Asian Paints 2020 Annual Report Takeaways!

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From a product-centric to a consumer and service-oriented brand.

  • Developed various avenues like AP Homes, beautifulhomes.com, Interior Design service, Asian Paints Colour Ideas Stores among others – to facilitate a holistic and integrated customer experience.
  • The decorative business is the key focus: (84% of revenues)
    • Expanded the market size by launching value for money emulsions, innovative solutions in the waterproofing and construction chemicals segment and more inspiring options in the Home décor.
    •  ‘Paint Total’ service, offering the full Painting Solutions through our Retailers forward with a footprint in more than 200 cities.
  • International business: (11% of revenues)
    • Improved the product propositions in some key units like Egypt, Bangladesh, Nepal and Sri Lanka. ( Amongst the top 3 players in decorative paints in 12 of the 14 countries outside India)
    • To tackle the foreign exchange crisis in Ethiopia by working on enhancing the localized content of raw materials.
  • Home Improvement business: (2% of revenues)
    • Foray into the sanitaryware business. (Capture all high ROIC businesses)
    • Investment into building brands & a strong service for the full kitchen delivery.
    •  The Company has hence, as a matter of prudence, made a provision for diminution in the value of its investment in Sleek (an old acquisition in the kitchen business) to the tune of Rs 29.7 crs.
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  • Industrial coating business (2% of revenues)
    • Market leader in the auto refinish segment and the second-largest player in the automotive OEM segment.
    • Asian Paints operates in the industrial coatings segment through two 50:50 JVs with PPG Industries Inc. The USA – PPG Asian Paints Pvt Ltd. (PPG-AP) and Asian Paints PPG Pvt Ltd. (AP-PPG).
  • The Health and Hygiene segment has been looked at strongly and we have offered antibacterial all surface coatings under our Luxury Royale Health Shield.
    • Approved from Indian medical association.
  • Blue Ocean Strategy:   Opening up new market spaces & creating unforeseen demand 
    • launched a Sanitization service ‘San Assure’ and ‘San Assure Pro‘ for offering to Housing Societies, Offices, Hospitals, hotels and institutions.
  • #1 in India, #3 largest paint company in Asia & #9 largest paint company in the world.
  • Financial metrics: Compounding of revenues with strong & consistent cash flows. 
    • Low raw material cost aided operating margins with double-digit volume growth: revenue grew less as pricing was reduced.
    • Avg ROCE (5 years) > 40%.
  • 70,000+ dealer network & 7,500+ team strength.
    • Median salary growth is 7%.
  • Total domestic industry size: Rs 50,000 crs. (decorative paints: 75%, coatings: 25%) 
    • Small unorganised paint manufacturers: 30- 35% share in the overall paint industry.
  • Paint being a discretionary spend item, there is a likelihood of customers putting their paint requirements on hold for some time, impacting renovation demand.
    • The paint industry would also be looking for increased focus from the government in pushing infrastructure investments as the real estate market is not expected to recover soon.
  • Diversified product portfolio gives some relief:
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  • Company has continued to invest in digital technologies such as AI, ML, Robotic Process Automation (RPA), security systems and advanced analytics.
    • Enhanced customer experience with better operational productivity.
  • The new MD & CEO, Mr Amit Syngle owns just 600 shares of the co. (the last one, Mr KBS Anand owned 270 shares only)
  • Promoter Shareholding: 53% & board with broad expertise. 
  • Investments in listed companies:
  • Goodwill Impairment risk: Rs 320 crs of goodwill as of March, 2020.
  • Doubtful trade receivables provisions (nearly 1% of sales)
  • Good liquidity (>750 crs in cash & deposits) to tide through this crisis.

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JST Investments is a Mumbai-based investment firm that believes in long-term wealth creation. It's a brainchild of Aditya Kondawar, Aditya Shah, and Anish Moonka.
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