Case Study: Asian Paint

Paint industry growht was at a rate of 12% during 1995-96. The industry as a whole will continue its grow at not less than 8- 10% rate in the coming years. Assian Paints is the leader in decorative paints, controlling 45% of market segment of the total of Rs. 1,800 crore paints and varnishes industry. In industrial paints, it is the largest player with a market share of 14%. With a low per capita consumption of paints in our country, it has good future prospects. The prospects for exports are good with an actual export of Rs. 16 crore in 1995-96. The users in industrial sector, namely, automobiles and its accessories, Household appliances and consumer durables etc. are showing prospects of rapid growth Thus, the potential for the industry both in the domestic and export sector is good. Asian Paints which is a leader in this industry has an installed capacity of 1.08 lakh T.P.A. of Paints enamels and varnishes. Its gross block grew from Rs. 123 crores in 1993-94 to Rs. 187 crores in 1995-96, due to continuous expansion of capacity. The sales turnover recorded a compound growth rate of 13.5% p.a. during the last five years, while its net profit grew faster by 27.5% during the same period.

This company has many plus factors :

1. Good Collaborator namely, Chemische Werke HHals A.G. Germany for manufacture of Vinyl Pyrdine Latex and PPG Industries Ine. USA, for electro deposition coating on automobiles.

2. Product differentiation and brand image is secured by Assian Paints by spending only 1.5% of revenue on advertiseents to testing the quality, availability and

dependability.

3. Plants well distributed geographically.

4. Six joint collaborations in foreign countries and good export growth.

5. Good stress on R & D for absorption of foreign technologies and their upgradation.

Asian Paints is one of the three winners of the ET Harward Business School Association of India awards for its performance in 1994-95. The measures used by them are as follows:

Financial Ratios of the Company

Gross Profits / Total assets 21.36%

Retained Profits/Net worth 18.24 %

Net Profit / Net Worth 25.96%

Growth in Market Cap / Growth in Net worth (over 5 years)

1.60

Cash flow to gross assets 20.64

Questions:

1. Comment over companys financial position?

1. Prepare fundamental analysis?

1. Explain companys Growth Prospects?