SAKTI PAINTS WORKING CAPITAL

SECTOR OF INDUSTRY : PAINTS

SUMMER TRAINING PROJECT ON WORKING CAPITAL

UCO BANK ZONAL OFFICE BHUBANESWAR

NAME OF CONTOROLLING BRANCH : SAHIDNAGAR

STUDENT NAME : DEBASMITA SATPATHYREGN. No. 0906287004COLLEGE : GITABRANCH : MBA

INTERNAL GUIDE : Asst. Prof. CHINMAY K. ROUT

ACKNOWLEGMENTS

The branch of UCO BANK deserves the thanks. Because they all help me for preparing the summer project under their bank. Which help me to more about the finance. Specially to Mr. Sing sir And Mr. Sethi sir. They help me a lot in time period that how to make the project.

After all of this my special thanks to our GITA COLLEGE’s Principal Mr. R.K. Galgali, our H.O.D. sir Mr. N.B. PRADHAN, and my internal guide Mr. Chinmay K. Rout. Because they allow me to do the SIP under UCO BANK. And the support given by them is not mentioned by words.

Thank you all

GENERAL PROFIL OF COMPANY :

NAME OF THE BORROWER : M/s CONSTITUTION : PROPRIETORSHIPDATE OF INCORPATION : 21/06/06

SECTOR ( PUBLIC/PRIVATE/Jt.) : PRIVATEGROUP/HOUSE : SAKTI GROUP ( Not a recognize one)If under MRTP : NANature of Industry/Activity : Manufacturing of Paints

Location :

Reag. Office : PLOT NO. 96SAILSHREE VIHAR, BBSR- 751021Controling Office : PLOT NO.96 SAILSHREE VIHAR, BBSR- 751021Factory : PLOT NO. 3 AND 4, INDUSTRIAL ESTATE Radhadamodarpur, ATHGARH CTC.Branches : No BRANCHESNAME OF THE PROPRIETORNAME : Dr. Urbashee Jena w/o Umakanta PadhiyariNet mean Rs. 51.94 lacs as on 15/03/2010AGE – 38Address : PLOT NO. 96 SAILSHREE VIHAR, BBSR- 751021% of share holding – 100Other direactorship/ partnerships- prorietress of m/s Shakti paints

Brief history :

The promoter of the company Mrs Dr. Urbasee Jena, aged 39 years is a holder of doctorate degree from UTKAL UNIVERSITY. In may 1997 she started taking interest in gaining knowlegein the paint trading business run by their husband. Her husband started a tradeding shop dealing in paints just after his exams. In 1995 in the name and style of “SHAKTI HARDWARE SHOP”. In November 2004, the proprietorship, the firm is converted in to private ltd company namely “ SHAKTI HARDWARE AND PAINTS (Pvt) LTD” and they both became directors. The company has enter in market in 2007.the achived tunered over of around 60,00,000 lakhs. INTRODUCING THE SHAKTI HARDWARE AND PAINTS GROUP

SHAKTI HARDWARE AND Paints is India’s largest paint company and India’s largest paint company,with a turnover of INR 54.63lakhs. The group has an enviable reputation in thecorporate world for professionalism, fast track growth, and building shareholder equity.SHAKTI HARDWARE AND Paints operates in 20 states and has 28 paint manufacturing facilities in theworld servicing consumers. Besides, SHAKTI HARDWARE AND Paints.

MESURE COMPITITORS:

The group operates

around the world through its subsidiaries Berger International Limited, Apco Coatings,SCIB Paints and Taubmans.Forbes Global magazine USA ranked Asian Paints among the 200 Best Small Companiesin the World for 2002 and 2003 and presented the 'Best under a Billion' award, to thecompany. is the only Asian paint company in the world to receive this recognition.In Nov 200 Paints 5 and Nov 2007, Forbes ranked Asian Paints among the Best under a Billioncompanies in Asia.The company has come a long way since its small beginnings in 1942. Four friends whowere willing to take on the world's biggest, most famous paint companies operating inIndia at that time set it up as a partnership firm. Over the course of 25 years Asian Paintsbecame a corporate force and India's leading paints company. Driven by its strongconsumer-focus and innovative spirit, the company has been the market leader in paintssince 1968. Today it is double the size of any other paint company in India. Asian Paintsmanufactures a wide range of paints for Decorative and Industrial use.Vertical integration has seen it diversify into products such as Phthalic Anhydride andPentaerythritol, which are used in the paint manufacturing process. Asian Paints alongwith PPG Inc, USA, one of the largest automotive coatings manufacturer in the world hasbegun a 50:50 joint venture, Asian PPG Industries to service the increasing requirementsof the Indian automotive coatings market. Another wholly owned subsidiary, AsianPaints Industrial Coatings Limited has been set up to cater to the powder coatingssegment which is one of the fastest growing segments in the industrial coatings market.

THE MARKET PRESENCE OF COMPITITORS:

Today the Asian Paints group operates in 20 countries across the world. It hasmanufacturing facilities in each of these countries and is the largest paint company ineleven countries. The group operates in five regions across the world viz. South Asia,South East Asia, South Pacific, Middle East and Caribbean region through the fivecorporate brands viz. Asian Paints, Berger International, SCIB Paints, Apco Coatings andTaubmans. In ten markets, it operates through its subsidiary, Berger InternationalLimited; in Egypt through SCIB Paints; in five markets in the South Pacific it operatesthrough Apco Coatings and in Fiji and Samoa it also operates through Taubmans.Berger International LimitedFew companies can claim of a history of over two and a half centuries, a presence in over 35countries and an impact on the lives of over a billion people. Ever since it was founded in Englandin 1760 by Lewis Berger, who perfected a new process for making Prussian Blue – the colour ofmost military uniforms then – Berger has never looked back.Over the years Berger expanded its operations across oceans, to cover numerous geographies.In 1994, Berger units were brought under the single umbrella of the holding company ‘BergerInternational Limited’ (BIL) with headquarters in Singapore, which was also listed on theSingapore stock exchange. In November 2002, BIL became a part of the Asian Paints Group.Today, the name of Berger is synonymous with quality and innovation. BIL has presence acrossthree regions viz. Middle East, Caribbean and South East Asia. In the Caribbean region, n the 1990s, helped by a growing economy, the Indian paint industry recorded a healthy growth of 12-13% annually. This was

mainly due to a drastic reduction in excise from a staggering 40% to 16%. However, the growth was restricted in 2002-03 to single digits. There was a revival in 2003-04 with a robust growth of 13%. 

The Indian paint industry has two main market segments--industrial and decorative paints. While industrial paints are used for protection against corrosion and rust on steel structures, vehicles, white goods and appliances, decorative paints are used in protecting valuable assets like buildings. 

The Indian decorative business has a share of approximately 77% in total sales. In foreign countries 50-70% of the business is from the industrial segment. 

The trends are likely to shift in India too, but at a slower pace, in favor of industrial paints. The per capita consumption of paint in India is 700 grams versus 19 kg in the U.S. and 2.7 kg and 5.8 kg in other developing countries like China and Brazil. Because consumption relates to affordability, the low Indian figure is not a surprise. 

Within the decorative segment, the share of exterior paints is 21%, interior emulsions 11%, distempers 30%, solvent-based enamel paint 36% and wood finishes two percent. 

The exterior category, particularly exterior emulsions, is the fastest growing segment at 20% for the last three years. 

The industrial coatings segment includes high performance coatings with 30% market share, powder coatings with ten percent, coil coatings with five percent, marine coatings five percent and automotive coatings 50%. 

While Asian Paints was a clear market leader with a turnover of approximately $420 million (Rs 1,943 crores) in 2003-04, Goodlass Nerolac was second with approximately $220 million (Rs 1,010 crores) during the same period. 

ORGANIZATION SYSTEM :

Most of the organized companies in India's paint and coatings market have a nationwide presence with multilocation manufacturing facilities. The companies in the unorganized sector are mostly regional, spread in and around their manufacturing facilities and deal in low value products. 

Asian Paints has created a nationwide marketing campaign focusing on all small interior markets. Not only was the company able to establish itself in interior markets, the demand percolated to main towns allowing the company to enlist support of large customers. 

Being restrained by FERA (Foreign Exchange Regulations Act) and MRTP (Monopolies & Restrictive Trade Practices Act), most players were not allowed to increase production capacities until the Nineties. With liberalization, these shackles were removed and other companies have expanded, though the gap between Asian Paints, which could expand continually and others has widened. 

Another winning point for Asian Paints was its strategy to focus on smaller packs while others were focussing on larger packs. Asian Paints has also been introducing new product categories, which helped in expanding the market. 

This made distribution still more complex as precise forecasts for more than 3,000 SKUs became a challenge for every organization. With the advent of color dispensing machines supported by all paint companies and sophisticated IT enabled distribution tools, the situation has eased considerably. 

FINANCIAL STREANTH AND WEAKNESS THE COMPANY :

Growth in operations sales increasing exponential. The firm’s turnover has increased manifold after increase in cc limit in 2008. From Rs.10,00,000 to Rs.20,00,000. The infractstrure development due to additional term loan of

Rs.40,00,000 in 2008-09 has contributed. Substantially for increase in production sales. Durning the currunt financial year 2009-10. A report projected to sale of Rs.490.50 lakhs appers to be achievable which may be accepted.

GROWTH IN PROFITABILITY :

It is reduced to 1.98% to projected sales during 2009-10 but gradually increasing in turn over result in higher over all profit.

GROWTH IN MARKET SHARES :

The brand “SHAKTI” has entered throughout the state of odissa as evidenced in the functioning of the accout., where cheaques of different regions of state are poured in to the account.

INDUSTRY ANALIYSIS IN BRIEF :

Nature of industry is manu facturing paints. Domestic Market is very good. Global Market is not applicable. Major constraints and completion. To complete with branded

product like BERGER,ASIAN PAINTS, NEROLAC. Future potential of the paint industry appears to be very bright. Industry risk perception is good.

PROPOSAL :

Brief statement of the proposal :

The unit has applied for enhancing it’s cc limi from Rs.20,00,000 to 80,00,000 to meet increase in turnover. The firm has also requested for additional term loan of Rs. 40,00,000 for construction of factory building and purchase of machinaries. Considiering the present turn over with the existing facilities, we had discussed with the properties and she has agree for enhancement of the cc. limit from the existing Rs. 40,00,000 lakhs. Since the existing Rs.20,00,000 to Rs. 40,00,000. Since the activity has expanded to meet with the demand, she propose to put some additional building, plant and machinery for which a term loan of

Rs 40,00,000 lakhs is required.

WORKING CAPITAL - Meaning of Working Capital

Capital required for a business can be classified under two main categories via,

1. Fixed Capital2. Working Capital

Every business needs funds for two purposes for its establishment and to carry out its day- to-day operations. Long terms funds are required to create production facilities through purchase of fixed assets such as p&m, land, building, furniture, etc. Investments in these assets represent that part of firm’s capital which is blocked on permanent or fixed basis and is called fixed capital. Funds are also needed for short-term

purposes for the purchase of raw material, payment of wages and other day – to- day expenses etc.

These funds are known as working capital. In simple words, working capital refers to that part of the firm’s capital which is required for financing short- term or current assets such as cash, marketable securities, debtors & inventories. Funds, thus, invested in current assts keep revolving fast and are being constantly converted in to cash and this cash flows out again in exchange for other current assets. Hence, it is also known as revolving or circulating capital or short term capital.

CONCEPT OF WORKING CAPITAL :

There are two concepts of working capital:

1. Gross working capital2. Net working capital

The gross working capital is the capital invested in the total current assets of the enterprises current assets are thoseAssets which can convert in to cash within a short period normally one accounting year.

CONSTITUENTS OF CURRENT ASSETS:

1. Cash in hand and cash at bank2. Bills receivables3. Sundry debtors4. Short term loans and advances.5. Inventories of stock as:

o Raw materialo Work in processo Stores and spareso Finished goods

6. Temporary investment of surplus funds.7. Prepaid expenses8. Accrued incomes.9. Marketable securities.

In a narrow sense, the term working capital refers to the net working. Net working capital is the excess of current assets over current liability, or, say

NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES.

Net working capital can be positive or negative. When the current assets exceeds the current liabilities are more than the current assets. Current liabilities are those liabilities, which are intended to be paid in the ordinary course of business within a short period of normally one accounting year out of the current assts or the income business.

CONSTITUENTS OF CURRENT LIABILITIES

1. Accrued or outstanding expenses.2. Short term loans, advances and deposits.3. Dividends payable.4. Bank overdraft.5. Provision for taxation , if it does not amt. to app. Of profit.6. Bills payable.7. Sundry creditors.

The gross working capital concept is financial or going concern concept whereas net working capital is an accounting concept of working capital. Both the concepts have their own merits.

The gross concept is sometimes preferred to the concept of working capital for the following reasons:

1. It enables the enterprise to provide correct amount of working capital at correct time.

2. Every management is more interested in total current assets with which it has to operate then the source from where it is made available.

3. It take into consideration of the fact every increase in the funds of the enterprise would increase its working capital.

4. This concept is also useful in determining the rate of return on investments in working capital. The net working capital concept, however, is also important for following reasons:

o It is qualitative concept, which indicates the firm’s ability to meet to its operating expenses and short-term liabilities.

o IT indicates the margin of protection available to the short term creditors.

o It is an indicator of the financial soundness of enterprises.

It suggests the need of financing a part of working capital requirement out of the permanent sources of funds.

(A) Assessment of Working Capital Requirment In lac

ASSUMPTION AS ON ACTUAL ESTIMATES PROJECTION

SALES-GROSS 152.97 490.52 540.75Sales net 152.97 490.52 540.75

Cost of Prouction 132.81 465.72 490.75

Cost of sales (incl.dep) 129.15 435.82 486.78

Raw material consumption 92.70 402.96 422.80

% cost of production/sales 87 95 91

% cost of sales/sales 84 89 90

% raw meterials consumption to cost of production.

70 87 86

(B) Level of hoiding : (months)

NORMS Actuals Estimated Projection

Indicative

AcceptedFor the year

Raw meterials 1 1 1.5

Consumable, spares and store

1 - -

Work-in-process

- - -

Finished Goods

1.4 1 1.2

Receivables 1.2 1.2 1.3

Other current assets

- - -

Sundry creditors

1/2 1/2 1/2

Other current liabilities

- - -

(C) Computing of working capital Rs. In lacs

As per the last assessment for the year 31/03/08

Past acuals audited31/03/09

Estimates as of 31/0310

Projectons31/03/11

Current asset

Raw materials 5.03 10.25 17.02 23.72

Consumable spares/ stores

-

Finised goods 11.46 15.13 25.02 31.77

recevables 1.15 25.51 43.53 53.45

Advances to supplier

- 1.70 -

Cash and bank balance

0.54 0.59 5.67 7.14

Other current asset

- - 15.25 7.59

Total current asset

18.19 53.19 106.48 123.63

Less Sundry creditors

4.52 9.88 12.74 15.59

Other 0.53 1.68 11.18 12.85

current liabilities

Working capital GAP

13.14 41.63 90.73 95.18

Cost center :

Unit within the organization in which the manager is responsible only for costs. A cost center has no control over sales or over the generating of revenue. An example is the production department of a manufacturing company. The performance of a cost center is measured by comparing actual costs with budgeted costs for a specified period of time.

Revenue center :

Unit within an organization that is responsible for generating revenues. A revenue center is a profit center since for all practical purposes there is no revenue center that does not incur some costs during the course of generating revenues. A favorable variance occurs when actual revenue exceeds expected revenue.

Profit center :

Responsibility unit that measures the performance of a division, product line, geographic area, or other measurable unit. Divisional profit figures are best obtained by subtracting from revenue only the costs the division manager can control (direct division costs) and

eliminating allocated costs common to all divisions (e.g., an allocated share of company image advertising that benefits all divisions but is not controlled by division managers). Profit is a very often used method to evaluate a division's financial success as well as the performance of its manager. In determining divisional profit, a transfer price may have to be derived. The divisional profit center allows for decentralization. as each division is treated as a separate business entity with responsibility for making its own profit.

Responsibility center :

Unit in the organization that has control over costs, revenues, or investment funds. For accounting purposes, responsibility centers are classified as cost center , revenue center , profit center , and investment center . A well-designed responsibility accounting system should clearly define responsibility centers in order to collect and report revenue and cost information by areas of responsibility.

Investment center :

Responsibility center within an organization that has control over revenue, cost, and investment funds. It is a profit center whose performance is evaluated on the basis of the return earned on invested capital. The corporate headquarters or division in a large decentralized organization would be an example of an investment center. Return On Investment (ROI) and Residual Income (RI) are two key performance measures of an investment center.

Product of the company :

Color powder paintTextured paintInsulation paintWall paintsPolyurethane paintsPaint stripper

BUSINESS REENGINEERING 

With the industry business becoming complex, most companies have restructured and have used information technology as the key driver for reengineering. They have aligned their organized structures on the basis of expanding business and its complexities. This was essential in order to tighten controls. 

Today, companies have divided their sales organizations into decorative, industrial and high performance coatings business units. The national level organization structure is split into zones, regions and branches. 

Color dispensing machines, both computerized and manual, have transformed the business, particularly on the manufacturing and distribution sides. Earlier, paint companies were required to manufacture all the shades (30-50 depending on a product line) in all the packs (five to eight packs). 

The demand pattern was difficult to predict even with the support of historical data/trends as consumer preferences were changing fast. The machines altered the production pattern from shades to producing bases thus providing economies of scale, reduced inventory levels and eliminated redundancy of stocks. It has cut down the new products introduction cycle considerably. This has helped expand the range of shades for each product category, offering a choice of shades to consumers in the hundreds. For the retailers also, it eliminated the sales loss for want of range/desired shade. The machines have brought a total change in the way business is transacted and revolutionized business processes as well. 

There are approximately 11,000 color-tinting machines installed at the dealers' end including multiple machines on some counters. Also popular are the gear mixers for 2K finishes in auto refinishes, which are installed at the dealers' end and at leading garages. 

The dependence on information technology has increased remarkably from a

corner room EDP operation to playing a pivotal role in the way business in transacted. While Asian Paints has invested in i2 technology, Goodlass Nerolac has backed up IBM enabled APO and has upgraded to the latest 3.1 version to improve its distribution and optimize production scheduling. Both companies are operating on an ERP (SAP R3) operating system through full connectivity across the factories and branches via V-SATS, thus virtually working on live data for sales, accounting and purchasing. 

Goodlass Nerolac has moved one step further by launching its intranet-employee portal to capture knowledge sitting in the minds/desktops of individuals to a common platform, which can be accessed by all employees. It has also invested in advanced business plan performance measurement tools like balanced score cards to track, review and align performance. 

Most companies in the Indian paint industry are functioning on multi-division models with individual functions controlled by business heads. Some manage their business through sub-committees. As in the case of Goodlass Nerolac there are two levels of teams managing/guiding business. 

While all the policy and major decisions are looked at by the management committee (MC), which reviews operations on a monthly basis, there is a parallel team--business analyst team (BAT)--which analyzes the businesses and discusses new initiatives, working as the think-tank for the company. Recently CAT (Creative Analysis Team) has been created to work on new long-term initiatives. 

PRODUCT CULTURE 

Most companies have an identical range of products for the decorative-paint market. In the industrial segment, the range of products is more customized and guided by the technology support provided by the collaborators. In the case of decorative products the technology has been mostly indigenously

perfected over the years and the products can be divided on the basis of interior and exterior application or in categories like water-based and solvent-based. Moreover, most companies have been advertising their products in the exterior emulsions category, which has expanded the market and triggered a shift from cement paint. 

While solvent-based enamels are still popular in India, outside India there is a clear shift visible from solvent- to water-based glossy enamels. India will take some time before this change is accepted on account of three hurdles currently faced including cost (water-based is expensive), low level of gloss in water-based enamels and the psychological barrier that water-based coatings cannot be superior to solvent-based coatings for protecting wood or metal surfaces. 

Companies not working on operational efficiency business models have been losing. Asian Paints and Goodlass Nerolac have been aggressively working on cutting costs/operating expenses. Berger has been managing well with economical yet acceptable formulations and low operating costs. 

The industry is not capital intensive and depreciation charges are not significant. Working capital requirements are moderate. However, most companies in the lower rungs are unaware about the realization of debtors. Added to this has been the problem related to collection of installments on color dispensing machines, which are mostly purchased on lease. 

The highest efficiency required is in physical distribution. The poor forecasts of demand result in poor distribution. As a result, companies are investing in sophisticated supply chain management tools. Margins have remained under pressure due to dropping prices, which have been more strategic and forced by the market leader. Companies have been working on improving internal efficiencies to retain profits. The pressure from OEMs to reduce prices has also been a cause for low profits for paint companies. Even with the turnaround of the Indian economy, the pressure has not relented. The customer, or retailer, has also been dictating his terms as most companies have common counters to meet their objectives. So they have no choice but to lure more customers through incentives. Lower productivity of high cost labor in the old units has been another problem. This in totality has increased operating pressures. 

Some of the international players are already present in India's paint and

coatings market, but mostly for industrial coatings. They include Akzo Nobel, BASF, Henkel (pre-treatment chemicals), PPG, ICI (decorative) and DuPont (auto refinishes). A few others are present through collaborations like Kansai and Nippon. 

For the decorative range of products, it is difficult for international companies to set up shop on a stand alone basis because of existing barriers such as the strong network of established players, brand image, range of products (Indian context) and required distribution logistics. Therefore, the safer route has been and will be to tag along with existing companies. For industrial products, however, this may not apply and based on their tie-ups in home countries and their OEM customers, the required range can be made and sold. 

There is however room for niche players, with radical and unique ranges of products properly conceived and marketed in the Indian context and supported with machines. 

CURRENT TRENDS 

The Indian paint and coatings industry is riding high on the growth in the Indian automobile industry, new construction in the housing segment and improving infrastructure throughout the country. Thirty percent of the paint business is comprised of new construction projects. GDP growth projections of six to 6.5% in the current year mean a growth of nine to ten percent in Indian paint business. The growth will be 12-13% in the industrial segment and eight to nine percent for decorative paint. The Indian automobile industry has been performing remarkably well and will benefit the market leader in the segment, Goodlass Nerolac. 

As for the future, the industry has predicted a CAGR of eight to nine percent for the next five years compared to last year's growth levels of 27.4% for cars and 8.9% for two wheelers. The Indian housing industry is likely to do well in the current year as well, recording a growth rate of 35% last year. As a result of the overall health of India's economy, it is safe to predict a nine to ten percent growth rate for the Indian paint industry in the next five years. 

Consumers can look forward to new product launches, some for application in special areas. Companies will be increasing the value added services available to customers by offering a variety of finishes through specialized and trained applicators. There will be more options like ranges of colors/finishes for wood applications through the tinting machines. Additionally, the trend towards water-based coatings is likely to set in both for industrial and decorative applications. While India has not yet embraced the DIY concept as cheap labor is still available, exclusive retail chain stores sponsored and run by Indian paint companies will become a reality. 

The Indian paint industry has progressed well and moving ahead is likely to be influenced by several factos including new technologies, new innovative products, new associations, consolidation of industry and poor performers getting out of the market. Ultimately, in the years ahead there will be only four or five key players operating in the Indian paint market. Valspar Corporation, the $2.97-billion global paint manufacturer, is planning to enter the Indian paint market. The Minneapolis-based company has held talks with Baroda-based Grand Polycoats, an unlisted firm that specializes in making protective industrial coatings. 

Grand Polycoats CFO Maulik Mehta confirmed talks with Valspar, but said it was not up for sale. "Many companies, including Valspar, have approached us but we have our own strategy for growth. There's no reason to sell out at this point." 

He could afford to say so. Grand Polycoats, whose protective coatings are used in auto parts, engineering and capital goods, chemicals and petrochemicals, has been growing at almost double the industry's average growth of ten to 12%. 

The company is among the top five players in protective coatings and has given paint majors like Akzo Nobel, Kansai Paints, Asian Paints and Berger Paints a run for their money, according to experts. Valspar didn't respond to an e-mailed questionnaire. 

Valspar, a leading paint and coatings manufacturer, is looking to expand overseas. Though Valspar makes a wide range of coatings, paints and related products, it is known for its coatings, which are used in protecting many iconic brands from the green that defines John Deere's tractors to Coco-

Cola's red cans and Caterpillar's machines. 

Valspar has grown through acquisitions in the 1980s and 1990s, and is now trying to grow beyond the U.S.--currently, 30% of its sales come from outside the U.S. compared with five percent a decade ago. Its success in China has pushed its annual sales growth in excess of 20% per year. 

The acquisition-led strategy has helped Valspar post good results increasing its net profit 19% in 2006 due to 9.7% growth in sales. In July 2006, Valspar acquired an 80% stake in Huarun Paints, a supplier of furniture, decorative and achitechtural coatings in China, for $200 million. 

In October 2006, Valspar also acquired H. B. Fuller's powder coatings business, marking its first powder manufacturing facility in Europe. It plans to use this to serve its industrial customers worldwide. In 2006, the company also entered into a joint venture with Tekno S A to supply coil coatings in Brazil. 

With the Indian paint market growing at ten to 12% and most of its global peers already here, it can hardly ignore this market. 

"What's attracting global majors is the growth prospects here. In infrastructure, India is trying to build in the next five years what it has built over the last 60 years," said Mehta. 

For the protective business, which is Grand Polycoats mainstay, infrastructure is the main driver for growth. This has a trickle down effect on the demand for capital goods and equipment, according to Mehta. If Grand Polycoats doesn't materialize, Valspar could explore other opportunities in India, including setting up a greenfield plant. 

MAJOR PAINT AND COATINGS MANUFACTURERS RIDE INDIA'S REAL ESTATE BOOM 

Riding on the back of a real estate boom, paint companies are extremely bullish on India, which is among the fastest growing markets across the

globe. 

Among the international companies that are increasing their investments is the Japanese paint major, Nippon, which is investing approximately Rs 80 crore for manufacturing facilities in Gurgaon and a 25-acre unit in Chennai. 

With Akzo Nobel likely to acquire ICI Paints globally for $16 billion, the Dutch giant will also increase its business in India. 

Akzo already has a powder coatings business in India through its acquisition of Courtaulds in July 1998, and it has also entered the decorative paints segment. 

DuPont is also expected to expand its presence in India. 

Industry experts expect other companies like Behr and BASF to set up shop in India as well. 

The Rs 11.000-crore Indian paints market is growing at double digits and the decoratives segment, which accounts for 70% of sales, is growing in excess of 20%. 

Asian Paints, the country's largest paint manufacturer, also has major expansion plans. The company is setting up its largest facility at Rohtak in Haryana. It will focus on emulsions. 

"The demand has exceeded our capacity and hence we are looking at this new plant," said Ashwin Dani, vice chairman and managing director, Asian Paints. 

Competitor Kansai Nerolac is also planning an 18,000-ton plant at a cost of Rs 68 crore, which will start production in two or three years. Berger Paints has 75% of its business in decorative paints. "In India, the housing sector is booming and this has provided a major boost to the decoratives business. This segment is expected to grow at 18-20%," said Abhijit Roy, vice-president marketing, Berger Paints. 

Higher raw material prices adversely impacted domestic &international margins. PBT for the group for H1 FY 09 hasdecreased from 14.9% to 13.3% due to increase in material

costs.– PBIT for domestic paints business grew by 17.9% for Q2FY09 and by 25.1% for H1 FY09.– Other income is lower due to lower dividends received.– Chemicals division and automotive business records lowerprofits than last year

Cash Flow

Decorative Business Unit

In general, demand conditions have been good– Value sales in the first half year has been excellent• Sales in Q2 is higher on account of early Diwali andprice increases across products leading to high stockswith dealers.– Retail demand varying across geographies,• Excellent in South and AP;• Good in parts of the North and East;• Weaker in the West - extended monsoon dampensdemand.– At a category level,• Interior and exterior emulsions have done exceedinglywell.

Indian Paint Market

Estimated to be around Rs. 98 bn (USD 2.1 bn)

–The paint industry is estimated to have grown by 15 % in volume terms in 05-06•Unorganised sector controls around 35 % of the paint market•Decorative to Industrial Coatings ratio is around 70:30•Exterior finishes is the fastest growing segment in D

–Interior Wall Finishes: 30% of the market by value•Distempers account for over 2/3rdsby volumes & continue to grow•Emulsion paints growing at a much higher rate–Exterior Wall finishes: 15% of the market and growing at an explosive rate–Alkyd enamels: 35% of the market•Growing, but slowly due to change in outdoor media and decreasing use on walls–Wood finishes: very small, but growing–Ancillary products account for the rest ecorative coatings while it is Automotive coatings for industrial coatings

Estimated to be around Rs. 29 bn (USD 650 million) •The automotive coatings segment accounts for nearly 45 % of the industrial coatings market•Another 30% of the market is accounted by the protective and powder coatings segment •New emerging segments like Road Markings, Floor coatings, coil coatings, etc are helping faster growth of industrial co •Investment in products and systems that provide more touch points with consumers•Continuous investment in building the company brand atings.

IMPACT ON BUDGET

• Market size of the Indian paint industry –Rs 5000crore.While the organize sector accounts for Rs 3500 Crore, the unorganized sector accounts for the balance of rs1500crore.

• In terms of volume, the unorganized sector accounts a major portion of

supply.

• Decorative paints and industrial paints accounts for around 70% and 30%of the total demand respectively.

• In decorative paints, enamels accounts for the maximum share followed by wall finishes, primers and wood finishes.

• In industrial paints, while automotive paints accounts for around 30 to 35%.General engineering paints accounts for balance.

• While Asian paints is the market leader in decorative paints, Goodlass Nerolac is the market leader in the industrial paint.

• Raw materials accost account for around 50%of the total cost of production.

• Demand is seasonal. Most of the demand comes during the October to March period.

• Industry is working capital intensive.

• Technology, distribution network, product innovation, service, brand recall, and geographical reach are the key success factor.

Budget paints 2008-09

Given that the growth of the Indian paints industry to a large extent hinges on GDP growth, the performance of the paints industry last year was healthy on the back of a robust growth in the Indian GDP.

Demand especially for decorative paints was strong led by increased construction activity and in the industrial paints business, powder and protective coatings logged in healthy growth rates.

In the next five years, the industry is expected to grow at a CAGR of around 11% to 12% and paint companies are expected to clock strong growth rates backed by capacity additions undertaken by them.

Having said that, rising crude prices will have a major bearing on the operating margins going forward.

Budget measures

• Customs duty exemption to be withdrawn on naphtha for use in the manufacture of polymers in order to correct price distortions and revenue losses.

• Naphtha for use in the manufacture of polymers will be subjected to normal rate of 5%.

• Increased emphasis on Bharat Nirman and improving infrastructure.

Budget Impact

• Reduction in excise duty on small cars, two wheelers and three wheelers will benefit paint companies, as the prices of cars will decline thereby boosting volumes.

• Increased emphasis on bolstering infrastructure in the country is a positive for companies, as it will enhance the performance of powder and protective coatings.

Company Impact

• Reduction in excise duty on small cars, two wheelers and three wheelers will benefit Kansai Nerolac and Asian Paints given their strong presence in the automotive paints segment.

• Emphasis on improving infrastructure such as roads, capital goods and power will be beneficial to Asian Paints, which has been witnessing strong growth in its powder and protective coatings businesses.

• Reduction of duty on import of raw materials used in the paints industry. All raw materials imports to attract a common duty.

Budget 2005-06

Construction of residential complexes having more than twelve residential

houses or apartments together with common areas and other appurtenances.

Exemption on tax deductible housing loan to continue. Under the rural development programme, 6 m additional houses to be constructed for the poor.Peak customs duty reduced from 20% to 15% The new income tax brackets, the change in exemption and deductions available to individuals and the increase in exemption for women. IT to generate around 7 m jobs till 2009.

Budget 2006-07

Peak rate of customs duty reduced from 15% to 12.5%. Basic inorganic chemicals reduced from 15% to 10%. Excise duty is being reduced from 24% to 16% on small motor vehicles. Duty to be reduced on major bulk plastics like PVC, LDPE and PP from 10% to 5%; on naphtha for plastics to nil; on styrene, EDC and VCM which are raw materials for plastics to 2%. Emphasis on the Bharat Nirman project and its timely completion.

Budget 2007-08

Hike in allocation for rural and urban housing infrastructure development. Reduction in custom duty on chemicals from 12.5% to 7.5%.Dividend distribution tax to be hiked from 12.5% to 15%.Additional education cess of 1% to fund secondary and higher education.

• Steady growth: The Indian paint industry has very low consumption levels as compared to the other developing economies. While the decorative segment is growing at 1% per annum, the industrial paint segment (led by powder and protective coatings) is also expected to record strong growth rates going forward.

• A mixed bag: A robust housing sector is likely to boost demand in the decorative segment. Long-term growth potential of the auto sector is also a big positive.

• Structural shift: Continuous fall in excise duty in the past has benefited organised players and the impending consolidation will add to the pricing power.

• Capex cycle booster: With investment cycle showing signs of momentum, industrial paint demand could grow at a much higher rate than the last five years.

Key Negatives

• Raw material worries: Since the paint sector is highly raw material intensive, rise in crude and petrochemical prices affects performance and the reliance is unlikely to reduce going forward.

• Monsoon blues: The performance of the decorative division also hinges on rainfall. In the last six years, the country has witnessed three years of poor rainfall, which has impacted paint demand.

Conclusion

Sakti hardware and paints is a booming paint industry, which is situated in ORISSA. It is leading paint company. Which is a challenge for other branded paint company like asian paints, berzer paints, neorolac, etc. From a small hardware store, they create India’s most leading brand SHKTI PAINTS. And the turn over is around 10,00,00,000 per year. They have also different branches all over india. According to study of the company account, the determinants of the working capital are perfectly used.