PREFACE

Management means an art of getting the things done through others. Today we find management in each and every field. It is a developing field. There are Frequent changes in it’s principles due to increasing complexities that we find around the financial area in management field. Today finance function has played a significant role in the field of management. True learning happens out of experience and observation. And for more improvement, new tools and techniques have been developed to meet the needs of modern business which works in complex environment.

I being a P.G.D.B.M. student got a great opportunity to improve my practical knowledge in the field of financing, having only theoretical knowledge is immaterial without practical knowledge.

There is a vast difference between the paper plan and implementation of the plan. So practical knowledge proves that experience is the best teacher and as a part of it i have understood and analyzed the information about the ASIAN PAINTS LTD.

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ACKNOWLEDGEMENT

Through this acknowledgement, I express my sincere gratitude towards all those people who helped me in preparing this project report, which has been a great learning experience.

At the outset, I would like to sincerely acknowledge the valuable guidance rendered by my project guide in-charge professor Dharmesh shah. A good idea needs nurturing to grow to full potential and that nurturing was done by him in the form of his suggestions, value additions and constructive criticism during the entire project besides his busy schedule and work load.

At last I would also like to thank my friends and classmates for their help and suggestions.

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TABLE OF CONTENTS

Sr.No: CONTENT Pg.No:

1 INTRODUCTION 5

2 ECONOMIC ANALYSIS 7

3 INDUSTRY ANALYSIS 9

4 FINANCIAL STATEMENT ANALYSIS

5 -5.1. Ratio analysis 11

-5.2. DuPont analysis 28

-5.3. Common-size statement

29

-5.4. Trend analysis

31

6 FINDINGS OF THE ANALYSIS 34

7 SUGESSTION 35

8 CONCLUSION 36

9 BIBLIOGRAPHY 37

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TABLE OF LIST

Sr.No: Particulars Table No: Pg.No:

1 GROSS PROFIT MARGIN 5.1.1 12

2 NET PROFIT MARGIN 5.1.2 13

3 CURRENT RATIO 5.1.3 14

4 QUICK RATIO 5.1.4 15

5 BOOK VALUE PER SHARE 5.1.5 16

6 EARNINGS PER SHARE 5.1.6 17

7 DIVIDEND PAYOUT RATIO 5.1.7 18

8 DEBT-EQUITY RATIO 5.1.8 19

9 FIXED ASSET TURNOVER RATIO 5.1.9 20

10 DEBTORS TURNOVER RATIO 5.1.10 21

11 INVENTORY TURNOVER RATIO 5.1.11 22

12 PROPRITORY RATIO 5.1.12 23

13 INTEREST COVERAGE RATIO 5.1.13 24

14 RETURN ON EQUITY CAPITAL 5.1.14 25

15 RETURN ON CAPITAL EMPOYED 5.1.15 26

16 LONG-TERM FUNDS TO FIXED ASSETS RATIO 5.1.16 27

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INTRODUCTION OF THE COMPANY

Asian Paints Limited was established way back on February 1,1942 and today stands as India’s largest paint company and Asia’s third largest paint company with an annual turnover of Rs 5,463 crore.

Presently the company is having its presence in 22 countries with 28 manufacturing locations, over 2500 SKU’s, Integrated SAP - ERP & i2 - SCM solution. Besides Asian Paints, the group operates around the world through its subsidiaries Berger International, Apco Coatings, SCIB Paints and Taubmans.

The company manufactures paints in the category of Decorative, Automative and Industrial segment. Apart from these the company also manufactures various Acessories like, Wall Primar, Wood Primer, Putty and Stainers etc.

Asian Paints along with its subsidiaries has operations in 20 countries across the world and 28 paint manufacturing facilities, servicing consumers in 65 countries through Berger International, SCIB Paints-Egypt, Asian Paints, Apco Coatings and Taubmans. Asian Paints operates in 5 regions across the world viz. South Asia, South East Asia, South Pacific, Middle East and Caribbean region through the five corporate brands viz. Asian Paints, Berger International, SCIB Paints, Apco Coatings and Taubmans. In 10 markets, it operates through its subsidiary, Berger International Limited; in Egypt through SCIB Paints; in 5 markets in the South Pacific it operates through Apco Coatings and in Fiji and Samoa it also operates through Taubmans.The company is having state-of-the-art supply chain system using cutting edge technology to integrate all its plants, regional distribution centres, outside processing centres and branches in India. All the company’s paints plants in India, two chemical plants, 18 processing centres, 350 raw material and intermediate goods suppliers, 140 packing material vendors, 6 regional distribution centres, 72 depots are integrated.

The company is having a big and experienced R&D team which has successfully managed to develop High-end exterior finished and wood finishes in-house, which was earlier imported into the country. These products are currently marketed under Asian Paints Elastomeric Hi-Stretch Exterior paint and Asian Paints PU wood finish respectively.

The company is having three subsidiaries viz, Apco Coatings - it is a subsidiary of Asian Paints in the South Pacific islands. The company operates in Australia, Fiji, Tonga, Solomon Islands and Vanuatu under the brand name of Apco Coatings.

On the recommendations of Booz, Allen and Hamilton, Asian Paints restructured itself into Growth, Decorative and International business units and has adopted SCM and ERP technology. Asian Paints aims to become the 5th largest decorative paint company in the world Product range of the company includes:

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Automotive Paints Decorative Paints Industrial Paints

Ancillaries - Range of ancillaries like primers, fillers stainers, and a lot more.

Milestones:1957 – 66 - The family-owned company makes the transition to a professionally managed organisation. British company Balmer Lawrie rejects the products of a giant British paint company in favour of Asian Paints. Asian Paints embarks on an ambitious grassroots marketing campaign, partnering with thousands of dealers in small towns all over India. 1945 - Asian Paints touches a turnover of Rs. 3,50,000, with an innovative marketing strategy 'to reach consumers in the remotest corners of the country with small packs.' 1954 - Asian Paints mascot, Gattu, the mischievous kid, is born.

1st February, 1942 - Armed with little knowledge and great determination, Champaklal H. Choksey, Chimanlal N. Choksi, Suryakant C. Dani and Arvind R. Vakil get together to manufacture paint in a garage on Foras Road, Bombay. They name their company 'The Asian Oil & Paint Company', a name that they picked randomly from a telephone directory.

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ECONOMIC ANALYSIS

We believe Asian Paints is a direct play on the growing India Consumption story. Analysis of the past data trends suggest strong correlation between paints volume growth and India GDP growth. Volume growth of paints is typically 1.5-2x of GDP growth.

Paints industry suffered in the second half of FY09 on account of a slowdown in the domestic economy. Paints being a discretionary item, purchases tend to get postponed in an environment of income uncertainty as well as weak consumer sentiment. FY09 also witnessed a spurt in the raw material prices; thus, aggravating the impact. Paints volume growth for FY09 slowed down to 13.4% in FY09 compared to 17.8% and 17.5% in FY07 and FY08, respectively. Given expectations of strong GDP growth, we expect paints demand to continue to witness robust demand momentum. We forecast volume growth of 15% and 14%, on the back of improving consumed sentiments and pick-up in urban discretionary demand. 70% of the decorative paints demand is on account of re-painting, while 30% comes from fresh painting; thus, dependent on the health and buoyancy of the property sector. Given the expectations of revival in residential property markets after the weakness, we expect construction of new homes to provide an additional catalyst for paint demand. In the absence of any authentic data on construction of new homes, we take housing loan disbursement from HDFC, India’s largest mortgage lender, as a proxy for demand from new construction.

International division International division of Asian Paints contributes nearly 17-18% of consolidated revenues. Asian Paints is primarily present in 17 countries spread over following 5 key regions: 1) Middle East 2) Caribbean 3) South Asia 4) South East Asia 5) South Pacific

Interestingly, despite the global economy facing a major slowdown in FY09, international division of Asian Paints has posted 28.5% revenue growth, higher than the 24.4% witnessed in domestic decorative business.

Middle East and South Asia contribute nearly 93% of International EBIT. Profitability of South East Asia continues to remain a drag. Management has intermittently reviewed the viability of certain international units and exited from some of the South East Asian markets like Hong Kong, Thailand, Malaysia etc.

Asian Paints strategy in international markets is divided into two parts:

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Leadership regions (Caribbean, South Pacific): a) Focus on improving cash flows b) Increase market share by 100bps each year.

Growth regions (Middle East, South Asia, South East Asia): a) Focus on top- line growth b) Aims to be amongst the top three players in every market where it is present.

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INDUSTRY ANALYSIS

The Fast Moving Consumer Goods (FMCG) industry primarily deals with the production, distribution and marketing of consumer packaged goods, i.e. those categories of products that are consumed at regular intervals. Examples include food & beverage, personal care, pharmaceuticals, plastic goods, paper & stationery and household products etc. The industry is vast and offers a wide range of job opportunities in functions such as sales, supply chain, finance, marketing, operations, purchasing, human resources, product development and general management. Global leaders in the FMCG segment are Sara Lee, Nestlé, Reckitt Benckiser, Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, Pepsi and Mars etc.

Performance In India, the FMCG industry is the fourth largest sector with a total (organized) market

size of over US$15 billion in 2007, as per ASSOCHAM, and can be classified under the premium and popular segments. The premium segment (~25%) caters mostly to the higher/upper middle income consumers while the price sensitive popular or mass segment (~75%) consists of consumers belonging mainly to the semi-urban or rural areas who are not, and cannot afford to be, brand conscious.

The market growth over the past 5 years has been phenomenal, primarily due to consumers’ growing disposable income which is directly linked to an increased demand for FMCG goods and services. Indeed, it is widely acknowledged that the large young population in the rural and semi-urban regions is driving demand growth, with the continuous rise in their disposable income, life style, food habits etc. On the supply side, the wide availability of raw materials, vast agricultural produce, low cost of labor and increased organized retail have helped the competitiveness of players.

At a time when the economy and other large industrial sectors such as automobiles, aviation and financial services are reeling from the global slowdown, the consumer goods sector in India has managed to defy the trend. According to the recent reports by Zeus Consulting, India's FMCG industry has so far been resilient to the slowdown in the economy and a dip in consumer sentiment, with most companies posting double-digit growth in net profits in the first half of fiscal 2009, backed by healthy sales. As very categorically said by the Amway India Enterprises managing director and chief executive, Mr. William Pinckney, “I am not saying that our company [sector] is recession-proof but it is recession-resilient.” This statement on the whole stands strong for most the leading players in the FMCG sector.

While a price hike and cost-cutting were the first lines of defense in a bid to protect margins, Indian manufacturers were able to let logic rather than bottom lines dictate measures, with increased marketing efforts, a well-thought product mix and new launches helping them emerge unscathed from the turmoil. The prospects going

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forward also remain promising. Adi Godrej, Chairman and MD of Godrej Consumer Products Limited (GCPL) and Chairman of Godrej Industries feels that the best policy would be to provide tremendous fiscal and monetary stimuli to the economy, “…[stimuli is needed] especially in industries connected with consumer finance. Once that is done, the economic growth will come through and that will generally create multiplier factors. FMCG already seems to be doing quite well and FMCG sector will have its best year ever in 2009-10,” he said.

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RATIO ANALYSIS

Ratio analysis is a widely used tool of financial analysis. It can be used to compare the risk and return relationships of firms of different sizes. It is defined as the systematic use of ratio to interpret the financial statements so that the strengths and weaknesses of a firm as well as its historical performance and current financial condition can be determined.

CLASSIFICATION OF RATIOS:

Different ratios are used for different purposes. These ratios can be grouped into various classes according to financial activities. Ratios are classified into four broad categories:

Liquidity ratios Leverage ratios Profitability ratios Activity ratios

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1. GROSS PROFIT RATIO : It measures the percentage of each sales rupee remaining after the firm has paid for its goods. And it is also known as gross margin ratio.

FORMULA: Gross profit *100 Net sales

TABLE: Table 5.1.1 (RS IN CRORE)

Particulars 2009-2010 2008-2009 2007-2008Gross profit 2501.27 2599.19 1475.97Net sales 5125.08 4270.05 3416.16Ratio 48.8% 60.87% 43.2%

CHART:

2009-2010 2008-2009 2007-20080.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

48.80%

60.87%

43.20%

Gross profit ratio

Gross profit ratio

INTERPRETATION: A high ratio of gross profit to sales is a good sign of a good management as it implies that the cost of production of the firm is relatively low. While a relatively low gross margin is definitely a danger signal, warranting a careful and detailed analysis of the factors responsible for it. Here in 2008-2009 the ratio is the highest where as it has decreased from 60.87% to 48.80% in 2009-2010 which means the company’s cost of production has increased which is not good for the company.

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2. Net Profit Margin : It measures the percentage of each sales rupee remaining after all costs and expenses including interest and taxes have been deducted.

Formula: earnings before taxes/ net sales *100

Table 5.1.2 (RS IN CRORE)

Particulars 2009-2010 2008-2009 2007-2008

Net Profit Before Tax 1153.85 621.33 616.59Net sales 5125.08 4270.05 3419.06Ratio 22.51% 14.55% 18.03%

Chart:

2009-2010 2008-2009 2007-20080.00%

5.00%

10.00%

15.00%

20.00%

25.00%22.51%

14.55%

18.03%

net profit ratio

net profit ratio

Interpretation: The net profit margin is indicative of management’s ability to operate the business with sufficient success. A high net profit margin would ensure adequate return to the owners as well as enable a firm to withstand adverse economic conditions when selling price is declining. Here it has increased in 2010 which is good for the company.

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3. Current ratio : This ratio establishes a relationship between current assets and current liabilities. The objective of calculating this ratio is to measure the ability of the firm to meet its short term obligation.

Formula: Current asset Current liabilities

Table: Table 5.1.3 (RS IN CRORE)

Particulars 2009-2010 2008-2009 2007-2008Current assets 1342.28 1228.42 1043.67Current liabilities 1460.44 957.74 951.05Current ratio(times) 0.92 1.28 1.09

Chart:

2009-2010 2008-2009 2007-20080

0.2

0.4

0.6

0.8

1

1.2

1.4

0.92

1.28

1.09

Current ratio(times)

Current ratio(times)

Interpretation: The higher the turnover ratio, the more efficient is the management and utilization of the assets while low turnover ratios are indicative of underutilization of available resources and presence of idle capacity. Here in 2009 it was higher while in 2010 it has decreased again.

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4. Quick ratio : It is the ratio between quick current assets and current liabilities and is calculated by dividing the quick assets by the current liabilities.

Formula: Quick assets Current liabilities

Table: Table 5.1.4 (RS IN CRORE)

Particulars 2009-2010 2008-2009 2007-2008Quick assets 579.14 681.71 791.77Current liabilities 1460.44 957.74 951.05Quick ratio(times) 0.40 0.71 0.83

Chart:

2009-2010 2008-2009 2007-20080

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0.4

0.710000000000001

0.830000000000001

Quick ratio(times)

Quick ratio(times)

Interpretation: A Quick ratio of 1:1 is considered satisfactory as a firm can easily meet all current claims. It provides in a sense a check on liquidity position of a firm. Here it has shown a decreasing trend from which can say that the company is having more assets which has tied up in slow moving and unsalable inventories and slow paying debts.

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5. Book value per share: It represents the equity of the equity share holder on a per share basis. It is computed dividing net worth by the number of equity shares outstanding.

Formula: Net worth Number of equity shares outstanding

Table: Table 5.1.5 (RS IN CRORE)

Particulars 2009-2010 2008-2009 2007-2008Net worth 1557.22 1094.47 928.50No.of shares 9.592 9.592 9.592Book value per share 162.35 114.10 96.8

Chart:

2009-2010 2008-2009 2007-20080

20

40

60

80

100

120

140

160

180 162.350000000001

114.196.8

Book value per share

Book value per share

Interpretation: it is used as a benchmark for comparisons with the market price per share. However it has a serious limitation as a valuation tool as it is based on the historical costs of the assets of a firm. Here it is highest in the year 2009-2010.

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6. Earnings per share: It measures the profit available to the equity shareholders on a per share basis. It is calculated by dividing the profits available to the equity shareholders by the number of shares outstanding.

Formula: Net profit Number of ordinary shares outstanding

Table: Table 5.1.6 (RS IN CRORE)

Particulars 2009-2010 2008-2009 2007-2008Net profit 1004.50 562.36 525.20No.of eq. shares 9.592 9.592 9.592Earnings per share 104.72 58.63 54.75

Chart:

2009-2010 2008-2009 2007-20080

20

40

60

80

100

120104.72

58.63 54.75

Earnings per share

Earnings per share

Interpretation: It is a widely used ratio. As a measure of profitability of a firm from the owner’s point of view, should be used cautiously as it does not recognize the effect of increase in equity capital as a result of retention of earnings. Here it has increased in three years.

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7. Dividend payout ratio: It measures the proportion of dividends paid to earning available to shareholders. It is also known as payout ratio.

Formula: Dividend to equity holders Net profit *100

Table: Table 5.1.7 (RS IN CRORE)

Particulars 2009-2010 2008-2009 2007-2008Dividend to eq. holders

258.98 167.86 163.06

Net profit 1004.50 562.36 525.20Dividend payout ratio 26% 30% 31%

Chart:

2009-2010 2008-2009 2007-200823%

24%

25%

26%

27%

28%

29%

30%

31%

32%

26%

30%

31%

Dividend payout ratio

Dividend payout ratio

Interpretation: This ratio generally shows what percentage share of the net profit after taxes and preference dividend is paid out as dividend to the equity-holders. So that the percentage dividend of equity holders is decreasing year by year.

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8. Debt-equity ratio: It measures the ratio of long-term or total debt to shareholders equity. It is the ratio of the amount invested by outsiders to the amount invested by the owners of business.

Formula: Long-term debt Shareholders’ equity

Table: Table 5.1.8 (RS IN CRORE)

Particulars 2009-2010 2008-2009 2007-2008Long-term debt 116.49 122.44 126.22Shareholders’ equity 95.92 95.92 95.92Debt-equity ratio 1.21 1.28 1.31

Chart:

2009-2010 2008-2009 2007-20081.14

1.16

1.18

1.2

1.22

1.24

1.26

1.28

1.3

1.32

1.21

1.28

1.31

Debt-equity ratio

Debt-equity ratio

Interpretation: It is an important tool of financial analysis to appraise the financial structure of a firm. If the ratio is high, the owners are putting up relatively less money of their own. It is danger signal for the creditors. A low ratio has opposite implications. Here the ratio is decreasing which is not good for the company.

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9. Fixed Asset turnover ratio: It indicates the efficiency with which firm uses all its assets to generate sales. It is based on the relationship between the cost of goods sold and assets/investment of a firm.

Formula: cost of goods sold Average fixed assets

Table: Table 5.1.9 (RS IN CRORE)

Particulars 2009-2010 2008-2009 2007-2008Cost of goods sold 2623.81 2599.19 1940.19Average fixed assets 1,088.18 711.77 539.22Fixed asset t/o ratio 2.41 3.65 3.6

Chart:

2009-2010 2008-2009 2007-20080

0.5

1

1.5

2

2.5

3

3.5

4

2.41

3.65 3.6

Fixed asset t/o ratio

Fixed asset t/o ratio

Interpretation: The higher the turnover ratio, the more efficient is the management and utilization of the assets while low turnover ratios are indicative of underutilization of available resources and presence of idle capacity. Here the ratio has decreased from 3.65 to 2.41 which mean company needs additional capital investment to expand their activities.

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10. Inventory turnover ratio: The number of times the average stock is turn over during the year is known as stock turn over. It is computed by dividing the cost of goods sold by the average stock. The objective of computing this ratio is to determine the efficiency with which the inventory is utilized.

Formula: cost of goods sold Average inventory

Table: Table 5.1.10 (RS IN CRORE)

Particulars 2009-2010 2008-2009 2007-2008Cost of goods sold 2623.81 2599.19 1940.19Average inventory 654.925 542.84 486.52Inventory turnover ratio

4 4.79 3.99

Chart:

2009-2010 2008-2009 2007-20080

1

2

3

4

5

6

4

4.79

3.99

Inventory turnover ratio

Inventory turnover ratio

Interpretation: A high ratio implies good inventory management. Here in 2008-2009 it was highest. But it decreased from 4.79 to 4. A low ratio is dangerous. It signifies excessive inventory or overinvestment in inventory.

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11. Debtor turnover ratio : It is the average amount of time needed to collect accounts receivables. The debtor’s turnover suggest the number of times the amount of credit sales is collected during the year, while debtor ratio indicates the number of days during which the dues for credit sales are collected. Suppose the debtors ratio is sixty days, it means that debtor’s pay their dues for credit sales after sixty days of making the sales.

Formula: Average debtors + bills receivables Credit sales *365

Table: Table 5.1.11 (RS IN CRORE)

Particulars 2009-2010 2008-2009 2007-2008Credit sales 5125.08 4270.05 3419.06Average debtors 331.43 311.02 251.90Debtor turnover ratio

23.6 26.58 26.89

Chart:

2009-2010 2008-2009 2007-200821

22

23

24

25

26

27

28

23.6

26.58 26.89

Debtor turnover ratio

Debtor turnover ratio

Interpretation: This ratio measures how rapidly receivables are collected. A high ratio is indicative of shorter time-lag between credit sales and cash collection. A low ratio shows that debts are not being collected rapidly. In 2007-08 the ratio was high which shows effective collection policy. But in 2009-10 the ratio has gone down to 23.6. This shows that the company’s policy is not so effective.

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12. Proprietary ratio: The ratio shows the proportion of proprietors funds to the total assets employed in the business. The proprietor’s fund or share-holders equity surplus. The ratio indicates the amount of capital contributed by the proprietor’s .The higher the ratio, the higher proprietors & the financial position of business.

Formula: proprietary’s fund Total assets *100

Table: Table 5.1.12 (RS IN CRORE)

Particulars 2009-2010 2008-2009 2007-2008Proprietor’s fund 1577.22 1094.47 928.50Assets 1673.71 1216.21 1054.72Proprietary ratio 94.23% 90% 88%

Chart:

2009-2010 2008-2009 2007-200884.00%

86.00%

88.00%

90.00%

92.00%

94.00%

96.00%94%

90%

88%

Proprietary ratio

Proprietary ratio

Interpretation: This ratio indicates the extent to which assets are financed by owners funds. It may also show some relationship between equity funds and assets. Here in 2010 the ratio is highest which is good for the company.

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13. Interest coverage ratio: The ratio indicates as to how many times the profit covers the payment of interest on debentures and long-term loans. Hence, it is knows as “times-interest earned ratio”. It is indicated in times.

Formula: EBIT Interest

Table: Table 5.1.13 (RS IN CRORE)

Particulars 2009-2010 2008-2009 2007-2008EBIT 1153.85 621.33 616.59Interest 13.76 10.40 8.27Interest coverage ratio 83.86 59.74 74.56

Chart:

2009-2010 2008-2009 2007-20080

10

20

30

40

50

60

70

80

90 83.86

59.74

74.56

Interest coverage ratio

Interest coverage ratio

Interpretation: It indicates the extent to which a fall in EBIT is tolerable in that the ability of the firm to service its interest payments would not be adversely affected. Here it has increased in the year 2010 so it can enable the firm to pay back to the lenders.

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14. Return on equity share capital: The ratio is important, as it indicates profitability of a firm from the viewpoint of real owners who are ordinary shareholders, who bear all the risks of business. It signifies the success with which the management has been able to earn enough returns on funds supplied by the proprietors.

Formula: Net profit after tax Equity share capital *100

Table: Table 5.1.14 (RS IN CRORE)

Particulars 2009-2010 2008-2009 2007-2008Net profit after tax 774.50 364.31 375.20Equity share capital 1557.22 1094.47 982.37Return on eq. share capital

49.74% 33.27% 38.19%

Chart:

2009-2010 2008-2009 2007-20080.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

49.74%

33.27%38.19%

Return on eq. share capital

Return on eq. share cap-ital

Interpretation: Here the ratio has increased from 38.19% to 49.74% which mean company has enough capital to pay the dividend to his shareholders. It is able to earn enough returns on the funds.

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15. Return on capital employed: It is an index of profitability of business and obtained by comparing net profit with capital employed. The ratio is normally expressed in the percentage. The term capital employed includes share capital, reserves and long term loan such as debentures.

Formula: EBIT Total capital employed *100

Table: Table 5.1.15 (RS IN CRORE)

Particulars 2009-2010 2008-2009 2007-2008EBIT 1153.85 621.33 616.59Capital employed 1557.22 1094.47 982.37Return on capital employed

74.09% 56.77% 62.76%

Chart:

2009-2010 2008-2009 2007-20080.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Return on capital employed

Return on capital employed

Interpretation: Here the profits are related to the total capital employed. The higher the ratio, the more efficient is the use of capital employed. Here the ratio is increasing so we can say that the funds of owner and lenders have been used efficiently.

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16. Long-term funds to fixed assets ratio: The fixed assets should always be acquired out of long-term funds meaning there by that this ratio should not be less then 100.

Formula: long-term funds Fixed assets *100

Table: Table 5.1.16 (RS IN CRORE)

Particulars 2009-2010 2008-2009 2007-2008Long-term funds 116.49 122.44 126.22Fixed assets 1,088.18 711.77 539.22Long-term fund to fixed asset ratio

10.7% 17.2% 23.4%

Chart:

2009-2010 2008-2009 2007-20080.00%

5.00%

10.00%

15.00%

20.00%

25.00%

10.70%

17.20%

23.40%

Long-term fund to fixed asset ratio

Long-term fund to fixed asset ratio

Interpretation: Higher the ratio, better for the company. In the year 2010 it has decreased to 10.7% from 23.4% which is not good for the firm. In 2009-2010 long term funds have decreased while fixed assets have increased and because of that only the ratio has come down to 10.70%.

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DU-PONT ANALYSIS

Particulars 2008 2009 2010Net sales 3419.06 4270.05 5125.08Less: operating expenses 2862.70 3708.78 4115.08Earnings before interests &taxes 616.59 621.33 1153.85Less: interest 8.27 10.40 13.76Earnings before taxes 608.32 610.93 1140.09Less: taxes 233.12 246.62 365.59Earnings after taxes 375.20 364.31 774.50Total assets 2005.77 2174.65 3134.15Debt 94.70 74.53 68.59Equity 982.37 1094.47 1557.22EAT/EBT(times) 0.62 0.60 0.67EBT/EBIT(times) 0.99 0.98 0.99EBIT/Sales(per cent) 0.18 0.15 0.23Sales/assets(times) 1.70 1.96 1.64Asset/equity(times) 2.04 1.99 2.01Return on equity(per cent) 0.38 0.34 0.50

(RS IN CRORE)

INTERPRETATION:

The equation indicates that the management of the company has three levers through which it can control ROE:

i. The net profit margin per rupee sales’ii. The sales generated per rupee of assets employed iii. The amount of equity used to finance the assets.

Here in the year 2008 the ROE is was higher which means company had the higher financial leverage. And it has decreased in year 2009 to 0.34 from 0.50 and again it increased a bit in the year 2010 to 0.38. Which means company is exploring the possibilities of increasing its profit. This 5 ways break up of ROE enables the firm to analyze the effect of interest payments and tax payments separately from operating profitability. The both leverage ratios have been increased in the years 2010 i.e. company has higher financial leverages. Which ultimately leads to the higher profit.

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COMMON-SIZE STATEMENT

Income-statement (common-size) (RS IN CRORE)PARTICULARS 31-Mar-

10(12) 31-Mar-

09(12)31-Mar-

08(12)Profit / Loss A/C Rs % Rs % Rs %   Net Sales  51144.50 100.00 42579.7

0100.00 34066.80 100.00

Material Cost 28740.80 56.20 25650.10

60.24 19473.10 57.16

Increase Decrease Inventories

-147.30 -0.29 586.70 1.38 231.90 0.68

Personnel Expenses 2647.80 5.18 2431.20 5.71 1991.30 5.85 Manufacturing Expenses

1103.50 2.16 983.40 2.31 836.70 2.46

Gross Profit 18799.70 36.76 12928.30

30.36 11533.80 33.86

Administration Selling and Distribution Expenses

8752.60 17.11 7381.30 17.34 6094.00 17.89

EBITDA 10047.10 19.64 5547.00 13.03 5439.80 15.97 Depreciation and Amortization

607.40 1.19 571.50 1.34 437.70 1.28

EBIT 9439.70 18.46 4975.50 11.69 5002.10 14.68 Interest Expense 191.00 0.37 159.10 0.37 82.70 0.24 Other Income 1544.80 3.02 721.40 1.69 726.10 2.13Pretax Income 10793.50 21.10 5537.80 13.01 5645.50 16.57 Provision for Tax 3301.70 6.46 1835.70 4.31 1879.60 5.52Extra Ordinary and Prior Period Items Net

253.20 0.50 -78.50 -0.18 -13.90 -0.04

Net Profit 7745.00 15.14 3623.60 8.51 3752.00 11.01

INTERPRETATION:These percentage figures bring out clearly the relative significance of each group of items in the aggregative position of the firm. For instance in the year 2010 the EAT of the company has increased to 6.46 from 4.31 in the year 2009. This improvement can mainly be seen from the efficiency in manufacturing operation. The increase in financial heads (interest) can be traced to the on time payment of the long term loans. Further analysis indicates that profitability is more because of decrease in operating expenses.

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BALANCE SHEET(COMMON-SIZE) (RS IN CRORE)

PARTICULARS31-Mar-

10% 31-Mar-

09% 31-Mar-

08%

Equity Capital 959.20 3.06 959.20 4.41 959.20 4.78 Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00Share Capital 959.20 3.06 959.20 4.41 959.20 4.78Reserves and Surplus 14613.0

046.63 9985.50 45.91 8325.80 41.51

Loan Funds 685.90 2.19 745.30 3.43 947.00 4.72 Current Liabilities 11562.7

036.89 7719.00 35.49 7845.60 39.12

Provisions 3041.70 9.71 1861.50 8.56 1664.90 8.30Current Liabilities and Provisions

14604.40

46.60 9580.50 44.05 9510.50 47.42

Total Liabilities  31341.50

100.00

21749.60

100.00

20057.70

100.00

Tangible Assets Net 6951.70 22.18 6177.90 28.40 4175.10 20.82 Intangible Assets Net 122.90 0.39 51.20 0.24 38.90 0.19 Net Block 7074.60 22.57 6229.10 28.64 4288.30 21.38 Capital Work In Progress Net 3807.20 12.15 888.60 4.09 1103.90 5.50Fixed Assets 10881.8

034.72 7117.70 32.73 5392.20 26.88

Investments 7036.90 22.45 2347.70 10.79 4228.80 21.08 Inventories 7631.40 24.35 5467.10 25.14 5389.70 26.87 Accounts Receivable 3314.30 10.57 3110.20 14.30 2519.00 12.56 Cash and Cash Equivalents 286.00 0.91 1282.60 5.90 413.50 2.06 Other Current Assets 667.10 2.13 484.60 2.23 331.80 1.65Current Assets 11898.8

037.96 10344.5

047.56 8654.00 43.15

Loans & Advances 1524.00 4.86 1939.70 8.92 1782.70 8.89Total Assets       31341.5

0100.0

021749.6

0100.0

020057.7

0100.00

COMMONSIZE INTERPRETATION:

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The common size balance sheet shows that current asset as a percentage of total asset have increased by around 10% over the previous year in 2010. This increase was shared by inventories and cash; the share of debtors also has decreased. The proportion of current liabilities has also increased. These facts signal a declining trend in the over all liquidity position in the company. Further, the share of long term debt has also declined and owners’ equity has remained the same through out the last 3 years.

TREND ANALYSIS Balance sheet (As on March 31) for the year 2008,2009 &2010 (Rs.in crore)

Particulars 2007-08 % 2008-09 % 2009-10 %Sources Of Funds :Share Capital 95.92 100 95.92 100 95.92 100Reserve & Surplus 832.58 100 998.55 120 1461.30 176Secured Loan 36.70 100 24.59 67 25.59 70Unsecured Loan 89.52 100 97.85 109 90.90 101Total liabilities 1054.72 100 1216.91 100 1673.71 100Application Of Funds:Fixed Assets 539.22 100 711.77 132 1088.18 202W-I-P - - - - -Investment 422.88 100 234.77 55 703.69 165CA & loans & Adv. 1043.67 100 1228.11 118 1342.28 129CL & Provisions 951.05 100 957.74 101 1460.44 154CA-CL 92.62 100 270.37 292 (118.16) (128)Miss. Exp. - 100 - -Total assets 1054.72 100 1216.91 100 1673.71 100

Interpretation:

The significance of a trend analysis of ratios lies in the fact that the analysis can know the direction of movement, that is, whether the movement is favorable or unfavorable. Trend analysis involves comparison of a firm over a period of time, that is present ratios are compared with past ratios for the same firm. It indicates the direction of change in the performance- improvement, deterioration or constancy- over the years.

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If we talk about total liabilities here it has been decreasing; this shows positive aspect of the company. But the amount in reserves and surplus of the company has decreased so company can not invest in other segments or departments their capital that easily.

Profit and loss account (Rs. in crore)

Particulars 2007-08 % 2008-09 % 2009-10 %Income :Net Sales 3419.06 100 4270.05 125 5125.08 150Other Income 60.23 100 60.06 100 143.85 240Total Income 3479.29 100 4330.11 124 5268.93 151Expenditure:Raw Materials 1956.13 100 2606.93 133 2840.24 145Other Manu. Expenses 194.67 100 238.90 123 260.84 134Selling, Admin Expenses 711.90 100 862.95 121 1014 142Miscellaneous Expenses - - - - - -Total Expenses 2862.70 100 3708.78 130 4115.08 144PBDIT 616.59 100 621.33 101 1153.85 188Interest 8.27 100 10.40 126 13.76 167PBDT 608.32 100 610.93 100 1140.09 187Depreciation 43.77 100 57.15 131 60.74 139PBT 564.55 100 553.78 98 1079.35 191Tax 189.35 100 185.52 98 304.85 161Net Profit 375.20 100 362.36 97 774.50 207

Interpretation:

Here in the year 2009-2010 the profit has decreased from 774.50 in 2007-08 to 375.20. It is just because of the monsoon which made delay in the production and the sales went down in the last quarter of the company. Interest rate has also decreased which is good for the firm only. The expenses of the company are also less related to last two years which also indicates good financial management of the firm that the firm is handling its finance very efficiently and effectively.

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FINDINGS:

Asian Paints Ltd, the market leader in wall paints, posted a year-on-year decline in profit in 2010. Profit fell for two main reasons. One, lower-than-expected revenue growth, and two, last year’s numbers included about Rs. 63 crore on account of sale of long-term investment. That’s precisely why other income has declined sharply this time, hitting profitability. Adjusting for that, net profit growth is more or less in line with Street expectations.

Revenue growth at both the stand-alone company and its subsidiaries was lackluster. The company attributes poor revenue growth to the seasonal shift due to the timing of Diwali. Also, rains in August and September played spoilsport on volumes. According to the company, the extended monsoon also resulted in delayed projects and maintenance demand, impacting industrial paints’ demand. Analysts maintain most of the revenue growth would have come from price realizations than volume growth.

Despite poor revenue growth, the good thing is that Asian Paints was able to maintain its operating profit margin.

Sustaining operating margin would be a key thing to watch out for. The company says raw material prices are expected to increase further in the coming quarter and that decorative paints would be impacted more because of this than the industrial paints segment. The performance of some subsidiaries is another concern, as some of them continue to face tough market conditions. Some other aspects found were:

Low profit margin a great concern.

Little shift in the income of the average class makes them shift to the emulsion category.

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SUGESSTIONS

Asian paint limited is a growing company and allover performance of the company is satisfactory. The main performance of the company can be judged by the Net profit ratio and it has increased year by year. The Expense has decreased, so company can get the more profit and can also give more dividend to the share holders.

They should promote Vendors in supplying the raw Materials Rather than Importing. They should develop suppliers in supplying basic ingredients for paints (pthalic

anhydride, Resins). During Monsoon Seasons they should increase Exports to More countries (Already

Captured exporting to 22 markets- Asia Pacific, Middle East, Africa). In addition, should offer Seasonal Products E.g. Diwali in North, Pongal in south & Christmas.

They should increase promotional activities with regard to Regional festivals. They should offer other variety of products ( Wood Polishes)at a discounted rate during

sale of Decorative paints-predator pricing Industrial paints and should tie up with Business units for longer periods or can take over of small companies to increase their market Share.

They should refinish their old Capital equipments/metals with paints for industries at low rates to prevent Corrosion.

And the dealers of the company are not satisfied with the price so they should also get price relaxation.

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CONCLUSION

From the above financial project report what can be concluded is that the Asian paints industry is the largest paint company providing the customer of all kind of the product they want. It is the leading firm in this industry. The company has expanded its business in different segments. Asian paint is operating in 21 countries and has 29 manufacturing units in the world servicing consumers over 65 countries. The company’s financial position is also good and they have the brand position in the market. The profit of the firm has been increasing year by year.

Asian Paints has sold its loss-making units in China, Hong Kong, Malaysia and Thailand. This will remove the dampening effects these units have, on its profitability. Asian Paints is looking at an upswing in consumer demand and strong recovery in real-estate, construction & automotive industry. The demand for decorative paints segment (75% of the paint industry) will be spear-headed by the demand from growing real estate industry. Asian Paints is the market leader in the decorative paints segment. Currently per capita paint consumption in India is at 0.5-0.75 kg which is very low compared to developed countries average of 22kg. This shows a huge potential ahead for Indian paint companies and especially for Asian Paints.

The company is also focusing aggressively on the industrial paints segment where it is currently in the 2nd position. The demand for industrial paints is expected to rise with the growing demand from the automotive sector and other industries

Asian Paints is India’s largest paint company having a Strong Brand & Huge Distribution network. It has a sound financial past & is expected to have robust growth, both in the short-term and long-term.

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BIBLIOGRAPHY

For introduction of Asian Paints ltd: www.asianpaints.com

For introduction of FMCG industry analysis:http://www.economywatch.com/world-industries/fmcg.html

For annual reports of the company: www.asianpaints.com

For economy analysis: www.slideshare.net

Ratio analysis: Management Accounting (5th edition)

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