INTRODUCTION

The objective of this analysis is to study the balance sheet of

two giants of Paint Industry in India Asian Paints and Kansai
Nerolac and give a comparative outlook since 2011 till current
FY available data i.e. 2015. With the motive to generate:
To analyse the profit and loss, balance sheet in last five
years from their annual report.
To analyse the financial health in their comparison to each
other with the help of calculation of different categories of
ratios.
Based on the derived values of the ratios, logical
deduction as interpretation over the trend.

INTERPRETATION
Liquidity and Coverage Ratio:
On a span of five years, the current ratio for Asian
paints has been growing under a healthy and a steady
rate, with 1.464 in 2011 to 1.51 in 2015 thus showing a
good comfort rate in the liquidity of the assets, since they
are under an industry in which inventory count shall exist
the main task is to smartly maintain and monitor the
inventory expenditure which is reflected in the quick
ratio or the acid test ratio as in Asian paints it has
been under a steady count from an value of 0.82 to 0.85
in 2011 to 2015 respectively, thus displaying not any
drastic variation of the impact of inventory or potential
asset conversion upon the comfort of liquidity of the
assets. But if seen the current and the quick ratio gap
displays that the check upon this aspect is required by
Asian paints. At a same platform when Kansai Nerolac is
checked for its current ratio it goes at PAR against Asian
Paints with a current ratio of 2.22 to 2.14 in 2011 to 2015
respectively, which is equally supported by a higher
Quick ratio or the acid test ratio at 1.42 to 1.24 in

2015, thus showing a better inventory conversion by

Kansai Nerolac.
On the other hand, Asian Paints has been marginally on
an uprising scale in case of interest coverage ratio
since -49.4 in 2011 to -47.9, this shows that the
borrowings have gone up, of Asian paints which is not
a good sign, as it means increased obligations, but at the
same time there has been healthy increase in the total
revenue too thus it doesnt acts as much of a matter of
concern, which is a good sign, on the other hand for
Kansai Nerolac interest coverage ratio has been on a
positive uprising scale this shows that although
borrowings have gone up but Kansai Nerolac high revenue
generation has handled this case efficiently.
Inventory
Inventory count has gone up from a count of 1072 in 2011
to 1872 in 2015, but at the same time current assets
have inclined up, since 2011 at 3855 to 7233 during
2015, this shows that the turnover of current assets has
been up to the mark thus inventory turnover is at a
healthy rate for Asian Paints. Similarly, for Kansai
Nerolac at an inventory being stable from a count of 354
to 542 in 2011 to 2015 respectively. This derives Kansai
Nerolac has shown a better conversion of inventory than
Asian Paints.
Profitability
REVENUE BASED PROFITABILITY:
In case of revenue based profitability, for Asian Paints,
net profit margin have been on a marginal stable scale
at 12.09 to 11.21 in 2011 to 2015 respectively, similarly,
gross profit margin too has been on a marginal stable
scale at 16.31 to 15.01 in 2011 to 2015 respectively, in
addition to it, the operating profit too has been on a
stable scale at 16.95 in 2015, this stable trend on all

revenue based profitability derives that revenue based

profitability is at an ideal condition and driving at a
healthy rate with better futuristic promises. The same gets
reflected in revenue generation from operations has
shown an increasing trend at 6411 crores to 11836
crores from 2011 to 2015 respectively. On the other hand
in this segment Kansai Nerolac lags behind Asian Paints
by lesser and declining net profit margin ratio at 9.52
in 2011 to 7.6 in 2011, gross profit margin is shared
under a same platform of stability. Overall Asian Paints
pars above in case of Revenue based profitability against
Kansai Nerolac.
ASSET BASED PROFITABILITY:
Return on total assets has been on a stable state for
Asian Paints since 2011 at 20.1 to 19.02 in 2015, vis-a-vis
Return on Operating profit has followed the same trend
of stability at 47.7in 2015. The contributing reason to this
stable trend has been due to increase in average total
assets. And operating profits too on the other hand have
shown a stable trend which is a good sign for futuristic
promises for Asian Paints. Contrary to that, return on
total assets has declined drastically for Kansai Nerolac
from 27.9 in 2011 to 11.81 because of lesser margin of
increase in Profit after tax from 2011 to 2015 where
average total assets have increased at a higher rate for
Nerolac. Thus, here too Asian Paints have a better Asset
based profitability than kansai Nerolac.
EFFICIENCY
For efficiency, it is ideal to look into asset turnover on
fixed and total asset turnover basis. If seen, on asset
turnover ratio, it has been on an increasing stable trend at
1.66 in 2011 to 1.69 in 2015 which is a good sign, for any
organisation. Asset turnover ratio is being maintained at
steady levels, which is satisfactory in terms of Asian
paints. Asset turnover is another Kink for Nerolac
against Asian Paints as it has decreased drastically from

2.93 in 2011 to 1.55, which is due to lesser revenue

generation rate against average total assets
increment rate. Thus, Kansai Nerolac lags against Asian
Paints in terms of efficiency too.
Return on Equity
It can be said as the master ratio or the main ratio as its
trend cannot be determined individually on the basis of
static value, as it consists of three components in major
i.e. Capital Structure Leverage, Efficiency and
Profitability. Each of these factors is equally responsible
for the state of return on equity.
In case of Asian paints Return on equity has been at a
healthy but a declining state with a steady and efficient
asset turnover ratio as mentioned above in efficiency
along with a better Capital Structure leverage
derived from Asset to Total equity. For Kansai
Nerolac return on equity has been under a declining
state, which is not a good sign for Kansai Nerolac, the
asset turnover ratio too has faced has drastic decline as
compared to Asian Paints, but the capital structure is at a
comparable rate for Kansai Nerolac against Asian Paints.
On the whole Asian paints carry a better return on equity
against Kansai Nerolac.