COMPANY’S PROFILE

Asian Paints is India's largest paint company and ranks among the top ten decorative coatings companies in the world today, with a turnover of Rs.30.2 billion (USD 680 million). It was formed as a partnership firm by four friends in 1942. The company has an enviable reputation in the corporate world for professionalism, fast track growth, and building shareholder equity.

Driven by its strong consumer-focus and innovative spirit, the company has been the market leader in paints since 1968. Today it is double the size of any other paint company in India. Asian Paints operates in five regions across the world viz. South Asia, South East Asia, South Pacific, Middle East and Caribbean region through the four corporate brands viz. Asian Paints, Berger International, SCIB Paints and Apco Coatings. Asian Paints has 30 paint manufacturing facilities in 22 countries with a combined total manufacturing capacity of around 370 million liters per annum. The company operates in 10 markets through Berger International Limited and in five markets in the South Pacific through Apco Coatings. In Australia it also owns the Pacific Paints brand, in Fiji & Samoa Islands it also operates through Taubmans, and in 6 countries through Asian Paints.

A talent pool of over 4700 employees employed across twenty-three countries brings in a unique blend of mindsets and skills. The Group's principal activities are to manufacture and market paints.

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PRODUCT MIX

Asian Paints produces a wide range of paints for decorative and industrial use. It also manufactures intermediate products like Phthalic Anhydride and Pentaerythritol. The chemicals business which contributes 5% to overall sales of the group is managed for value. APIL's product range includes Wall paints, Metal paints, Wood Finishes, Primers and others.

Apart from offering the customers a wide range of decorative and industrial paints, it even custom-creates products to meet specific needs.

Following are few of the famous products of Asian Paints.

Apex Weatherproof Exterior Emulsion is a water-based 100% acrylic, exterior wall finish. A high performance, long-lasting exterior paint specially formulated to withstand extreme tropical

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conditions of high rainfall, humidity and heat, Apex provides excellent resistance against the growth of algae and fungi on the walls. It offers excellent protection against alkali and UV degradation too.

Premium Emulsion provides a rich and matt finish to interior walls due to its super-acrylic quality. Its composition imparts excellent durability to the paint film, giving your walls that just painted. It washable and most stains can be removed easily by sponging with a mild soap solution. The paint film is also fungus and mildew resistant.

Apcolite Premium Satin Enamel is a solvent-based finish. Low gloss enamel with the gentle, soothing sheen of Satin fabric, it is just as tough and durable as premium high gloss enamels and gives a long lasting washable finish. It can be used on interior and exterior surfaces. Utsav

Royal

Tractor emulsion

MARKETS

The countries that Asian Paints has presence are as follows:

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South AsiaBangladesh, Nepal, India and Sri Lanka.

South East AsiaChina, Malaysia, Myanmar, Singapore and Thailand.

AfricaEgypt

Caribbean IslandsBarbados, Jamaica, Trinidad and Tobago.

Middle EastBahrain, Dubai and Oman.

South PacificAustralia, Fiji, Solomon Islands, Tonga, Vanuatu and Samoa Islands.

SALES REVENUE IN THE YEAR 2005

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RAW MATERIAL AND SOURCES OF AVAIBILITY

The paint industry is raw material intensive. Paint involves the mixing of various raw materials in various proportions. The raw materials are of a wide variety. On an average, raw materials account for 60% of net sales (industry average). In case of small-scale units it forms up to 70% of the net sales.

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Raw materials are divided into three major groups, namely, pigments (titanium dioxide, zinc oxide etc.), solvents (mineral turpentine) and resins and additives.

Pigments are finely ground solids of different shades to give colour, durability, consistency and other properties to paint. It is also one of the major raw materials, accounting for one-third of the total raw materials cost.Amongst the vital pigments used in the process of paint manufacture is Titanium dioxide (TiO2) and the industry consumes around 60% of TiO2. This pigment is available in two grades: anatase and rutile, of which anatase is exclusively used in interiors while rutile is preferred in exteriors.

Solvents are volatile organic compounds (VOC) used to dissolve, suspend or change the physical properties of other materials. They are generally used to bring down the viscosity of paints to the desired level, which also reduces the cost of paint formation. They constitute 70%-75% of the paint liquid and ultimate escapes into the atmosphere when the fluid dries. Solvents such as ethylene glycols and alcohols are finding wider use as co-solvents in new water-borne formulations.

Binders are generally oils, resins and plasticisers that give paints its protective property. Most resin manufacturers make alkyds, polyesters, emulsion polymers, epoxy resins, amino resins, powder coating resins etc.

Additives are added in small proportion to the paint to improve its performance characteristics in various ways. Skinning inhibitors, fungicides, wetting agents, driers are included in this category.

Around 600 raw materials are required by the industry and all raw materials are not directly related to crude oil. The basket of raw materials is quite exhaustive. Raw materials, which constitutes around 60 per cent of total cost for the paints industry is an important factor for maintaining operating

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margins. The industry imports around 25 per cent of raw materials. But the most important raw material is titanium dioxide, which accounts for around 25-30 per cent of raw material costs.

LOGISTICS

As demand in India is dispersed and spread over a wide geographical area, Asian Paints strategy to focus on building an extensive distribution (nearly 15,000 retail outlets) and logistics management network has paid it rich dividends. As a result of its wider reach and better logistics management, it

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has been able to market brands aggressively, thereby outperforming the industry year after year

In this rapidly changing Business Environment, what gives companies like Asian Paints the Competitive Advantage...The answer is LOGISTICS. We can actually compare logistics to the most precious element on this planet WATER. It’s the ability of water to reach and occupy all available space and quench thirst, similarly it’s the ability of logistics to reach wherever the consumer demand exists.

Logistics is a process of planning, implementing and controlling efficient and cost-effective flow of materials and information from point of origin to point of consumption. Hence, Logistics is nothing but the process of strategically managing the movement and storage of materials, parts, and finished inventory from suppliers, between enterprise facilities and customers.

Typically 10-15% of a companies turnover is spent on logistics, depending on the nature of product and the distribution pattern adopted.

Having exhausted all options in the areas of product differentiation, pricing, promotional strategies and advertising warfare, corporations are increasingly turning to logistics. Hence efficient management of logistics is critical for the profitability of any company. To gain a competitive advantage over its competitors, a company needs to be flexible and adaptable to the market demand. In this changing scenario the following are the needs of the hour:

The company needs to reach the customer at the right time ensuring the availability of the product on shop shelves

This calls for reduction in lead time, operating costs and inventory levels

And Improved asset productivity to leverage core competency

Modern business concepts advocate "let experts do the job". A paradigm shift could be towards partnering with the professional in the field, which will positively impact the bottom-line. This can definitely be achieved through Outsourcing.

Outsourcing logistics is the new weapon in the corporate arsenal. It is an easy access to World-Class Logistics capabilities and better control over the

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distribution system through an external agency offering specified services, which could be constantly improved upon.

SOME LOGISTIC FUNCTION OF ASIAN PAINTS

(a)Order processing:

Most paint companies are hit by the fact that they do not make the raw materials themselves. For example, phthalic anhydride (PAN) is manufactured from orthoxylene and which goes into the production of paints along with titanium dioxide. Asian Paints is the only paint company that manufactures PAN. The other paint companies have to import their stock.

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Since PAN prices generally outpace international orthoxylene prices by almost 50% paint companies end up paying a fortune when prices rise. In such a situation Asian Paints benefits by selling PAN in the open market.

(b)Transportation Management

The company has outsource its transport management to Dynamic Logistic Pvt. Ltd.

(c)Inventory Management

The company prefers to maintain low inventory levels due to having large no. of suppliers at bay. The company has 350 raw material and intermediate and goods suppliers.

(d)Warehousing

The company has 72 warehouses scattered all over the India.

(f)Packaging

The company has 140 packing material vendors.

(g)Acquisition

The acquisition gives Asian Paints a foothold in an emerging market and also opens the possibility of exporting to neighbouring countries. Asian Paints has already made its presence felt in the emerging markets after its acquisitions in Singapore (Berger International) and Egypt (SCIB Chemicals SAE). These acquisitions immediately give access to both emerging markets and those in which Berger International has a strong presence. In the industrial coating segment, the company acquired Hawcoplast Chemicals in November 2001 for Rs 22 crore, which provided it with a presence in the growing powder coating segment.

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MARKETING AND SALES

Product: Asian Paints Colour World is the brand name for the one-stop colour shop of Asian Paints, which are unique paint shops where shades are generated with the help of a computer with software to choose and select 1,511 shade combinations, designed to reach consumers in a direct `dil se' style.

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Advertising Objective: Position Asian Paints Colour World as the ‘one stop paint shop’ with all the colours one could want. The advertising should create enough interest in potential consumers to ensure that they come to the Asian Paints Colour World outlet or at least call the Asian Paints helpline.

Target Customers Demographics

Region: India, urban population Occupation: Service/working professional/self-employed Gender: Male Religion: Insignificant Social class: Upper Middle and upwards SEC: B and upwards Family life cycle: Middle aged

CUSTOMERS

According to the company customer is most important thing. The customer is not dependent on company but the company is dependent on the company.

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The company does not favor the customer by serving him but the customer is doing them a favor by giving them an opportunity to do so.

SEGMENTS

Segment InformationAsian Paints (India) Limited has identified two segments in line with the Accounting Standards on Segment Reporting (AS-17). These are Paints and Others. Others include the Chemicals business of the company viz. the manufacturing of Phthalic Anhydride & Pentaerythritol.

Paint sales for the company recorded growth of 11.4 % at Rs. 14590.3 million compared to Rs. 13096.7 million in the previous financial year. Segment results of the paints business increased by 17.9% to Rs. 2579.9 million from Rs. 2188.4 million in 01-02. Sales from the Chemicals business registered growth of 32.2% at Rs. 1147.56 million compared to Rs. 868.19 million in 01-02. It is for the first time that the Chemical business has recorded sales of over Rs. 1000 million. Segment results of the chemical business increased by 190.8% to Rs. 182.9 million from Rs. 62.9 million in 01-02.

The company’s decorative business is the largest contributor to the revenue of the company. In the decorative business, Asian Paints is the leader in all segments. All product categories of the Decorative business registered good growth with exterior finishes sales increasing by over 30%. The total number of Colour World installed by the company across the country is 3200 as on Mar 31, 2003.

The company products are broadly divided into two segments

Decoratives: Major segments in the decorative include exterior wall paints, interior wall paints, wood finishes and enamel. Decorative paint's market size stands at around Rs 32.5 bn. Asian paints is the market leader in this segment. Demand for decorative paints arises from household painting, architectural and other display purposes. Demand in the festive season

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(September-December) is significant, as compared to other periods. This segment is price sensitive and is a higher margin business as compared to industrial segment.

Industrial: Three main segment of the industrial sector include automotive coatings, powder coatings and protective coatings. Industrial paint's market size stands at around Rs 9.5 bn. Goodlass Nerolac is the market leader in this segment. User industries for industrial paints include automobiles engineering and consumer durables. The industrial paints segment is far more technology intensive than the decorative segment.

MARKET STANDING

Asian paints is the market leader in India’s paint industry with a commanding market share of about 39% in the organized segment. It is among the top 10 players in decorative segment in the world. The unorganized sector is a strong force and controls almost 35 per cent of the industry involving estimated 2,500-3,000 players. A decade earlier, the

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unorganised segment used to have a much higher share of the market but this is slowly changing. Today's consumer is evolving and has become quality and brand conscious. In addition, the reduction of excise duties from a high of 40 per cent to 16 per cent in the last decade has reduced the advantage of the unorganized segment. Increase in raw material costs will equally affect both the organized and the unorganized sector. Asian Paints has been the market leader in the Indian paint industry for over three decades. Today the company has a very high market share. The nearest competitor is half of there size. Yet, despite the dominant position in the market, Asian Paints has been able to consistently record an increase in market share. The company's market share has increased over 3 per cent in the past seven years.

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Comments –

1. The ware housing facilities are well maintained.

2. The company specially looks after the environmental aspects and tries to avoid pollution and pollutants by adapting eco friendly production methods.

3. The company keeps low inventories in off seasons, and high inventory in festival seasons.

4. The company has huge base of raw material suppliers, giving company bargaining power resulting in higher profit margins then competitors.

5. The company has succeeded in establishing themselves in rural parts of India by large distribution network, retail outlets etc.

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Suggestions –

1. As seen above the company’s raw material price is directly related to crude oil prices, keeping this in mind the company should try to keep optimum level of raw material to avoid breakdownns in production function.

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BIBLOGRAPHY

Our primary source of data is Asian paints Our secondary source of data is www.google.com, www.asianpaints.com Thank you.

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