- April 21, 2022
- Posted by: admin
- Category: News & Atricles
Asian paints monopoly in the paint market – a case study
Asian paints is one of the most powerful countries in the history of India, and the most astounding thing – they have a 20% CAGR (Compound annual growth rate) for the past 60 years.
In 1942, the Second World War brought a temporary ban on importing paints in India. At that time, only a few foreign competitions were running operations in India. Launching a new painting company and competing with dominant actors in these fierce moments was complicated.
However, a 26-year-old Champaklal saw this as the opportunity to visit Entering the market with his three friends. It became a significant paint production company that is still contained today.
Asian Paints has become a brand that connects all Indians, established as the largest company in India and the third-largest in Asia in the paint industry.
Creating an extensive business empire
The journey from a small garage to starting your own paint business was not easy; many hidden struggles have been. At the time, the new entrant to the block, Asian Paints, could not convince the major distributors in Bombay.
Thus, instead of focusing on product volume in big cities like Bombay, Asian Paint chose to serve an overlooked market in India’s rural areas. They opened their first direct dealership in Sangli, Satara, in Maharashtra. After Asian paintings seemed to win in rural areas, Majay’s major distributors began to contact them and started storing Asian paintings.
This has been achieved due to the company’s development of creating a solid brand, marketing, and high-efficiency supply chain. Asian Paints has successfully differentiated its products for 75 years in India. It has forged a remarkable position in the coatings industry, just as the Colgate brand has made in the toothpaste industry in India.
Asian paintings and international cooperation
Up to now, the Asia Paint Group has been present in 15 countries worldwide. It mainly operates in four regions, namely Asia, Middle East, South Pacific, and Africa, through eight corporate brands: Asian P Paint, Asian Paints Berger, SCIB Paints, Apco Coatings, Taubmans, Causeway Paints, and Kisco.
The company’s eight production plants in different locations have 1.73 million KL per year of decorative paint products.
The launch of many new products, supported by research and meeting consumer expectations, has contributed to this success. The exponential increase in its brand value contributes to its global expansion efforts.
What do Asian Paints hold?
- 26 manufacturing plants around the world serving consumers in more than 65 countries.
- It currently operates in 17 countries, including the USA, Australia, Sri Lanka, etc.
- It serves more than 150,000 retailers in India.
- It was established as the 9th largest paint company globally and has been a market leader in India for 50 years.
- It is the third-largest paint company in Asia and operates in 22 countries worldwide.
- Home Improvement
The company provides decorating solutions and has been steadily adding products to help customers build homes in their dreams. It operates in kitchen and bathroom appliance classes, including a modular kitchen and sanitary ware range.
Asian Paints recently ventured into the wardrobe and wardrobe business. This segment is a priority area for its future growth, as the Indian property market is expected to grow, supported by the country’s growth of the affordable housing segment.
- Kitchen Solutions
Asian Paints Co., Ltd. entered the kitchen solutions sector with the acquisition of Sleek International Pvt Ltd. Paint Company invested Rs 120 to take 51% share, Sleek International’s promoters will own the rest.
The Mumbai-based company manufactured, sold, and distributed kitchens and kitchen parts, including wire baskets, cabinets, appliances, and accessories. It has a retail network with more than 30 stores and 250 dealers.
Sleek is a subsidiary of Asia Paint Company and offers complete kitchen and wardrobe solutions. It is the largest modular kitchen brand in India. Its construction is renowned for its innovative and efficient designs, world-class quality, and outstanding craftsmanship, built with state-of-the-art facilities, engineering, and innovation.
Asia paint supply chain and business model
Asian Paints is one of those companies that started identifying trends and consumption reasonably early in their game and built innovative and effective strategies around them. Asian Paints boasts a market capitalization of 2,54,125.07 INR, and this is unlikely to happen if it doesn’t target the right users with quality products fueled by the appropriate marketing mix.
Asian Paints has developed its business on a B2C business model, where the brand manufactures and distributes products directly to consumers and through retailers and distributors.
Furthermore, the company spent around Rs 8 crores to purchase a mainframe to be the first private company to own a supercomputer, which is a bold move. This computer is used to analyze data and help the company forecast demand and improve service levels throughout the supply chain. In contrast, other companies continue to generally use computers for work salary calculation and administration.
Asian Paint has continued to make wise investments to improve supply chain efficiency and has always sought to stay ahead of its competitors and competitors, as it has done for many years.
The company conducted an IPO in early 1982 and has used the process to grow its business and launch various exciting new products. The supply chain practices developed by Asia Paints have always been second to none in the coatings industry in India.
The company also believes in scaling operations and improving factories and expanding capacity with modern machinery, and investing wisely in their IT operations.
Target Market Asian Paints
- Asian Paints targets a wide range of customers, including but not limited to homeowners, businesses, car manufacturers, wholesalers, and distributors.
- Asia Paint Company’s retail customers are usually people aged 20 years and over in the middle, middle and upper-income groups.
- The company’s clients belong to private companies, government agencies, and other organizations.
Over the years, Asian Paints has finished numerous exceptionally a-hit promotional activities. One of its maximum remarkable is the logo mascot Gattu, an incredible animated film created through R.K Laxman in 1954 that went directly to grow to be famous and identified determine for greater than 4 decades.
The organization’s essential recognition is being all approximate families and emotionally connecting with the clients. Many well-known public figures have been Asian Paints logo ambassadors, including Akshay Khanna, Ranbir Kapoor, brother-sister duo Saif Ali Khan and Soha Ali Khan, with the maximum latest being Deepika Padukone.
Financial ratios of Asian paintings
- Profitability ratio
Asian Paints has an EBITA margin of 17.83%, which has steadily increased over the past few years and is the highest among its peers. The recent increase from 16.99% in 19 to 17.83% in 20 is mainly due to falling crude oil prices. Paint Asia has consistently delivered a large RoE ratio of over 25%. The current RoE is 27.79%.
In FY 2020, RoCE is 35.83%. However, there has been a downward trend in RoCE over the past two years, mainly due to increased competition, additional CAPEX, and investments for future growth.
- Leverage ratio
The current ratio for the company’s fiscal year 2020 is 1.73%, which has been steadily improving over the past two years. A current rate above 1.33% is considered healthy. The company is virtually debt-free, with a Debt to Equity ratio of just 0.04. This means that the company funds additional projects from its funds.
The company’s quick ratio was 0.96 in the last financial year. Although liquidity has not improved over the past few years, it still maintains the required level.
- Effective reporting
The asset turnover ratio has continuously decreased since 2016 (1.83). Currently, the ratio is 1.44%. However, all companies in the same industry experienced similar declines, and Asia Paint still has a slightly higher figure than its peers.
The inventory turnover ratio for 2020 is 7.14%, the highest among peers. However, the industry has seen this rate drop over several years.
The number of payable days has decreased from the previous fiscal year (52.73 to 50.51), which shows the supplier`s bargaining power over the company. In contrast, the receivable days continuously increased over the last few years, indicating stiff competition.
Shareholding Pattern of Asian Paints
Promoters hold 52.79% of the company, with around 10.67% pledging. Promoter holding has been constant for the last few quarters, and shares have also reduced from 12.53% in December 2019 to 10.67 % in December 2020. Nevertheless, pledging above 10% is an alarming sign.
A constant increasing trend has been seen in the case of FII holding for the last few quarters, with a shareholding of 17.24% in September 2019 to 21.13% in the recent quarter.
However, DII’s stake in Asian Paints has been consistent downward over the past few quarters. Public participation is more or less the same in Asian paintings from about 200%.
Asian Paints is the marketplace leader, with over 30% marketplace share. Its largest competition is- Berger Paints, Kansai Nerolac, Indigo Paints, Akzo Nobel, Sirca Paints, and Shalimar Paints. Asian Paints` aggressive benefit is its distribution strength.
Its product portfolio, comprising the exhaustive listing of portrayed wishes, is likewise an aggressive benefit at the side of its visibility and geographical reach.
The organization`s stand-out function is its variety of one-of-a-kind signature shops supplying clients with professional help from skilled specialists imparting custom-designed furnishing and ornament solutions. Many such measures have been taken to lessen the impact of painters on the clients` desire for brands in a singular manner over the years.
Prospective clients may even, without delay, name the organization`s helpline to test out the product services and get an immediate quote.
But ultimately, those benefits are imitable. What the organization wishes to do for a long-time period of leadership is generate more excellent calls through manner of intermediaries.
In the paint business, intermediaries like painters, contractors, designers, decorators, and many others disproportionately impact clients` buy decisions.
Asian Paints ought to use those intermediaries to their benefit by using them as an advertising and marketing arm to sell their merchandise as spokespersons without delay to the end-user.
The success mantra
The success of Asia Paint Company can be attributed to the following:
The company’s growth and success have been attributed to building a solid and successful parent brand focusing on chain management supply.
It proposed a new working strategy from day one, from choosing to set up its first dealership in the small town of Sangli, Maharashtra, to launching new products and advertising with the help of a mascot that emotionally connects with Indian customers. Investments in IT as early as the 1970s gave the company a significant competitive advantage over its supply chain rivals. In 2020, substantial investments in Asian Paint’s digital technology were being made to maintain supply chain efficiency, cost leadership, and charge premium fees. For its products.
With increasing demand, the company launches new products and attracts new customers through effective advertising, technological innovation, and strong management.