A REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE

REEQUIREMENTS FOR THE DEGREE OF

Master of Business Administration
BY
RAHUL KUMAR YADAV-1806260046

TOPIC-ASIANPAINTS INDUSTRY

ROURKELA INSTITUTE OF MANAGEMENT STUDIES

MARCH 2019

GUIDED BY

Prof. Santosh Kumar Biswal

 ACKNOWLEDGEMENT

“It is not possible to prepare a project report without the assistance & encouragement
of other people. This one is certainly no exception.”

On the very outset of this report, we would like to extend my sincere & heartfelt
obligation towards all the personages who have helped us in this endeavour. Without
their active guidance, help, cooperation & encouragement, we would not have made
headway in the project.

We are extremely thankful and pay our gratitude to our faculty Prof. Santosh Biswal,
for his outstanding teaching, his valuable guidance and his support in completing
this project.

We extend our gratitude to Rourkela Institute of Management Studies for giving us

this wonderful opportunity to learn about the need for Financial Analysis &
complexities in an investment decision making.

Any omission in this brief acknowledgement does not mean lack of gratitude.

Thank You!
 TABLE OF CONTENTS

INRTODUCTION

INTERNATIONAL STRATEGY

MARKET SHARE

MAJOR PLAYERS

SUPPLY CHAIN

HUMAN RESOURCE

PEST ANALYSIS

SWOT ANALYSIS

PORTER’S FIVE FORCE MODEL

OBJECTIVES ACHIEVED

FUTURE GROWTH OPTION

ANALYSIS REPORT

CONCLUSIONS
 INTRODUCTION

Asian Paints is India’s leading paint company with a group turnover of Rs 168.43 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, Apco Coatings, SCIB Paints, Taubmans, Causeway Paints and Kadisco.

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.

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 has discontinued production of Phthalic Anhydride from end of July 2017.

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.
About Asian Paints

 Started in 1942 by four entrepreneurs: Choksey Brothers.

 In 1967, Asian Paints became the 10th largest paint company in the

world.

 In 1973, it became a public limited company.

 In 2002, it was a market leader of Indian decorative paints.

With a turnover of Rs.158.5 billion ,Asian Paints operates in 19 countries and

have 26 manufacturing facilities, and serving customers over 65 countries

Vision

“ Asian Paints aims to become one of the top five decorative coatings

companies world-wide by leveraging its expertise in the higher growth

emerging markets.” “ Simultaneously, the company intends to build long term

value in the industrial coatings business through alliances with established

global partners.”
INTERNATIONAL STRATEGY

• All the research and development centres of the company is in India.

Asian Paints have a Research & Technology centre at Turbhe on the

outskirts of Mumbai. PPG Asian Paints, the subsidiary of Asian Paints

Ltd have a R&D centre in Mumbai and Chennai.

• Asian Paints have 23 manufacturing facilities around the world. All of

these facilities are managed by the corporate office in India.

COMPARATIVE POSITION OF COMPANY

India’s paint industry: market share of major players

Source-Economic Times(October 2017)

MARKET SHARE OF THE PAINTS INDUSTRY ACROSS
INDIA IN FY 2017, BY COMPANY

Source-Economic Times(October 2017)

SUPPLY CHAIN

Asian Paints has harnessed the powers of 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. The company has two chemical plants, 18 processing
centres, 350 raw material and intermediate goods suppliers, 140 packing material vendors,
6 regional distribution centres, 72 depots. The supply chain runs through a wide spectrum
of functions right from materials planning to procurement to primary distribution.
HUMAN RESOURCES

Asian Paints believes that people are its strongest assets, for a company can go only as
high as its people aim. It is people who innovate and invent, and who engineer the
efficiencies that make a business succeed. It is they who drive growth and lead to greater
heights. At Asian Paints, our human resources systems are designed to create a focused,
performance oriented and agile company. A talent pool of over 4700 employees employed
across 23 countries bring in a unique blend of mindsets and skills.

RETAIL INITIATIVES & INFORMATION TECHNOLOGY

 Asian paints introduced colour world which offer a wide range and choice
in colours. It also offer painting solutions for children with the launch of
Kids World.
 The company now introduced Asian Paints Home Solution which provide
toll free helpline service where consumers call and ask queries related to
painting.
 Asian Paints has launched a supplier portal that includes an automated
digital document exchange facility that will improve the efficiency of
interaction with suppliers. An employee portal has also been set up.
Customer Relations Management (CRM) tools are being used in Asian
Paints Helpline.

RESEARCH AND DEVELOPMENT

 Supports Manufacturing in process cycle time reduction & improves

productivity by alternate / break through processes
 Provides solutions to environmental issues by minimizing waste at the
time of generation and also in recycling
 Aids Marketing in providing technical tools/USPs to demonstrate and push
new products
CLIMATE(PEST ANALYSIS)

 Political Factors:

• India is the largest democracy in the world

• The Government is federal public

• Political situation is more or less stable in nature

• Export oriented economy

 Economic Factors

• Market based Economy

• Second fastest growing economy in world

• Third largest in terms of purchasing power

• Introduction of FDI in new sectors

  Social Factors

• India, second largest populated in world

• Rise in price of raw material

• Import of raw material

 Technological Factors:

• Emerging IT sector

• Modernization of paint like water proof, Teflon, creative colors

• Lead free paints

SWOT ANALYSIS

Strengths

 Market leader

 Large capacity manufacturing plan

 Strong international presence

 Wide distribution Network

Weaknesses

 Industrial business performing below par

 Limited market share in industrial paints

 products become obsolete

Opportunities

 Fast growing Indian economy

 Shorter repainting cycles

 Growth in the tier II and III towns

 Good scope for growth especially in industrial paints category

Threats

 Competition from the majors world players

 Rising cost of raw materials

 Unstable political situation in middle east

MICHAEL PORTER’S FIVE FORCE MODEL ANALYSIS OF
PAINT INDUSTRY

 THREAT OF NEW ENTRANTS

 Paint market in India is dominated by few players, making it

difficult for anyone newly entering the industry to compete.

 It is estimated that 18-20% of the total raw materials used in the

industry are imported

 Working capital needed is high-causes difficulty to local players

& big firms enjoy economies of scale

 Big players have high brand image & quality products

Threat of new entrants is Low
  THREATOF SUBSTITUTES

 In rural areas lime wash is used as substitute

 Another alternative for decorative wall paints available today is

Wallpaper

 Availability of Paint varieties are there

 Buyer propensity to substitute is low

 Relative price performance of Decorative walls is High

Availability of substitutes is Low

 BARGAINING POWER OF SUPPLIERS

 Raw material intensive production- over 300 raw materials make the
final product

 Raw materials-pigments, binders, additives, solvents, etc.

 Titanium Dioxide is one of the key pigment used in he production of

paint and is facing a global supply shortage. Thus supplier of this

material has solid bargaining power.

 Other raw materials-crude derivatives-have high price fluctuations

affecting industry profits

Bargaining power of suppliers is Medium

  BARGAINING POWER OF BUYERS
 Households and Industrial Users are the main customers of this
industry.
 For housing requirements, the buyers are building contractors who
buy in bulk and end people who paint their house. Customers are
more price sensitive because for them number of options are
available
 Industrial segment is low margin high revenue business and
buyers of these segments are knowledgeable about their needs.
Therefore, price comparison is done effectively by the customers.
However, The leading Industrial paint suppliers have their
expertise in their favour, which limits the bargaining power of
buyers.

Bargaining power of buyers as a whole is Medium.

 COMPETITIVE RIVALRY
 About 80% of organized sector contributed by top 3
players
 Current market growth rate can provide ample room of
opportunity for all the players of the industry to flourish.
 Asian Paints is the only paint company that
manufactures PAN(phthalic anhydride) which is one of
the main raw material for paint industry.
 Presence of unorganized sector –can cause competition

Competitive rivalry is Low

OBJECTIVES ACHIEVED

Through this financial accounting project we:

 Had a first hand experience of analyzing financial statements.

 Critically examined the performance of Asian Paints vis-à-vis its

closest competitor i.e. Berger Paints.

 Observed the level of consistency in the financial performance of

Asian Paints.

 Understood the roles of the various heads of the accounts which are

part of financial statements of the company.

 FUTURE GROWTH OPTION

• The paint industry is in growth stage in India as construction activity has

a high priority.

• To keep their dominant position Asian Paints should pursue vigorous R

& D for innovative products .

• Increase the number of depots for covering the entire country

• Has launched E-Strides, an ERP (Enterprise resource planning)

• Predator pricing- Predatory pricing (also undercutting) is a risky, and

dubious pricing strategy where a product or service is set at a very low price,

intending to drive competitors out of the market, or create barriers to entry for

potential new competitors

Paints Sector Analysis Report

 Demand for paints comes from two broad categories:

 Decoratives:

Major segments in decoratives include exterior wall paints, interior

wall paints, wood finishes and enamel and ancillary products such
as primers, putties etc. Decorative paints account for around 80% of
the overall paint market in India. Asian Paints is the market leader
in this segment. Demand for decorative paints arises from
household painting, architectural and other display purposes.
Demand in the festive season (September-December) is significant,
as compared to other periods. This segment is price sensitive and is
a higher margin business as compared to industrial segment.
  Industrial:

Three main segments of the industrial sector include automotive

coatings, powder coatings and protective coatings. Kansai Nerolac
is the market leader in this segment. User industries for industrial
paints include automobiles engineering and consumer durables.
The industrial paints segment is far more technology intensive than
the decorative segment.

 The paints sector is raw material intensive, with over 300 raw
materials (50% petro-based derivatives) involved in the
manufacturing process. Since most of the raw materials are
petroleum based, the industry benefits from softening crude
prices.
 2017-18 was an eventful year for the domestic market. The
introduction of GST ushered in a new era in Indian business.
The Paint industry successfully adopted the new Tax system
put in place.
 The industry did feel the impact of demonetization as well as
GST and demand as a whole for the industry was subdued in
 both the segments. The organized players are expected to
perform better than the small and medium scale players. The
industry however views GST as positive and beneficial in the
long run.
 Under the make in India initiative, the government of India
aims to increase the share of the manufacturing sector to the
gross domestic product (GDP) to 25% buy 2022 from existing
16%.

PROSPECTS:-

 Decorative paints segment is expected to witness higher growth

going forward. The fiscal incentives given by the government
to the housing sector have immensely benefited the housing
sector. This will benefit key players in the long term.
 The Indian paint and coating industry is expected to grow
steadily in the short and medium term on the back of strong
growth in Indian economy. India’s young population represents
a huge opportunity as more young Indians join the workforce
and will have disposable income available.
 Manufacturing sector grew at a CAGR of 6.9% between FY12
and FY18.
 Huge domestic market with a rapidly increasing middle class
and overall population. By 2030, Indian middle class is
expected to have the second largest share in global
consumption at 17%. (Source IBEF)
 Just like GST, the Government is expected to continue with its
reforms agenda, with policy decisions to come in sectors like
infrastructure and power. These reforms would provide great
impetus to the economy as well as to the paint industry.
 Decorative paints segment is expected to witness higher growth
going forward. The fiscal incentives given by the government
to the housing sector have immensely benefited the housing
sector. This will benefit key players in the long term.
 CONCLUSIONS & SUGGESTIONS
 Indian economy is one of the Fastest growing economies in the
world as per the Central Statistics Organisation (CSO) and
International Monetary Fund (IMF). It will be one of the top three
economic powers in coming 10 to 15 years due to strong
democracy support and partnerships.

Thank You!