Financial Report Analysis of Asian Paints 2016-17
Financial Report Analysis of Asian Paints 2016-17
by
ASHUTOSH SINGH
(ROLL NO-A35904616016)
Declaration
This is to declare that this report has been written by me. No part of the report
is plagiarized from other sources. All information included from other sources
have been duly acknowledged. I aver that if any part of the report is found to
be plagiarized, I shall take full responsibility for it.
Ashutosh Singh
A35904616016
Place : Ranchi
Date : 09-03-2018
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CERTIFICATE
This is to certify that this project report entitled “COMPANY REPORT (ASIAN
PAINTS) FY: 206-17” submitted to Amity University Jharkhand, is a bonafide
record of work done by “ASHUTOSH SINGH” under my supervision from “ 19TH
FEB” to “ 9TH MARCH”
Place : Ranchi
Date : 09-03-2018
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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. Soovana Choudhry, for
his outstanding teaching, his valuable guidance and his support in completing this project.
We extend our gratitude to Amity University Ranchi, Jharkhand 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
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INDEX
Sr No. Particulars Page No.
1. Introduction 6
Objectives
Analysis methodology
2. CONSILADETED BALANCE SHEET OF FY 7
2016 & 2017
5. Income Statement 13
6. Analysis of Asian Paints: Trend 15
INTRODUCTION
Objectives Achieved
Analysis methodology
Done Trend analysis, Vertical analysis, and Ratio analysis of both Asian Paints
and Berger Paints and compared each other. We also did the forecasting for
Sales and Net Profit of Asian Paints for the next financial year.
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LIABILITIES
NON-CURRENT LIABILITIES
Financial Liabilities
Borrowings 41.07 72.63
Other Financial Liabilities 7.02 10.62
Provisions 146.03 121.37
Deferred Tax Laibilities (Net) 359.19 296.83
Other Non-Current Liabilities 3.65 1.82
557.14 503.27
CURRENT LIABILITIES
Financial Liabilties
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Income Statement
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The Loans and Advances of the company, both Long and Short Term have shown an
irregular trend over the period.
Employee Benefit Expenses have increased continuously over the period, showing
that the company is willing to share the benefits of increased revenues with its
employees. This also sheds light on the HR practices of the company, telling us that
the company believes in the philosophy: Happy employees are productive
employees.
Company’s Tangible Fixed Assets show an irregular growth during the period and
the Intangible Fixed Assets show a high growth during period. It signifies that the
company has acquired a lot of Patents and Exclusive Rights during the period. It
may also signify a sharp increase in the company’s Goodwill, though a Goodwill
revaluation looks unlikely. This increase in assets over the period of time.
The Net Revenue from Sales has shown a steady decline when expressed as a
percentage of Sales Revenue, even though the Revenue in absolute terms has increased.
This declining percentage can be directly attributed to an increase in the excise duty over
the years. This implies that the company has increased its scale of operations.
Other Incomes of the company have also increased over the years, albeit
irregularly. Much of this income can be attributed to Interest Income Received from
Investments as the Investments of the company show a similar trend.
The Cost of Materials Consumed, though increased in 2011-12, declined
continuously after that during the period. This implies the company has increased its cost
efficiency. It can also be implied that the inputs cost have decreased.
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The company’s Purchases of Stock-in-Trade has risen continuously over the years,
solidifying
the ground for our assumption that the scale of operations has increased.
The EBITDA, Profit Before Exceptional Items and Taxes, Profit Before Tax and Profit
After Tax
as a percentage of sales have continuously decreased over the year.This implies
that the input costs have been reduced during the year 2016-17.
The Finance Costs of the company increased during the year 2011-12. This can be
directly attributed to Interest on Short Term Borrowings, which increased almost 35 times
during one year. After that the Finance Costs have declined continuously as a result of
continuous decline in the Long Term Borrowings and Redemption of the Short Term
Borrowings.
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Working Capital:
Current Ratio:
Quick assets are those current assets that are quickly convertible into
cash. They excludes merchandise inventories ,because such
inventories have yet to be sold and are not quickly convertible into
cash.
The quick ratio of Asian paints in 2016 is 0.91. Some conclude that a
quick ratio less than 1:1 is of poor quality but considering the very fact
that higher quick ratio is mainly necessary for those companies which
face difficulty in borrowing, and not for the companies like Asian paints,
who consistently perform well, we conclude that this .19 difference
from the benchmark is not a highly damaging point.
Analysing Debt of Asian Paints:
Debt ratios show the extent to which a firm is relying on debt to finance its
investments and operations, and how well it can manage the debt
obligation. If the company does not manage its debt properly, it may
bankrupt like in the case of Kingfisher Airlines. On the other hand, if it uses
borrowings efficiently it can build business by exploring and expanding to
new frontiers. There are various ratios which test the debt repaying ability.
They are:
In fact, it is the real estate sector that bought the 2008 subprime crisis
and key reason is it exponentially high debt to equity ratio and high
debt to asset ratio.
Interest Coverage (or Times Interest Earned) Ratio:
This ratio shows the firm’s ability to pay the fixed interest charges (on
both short-term and long-term debt) with current earnings.
Higher is the ratio, more is the capacity of the firm to meet the interest
payments.
Generally if the ratio is above 1.5 it is considered to be able to pay its
interest.
Analysing Profitability:
Operating Margin:
Return on Assets:
Return on Equity:
Days in Inventory:
This shows that though they have increased the assets hugely, there is
a further scope for improvement as far as sales is concerned. Asian
Paints can utilize their resources more efficiently. The reduced ROA
also underlined the same signal.
Having said the above, it may not be fair on our part if we don’t consider
the very fact that the market slowdown may have interrupted their
investment plans and the demand in the market, than they expected.
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Return on
Assets
83.17 19.8 61.5 21.77
Excluding
Revaluations
High
Management Efficiency Ratios
Inventory
Turnover 6.5 5.21 8.31 6.66
Ratio High
Debtors
Turnover 11.35 8.75 12.8 9.23
Ratio High
Investments
Turnover 6.5 5.21 8.31 6.66
Ratio
High
Fixed Assets
Turnover 4.35 3.96 3.35 3.52
Ratio
High
Total Assets
Turnover 1.87 2.09 2.64 2.72
Ratio
High
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Asset
Turnover 2.08 2.35 2.67 2.66
Ratio High
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1.4
1.2
0.8
0.6
0.4
0.2
0
2015-16 2016-17
Asian Berger
Asian Berger
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0.07
0.06
0.05
0.04
0.03
0.02
0.01
0
2015-16 2016-17
Asian Berger
100
80
60
40
20
0
2015-16 2016-17
Asian Berger
27
20
15
10
0
2015-16 2016-17
Asian Berger
12
10
0
2015-16 2016-17
Asian Berger
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80
70
60
50
40
30
20
10
0
2015-16 2016-17
Asian Berger
0
2015-16 2016-17
Asian Berger
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14
12
10
0
2015-16 2016-17
Asian Berger
0
2015-16 2016-17
Asian Berger
j
30
Asian Berger
2.5
1.5
0.5
0
2015-16 2016-17
Asian Berger
31
2.5
1.5
0.5
0
2015-16 2016-17
Asian Berger
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Asian Paints is the leading Paint manufacturing company in India with a market
share of over 54 percent.
Strength
Strong Growth: Asian Paints has shown a healthy growth of around 8 – 12 % in the past 5
financial years. This has made sure that the company maintains the top spot as far as market
share is concerned. It is double the size of any other paint company in India. Strong Global
Presence: Asian Paints has a wide footprint on a globe operating in 19 countries and have 26
manufacturing units around the world. Asian Paints serves in over 65 countries and is the fourth
largest paints company in Asia.
A wide range of Products: The Product portfolio of Asian Paints allows them to cater to
different segments and industries, they are present in the Industrial coatings, Decorative paints,
Ancillaries, Asian Paints Royale etc. This allows them to penetrate different segments of
business and sections of society which helps them maintain market share.
Brand Value: Asian Paints was ranked 20th in the Top 20 best brands in Interbrand report
by Economic Times. It also featured in the Top 20 World’s Most Innovative companies.
Strong Supply Chain Management: Asian Paints has is a superior technology driven
company which has focused on integrating Supply Chain Management (SCM) and Enterprise
Resource Planning (ERP) solution from SAP.
Marketing campaigns – Asian paints has always had good marketing campaigns. It has
continued its association with Saif Ali khan over the years and had also roped in Soha ali khan
for a beautiful campaign. From time to time it has roped in other personalities for ads but Saif
Ali khan has been a constant. Recently, Deepika padukone has been chosen as their brand
ambassador for Asian paints Royale play. Their brand mascot – GATTU is very famous too
and is one of the most popular brand mascots of India.
Asian paints royale play – The Royale play was an amazing and breakthrough concept
launched in the market by Asian paints wherein painters from the company themselves will
paint your house using unique designs and colours. These painters were specially trained and
consumers relied on them because they came from the house of Asian paints. Deepika
Padukone is the brand Ambassador for the sub brand.
Weakness
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Low Market Share in Industrial and Auto Paint: Asian paints has a low market share in the
industrial paint (about 15 percent) and auto sector (about 20 percent) when compared to Kansai
Nerolac and AkzoNobel.
Slow International Business: Except for Bangladesh, Nepal and UAE, Asian Paints have been
performing below par in other overseas countries.
Opportunity
Growth in Industrial Sector: It has a chance to acquire market share in the Industrial as well
as automobile sector as well considering the current market situations.
Growing Indian Economy: With growth in Indian Economy and developing infrastructure,
Asian Paints has a chance to increase revenue base and venture into smaller cities, to increase
sales.
Emerging Nations: Asian Paints’ vision is to become one of the top five decorative coatings
companies in the world. This can be achieved by focusing on the emerging economies of the
world.
Threats
The threat of Slowdown: Any Economic slowdown will have a direct negative impact on the
construction industry and consequently paint industry will also get affected.
Unorganised sector: The unorganised sector still has about 35 percent of the market share and
this can prove out to be a deterrent to the growth of the industry.
The scarcity of Raw materials: The raw materials required in the Paint industry control
the pricingof paint and scarcity can cause a jump in the prices, which can be a threat for the
Paint Industry.
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Conclusion:
According to the Trend, Vertical, and Ratio analysis we did for the Asian Paints and its
competitor, Berger Paints, we conclude that Asian Paints managed their business
better compared to the Berger Paints.
Any investor will expect a comparatively a better choice among the given options. He/She
may choose the company if that company performs better in majority of the crucial 16
parameters those are analysed. What if a company clean sweeps all the 16 parameters?
Asian Paints did the same. Though its latest performance in some parameters like Interest
Coverage Ratio, Operating Margin, Net Profit Margin, and ROA decreased compared to the
previous years, it did well in comparision to its peers.
We understood that subprime crisis, economic downturn, high inflation, real estate bubbles,
and slow construction sector are some of the reasons for the reduced performance.
Despite all the hurdles it faced, Asian Paints performed fairly well and that is the reason
for increase in its share price by 3 times, in a short span of 5 years, while Berger Paints
share increased only 2.2 times.
In a nutshell, Asian Paints deserves its first place in the market and should be the first
investment option for any investor, who is interested in Paint industry.
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