the paint industry had gradually returned to normalcy from the de-stocking effects of the GST roll-out. However, the first half of FY2018-19 was impacted by supply chain disturbances due to the GST rate reduction from 28% to 18% leading to a bit of de-stocking in the distribution channel. The longer festival season ensured that there was good growth in the paint industry in the Sept-Oct period. The paint industry experienced significant raw material price inflation during the year with rising crude prices and depreciating currency and this led to a few rounds of price increases by the industry players to shore up margins. The automotive coatings market is primarily dependent on the auto and two-wheeler industry builds and the significant slowdown faced by the auto-industry impacted the demand conditions for automotive coatings products.

Non-automotive industrial coatings market grew at a high single-digit rate during the year under review. While the organised sector was a clear beneficiary of the GST implementation creating level playing field across market segments, demand for industrial coatings remained sluggish due to low manufacturing growth and slowdown in infrastructure and power segments. Overhang of bad debts, rising policy uncertainties ahead of the general elections and lack of progress in unclogging the pipeline of stalled projects brought down the growth in the industry.

Outlook

The demand outlook would depend on the outcome around the election results, monsoon progress which is crucial for supporting the rural demand and recovery in the construction and automobile sector. The shorter Diwali period will have implications with much lesser households getting repainted this year. Governmentʼs focus on infrastructure development would support the industrial coatings demand. The volatility affecting critical raw materials including crude oil as well as volatility on the exchange rates will need to be critically monitored to cushion the impact on profitability.

Kitchen solutions

Industry overview

The kitchen market in India is estimated to be worth more than ₹ 15,000 Crores consisting of the main product categories of hardware, cabinet/shutters, appliances and accessories. Only around 7-8% of this market is controlled by the organised players offering modular solutions, while the rest of the market is with the local unorganised players and local designers/carpenters. Within the overall kitchen market, the hardware category has an estimated market of ₹ 6,000 Crores, the wooden cabinets/ shutters market is estimated at ₹ 5,000-6,000 Crores and appliances and accessories have an estimated market of ₹ 1,000 Crores.

Industry trends

In India, a large majority of kitchen installations are undertaken by local carpenters directly or through architects. However, today, consumers are increasingly viewing modular kitchens as aesthetically appealing and space saving. They are ready to pay premium prices for superior quality finishes, top-end designs, latest technology such as soft-closing mechanism, seamless installations and warranty support. The industry is expanding rapidly with global players like IKEA setting base in metros and established organised brands like Sleek increasing presence across Tier II and Tier III cities. Online players are also investing aggressively, leading to a strong shift of consumers from unorganised to organised players.

Outlook

The kitchen industry is highly fragmented, but offers immense potential for organised players in the long run. As a result, various players from big box retailers to home interiors to online players are setting models for selling modular kitchens. As new players are entering the market, it is not only intensifying competition, but is also leading to expansion of the organised market. In such a scenario, differentiated offerings and delivery of operational expertise and value to the consumers would determine the success or failure of players in the kitchen industry.

Bath fittings

Industry overview

The bathroom segment in India consists mainly of sanitaryware, Chrome-plated (CP) fittings and tiles. The Company operates in the CP fittings market, which is estimated to be ~₹ 8,000 Crores, nearly 60% of which is estimated to be serviced by organised players. The industry is marked by several domestic and international brands, thus giving rise to healthy competition. With consumersʼ increasing preference for trusted quality and higher levels of performance requirements, the market share of organised players is expected to increase further.

Industry trends

The overall demand is directly proportional with the growth in housing and new construction. There is significant replacement and renovation demand as well, which continues to grow at a healthy rate, irrespective of swings in new housing demand. Growing incomes and aspirations have led to consumers upscaling expenditure on bathrooms. This is expected to increase the share of luxury and premium segments in the total fittings market. Correspondingly, demand for branded fittings is also catching up in smaller towns and cities.

Outlook

Apart from the surge in aspirational spending in the bath fittings segment, the governmentʼs drive towards improved infrastructure, affordable housing and the Swachh Bharat initiative are expected to be key drivers which will provide a sustainable growth platform for the industry.

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Business review

In FY2018-19, the company provided over 8 lakh in-store colour consultancies (through its Colour Idea stores), painted over 40,000 homes through Paint Total, Paint Rite and Home Solutions services; provided full Décor services through its five AP Homes launched a new series of wallpaper through Nilaya, many problem solving products like Royale Healthshield, Apcolite Rust Shield, Ultima Proteck Lamino, Economy Sheen products- Tractor Emulsion Shyne and Ace Shyne and a whole new range of waterproofing products.

FY2018-19 was a good year for Asian Paints. All the businesses in India grew well above the market growth rates, thereby gaining share across all areas of operation. Although profitability was hit (due to the sharp increase in raw material prices), growth in demand due to an extended Diwali season and reduction of GST rates ensured a satisfactory performance for the year.

On the channel front, the company opened more than 3,000 new outlets bringin its total strength to over 60,000. The company increased its Colour Idea stores to over 400 and its Colourworld network exceeded 46,000.

The Home Improvement businessesSleek kitchens and Ess Ess bath fittings did exceptionally well growing by over 20% and Asian Paints is now confident that they would be growth drivers of the future.

The Company commissioned 2 large paint manufacturing units of 300,000 KL /annum each at Mysuru and Visakhapatnam during the year. This additional production capacity would be sufficient to provide for the growth the company expect over the next few years.

The Industrial Coating businesses were severely hit by the sharp increase in raw material prices. PPG-AP was also affected by the slowdown in the automotive sector. AP-PPG (protective coatings) grew exceptionally well by over 20%, making significant competitive gains across markets.

The International business did not perform well. High inflation (including currency depreciation), rising raw material costs and poor economic growth affected the performance of units. Ethiopia (currency restrictions), Egypt (economic downturn) and Bangladesh fared badly while Nepal and the Middle East units of Oman, UAE and Bahrain did well. The international business should do much better in FY2019-20.

Transformation through technology

Asian Paints has continued to develop its creative edge in a highly competitive industry by investing in cutting-edge technology for research and development of products in accordance with global trends. The company employ design thinking to connect with its consumers’ evolving tastes.

During FY2018-19, the company added a range of value-added features to its existing products and successfully created differentiation for its products in the market.

Moreover, Asian Paints is encouraging the use of tools such as Design for Six Sigma (DFSS) and Design of Experiments (DoE) to strengthen product development methodology, across the organisation.

The company's futuristic, high-quality products have garnered international product certifications, helping to grow the credibility of its products as well as its brand value. FY2018-19 witnessed the launch of 23 new products in the architectural paints segment and 15 in the Industrial paints segment.

Enhancing product quality

The company's robust quality standards translate into sustained and committed efforts to ensure product viability and stability. The company's application research helps to establish product stability, the process for which includes testing for performance across various environmental conditions. An exterior paint testing facility is in place in Kochi. Testing for product validation involves the use of laboratory simulation techniques; a dedicated site for this was constructed during FY2018-19 in Mahabaleshwar, Maharashtra.

Digital way

The company's digital channels are enabling it to transform from being a brick-and-mortar business into a click-and-mortar business. Winning in a digital world is all about how you weave and create an ecosystem that is digitally connected.

Digital Touchpoints

The company's touchpoints (website, apps store, services, stores and call centre among others) capture data from consumers which in turn helps businesses to gain insights and provide better customer experience.

Social media presence

Asian Paints has run quite a few successful campaigns on social media to inspire, educate and help its customers make better choices on colours.

Financial highlights

For the Nine months ended December 31, 2019, Asian Paints Group Revenue from operations has increased by 9.2 % to 15,575.66 crores from 14,256.95 crores. PBDIT for the group has increased by 14.7 % to 3,302.15 crores from 2,879.13 crores. Profit before tax (PBT) increased by 14.2 % to 2,934.77 crores from 2,570.55 crores. Net Profit after non-controlling interest increased by 33.2% to 2,243.28 crores as compared to 1,684.27 crores in the previous corresponding period.

Asian Paints Consolidated December 2020 Net Sales at Rs 6,788.47 crore, up 25.24% Y-o-Y 3

January 22, 2021; Reported Consolidated quarterly numbers for Asian Paints are:

  • Net Sales at Rs 6,788.47 crore in December 2020 up 25.24% from Rs. 5,420.28 crore in December 2019.
  • Quarterly Net Profit at Rs. 1,238.34 crore in December 2020 up 62% from Rs. 764.43 crore in December 2019.
  • EBITDA stands at Rs. 1,885.81 crore in December 2020 up 49.76% from Rs. 1,259.22 crore in December 2019.
  • Asian Paints EPS has increased to Rs. 12.91 in December 2020 from Rs. 7.97 in December 2019.

References

  1. ^ https://www.asianpaints.com/about-us.html
  2. ^ https://www.bseindia.com/bseplus/AnnualReport/500820/5008200319.pdf
  3. ^ https://www.moneycontrol.com/news/business/earnings/asian-paints-consolidated-december-2020-net-sales-at-rs-6788-47-crore-up-25-24-y-o-y-6381761.html
Created by Asif Farooqui on 2020/04/13 13:32
     
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