ASIAN PAINTS LIMITED

Case Study

23rd December 2023

ABOUT THE COMPANY

Asian Paints Ltd is an Indian multinational paint company, headquartered in Mumbai, Maharashtra. It manufactures a wide range of
paints for decorative and industrial use. In decorative paints, the company is present in interior wall finishes, exterior wall finishes,
adhesives, waterproofing, undercoats, enamels and wood finishes. In the industrial segment it operates through two joint ventures
(JV) PPG Asian Paints Pvt. Ltd. (PPG-AP) for automotive, marine and packaging coatings and Asian Paints PPG Pvt. Ltd. (AP-PPG) for
industrial protective coatings, powder coatings, floor coatings and road markings. In the home décor segment, it offers solutions that
includes paints, adhesives, wall coverings, modular kitchens and wardrobes, textures painting aid, bath fittings and sanitaryware,
waterproofing, decorative lightings, wall stickers, furniture, furnishings & rugs, UPVC (unplasticized polyvinyl chloride) windows & door
systems and mechanised tools.
Company’s installed in-house decorative paint manufacturing capacity in India is 17,30,000 kilo litre/annum. It has 27 in-house paint
manufacturing facilities worldwide. It caters to ~1,60,000 touch-points across India.

It operates in emerging economies through its seven corporate brands, viz. Asian Paints, Apco Coatings, Asian Paints Berger,
Asian Paints Causeway, SCIB Paints, Taubmans and Kadisco Asian Paints.

CASE STUDY
ABOUT THE COMPANY

Revenue Mix (FY23)

Segment Wise Region wise**

3%
5%
9%

22%
44%

88% 29%

Decorative & Home Décor business* International business Asia Middle East Africa South Pacific

Industrial business
*Home Décor business currently contributes ~4% of decorative
business revenue
**For International Operations (excluding India)
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GROWTH

SALES GROWTH
In FY23, the company achieved revenue of ₹34,489
cr, with net sales growth of 18.5% YoY. The
decorative volume growth was 14% YoY. It saw some
downtrading due to the calibrated price increases
that they took over the last two years.
The international business witnessed a growth of
6.2% YoY, however the business conditions remained
challenging in Asian countries, while the African and
Middle East market witnessed a healthy double-digit
growth. The home improvement business also
witnessed a double-digit growth.
In H1 FY24, the revenue was ₹17,660 cr an increase
of 3.5% YoY. The sales remained moderate owing to
monsoon season and slowdown in demand from the
rural segment, while urban demand was steady. In
the decorative paints segment, the volume growth
and value growth was 8% and 4.8%, respectively. The
company continued its focus on innovation and new
products contributed to ~11% of overall revenue in
Q2 FY24.
5 Year CAGR: 14.8% CASE STUDY
GROWTH

EBITDA GROWTH
The company’s EBITDA stood at ₹6,260 cr, a growth
of 30% YoY in FY23. The growth was largely
attributable to the growth in the top-line, slight YoY
decline in the raw material inflation and increase in
employee efficiency.
The product mix was led by the economy and
waterproofing range. The Premium range of products
witnessed downtrading.
In H1 FY24, EBITDA was ₹3,838 cr and grew by 38%
YoY. The increase can be attributed to softening of
key raw material price i.e., titanium dioxide (crude
derivative) and utilization of high cost inventory.

5 Year CAGR: 14.4% CASE STUDY

GROWTH

PAT GROWTH
In FY23, the PAT stood at ₹4,101 cr, registering a
growth of 34% YoY. During the period, it recognized
an exceptional expense of ₹49 cr, primarily related to
impairment of asset in Sri Lanka and Nepal due to
adverse currency movements.
In H1 FY24, the net profit was ₹2,747 cr and grew by
52.2% YoY. The company saw an increase in other
income on a YoY basis i.e., from ₹194 cr in H1 FY23 to
₹362 cr in H1 FY24.

5 Year CAGR: 15.7% CASE STUDY

 GROWTH EDGE METER

An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating.
Since judgement on equity is subjective because different people will have different expectation from their investments, it
is better to study each aspect and give an individual grading to arrive at the final evaluation of a stock.

CASE STUDY
PROFITABILITY

EBITDA MARGIN
In FY23, the EBITDA margin was 18.2%.
Improvement in margin was mainly due to the
decline in cost of raw materials.
Going forward, the EBITDA margin is expected to be
in the range of 18%-20%. The company may extend
discounts or rebates to its customers to pass on the
benefit of decrease in raw material prices. Eyeing on
the growing competitive environment, it plans to
increase the advertisement expenditures from its
current range of 3%-3.5% of its revenue.
In H1 FY24, the EBITDA margin stood at 21.7% an
expansion of 542 bps YoY. There was a raw material
price deflation of 600 bps in H1 FY24.

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PROFITABILITY

PAT MARGIN
PAT margin was 11.9% in FY23.

In H1 FY24, the PAT margin stood at 15.6% exhibiting

a YoY increase of 498 bps.

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PROFITABILITY

ROCE
In FY23, ROCE increased to 37%.
The company continued expansion of distribution
footprint and it is catering to over 1.6 lac retail
touchpoints, added 2,500 touchpoints in Q2 and
during H1 FY24, the additions were 5,000. Towards
the end of H2 FY24, the total additions would be
~8,000-10,000 touchpoints.

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PROFITABILITY

ROE
ROE improved to 28% in FY23.
For the previous five years, the company maintained
its ROE in the range of 23%-28%.

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 PROFITABILITY EDGE METER

An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating.
Since judgement on equity is subjective because different people will have different expectation from their investments, it
is better to study each aspect and give an individual grading to arrive at the final evaluation of a stock.

CASE STUDY
EFFICIENCY

CASH FLOWS
In FY23, the company generated a cashflow of
₹4,193 cr. CFO for the year increased YoY primarily
on account of increase in net profit before tax and
working capital adjustments.
The company had a net cash outflow of ₹1,275 cr
from investing activities, primarily owing to the
purchase of PP&E.
The cash outflow from financing activities was
₹2,140 cr, mainly on account of payment of
dividends.

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EFFICIENCY

WORKING CAPITAL CYCLE

Company’s working capital days stood at 16.5 in
FY23.

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EFFICIENCY

FREE CASH FLOW

In FY23, the free cash flow per share was ₹29.6.
The company has planned an investment of ₹8,750
cr, that is to spent over the next three years. This
shall entail spending towards VAE (Vinyl Acetate
Ethylene Emulsion) and VAM (Vinyl Acetate
Monomer); backward integration in the white
cement space and therein it has entered into a JV;
brownfield expansions at its existing decorative paint
plants at Kasna, Khandala, Ankleshwar, and Mysuru,
along with other regular capex. It has plans to set up
a new water-based paint manufacturing facility as
well.

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EFFICIENCY

ASSET TURNOVER RATIO

In FY23, the asset turnover ratio increased to 1.69x.
The rise was on account of increase in sales.

CASE STUDY
 EFFICIENCY EDGE METER

An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating.
Since judgement on equity is subjective because different people will have different expectation from their investments, it
is better to study each aspect and give an individual grading to arrive at the final evaluation of a stock.

CASE STUDY
SOLVENCY

DEBT TO EQUITY
The debt-to-equity ratio was 0.1x.
As on 30th Sep 2023, the company had long-term and
short-term debt worth ₹59 cr and ₹1,039 cr,
respectively.

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SOLVENCY

INTEREST COVERAGE RATIO

The company has sufficient resources to meet its
interest obligations.

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SOLVENCY

CURRENT RATIO
In FY23, the current ratio was at 2.1x.
Current assets largely comprises of inventories, trade
receivables and investments. Current liability mainly
consists of trade payables and other financial
liabilities.
As on 30th Sep 2023, the company had cash and bank
balance of ₹758 cr.

CASE STUDY
 SOLVENCY EDGE METER

An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating.
Since judgement on equity is subjective because different people will have different expectation from their investments, it
is better to study each aspect and give an individual grading to arrive at the final evaluation of a stock.

CASE STUDY
VALUATION

PE RATIO
The company is currently trading at a TTM PE
multiple of 63.31x.
Asian Paints leadership position in domestic paints
industry along with largest distribution network
provides company with a premium valuation. In
future as well, expansion of distribution reach and
product innovation remains key strategies for
growth. Rapid urbanisation, consumers upgrading to
a better lifestyle and improving infrastructure are
some of the key long-term growth drivers for the
paints industry in India.

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VALUATION

DIVIDEND YIELD
Total dividend for FY23 stands at ₹26 per share. The
dividend payout ratio was 59.9%.

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VALUATION

KEY LEVELS
Asian Paints had been consolidating between ₹1100
and ₹1500 between the year 2017 and 2019. Finally,
the stock broke out beyond ₹1500 in Sep 2019 and
moved higher up to ₹1900. It then retested the
₹1500 odd level in the Covid panic. Since then, the
stock rose continuously and made a life-time high in
Jan 2022.
However, post that rising crude oil prices resulted in
some cooling off in the stock price. This was followed
by quick recovery to previous high.
The zone of ₹2700-₹2950 would act as a strong base
for accumulation for the stock.

CASE STUDY
 VALUATION EDGE METER

An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating.
Since judgement on equity is subjective because different people will have different expectation from their investments, it
is better to study each aspect and give an individual grading to arrive at the final evaluation of a stock.

CASE STUDY
QUALITY

MANAGEMENT
Amit Syngle, has been associated with the company
for more than 29 years. He is a mechanical engineer
and a postgraduate in management from UBS,
Chandigarh. He started his career with the company
as a management trainee. He has worked in various
capacities and across functions sales, marketing,
supply chain & research and technology.
RJ Jeyamurugan is a Company Secretary and
Chartered Accountant by qualification. He joined the
company in 1991.

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QUALITY

SHAREHOLDING PATTERN
Promoters’ stake in the company was 52.63% in Q2
FY24.
FII stake increased from 17.48% in Q1 FY24 to
17.65% in Q2 FY24.
DII increased their stake in the company from
10.04% in Q1 FY24 to 10.05% in Q2 FY24.
Top Public Shareholding:-
LIC of India 4.48%
SBI Nifty 50 ETF 1.52%

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QUALITY

SECTOR POTENTIAL
• The domestic paint industry consisting of the decorative and industrial paint segment is estimated at over ₹70,000 cr. The
decorative paint segment constitutes 75% and industrial paint segment makes up the balance 25% of the domestic paint market.
Indian paint industry is projected to reach a market size of ₹1,00,000 cr within the next five years.
• 75% of the Indian paint industry is dominated by the organized players and rest by the unorganized players. Increased customer
awareness has led to a shift in preference from unorganized to organized players, reducing dealer influence and making it
imperative to establish a strong brand image.
• The residential sector in India has recorded a 9-year high sales volume during January–June 2022. Further, the measures from
government for making houses affordable would aid the decorative paints demand in future.
• The Indian paint industry has been witnessing a gradual shift in the preferences of customers from the traditional whitewash to
high-quality paints like emulsions and enamel paints, which is providing the basic stability for growth of Indian paint industry.
• Rise in the disposable income of average middle class, rapid urbanization and various launches of innovative products, like friendly,
odour free, and dust & water-resistant paints, are major drivers that are propelling the growth of the paint market in India.
• Crude oil forming an essential component of raw materials for paint companies, any volatility in its price will need to be critically
monitored to cushion the impact on profitability.

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QUALITY

COMPETITIVE LANDSCAPE
The Indian Paint sector resembles an oligopoly
market, with few big players constituting majority
share and strong entry barriers like brand value and
dealer distribution network. Increased customer
awareness has led to a shift in preference from
unorganized to organized players, strengthening the
value of brand equity.
Asian Paints has been a leader in terms of both
volume and value of market share. It also has a
widespread dealer network in the country,
significantly more than its competitors.

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QUALITY

FUTURE OUTLOOK
• The company is committed to take home décor segments revenue contribution to 8%-10% of decorative business by FY26.
• Company’s work on capacity expansion and backward integration initiatives are progressing well which shall be coming up in the 2
years. ~50% of the said capex (of the ₹3,400 cr shared for brownfield expansion, ~₹1,500 crore has been utilised) has been utilised
towards the project expansion.
• Towards, the White cement project in Fujairah (Dubai), the company stated that it is in the process of getting approvals for land
acquisition & agreements and it is ordering equipments for entire project. As per the timeline, this project should get complete by
the end (December) of 2025. The VAM (Vinyl Acetate Monomer) and VAE (Vinyl Acetate Ethylene Emulsion) projects are
proceeding well in terms of layouts & permissions, etc, and it shall be ready by Q4 FY26.
• Towards the Ankleshwar project, (for expansion of manufacturing capacity of paints, resins & emulsions) the management stated
that it is expected to become operationalised by December 2023.
• It completed the launch of Nilaya Naturals. Nilaya Naturals has over 90% natural content, leaving behind negligible carbon
footprint. The same is packaged in ocean recycled plastic, a first in the Indian paint industry.

CASE STUDY
 QUALITY EDGE METER

An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating.
Since judgement on equity is subjective because different people will have different expectation from their investments, it
is better to study each aspect and give an individual grading to arrive at the final evaluation of a stock.

CASE STUDY
FINAL EDGE MATRIX

Growth Efficiency Valuation

TOTAL

3 + 4 + 4 + 5 + 3 + 4 = 23

Profitability Solvency Quality

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 THANK YOU
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