Académique Documents
Professionnel Documents
Culture Documents
BY
Alan Simon
1IA18mba09
Submitted to
Department of MBA
August 2019
1
CERTIFICATE
guidance of Prof. Sendhil Kumar ,in partial fulfillment of the requirements for the
1.
2.
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3
DECLARATION
I, Alan Simon hereby declare that the Organisation Study report with reference to Asian Paints. Pvt
is prepared by me under the guidance of Prof. Sendhil Kumar faculty of M.B.A Department, AIT
and external assistance by Mr. Avin Francis, General Manager of Peejay enterprises. I also
declare that the Organisation Study has been carried out towards the partial fulfillment of the
Visvesvaraya Technological University, Belagavi. I have undertaken the Organisation Study for a
Date:
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Acknowledgement
I wish to express my sincere thanks to our respected Principal, Dr Prakash M R, beloved Dean-
Acharya Institute of Technology, Bengaluru for their kind support and encouragement in
I would like to thank external guide Mr. Avin Francis, Area general manager, Peejay
esteemed organization, which helped me to learn various concepts and also thank Internal guide
Finally, I express my sincere thanks to my parents, friends and all the staff of MBA department of
AIT for their valuable suggestions in completing this Organisation Study report.
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TABLE OF CONTENTS
Executive Summary
LIST OF TABLES
No.
1 Competitors analysis 20
3 Impairment Loss 41
5 Income Statements 45
6 Liquidity Ratio 47
7 Dupont analysis 49
6
LIST OF CHARTS AND GRAPHS
1 Segmentation of Paint 18
2 Mckinsey 7S Framework 24
6 Expense Trends 46
7 EBIT Chart 47
8 Liquidity ratio 48
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EXECUTIVE SUMMARY
Unlike most other industry, the paint industry was relatively free of regulations. However for a long
time it was perceived to be a luxury item and was subject to high levels of sales and excise taxes.
The high excise duty regime coupled with relatively low costs of investment in setting up a paint unit,
made local manufacture and distribution quite attractive. This lead to the emergence of a very large
number of small manufactures competing mainly in lower segment of the decorative paint market.
Boom in Indian Housing Sector: Increasing urbanization, cheaper housing loans and a shift from
semi-permanent to permanent housing structures have been driving growth in decorative paints
Strong Industrial growth: An average growth of about 10% in the automobile sector which provides
50% of the revenues in the industrial paints segment. Industrial paints account for 30% of the paint
Heavy Infrastructure Spending: New projects in roads, ports and industrial segments increases
revenues from protective coatings for civil applications and road-marking paints to all parts of the
Increase in manufacturing activities: Over 40% of the industrial sector takes the form of OEM
finishes, which is expected to grow steadily as a result of increasing demand for consumer goods in
India as well as India’s position now as a leading manufacturing hub for the supply of goods to the
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Less Seasonality: About 65 per cent of the demand for decorative paints stems from repainting.
Rising aspiration levels, Shift in the perception of paints as having a protective value rather than a
Rise in Income: Lifestyle based spending by Indian middle class is helping decorative segment of
this industry. Contemporary wood finish formulations are replacing the more traditional lacks and
In this study I have tried to find out the “Consumer Attitude towards Asian Paints”. Consumers have
different perception, by analyzing the responses given by them in the survey I have given some
Responses for the questions were of yes or no type & also their were guarantee of the product
aware of other products were asked, suggestions for improving pricing of the product, online
information given by the company were also included in the questionnaires. Which purpose the
consumer is using the product. By which factor they were influence by the product.
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Chapter 1
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INTRODUCTION
An internship is an excellent way to determine if the industry and the profession is the best career
option to pursue. It helps individual to combine theory with practical work experience. It helps
opportunity to analyze workplace setting, and offers platforms to compare differences in work style.
Objectives of internship
The main objective of the internship course is to facilitate reflection on experiences obtained in the
setting. Internship will provide students the opportunity to test their interest in a particular career
• Internship will help the trainees to develop skills and techniques directly applicable to their
careers.
• Internship will provide students with an in-depth knowledge of the formal functional activities
of a participating organization.
• Internship will provide students the opportunity to develop attitudes conducive to effective
interpersonal relationship.
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
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and India's leading paints company. Driven by its strong consumer-focus and innovative spirit, the
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 16 countries and has 27 paint manufacturing
facilities in the world servicing consumers in over 65 countries. Besides Asian Paints, the group
operates around the world through its subsidiaries Berger International, Asian Paints Berger, Apco
Coatings, SCIB Paints, Taubmans, Causeway Paints and Kadisco Asian Paints.
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
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
Vertical integration has seen Asian Paints diversify into chemical products such as Phthalic
Anhydride and Pentaerythritol, which are used in the paint manufacturing process. The company
In the Home Improvement and Décor category, the company is present in the Kitchen and Bath
fittings space and offers various products under Sleek and Ess Ess brand respectively.
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Industry profile
The Indian paint industry is over 100 years old. Its beginning can be traced back to the setting up
of a factory by Shalimar Paints in Calcutta (now Kolkata) in 1902. Until World War II, the industry
consisted of small producers and two foreign companies. After the war, the imports stopped, which
led to the setting up of manufacturing facilities by local entrepreneurs. Still, the foreign companies
continued to dominate the market. Initially British paint companies such as Goodlass Walls (now
Goodlass Nerolac), ICI, British Paints (now Berger Paints), Jenson & Nicholson and Blundell &
There are now twelve players in the organized sector of India's paint and coatings market and over
2,000 in the unorganized sector. In 2003-04, the organized sector held 70% share of the
approximately $1.5 billion (Rs 6,800 crore) industry, while the balance was made up of the
unorganized units.
The major players are Asian Paints, Goodlass Nerolac, Berger, ICI and Shalimar. Recently, world
leaders like Akzo Nobel, PPG, DuPont and BASF have set up base in India with product ranges
such as auto refinishes, powder coatings and industrial coatings. Kansai Paints of Japan, which
entered into collaboration with Goodlass Nerolac in 1984, is now the holding company for
Goodlass Nerolac with 64.52%equity holding. PPG has a joint venture with Asian Paints to
manufacture industrial coatings. Jenson & Nicholson and Snowcem India are no longer active
In the 1990s, helped by a growing economy, the Indian paint industry recorded a healthy growth of
12-13% annually. This was mainly due to a drastic reduction in excise from a staggering 40% to
16%. However, the growth was restricted in 2002-03 to single digits. There was a revival in 2003-
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The Indian paint industry has two main market segments-industrial and decorative paints. While
industrial paints are used for protection against corrosion and rust on steel structures, vehicles,
white goods and appliances, decorative paints are used in protecting valuable assets like
buildings.
The Indian decorative business has a share of approximately 77% in total sales. In foreign
The trends are likely to shift in India too, but at a slower pace, in favor of industrial paints. The per
capita consumption of paint in India is 700 grams versus 19 kg in the U.S. and 2.7 kg and 5.8 kg in
other developing countries like China and Brazil. Because consumption relates to affordability, the
Within the decorative segment, the share of exterior paints is 21%, interior emulsions 11%,
distempers 30%, solvent-based enamel paint 36% and wood finishes two percent.
The exterior category, particularly exterior emulsions, is the fastest growing segment at 20% for
The industrial coatings segment includes high performance coatings� with 30% market share,
powder coatings with ten percent, coil coatings� with five percent, marine coatings five percent
While Asian Paints was a clear market leader with a turnover of approximately $420 million (Rs
1,943 crores) in 2003-04, Goodlass Nerolac was second with approximately $220 million (Rs
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CHAPTER 2
15
Company Profile
Asian Paints Limited(APL) is the market leader in the Indian paint industry, commanding a market
share of 38 per cent in decorative paints and 33 per cent overall in the organised sector. Its annual
sales turnover exceeds Rs. 1,300 crore, way ahead of all the competitors in the industry. In profits
too, Asian Paints is far ahead. Asian paints market leadership in the decorative paints segments
can be grasped correctly when we take note of the relative position of the various players in the
industry. Whereas Asian Paints has a market share of 38 per cent, its nearest rival, Goodlass
Nerolac, commands a share of just 14 percent. All others have only less than 10 per cent. Such an
achievement by a company that is wholly Indian in capital, management and technology and in an
* Sourcing efficiencies
Background
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Asian Paints Limited was established in 1942 as a partnership firm by four friends Champaklal H.
Choksey, Chimanlal N. Choksi, Suryakant C. Dani and Arvind R.Vakil to manufacture paints in a
garage in Mumbai (Bombay). From its humble beginnings, the company has moved on to become
the largest paints company in India with a market share of 30 per cent.The company with a
turnover of US$ 535 million on standalone basis and US$ 640 million on consolidated basis
(including turnover of all its subsidiaries) is one of the top ten decorative paints companies in the
world. Its reach and dominance in the Indian market can be gauged from the fact that it is more
than twice the size of its neares competitor in India and it has been the market leader in paints
industry in India since 1968.The company operates in 22 countries and has 29 paint manufacturing
plants in the world which service consumers in over 65 countries.The company operates around
the world on its own and also through its three subsidiaries Berger International Limited,Apco
Coatings and SCIB Chemicals.The company aims to become one of the top five decorative paint
companies in the world and has embarked on an aggressive strategy of expanding its global
operations. The promoters hold the majority stake in the company (46.8 per cent of the equity
stake).The next largest shareholders are the foreign institutional investors (19.5 per cent stake),
followed by Indian public (16.5 per cent stake). Domestic banks, financial Institutions, mutual funds
and insurance companies hold 13.4 per cent stake. Corporate bodies and non-resident Indians
Vision
“To be the most admired Indian paint and coating solutions company with globally recognized
competencies”.
Mission
“To maximize shareholder value by developing and delivering innovative and best solutions for our
customers, consistently outperforming our peers and providing a dynamic and challenging work
Decorative - major segments in decorative include exterior wall paints, interior wall paints, wood
finishes and enamel and ancillary products such as primers, putties etc. Decorative paints account
Industrial - three main segments of industrial sector include automotive coatings, powder coatings
and protective coatings. Industrial paints comprising 30% of the market include automotive paints,
high performance coatings, coil coatings, powder coatings, marine paints and general industrial
coatings.
Product details
Asian Paints has clearly demonstrated its commitment to Indian consumers for over 88 years, by
offering its varied range of high performing quality products backed by highest level of customer
service. It offers a wide range of paints for interior and exterior wall coatings.
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Interior wall coating
• Breathe easy
'Breathe Easy' is the only paint which leaves no smell after painting. It has been certified by Green
Label Committee of Singapore Environment & Health Safety Standards as eco-friendly and
healthy. Additionally, it is highly cleanable and resistant to fungus growth. All this and its
impeccable sheen, makes it a truly innovative product in premium interior emulsion segment.
Rangoli Super Acrylic Emulsion is made of unique forms of co-polymers and pigments available.
These ingredients along with exclusive additives provide an optimum dispersion level. It gives a
rich matt effect and a superior covering when applied for interior walls with stain guard technology.
Weather Coat Long life, a premium plus acrylic paint for exterior walls, with its Elastomeric
property, ensures that the paint film stretches to cover hairline cracks thus ensuring that walls a
look new for longer. The paint is suitable for buildings with hairline crack problems and structures
in high rainfall areas where water seepage occurs through hairline cracks.
Asian Luxol High Gloss Enamel, perfect for all surfaces both interior and exterior, can withstand
any Indian weather condition. Formulated with alkyd and select colorants, it gives a long lasting
• Butterfly enamel
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Butterfly Enamel meant only for interior surfaces can be applied on wooden surfaces and select
mild-steel surfaces. It is a solvent based paint which provides maximum level of gloss and
COMPETITORS’ ANALYSIS
The following table shows the condensed cash flow statements of Asian Paints and
The above table shows that Asian Paints clearly has the highest amount of cash inflows from
its operating activities where as the other two companies have very less amounts of inflows
from operating activities. Though ICI India has huge amounts of cash and cash equivalents,
it has the lowest amount of cash inflows from its operating activities. Asian paints also has
more cash outflows from investing activities than the other companies which shows that
Asian Paints is on a huge expansion mode where as the other companies are not. Especially,
ICI India has more cash inflows from investing activities than from its Operating activities
which means that the company is selling more of its assets for cash. ICI India also has more
cash outflows from Financing activities than from the inflows from Operating and investing
activities put together. This shows that the ICI India Ltd Company is not in a healthy
Kansai Nerolac has cash flow percentages similar to that of Asian Paints but in smaller
magnitudes. While Asian Paints and Nerolac have net decrease in cash at the end of the year,
ICI India has net increase in cash. Asian Paints has invested heavily in acquiring fixed assets
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which led to net overall outflow of cash whereas for Nerolac it is due to repayment of loans
that the net cash flow is negative. Clearly, Asian Paints cash flows look healthier and helpful
Asian paints as won many awards in the past years and they are:
Achievements/ recognition:
• Asian Paints was included in Forbes Magazine's – Asia's Fab 50 List of companies in 2011,
• Asian Paints was ranked 13th amongst the top paint companies in the world by Coatings
• In March 2012, Asian Paints was presented the Asian Centre for Corporate Governance &
• Mr. P M Murthy, the then MD & CEO, Asian Paints received the 'CEO of the Year' award
from Business Standard, one of India's leading business dailies (March 2011).
• Asian Paints receives the Best Audit Committee Award from the Asian Centre for Corporate
• Asian Paints is the 10th largest decorative paint company in the world.
• Awarded the 'Sword of Honour' by the British Safety Council for all the paint plants in India.
This award is considered as the pinnacle of achievement in safety across the world.
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• Forbes Global magazine, USA ranked Asian Paints amongst the 200 'Best Small
Companies of the world' in 2002 and 2003 and amongst the top 200 'Under a Billion Firms'
of Asia in 2005.
• Ranked 24th amongst the top paint companies in the world by Coatings World – Top
• The Asset – one of Asia's leading financial magazine ranked Asian Paints amongst the
• Received the Ernst & Young 'Entrepreneur of the Year – Manufacturing' award in 2003.
• Rated Best Employer by BT–Hewitt survey, 2000 Bluest of the blue chips by Hindu
Business Line; Most admired company to work for by ET–BT survey, 2000
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Chapter 3
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Mc Kinsey’s 7S framework and Porter's Five Force Model
STRATEGY:
Asian paints.ltd. aims to be the ‘supplier of choice’ for its entire customer base. To achieve this we
invest in Research & Development, Technology Enhancement and Quality to ensure the
superiority of our offerings in all aspects. We have already commenced on the journey to going
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beyond being a mere paint supplier to our consumers to becoming a complete solution provider for
SHARED VALUES:
Transparency by classifying and explaining the Company’s policies and actions to those towards
whom it has responsibilities, i.e. maximum possible disclosures without hampering the Company’s
Professionalisation ensures that the management teams at all levels are qualified for their
positions, have a clear understanding of their roles and are capable of exercising their own
judgement, keeping in view the Company’s interest, without being subject to undue influence from
outsiders.
Trusteeship brings into focus the fiduciary role of the management to align and direct the actions
Corporate Social Responsibility ensures the promotion of ethical values and setting up exemplary
standards of ethical behaviour in our conduct towards our business partners, colleagues,
shareholders and general public, i.e. abiding by the laws, showing mutual respect and acting with
honesty and responsibility. Corporate social responsibility ensures that the Company contributes
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to society’s overall welfare by undertaking not -for-profit activities, which could benefit all or any of
Safeguarding Integrity ensures independent verification and truthful presentation of the Company’s
financial position. For this purpose, the Company has also constituted Audit Committee, which
STYLE:
At Asian paints .ltd., corporate governance is all about the processes, which involve direction and
control of affairs of the Company in a fashion that ensures optimum returns for the stakeholders.
Corporate governance is a broad framework, which defines the way a corporate body functions
and interacts with its environment. It is a combination of voluntary practices and compliance with
laws and regulations leading to effective control and management of the organization. The
company is open, accessible and consistent with communication and shares long-term
perspective and firmly believes that good Corporate Governance practices underscore its drive
towards competitive strength and sustained performance. Thus, basic Corporate Governance
norms have been institutionalized as an enabling and facilitating business process at the Board,
STAFF:
Human resources play a crucial role in the development process of the present economy. Though
the exploitation of natural resources, availability of physical and financial resources and
international aid play prominent roles in the growth of modern economies, none of these factors is
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more significant than efficient and committed manpower. Recruitment is done through
advertisement and employment exchange. Candidates are called for interview and final decision is
with the chief executive. As of now there are no major constraints in attracting the right talent since
the organisation is a reputed one and the compensation package is really attractive. Asian
provides training for both managers and workers. Training program for managers consists of both
internal and external program. The workers undergo internal training programmes conducted by
SYSTEM:
The system department is responsible for computerisation of different departments of ATL. The
main function of this department, operates and co ordinates all systems in the organization. The
simple structure of department facilitates speedy communication flow with in the department.
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Porter's Five Force Model
Porter Five Forces Analysis of Asian Paints Ltd International Business Division
We can say that the industry has a high level of rivalry among competitors since the market is
fragmented and there are a large number of dealers existing separately with their particular
organisation designs. The truth that no big firm has actually entered this Porters Analysis of Asian
Paints Ltd International Business Division case service adds to the high level of degree of rivalry
among industry players.Since the services being provided are primarily similar, the lack of
distinction provided by industry players more increases the degree of rivalry amongst industry
players.
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Threat of new entrants:
The market has a high danger of brand-new entrants because it does not need high financial
investment in innovation to get in the market. The purchase of products and products is relatively
simple therefore little players can easily enter the market. Without any economies of scale being
seen in the market due to the absence of larger gamers, the market provides extremely low
barriers to entry. Furthermore, there is no exceptional skill needed in Painting, if we take a look at
business models being utilized currently which further decreases the barriers of entry.
Threat of substitutes:
The threats of substitution may be low provided the reality that Painting does not particularly have
substitutes. While the idea might have different types of paints Porters Analysis of Asian Paints Ltd
International Business Division such as wood finishes and Enamel and putty Porters Analysis of
Asian Paints Ltd International Business Division, however the overall concept of Paints does not
have substitutes.
The bargaining power of the supplier is rather low offered the reality that there are a large number
of providers in the paint market. With the absence of vendor agreements and consumer
With the industry having a large number of providers using services with their respective rate,
quality and individuality, the customer can quickly change in between suppliers. Since brand name
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changing is not done at a high cost to the customer, the market has a high bargaining power when
Buyers are not devoted to any specific brand name while at the same time the choice of paint
appliance at homes likewise exists which involves almost no financial cost to the purchaser. This
more increases the bargaining power that the purchaser has in the industry.
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Chapter 4
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SWOT Analysis
Strength :
international growth.
recall activities.
weakness :
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opportunity :
Threats :
➢ Growing industry and low capital intensive nature of business will attract
competition.
(a) Repaint activity and (b) Construction. Any slowdown in any of the two will
have
➢ Aggression from existing players ➢ The external environment saw an entry of a lot of
multinationals trying to
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Chapter 5
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Analysis of financial statements
The following table gives the sales break down of different products of the company in the
FUTURE PLANS
It has set itself a stiff target to acquire 60 percent plus market share in the domestic market
and has plans up its sleeve to make inroads in the international market. To achieve its goals,
Asian Paints plans to launch a range of new products across all segments, backed by a
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further strengthening of distribution network. Asian Paints is boosting capacity in a bid to
grab a larger share of the incremental demand, along with focused marketing strategies to
make its products the preferred paint. The company is expanding its capacity by 40% to
494,000 tons per annum in 2009-10 at capital expenditure of Rs 3 billion. The company also
plans to focus on increasing the revenue by reducing losses from its South East Asian
operations.
AUDITOR’S REPORT
conduct an audit in accordance with the auditing standards generally accepted in India.
These standards require that the auditor plan and perform to obtain reasonable assurance
about whether the financial statements are free of material misstatements. An audit includes
examining on test basis, evidence supporting amounts and disclosure in the financial
statement. An audit also includes assessing the accounting principles used and significant
estimates made by the Management, as well as analyzing the overall financial presentation.
On Approval of the shareholders Asian Paints Limited has appointed Joint Auditors of the
company.
The company has been quite consistent in hiring the services of SHAH & COMPANY
as the as an independent auditor till the annual report of year 2006-07. There has been a
change in the Auditors of the company in the year 2007-08 with the appointment of BSR &
ASSOCIATES AND SHAH & COMPANY as Joint Auditors with the approval of the
shareholders at the Annual General Meeting held on 27 June, 2007. A passing look at last 4
years report would suggest that every year the auditors arrive at a similar assessment in
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terms of audit practices. Both, in the auditors report to the members and auditors report on
the annual financial statement, the independent auditors remain very satisfied consistently
over the years. Both the documents in terms of compliance to accounting standards over the
years read the same. The only changes that occur in report to members is in terms of
disputed dues in respect of sales tax, wealth tax, income tax, service tax, customs duty,
excise duty and cess unpaid as at the last day of the financial year. The report gives a very
unbiased and objective assessment of the financial health of the company. The Independent
Auditors opinion can play a very important role in our assessment. A true and fair reflection
The report begins by outlining the financial summary of the company and specifically
highlights the growth in the areas of net sales, operating income, operating profit and PAT.
While Asian Paints Limited made a profit of Rs 525 Crores, the group’s consolidated profit
was Rs 559 crores. The profit was disposed off by distribution of dividend, transfer to
General reserve and C/F to balance sheet. The company therefore instills confidence in the
be distributed. The report is followed by Management discussion and analysis. Health of the
economy is a matter of concern and the medium term outlooks for growth seems good, albeit
a little lower than the past because of volatile commodity prices. The director goes on to say
that in the year under review, the company benefited immensely from a strong rupee and a
good supply situation, resulting in soft prices for the raw materials. The future of the
company seems bright because of its strong commitment to growth. The international
business unit of the company has performed well by showing growth in all the regions
Director’s report brings out that the company is conscious of its environmental impact.
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Its CSR initiatives, HR practices and environmental responsibility will enhance its goodwill
and bring visibility. Focus on use of IT to achieve efficiency and R&D for new products will
add to the profitability in the times to come. All its assets are adequately insured. The report
makes a thorough analysis of current industry problems and prospects. The report has rightly
assessed the growth outlook for the economy at 7.5 to 8% in 2008-09. However the lower
implementation of sixth pay commission, farmer loan waiver and a normal monsoon. It also
brings out significant challenges for reducing losses in South East Asia Region in the form
of price controls. The company is also seized of the risks in the macro-economic conditions
in the global economy that might have an adverse impact on its operations. All these aspects
will be taken into consideration in assessing the financial health of the company.
Revenue from sale of goods is recognized on transfer of all significant risks and rewards of
ownership to the buyer which is on dispatch of goods. Sales are stated gross of excise duty
as well as net of excise duty; excise duty being the amount included in the amount of gross
turnover. The excise duty related to the difference between the closing stock and opening
when the right to receive payment is established. Interest income is recognized on the time
proportion basis.
Analysis:
We feel that the revenue recognition policy has not changed over the last 4 years. It has
been consistent with the policies prescribed by the regulator (AS – 9). These policies are
consistent with the way the company carries out its business because most of the
revenues are generated by selling paints and varnishes. As most of the sales are by
tangible goods, it is easier for the company to recognize its revenues and for the auditor
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to verify them. The company has little scope to play with the accounts as it has to
A major part of Asian paints revenues are generated by sales of paints. Asian paints also
have revenues generated from services which form a very small part of its total revenue.
The following revenue recognition policy was mentioned in the year 2004 – 05.
completion of the transaction at the balance sheet date determined by services performed
to date as a percentage of total services.” Where as, in the year 2007 - 08 it was changed
no mention of the revenue recognition policy used during the years 2005 – 06 and 2006 –
07 in the annual report of the company though it has revenues generated from services.
We feel that the company has been following the standards prescribed by the regulator
and it has been less conservative in recognizing its revenues from goods. But the
company has changed its stance from the year 2004 - 05 to 2007 – 08 in recognizing the
revenues from services. It has tried to be more conservative in reporting the revenues
from services in the last year where as it appeared to be less conservative about this in
The ICAI issued Accounting Standard AS-10, AS-19 and AS- 26 explains the
significance of tangible and Intangible Assets such as land, buildings, plant and machinery,
vehicles, furniture and fixtures and Leases in preparation of financial reports of a company.
These accounting standards also provide an insight in to the norms of standard accounting
v Identification
v Measurement
39
v Valuation
v Revaluation
v Impairment
for improving our understanding of these accounting standards and there by analyzing the
accounting policy for valuation of tangible and intangible assets. The financial statements for
Asian Paints have been prepared by taking the historical cost convention on accrual basis of
assumptions for the reported amount of its tangible and intangible assets.
Fixed Assets
For fixed assets Asian Paints uses at the cost of acquisition or construction less
accumulated depreciation. The cost of fixed assets includes taxes (other than those
subsequently recoverable from tax authorities), duties, freight and other incidental expenses
related to the acquisition and installation of the respective assets. Interest on borrowed funds
directly attributable to the qualifying assets up to the period such assets are put to use is
included in the cost. Know-how related to plans, designs and drawings of buildings or plant
Lease
Leasehold land and major leasehold improvements are amortized over the primary
period of lease. Purchase cost, User license fees and consultancy fees for major software are
amortized over a period of four years. Acquired Trade Mark is amortized over a period of
five years.
Assets taken on lease: Lease rentals on assets taken on lease are recognized as expense in
the Profit and Loss Account on an accrual basis over the lease term.
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Assets given on lease: The Company has provided tinting systems to dealers on an
operating lease basis. Lease rentals are accounted on accrual basis in accordance with the
Goodwill
less any accumulated impairment losses. For the purpose of impairment testing, goodwill is
allocated to each of the Group’s cash-generating units expected to benefit from the synergies
subsequent period.
Impairment loss
An impairment loss is recognized whenever the carrying amount of asset exceeds its
recoverable amount. Asian Paints reported impairment losses of Rs 41.86 Crores in 2007-08,
a decline of 5.27% from previous fiscal. Company reported impairment losses in following
assets
impairment of the carrying amount of the Company’s fixed assets. Company explains that if
41
impairment loss is recognized in the Profit and Loss Account. After recognition of an
impairment loss or reversal of an impairment loss as applicable, the depreciation charge for
the asset is adjusted in future periods to allocate the asset’s carrying amount, less its residual
BALANCE SHEETS
A quick overview of vertical from of balance sheet clearly shows an increasing trend in total
42
Total assets have shown an increasing trend over the years that can be attributed to the
acquisition and installation of fixed assets over successive years & an increase in long term
investments.
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Chart 1: Asset Trend
Similarly there is an increasing trend for total current liabilities and other long term
liabilities. Following graphs clearly illustrates the trend in various financial parameters:
INCOME STATEMENTS
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The net sales figure comprises sale of products/services, income from hire
purchase and loan contracts and other miscellaneous incomes. This figure is net of discount
& excise duty. It can be noted that the sales figure has been growing consistently over the
years. With the increase in income level of the overall population and growing consumer
culture, the Paint industry is expected to show a steady growth both in terms of personal
Cost of sales has shown an increasing trend over the years due to increased
production and hence increased consumption of raw material and components & other
related production costs. Other expenses include product development expenditure which
has been shown an increase followed by subsequent decrease over the last four years. The
increase in the net value of other expenses can be attributed to the increase in depreciation
expenses. Depreciation is calculated on a straight line basis and the value has shown a rise
The interest expense in 2008 has shown a fall in the period 2007-2008 as compared to the
previous year.
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Chart 3: Cost of sales and other expenses trends
Expenses
Income taxes have shown a steady increase proportionate with the EBT except for
the year 2007 when the company had to shell out more taxes as deferred taxes along with the
current tax expenses.Net income has been steadily increasing over the last four years.
However the growth has declined in the last year because of a decline in the growth of sales.
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RATIO ANALYSIS
Liquidity ratios are a set of financial metrics that is used to determine a company's ability to
pay off its short-terms debts obligations. We have used only the sum of cash and equivalents
divided by current liabilities because they feel that they are the most liquid assets, and would
be the most likely to be used to cover short-term debts in an emergency. Liquidity ratios
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Generally higher value of the ratios means the larger the margin of safety that the company
possesses to cover short-term debts. Common liquidity ratios include the current ratio, the
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DuPont Analysis:
DuPont analysis was first used as a method of performance measurement by the DuPont
Corporation in the 1920s. With this method, assets are measured at their gross book value
rather than at net book value in order to produce a higher return on equity (ROE). It is also
= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)
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CASH FLOW ANALYSIS
The major chunk of cash in flow to the company in the last 4 years has been from the
Operating activities indicates the good health of the company in its operations. There is no
net inflow of cash for the company from investing and financing activities in the last 4 years.
The company has consistently been buying and selling investments which generated net cash
The company has consistently been acquiring new assets over the last four years
which indicates that the company is in expansion mode. The company acquired fixed assets
worth 258Crore in the year 2007 -08 which is significantly higher when compared to the last
3 years. This indicates that the company has begun a massive expansion this year. Asian
Paints has a net decrease in the cash and cash equivalents at the end of 2007-08 owing to the
The company also has only net outflow from financing activities over the last four
years which indicates that the company is self sufficient and it has been repaying its old
loans which is why the company has net outflow of cash from financing activities. The
company has lesser cash outflow in the year 2007-08 when compared to the previous year
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due to considerable reduction in the amount of dividend paid.
The analysis of cash flow statements for the last 4 years indicate that the company is in a
maturing phase and the cash generated from its operating activities are sufficient to cater to
its investing and financing activities. The continuously increasing cash flows from the
operating activities indicate that the cash flows of the company are very healthy.
OPERATING CYCLE
The following tables show the operating cycle calculations for the company
DIO (Days inventory outstanding) is obtained by dividing the average inventory by cost of
sales per day. The DIO has more or less remained in the same range over the last four years.
Compared to the other figures like DSO and DPO this number is a bit on the higher side
which means that the inventory has remained unused for nearly 60 days. The company has
some of its cash lying unused for many days which may not be a very good sign.
DSO (Days Sales Outstanding) is obtained by dividing the average Accounts receivable bynet
sales per day. This number is very low compared to DPO which indicates that thecompany is in a
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strong position in the market and is able to get back its accounts receivableswithin 25 days. This
number also has remained more or less stable over the years indicatingthe strong position of the
The operating cycle of the company has been fluctuating in the range of 46 and 55 in the last
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Chapter 6
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WORK EXPERIENCE
My internship took place in Asian paints, one of the top 5 companies in paint industry. It has well
established operations and supply chain network spanning throughout the country with 7
manufacturing facilities, 85 depots, several regional and area offices with 2500 employees and
over 1500 dealers. I took up internship in the field of marketing. This helped me to know the
customers more and build a good relationship with them. First day at office I was nervous but as I
met my Sir, I was relieved because he was a kind man and he welcomed me with a smile. He
made me choose a topic for my internship and he asked me to start working on the topic. My topic
First week at work sir asked me to know about the company and how it works. So he asked an
employee to show me around the go down and learn how the distribution works in and around the
company. Employees name was Mr.AVIN FRANCIS; AVIN explained to me about the depot in
Bangalore, the main depot is in K.R.market. Then I got to know about variety of paints available in
market. It is divided into two interior (bison, rangoli, easy clean, silk) and exterior (weather coat all
guard, weather coat smooth). The first week I spent my time in the go down and it was a good
experience, got to know more about paints and how does it function.
They also gave me a brief explanation about how the distribution works. The dealer if required of
stock must make the order through call center or the concerned depot. Once the call center
receives an order it is passed to the depot. Depot receives the order in CRM software (customer
relationship management) and then it is sent to the system of the concerned depot, the depot
makes a pick list and sends it to the go down, here the in charge officer checks if the stock is
available and makes a mark against the availability of the stock. Once this is done they send the
information back to the system, they prepare an invoice of the order and sends it to the dealers
thereafter the stock is delivered to the respective dealers. This information was very new to me
and I learned the distribution method happening in the company. The company employee was very
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kind towards giving such information and that made me more comfortable in my work place. They
were ready to give answers to my questions and it made me feel one among them.
They also gave me information on how painting takes place. They told me that painting takes place
in five steps. The first step is making the wall smooth so there is no difficulty in painting process;
they make use of sand paper for this. Second they give a premier coating which is left to dry for 8
hours. Third they give two layer coating of patty, then again premier coating. Last is the final
Second and third week I spent my work in consumer survey. Sir asked me to deal with customers
and to know their reviews about the company. I had to meet 50 customers talk to them and get
their view. This was interesting and helped me to develop my communication skills. Each customer
gave different opinion and told their views about the company.
The main aim of the study was to understand the customers paint purchase preferences and to
analyze the role of influencers in purchase decision and the dealers selling preference/brand
preference. Therefore this survey helped me to know more about the company and their problems.
During my survey I learned about customer behavior and this also developed my communication
skills. It helped me to interact more with the customers and helped me gain more knowledge about
the company. The survey not only helped me to communicate with the customers but also with the
dealers. They gave me information on how they sell their products and convince the customers. I
also learnt that the company provides with different schemes, dealers have to try and achieve
points through selling the products this in turn gives them rewards. I feel this is a great way to
market and sell their products. This will encourage the dealers to sell more goods and earn more
This survey taught me many things and one of it is customer relation. All companies need to have
good relationship with their customers and dealers so it will help them to develop the company and
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improve their products. Customers will develop a trust with the company and they will not hesitate
The last week of my internship was at my office where I spent time in looking through the
customers accounts. It showed me how the customers earn their points. When I was looking
through the accounts, I realized that every customer is given a target to meet. If they don’t meet
their target they don’t get the specified points. Points are very important for the dealers so they get
various rewards which they can enjoy. By this I end my internship and bid goodbye. This internship
was very helpful to me because it helped me to improve my skills and help to know about the office
environment. This was a good experience for me because all this is new to me. It gave me a basic
Conclusion
Findings
Threats of new entrants for dealers in paint industry. The reason is that it is hard to exist in the
market due to intense market competition. The dealers prefer to sell better quality brands that are
fast moving and have got better customer pull. Dealers hold a good opinion about the quality of
Asian paints in comparison with the major market share holder Burger paints. But the dealers are
of the opinion that Asian paints are the most preferred brand for the customers. A large portion of
the respondents’ dealers takes effort to collect customers feedback and understands the
importance of retaining customers. Majority of dealers believe they have got some influence in
altering customers purchase Threat of new entrants is greater for dealers in paint industry. The
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Majority of customers are of the habit of painting their house within 1 to 5 years. Out of that a good
percentage of customers prefer to paint within 3 to 5 years, for whom durability will be an important
factor of concern. The major source of brand awareness is television and friends/family. Hence the
company can focus on these while formulating advertising and promotional programs.
Asian needs to focus on including recall cues and elements in advertisements. Customers are not
able to recall the product name and advertisement of Berger paints as much as they can for Asian
paints.
For majority of customers color shade options and durability are the most important considerations
while making a purchase decision, then comes the price. They tend to do internal information
search and review of past experience before taking purchase decision. The brand awareness and
own experience are the most important factors considered in purchase decision. Customers tent to
avoid dealers suggestion in a view that their motive is to gain profits only but a small portion of the
customers tend to accept painters/contractors suggestion upon consideration that they have
experience with most of the paint brands. The customers prefer to purchase the paint personally
from authorized company dealers. Celebrity endorsements haven’t influenced customers purchase
decision. There is lack of awareness about the company’s painting services among end
customers.
Most of painting contractors used to purchase regularly from regular dealers. This allows the
company for introducing trade promotions concentrating on contractors and their regular dealers
and gives ease of distributing rewards. Most of the contractors recommend paint brands to their
customers. But they are conscious about suggesting a good quality and economical brand in view
of customer retention. Quality and coverage are the factors that contractors consider while
recommending a paint brand for their customers. The contractors are satisfied with their
experience with Berger paint in terms of company support, coverage, range availability, overall
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marketing and brand acceptance level by the customers and they are willing to continue the
usage.
The perceived strength of Asian paints in Bangalore market in terms of quality is coverage,
durability and range availability. Asian paints is perceived to be proving quality products almost as
equal as Burger paints products. It is the promotional activities that make Asian the most
acceptable brand in Karnataka market. As the perceived quality of Asian paints is equal lent to
that of Burger paints it can attempt to capture Burger paints market share on promoting the brand
properly to customers, dealers and contractors. Asian has to focus on building a strong brand
Asian has to concentrate on building a strong brand image along with delivering quality products,
so as to capture more market share in the Burger dominated market. Asian paints should do more
promotions to increase the preference for the brand. It has to focus more on creating impactful
advertisements with good recall cues. They can also focus on newspapers and personal referrals
For customers, spokesperson in the advertisement is not as important as how the advertisement is
being presented. Hence Asian advertisements need to focus on the clarity and simplicity of
As 58% of the sample shows a positive attitude towards company personnel’s visit, company can
avail this opportunity. The company has to employ aggressive and efficient sales personnel with
better product knowledge for this job who have the ability to influence customers.
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Company need to actively promote the painting service to reach the unaware category of
customers. Asian can inform a person about its painting services through advertisements, which
The company has to focus on durability and warranty in case of the painting services. They have
Promoting the brand to the contractors and providing them good margins can help in converting
This can help Asian to dip into Burger paints market share as Burger doesn’t focus on making its
The dealers want to make profit on selling those brands having demand –‘good quality plus
profitable’ brand. Hence the company should not compromise in providing quality products and
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