Hello. I am Gunjan Grover.
Today we will be discussing the fundamentals of a company that has been a market leader in its industry for over 50 years.
And has still managed to maintain a robust growth engine with a 10-year sales CAGR of 11% and a 10-year profit CAGR of 14%.
It has transformed the home décor space in India and is now an international paints player.
Yes, we will be talking about Asian Paints.
In this video, we will be discussing, How did Asian Paints get to where it is today,
An Overview of Asian Paints, Its major operating segments, The way ahead.
First, let's talk about the Company's history.
Asian Paints was started in a garage in Mumbai in 1942 by 4 friends Champaklal Choksey, Chimanlal Choksi, Suryakant Dani, and Arvind Vakil.
Due to a temporary ban on the import of paints that had cornered the market for a few international players and Shalimar Paints.
So Asian Paints could expand quickly.
In the next 25 years, the company established itself as the biggest player in the Indian paints industry and has been the market leader ever since.
Over the years, the company made many innovations including a washable distemper in 1950.
It was a balance between the cheap dry distemper that peeled easily and the more expensive plastic emulsions.
It marketed its new Tractor Distemper with the slogan "Don't lose your temper, use Tractor Distemper".
The company also made a masterstroke of hiring the famed cartoonist RK Laxman to create the company mascot Gattu –
A simple boy with a paint bucket, which was a big hit with the masses.
It launched many influential ad campaigns including focusing on festive occasions in the 1980s with their tag line "Har Ghar Kucch Kehta Hai".
I am sure that you also remember this ad.
In the 90s, its ads were focused on how to use its products to make home exteriors timeless.
In the 2000s, it was focused on the customized color selection with the “Mera Wala Blue” campaign.
The latest one is focusing again on home exteriors with the “Lamination Wala Exterior Paint” slogan.
Now let's talk about the Company overview.
Asian Paints is now a company with more than Rs 21000 Cr in yearly sales
Asian Paints now operates in 15 countries with over 26 manufacturing plants while servicing customers in over 60 countries.
It is the 3rd largest paints company in Asia and the 9th largest in the world.
Its main corporate brands and their operating geographies are
1. Asian Paints in India, Bangladesh, Nepal & Indonesia 2. Asian Paints Causeway in Sri Lanka
3. SCIB Paints in Egypt 4. Asian Paints Berger in UAE, Bahrain, Oman, and Qatar
5. Apco Coatings in Fiji, Solomon Islands, and Vanuatu 6. Kadisco Asian Paints in Ethiopia
7. Taubmans in Fiji and Samoa
It has home décor products like paints, waterproofing, wall coverings, adhesives, sanitary ware, furnishings, lightings, etc.
It also offers many services like home painting, interior design, projects, and sanitization services.
It also manufactures industrial coatings through 2 joint ventures with PPG USA for the automotive coatings and industrial coatings.
Domestic Decorative Coatings: 83.9% of revenue Industrial Coatings: 2.3% of revenue
International Operations: 11.5% of revenue Home Improvement: 2.3% of revenue
In Business segments, let's first talk about Decorative Business.
Asian Paints has a share of over 50% in the domestic paints industry.
In the decorative paints space which accounts for 80-85% of the overall industry, Asian Paints has around 60% share of this market.
Asian Paints has a wide distribution network with over 70,000 dealers across India.
Under this segment, the company has also launched Safe Painting services in response to the COVID-19 pandemic.
It developed a platform called ‘Beautiful Homes with Asian Paints’ acting as 1 stop solutions shop for customers to plan perfect home décor.
The company has 18 such stores in India currently.
Also, these stores offer décor products like furniture, furnishing, decorative lighting, customized tiles, kitchens, wardrobes, baths, and sanitaryware.
It offers over 2200 shades of colors in its offerings in this segment.
The interior paints are sold under the Royale and Tractor brands while the exterior paints are sold under the Apex, Apex Ultima, and Ace brands.
The metal finish products are sold under the Apcolite brand, and the wood finish products are sold under the Woodtech brand.
The adhesive products are sold under the Loctite and Trugrip brands while the waterproofing products are sold under the Smartcare brand.
The company sells its wall coverings under the Nilaya brand
It includes many designer collections including a premium range by the famed clothing designer Sabyasachi Mukherjee.
Now let's talk about International Operations.
Asia remains the earner for Asian Paints from International operations.
The company is one of the top 3 players in the paints industry in every market it operates in.
It is focusing on maintaining its core strengths from the Indian market and offering differentiated products for different categories.
The company’s international units are also focusing on establishing themselves in the waterproofing category.
Next, let's talk about Home Improvement Business.
In this, first is the Kitchen segment.
Asian Paints forayed into this industry by acquiring a 51% stake in Sleek International in FY14 and completing a 100% acquisition in FY18.
The company offers kitchen components and modular kitchen solutions under the ‘Sleek by Asian Paints’ brand.
In the kitchen business, it sells kitchen products like kitchen hardware, kitchen accessories, and kitchen appliances in a B2B mechanism.
In the modular solutions business, Sleek does projects involving design-to-execution of full kitchens.
Sleek is the largest modular kitchens brand in India and it is present in Mumbai, Pune, Delhi, and many cities in South India.
It is expected to have a lot of potential for market capture in this industry at 15000 crores.
In Bath Fittings, Asian Paints entered this industry by acquiring the front-end business of Ess Ess in FY15.
Ess Ess makes chrome-plated faucets and bathroom accessories.
The company has also expanded into sanitary ware and bath products and bathroom planning solutions.
It is also making new products in the touch-free category with hands-free faucets, flushing systems, and others.
The services under this category are offered under the Bathsense and Royale brands.
In Industrial Business,Asian Paints operates 2 Joint Ventures with PPG Industries USA.
Its 50:50 JV PPG Asian Paints makes and sells paints and coatings for auto OEMs, refinishing, packaging, and marine segments.
The other JV of Asian Paints PPG serves the non-auto segment like infrastructure, oil and gas, power plants, and white goods sectors.
Offering protective coatings, floor coatings, road markings, and powder coatings.
Now let's talk about the financials.
The market cap of Asian Paints is 299,548 crores.
In the last one year, it has generated 43.3% returns.
5 years sales Var is 8.76% with an Operating margin of 18.8%
The net profit margin is 14.7% and Debt to equity is 0.11
ROE is 27.3% and trading at a 92 PE ratio.
Now let’s talk about the way ahead.
Despite being the market leader for over 50 years, Asian Paints has been going strong with its innovation, strong marketing & distribution abilities.
The company is constantly introducing new concepts in its core segment of decorative paints and wall coverings.
It is leveraging its strong brand image & establishing itself in adjacent categories like Kitchen, Bath, Furnishings, Furniture, and Lighting.
New markets especially modular kitchen and bathroom categories, organized markets are fragmented.
With small competitors, the company wants to expand itself.
The company’s legacy paint products and new products
Like waterproofing, adhesives, and home furnishings are boosting due to the demand for home and infrastructure construction.
Rapid urbanization Rising per capita income
Large working-age population Govt programs promoting home buying and construction
Large scale infrastructure spending
So the increasing trend in demand for home demand and infrastructure construction is expected to sustain.
Asian Paints is mainly operating in the emerging economies of Asia, the Middle East, and Africa.
Similar factors are also present in international operations.
Asian Paints looks are looking to recreate its India journey in many of its international operating regions.
And capturing fast-rising subsegments of home construction and décor while maintaining its strong hand in the paints space in India.
I hope you found all this information helpful.
If yes, then dont forget to like and subscribe.
All of this is for educational purposes and it's not a buy or sell recommendation.
On that note, here's me Gunjan Grover. Signing off.
Bye-bye. Take care Keep calm. Invest on.