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Asian Paints – Anchoring the show

Jun 10, 2000

All paint majors had a good year in terms of demand thanks to the tax sops for the housing sector and the buoyant automobile industry growth. But one company stands out of its peers through its performance. Asian Paints Limited. Asian Paints the market leader in the paint sector has led the show for the year ended FY00 both on the sales growth and bottomline. The company’s has outperformed the market with a 23% increase in sales (4.2% for ICI India, 15% for Goodlass Nerolac) volumes, a record for last 20 years. But the value growth was lower (18%) since prices were reduced twice during the year. The company is planning to declare a bonus issue at the rate of 3:5.

Powered performance…
(Rs m) Asian Paints ICI Ind Goodlass
Nerolac
Sales 10,662 8,999 6,292
Other Income 136 56 -
Expenditure 8,885 8,076 -
Operating Profit (EBDIT) 1,777 923 -
Operating Profit Margin (%) 16.7% 10.3% -
Interest 203 155 -
Depreciation 278 233 -
Profit before Tax 1,432 591 423
Other Adjustments - 52 -
Tax 458 - 123
Profit after Tax/(Loss) 974 643 300
Net profit margin (%) 9.1% 7.1% -
Earnings per share* 24.3 15.7 19.7

The company’s bottomline has grown by 27% compared to Goodlass Nerolac’s 18% and ICI India’s 5%. The operating margin of the company has also improved from 14% to 17%, which is also healthier.

Market View
The company has targeted gross sales of Rs 2,100 m compared to the current sales of Rs 1,335 m by FY03. This seems to materialise taking into consideration the IT initiatives (ERP and SCM) taken by the company on the distribution front to minimise the cost on inventory and receivables. Though there were few hiccups on the reports of deficit rainfall, the southwest monsoon has not disappointed. The affected areas like Gujarat, Rajasthan and Andhra Pradesh are expected to see an average rainfall.

Perhaps, the only apprehension is the depreciation in rupee. If the crude prices remain at the same rate combined with the depreciation in rupee, the company may have to increase the prices of paints, which may affect the sales. If on the other hand the company were not to pass on the hike in costs, the markets would suffer.


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