X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Asian Paints: Spreading wings - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 16, 2002

    Asian Paints: Spreading wings

    There are very few examples of Indian companies that look beyond domestic shores and aim of making it big in the international arena. Asian Paints (APL) is one of them.

    The domestic market leader recently acquired two companies, one in Egypt and the other in Singapore. The first acquisition, SCIB Chemicals S.A.E, Egypt, is one of the top five paint companies in Egypt. The acquisition for a 60% stake in the company was made at a consideration of US$ 5 m (Rs 250 m). As per the management, the Egyptian paint market offers similar growth prospects like India with reforms gaining momentum. The estimated Egyptian paint market is 140,000 metric tonnes (MT) valued at Rs 7.5 bn. To put things in perspective, this amounts to around 15% of the Indian paint market size of Rs 50 bn.

    Another significant move by APL is the acquisition of Berger International (BIL), the Singapore stock exchange listed paint major. BIL has operations in 11 countries that include China, Singapore, Thailand, Malaysia, Myanmar, Bahrain, Malta, United Arab Emirates (UAE), Jamaica, Barbados and Trinidad & Tobago. BIL also holds a 30% stake in Dutch Boy Philippines Inc (a Philippines based paint company). The combined paint manufacturing capacity is estimated at 50,000 MT (22% of APLís existing capacity). The acquisition consideration, funded by APL, would amount to Rs 576 m (US$ 12 m).

    Acquisition detailsÖ
    Company Stake Presence Consideration (Rs m)
    Berger International 51% China, Singapore, Thailand, Malaysia,
    Myanmar, Bahrain, Malta, United Arab Emirates (UAE),
    Jamaica, Barbados and Trinidad & Tobago
    576
    SCIB, Egypt 60% Egypt 250

    Since APLís international growth strategy revolves around SAARC countries, BILís plants in South East Asia and Arab nations offer growth synergies. Moreover, the Indian paint major already operates in select Caribbean islands since 1975. BILís Carribean operations are cash rich and command significant market share. APL is positive on the South East Asian market and hopes to turnaround BILís operations.

    While the Egyptian operation has sales to the tune of Rs 540 m, BILís turnover is estimated at Rs 3,220 m. Currently, APLís international operations contribute 5% to its revenues, estimated at around Rs 710 m in FY02. With the two acquisitions, international operations gain significance and would account for as high as 15% of estimated consolidated sales in FY03. APL also hopes to turnaround some of its own and BILís loss making subsidiaries as well in FY03.

    While international exposure brings with it a set of opportunities, there are few risks attached with it as well. For one, the path to turnaround could be delayed, as most subsidiaries are in the SAARC and other smaller developing countries that run a major risk of political instability. This could have a major effect on consolidated profitability in the immediate term. Currency risk is also the other key cause of concern.

    Asian Paints currently trades at Rs 342 implying a P/E multiple of 15.4x on standalone FY03E earnings. While valuations are expensive on a peer valuation basis, growth prospects remain promising for the company. However, one has to invest in the stock based on consolidated profitability especially in light of the fact that international operations would account for a substantial portion in the future. BIL is still a loss making company and the loss has been widening in the last few years. Due to regulatory restrictions, the company was not able to reveal all information pertaining to the acquisitions in the recent analyst conference. Wait and watch.

     

     

    Equitymaster requests your view! Post a comment on "Asian Paints: Spreading wings". Click here!

      
     

    More Views on News

    Asian Paints: Good Performance Across Segments (Quarterly Results Update - Detailed)

    May 18, 2017

    Asian Paints registers 10.4% YoY growth in profits during 4QFY17 with double-digit volume growth in the decorative segment.

    Asian Paints: Volumes Weighed by Notebandi (Quarterly Results Update - Detailed)

    Feb 17, 2017

    Asian Paints has reported a 2.6% YoY increase in the topline and a 0.6% YoY decline in the bottomline during the quarter.

    Asian Paints: Prolonged Monsoon Impacts Volume (Quarterly Results Update - Detailed)

    Oct 28, 2016

    Asian Paints has reported a 10.2% YoY increase in the topline while the bottomline has grown by 18% YoY

    Asian Paints: A Robust Performance (Quarterly Results Update - Detailed)

    Aug 3, 2016

    Asian Paints has reported a 9.1% YoY increase in the topline while the bottomline has grown by 17.9% YoY.

    Asian Paints: Volume growth drives topline (Quarterly Results Update - Detailed)

    May 18, 2016

    Asian Paints has reported a 12.3% YoY rise in the topline while the bottomline has grown by 20% YoY.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    ASIAN PAINTS SHARE PRICE


    Aug 16, 2017 (Close)

    TRACK ASIAN PAINTS

    • Track your investment in ASIAN PAINTS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    ASIAN PAINTS 8-QTR ANALYSIS

    Detailed Quarterly Results With Charts

    COMPARE ASIAN PAINTS WITH

    MARKET STATS