Research Insights 1

Sector 1: Chemicals Company 1: Asian Paints

General Overview
Asian Paints (APL) is the undisputed leader in the Indian paint industry with a virtual
stranglehold over the decorative paint segment. From its humble beginning in 1942, the
company has moved on to become the largest paint company with a market share of 38.1
per cent.

The company has five paint manufacturing facilities across India (Maharashtra, Gujarat,
UP, AP and Tamil Nadu) with a total capacity of 3.7 lakh tonnes per annum. As a part of
its backward integration strategy, APL manufactures phthalic anhydride (PAN) and
pentaerythritol (Penta). This provides it an edge over its competitors by reducing its raw
material costs. The company consumes 45 per cent and 55 per cent of PAN and Penta
production, respectively, while the surplus is sold under the chemicals division.
However, the chemicals division contribute only 3.1 per cent to the company's total
revenues. The company's bulk of revenues flow from the paint segment, which accounts
for over 96 per cent of the company's total sales.

The company's dominance is on account of its presence in all segments of decorative

paints (viz., interior wall finishes, enamels, exterior finishes and wood finishes) while
other companies cater to niche markets. The company's brands Tractor, Apcolite, Utsav,
Apex and Ace are well entrenched in the market. The company has fostered a customer-
centric approach to business. APL's retail initiatives like the `Colour World' (offering over
one thousand shades), `Asian Paints Home Solutions' (offers painting services in addition
to the paint), Colour Next (prediction of colour trends) and Kids World (painting
solutions for children) have helped the company sustain its growth momentum.

As the decorative paints business shares a lot of traits with the FMCG industry, marketing
and distribution plays a critical role in the company's fortunes. This is where APL is
strongly placed as compared to its peers with its superior brand positioning and wide
distribution network. The company has an extensive network with 35,000 dealers
spread over all its market. It is closely followed by Kansai Nerolac Paints (the second
largest paint company) with 19,000 dealers across the country. The other two major
companies Berger Paints and ICI India are way behind in terms of market reach. APL's
reach and dominance in the market can be gauged from the fact that it is more than twice
the size of its nearest competitor Kansai Nerolac. APL is the second largest company in
the industrial coatings segment in India. The company has presence in the automotive
paints segment in India through its 50:50 joint venture (Asian PPG Industries) with PPG
Industries Inc, USA. The powder coatings segment is catered by its subsidiary company
Asian Paints Industrial Coatings. APL caters to the non-auto industrial segments like
protective coatings, floor coatings, general industrial liquid paints segment and the road
marking segment.
 Shareholding Pattern of the Asian Paints
FII, DII, MF, Institutional, Promoter and individuals shareholding changes, pledges,
historical increases and decreases of shareholding for Asian Paints Ltd. for latest quarter
in a single page.

The company has 12 institutional owners and shareholders that are investing
through Securities Exchange Commission (SEC). Largest stakeholders include Bridge
Builder International Equity Fund, and Touchstone Sands Capital Emerging Markets
Growth Fund.

Shareholding Summary for Asian Paints Ltd.

Historical Promoter holding in Asian Paints Ltd.

Historical MF holding in Asian Paints Ltd.

Historical FII holding in Asian Paints Ltd.

 Shares pledged or otherwise
Name of the Shareholder Total Shares held
encumbered

As a % of As a % of
% of Total
grand total grand total
Number Number shares
(A) + (B) + (A) + (B) +
held
(C) (C)

AASHAY ASHISH CHOKSI 125,380 0.01 0 0 0

Castle Investment & Industries 15,457,470 1.61 0 0 0

Private Limited

Centaurus Trading And 7,408,940 0.77 0 0 0

Investments Pvt Ltd

Ami Manish Choksi 472,200 0.05 0 0 0

Anay Rupen Choksi 130,500 0.01 0 0 0

Doli Trading And Investments 9,363,440 0.98 0 0 0

Private Limited

Elf Trading & Chemicals 2,108,160 0.22 0 0 0

Manufacturing Limited
 Shares pledged or otherwise
Name of the Shareholder Total Shares held
encumbered

As a % of As a % of
% of Total
grand total grand total
Number Number shares
(A) + (B) + (A) + (B) +
held
(C) (C)

Ashish Ashwin Choksi 880,840 0.09 0 0 0

ASHISH ASHWIN CHOKSI 5,620 0 0 0 0

KARTA FOR ASHISH ASHWIN
CHOKSI HUF

Jaldhar Investments And 12,428,250 1.3 0 0 0

Trading Company Pvt Ltd

Lyon Investment & Industries 14,342,060 1.5 0 0 0

Private Limited

Binita Ashish Choksi 131,700 0.01 0 0 0

Druhi Ashish Choksi 100,000 0.01 0 0 0

Rupen Investment & Industries 18,849,825 1.97 0 0 0

Private Limited

Satyadharma Investments And 18,334,280 1.91 0 0 0

Trading Co Pvt Ltd.

Jigish Shailesh Choksi 1,995,180 0.21 0 0 0

MAHENDRA CHIMANLAL 539,800 0.06 0 0 0

CHOKSI KARTA FOR
MAHENDRA CHIMANLAL
CHOKSI HUF

Sudhanava Investments And 19,001,760 1.98 1101000 5.79 0

Trading Co Pvt Ltd

Tru Trading And Investments 12,176,500 1.27 0 0 0

Pvt Limited

Mahendra Chimanlal Choksi 1,656,380 0.17 0 0 0

Manish Mahendra Choksi 2,381,040 0.25 0 0 0

Dani Finlease Limited 10,930 0 0 0 0

 Shares pledged or otherwise
Name of the Shareholder Total Shares held
encumbered

As a % of As a % of
% of Total
grand total grand total
Number Number shares
(A) + (B) + (A) + (B) +
held
(C) (C)

Geetanjali Trading And 45,706,140 4.77 5596000 12.24 0

Investments Private Limited

Management of the Company

Name Designation

Abhay Vakil Non Executive Director

Amit Syngle Chief Operating Officer

Amrita Vakil Non Executive Director

Ashwin Dani Non Executive Chairman

Deepak Satwalekar Independent Director

Jayesh Merchant CFO, President & Co. Secretary

Jayesh Merchant Secretary

Jigish Choksi Non Executive Director

K B S Anand CEO

K B S Anand Managing Director & CEO

M K Sharma Independent Director

Malav Dani Non Executive Director

Manish Choksi Non Executive Vice Chairman

Pallavi Shroff Independent Director

R Seshasayee Independent Director

S Ramadorai Independent Director

S Sivaram Independent Director

Suresh Narayanan Independent Director

Vibha Paul Rishi Independent Director

SWOT Analysis of Asian Paints

 Strengths

 Goof Growth: Over the past five financial years, Asian Paints has seen a healthy growth
of about 8 – 12 percent. This has ensured the company is holding a good position in
terms of market share. It is twice the size of any other Indian paint firm.
 Clear Global Presence: Asian Paints has a large presence on a globe that operates in 19
countries and has 26 manufacturing units worldwide. Asian Paints operates in more
than 65 countries and is Asia’s fourth-largest paint firm.
 A wide variety of products: Asian Paints’ product line enables them to cater to various
markets and sectors, they are present in automotive coatings, decorative paints,
ancillaries, royal Asian Paints, etc. This enables them to infiltrate various business
segments and sections of society which helps them to retain market share.
 Brand Value: Asian Paints ranked 20th in Economic Times’ Top 20 Best Brands in
Interbrand Report. It was also listed among the Most Creative companies in the Top 20
Countries.
 Clear supply chain management: Asian Paints is a technology-driven superior
organization focused on combining SAP’s Supply Chain Management ( SCM) and
Enterprise Resource Planning ( ERP) solution.
 Marketing strategies-Asian paints have always had successful campaigns for marketing.
Over the years, it has continued its partnership with Saif Ali khan and roped for a
beautiful campaign in Soha Ali khan, too. Occasionally it roped for advertisements in
other celebrities but Saif Ali khan was a constant. Deepika Padukone has recently been
appointed as their brand ambassador for Royale Play in Asian paints. Their mascot
brand-GATTU is also very famous and is one of India’s most popular brand mascots.

 WEAKNESS
 Small market share in Industrial and Auto Paint: Asian paints have a low market share
in industrial paint (around 15%) and automotive (around 20%) relative to Kansai
Nerolac and AkzoNobel.
 Slow International Business: Asian Paints have performed below average in other
overseas countries, except for Bangladesh, Nepal and the UAE.

 OPPORTUNITIES
 Industrial growth: it has the opportunity to acquire market share in both the industrial
and automotive sectors, taking into account current market situations.
  Growing Indian Economy: Asian Paints has a chance to increase revenue base and
expand into smaller cities with growth in the Indian Economy and the creation of
infrastructure, to increase revenues.
 Emerging Nations: The dream of Asian paints is to become one of the world’s top five
decorative coatings firms. That can be done by an emphasis on the world’s developing
economies.
 Adapting to the psyche of the consumer-Change is constant. Thus, while Asian paints
are leading the market as a result of Royale play, there are other reasons that it can put
in to dazzle its customers and thus retain the majority market share. Of course, it was
simpler than to say done.

 THREATS
 Market Slowdown Threat: Any economic slowdown will have a direct negative impact
on the construction industry and consequently also affect the paint industry.
 Unorganized sector: The unorganized sector still accounts for about 35 percent of the
market share and this may prove to be dissuasive to industry growth.
 Raw materials scarcity: the raw materials available in the paint industry influence the
cost of paint and scarcity can cause a price change, which can be a challenge to the paint
industry.
 Government regulations: Government Regulations and laws can also have an adverse
effect on the company.
 Growing Popularity of Competitors can also be a major threat to the company

Competitive Analysis
The unorganized sector controls around 35% of the paint market, with the organized sector
accounting for the balance. In the unorganized segment, there are about 2,000 units having
small and medium sized paints manufacturing plants. Top organized players include Asian
Paints (30% market share), Kansai Nerolac (20% market share), Berger Paints (19% market
share) and ICI Paints (12% market share).

Asian Paints Limited's top 9 competitors are Nerolac, Berger Paints, Shalimar Paints
Limited, Pidilite, Jubilant Industries, HUL, Resinova, Berger Paints Bangladesh and Rangai
Putai.

Asian Paints Nerolac Paints Berger paints ICI paints

In their finishing
Market leader in
Well ahead leader In the II nd position business it has one
overall paint market
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in Industrial paint in the industrial of the best quality
market paint sector. refinish paint for
paint market in India
cars.
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Available in urban & Germany Valspar of
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(main client Maruti impressive. almost 2-3%
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Udyog)

Offers higher
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share
 Conclusion

 Rising profits can be an result of lower tax rates and softer input costs. Softer crude
prices in Q4 could have aided gross margin expansion at companies with higher
exposure to crude derivatives. Oil constitutes about 8% of raw material cost.

 Asian Paints' decorative paint volumes may have got impacted at the fag- end of
quarter due to supply disruption. This was caused by lockdown imposed by the
government.

 Temporary shut down of construction projects could have led to a decline in

demand towards the end of FY 20 and the first quarter of FY 21.

 While other corporates indulged in pay cuts or layoffs, Asian Paints decided to give
employees a salary hike in the face of an ongoing economic crisis
 and pandemic.

 Asian Paints also transferred money directly to their contractors’ bank

accounts through a Direct Bank Transfer mechanism. This was done in the
first week of April 2020 and has benefited more than 40,000 contractors
across the country.

 Asian Paints managed to grow the Exterior Textures, Smartcare

waterproofing and Adhesives category strongly during the year. The focus
on delivering decor to services like Paint Total and Beautiful Home Service
has received wide acceptance with the channel partners as well as
customers.

 The international business registered a single-digit value growth in the year.

Key units like Egypt, Ethiopia and Emirates saw an improvement as
compared to the previous year. Nepal also did well. Revenues from the
Greenfield operations in Indonesia did well though lower than planned.