CASE STUDY.pdf

IMB 749
Asian Paints Limited: Painting History
J. RAMACHANDRAN AND JALAJ GARG
J. Ramachandran, Professor of Strategy and Jalaj Garg, Wharton MBA Class of 2013, prepared this case for class discussion. This
case is not intended to serve as an endorsement, source of primary data, or to show effective or inefficient handling of decision or
business processes.
Copyright © 2019 by the Indian Institute of Management Bangalore. No part of the publication may be reproduced or transmitted
in any form or by any means – electronic, mechanical, photocopying, recording, or otherwise (including internet) – without the
permission of Indian Institute of Management Bangalore.
This document is authorized for use only in Prof. Swarup Kumar Dutta's MBA & MBA-BA 2022-24/ Corporate Strategy at Indian Institute of Management - Ranchi from Jun 2023 to Dec 2023.

September 2018. Asian Paints Limited (“APL”) was the largest paint company in India, a position it had
comfortably maintained for over five decades by focusing on customer needs and constant innovation in
products, marketing, and service delivery. In the last ten years, the company – which was also the tenth
largest paints company in the world – had grown its revenues over four times, its profits five times, and its
market capitalization nearly ten times (see Exhibit 1). To further accelerate its growth and realize its vision
of being “India’s most exciting and inspirational home décor brand and business”, APL was investing over
₹40 Bni
to double its decorative paints manufacturing capacity and expand its presence in the home
improvement (adhesives, waterproofing, etc.) and decor space (modular kitchens, wardrobes, etc.). KBS
Anand, Managing Director & Chief Executive Officer, remarked:1
We are in the midst of our largest capacity expansion … [the two new] large plants would
give the company the ability to manufacture paints at the lowest cost well into the future.
These decisions, however, were not devoid of skepticism. Ambit Capital, for instance, described these
moves2
as indulging in “empire building”, and venturing into categories which provide “no apparent
synergies” and would prove to be “a distraction in terms of capital as well as management”. It downgraded
APL’s stock to “Sell” (with a target price of ₹860, when APL was trading at ₹1,166):3
We are worried about Asian Paints’ capital allocation decisions around: (1) aggressive
capacity expansion; (2) entry into weak international markets; and (3) acquisitions in home
improvement … the stock trades at a 34% premium to the FMCG sector. We believe this
premium is unjustified … a de-rating for Asian Paints is warranted.
PAINT INDUSTRY: A PRIMER
Paints are colored substances, which when applied on metallic and non-metallic surfaces and allowed to
dry, leave a thin coating that can be for decorative (aesthetics) and/or protective (humidity, air, sunlight,
etc.) purposes. They can also serve other functionalities as required (e.g. fire retardation, luminescence,
solar reflection, waterproofing, insect repelling). There are four primary components of a typical paint:
pigments and extenders (lend color), binders (hold pigment particles together to form a film), solvents (wet
the paint and make it suitable for applying; usually water or organic), and additives (for specific
functionalities mentioned earlier). Although the benefits offered by paints can be achieved in other ways –
by using different base materials (such as stainless steel instead of iron or PVC instead of wood or colored
bricks/concrete blocks that do not require any additional coatings) – these design decisions are not trivial
since the choice of base material is fundamental to the performance of the product. Consequently, while
direct and indirect substitutes exist, these have not disrupted the paint industry per se.
Paint is a raw material intensive industry, with titanium dioxide (a pigment), crude oil (and derivatives),
and mineral turpentine oil as the major inputs. These raw materials typically constitute 15-20%, 35-40%,
and 6-7% of the overall raw material basket,4
respectively, though it varies by product type. Commercial
i
Exchange rate: 1 US $ = ₹71.26.
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manufacture5
of paints began in Europe and the United States in the 18th
century. By the middle of the 19th
century, traditional approaches that used manual power gave way to grinding and mixing machines. By the
second half of the 19th
century, the chemical industry emerged and allowed major chemical companies (e.g.
Bayer, DuPont) to develop new innovations in paint technology. By the late 20th
century, production was
done in batches of various types of paints depending on end demand of each type. While large production
volumes offered economies of scale, paints’ high volume-to-value ratio (that made them expensive to
transport) and the need for large variety dictated smaller scales of operation near end markets.
HISTORY OF INDIA’S PAINT INDUSTRY
The first manufacturing unit in India was set up in 1902 by International Paint (a British company). Other
British companies such as ICI, Jenson & Nicholson, and Berger followed soon and shaped the industry’s
early years. However, it was an Indian player – Asian Paints – that became the industry leader in the late
1960s. Several global players such as Nippon Paints (Japan), Sherwin Williams (USA), and Jotun (Norway)
entered the market following India’s economic liberalization in the early 1990s. APL, however,
successfully defended its leadership position, and has dominated the industry for over five decades.
Demand for paint in India was closely correlated with GDP growth (1.2–1.6x of the GDP growth). Over
the years, the industry evolved from being a chemical product to more of a consumer product. Increase in
disposable incomes together with a higher propensity to consume and up-trading by consumers (in search
of superior products) resulted in strong industry growth. The industry grew six-fold – from ₹8,0006
Crii
in
2005 to over ₹50,000 Cr7
in 2018iii
(and expected to grow to ₹70,000 Cr by 2020) – outperforming other
consumption categories such as packaged foods, beauty and personal care, and apparel. Despite this robust
growth, India’s per capita paint consumption of 2.5–3.58,9
kg was much lower than developed countries and
global peers such as China (~12.8 kg) and Brazil (~7.0 kg), signaling considerable growth potential.
In 2018, the Indian market was dominated by four players (“paint majors”): APL, Berger, Kansai Nerolac,
and Akzo Nobel (see Appendix for competitor profiles). This competitive order had been quite steady (see
Exhibit 2) with low disruptions in terms of pricing or discounts, prompting many to describe it as a cozy
oligopoly. This structural characteristic meant that companies could pass input cost fluctuations to
customers and grow profitably. Their scale, distribution muscle, and product development capabilities
afforded the paint majors considerable advantage over the smaller and unorganized players.
The small and unorganized sector consisted of about 2,500 units that were typically located in smaller cities
and focused on lower value decorative products (that had lower technology and quality requirements).
Historically these units had an advantage over the organized players with respect to excise duties and taxes.
Reduction in excise duties (from 40% to 12%) followed by the introduction of the Goods and Services Tax
(GST)iv
eroded this advantage. Also, since pricing was the only lever for the smaller players, their market
ii
1 Cr = 10 million
iii
APL’s net revenue from operations grew over seven-fold from ~₹1,960 Cr to ~₹14,100 Cr during this period.
iv
GST, a value-added tax on the supply (manufacture, sale, consumption) of goods and services, was introduced in July 2017. It subsumed central
excise law, service tax law, VAT, entry tax, octroi, etc., thereby simplifying the indirect tax structure. A key benefit was that it eliminated tax on
Page 3 of 25

share steadily declined from 45% to 35% over the last decade. Unlike some FMCG products (e.g. biscuits,
detergents), outsourcing in paints was limited to lower-end products. The top four players purchased about
30% of their total sales volumes, with the rest manufactured in-house.
PRODUCT SEGMENTS
Paints can be classified into two primary product segments: Decorative/Architectural paints and Industrial
paints (see Exhibit 3). At 70-75% share10,11
of the overall Indian paints market in value terms, the decorative
segment was significantly larger than the industrial segment. Internationally, though, the industrial segment
was typically larger in developed economies, with the global average being 58%.
The decorative segment comprised exterior and interior wall paints (emulsions, enamels, distempers),
primers, varnishes, putties, etc. Their demand stemmed12
from residential (35-40% repainting, 20-25% new
houses), commercial (offices, malls; about 25%) and industrial/institutional (about 15%) users, and saw
significantly higher demand during the festive season (September to December).
Distribution in the decorative segment was direct to retail; there were no wholesale distributors who broke
bulk or helped manage credit to retailers. Hence, paint companies needed to directly deal with thousands
of retailers and manage credit with them (on average, the industry gave credit of three weeks to retailers).
Over the years, all the paint majors had invested heavily in expanding their distribution network (see
Exhibit 4), particularly in rural India. They had also installed Computerized Color Dispensers (“CCDs”)
or tinting machines at a large number of their dealerships. These CCDs could produce large variety of
shades using a small set of standard colors, thereby minimizing inventory requirements at points of sale.
Though CCDs were pioneered in India by Jenson & Nicholson, all paint majors adopted them. CCDs were
manufacturer-specific and required significant space (25–35 sq. ft.), making it very difficult for a new
company to penetrate existing outlets. CCDs had a payback period of three to five years, and typically paint
companies helped their dealers finance the initial outlay of ₹3-4 lakhsv
per CCD.
While buying continued to be heavily influenced by painters, contractors and dealers, involvement of end
consumers in the purchase decision was gradually increasing. Paint consumers were becoming less price-
sensitive and were willing to pay a premium for better products and brands. The industry therefore
witnessed a huge growth in premium products since the late 2000s. This trend was homogeneous across
India, including in small cities. Creative marketing campaigns and sustained endorsements by celebrities
evolved this hitherto low involvement consumer category into an aspirational brand play and created strong
brands for the paint majors, a facet that was challenging for new and smaller players to replicate. That said,
the brand spend of these paint companies was generally lower than that of FMCG players.
Both these aspects – distribution and brand – enabled the top four players to command considerable pricing
power. They were able to pass through cost inflation to consumers at times of high inflation, with APL
tax, i.e. double taxation, which cascaded from the manufacturing level to the consumption level. It was the largest tax reform in the country since
independence and was expected to integrate the economies of the various states in the nation and aid economic growth.
v
10 lakhs = 1 million
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usually serving as the benchmark. Short periods of disruptions notwithstanding, the leading players
reportedly maintained competitive order in terms of pricing and promotions.
In contrast, competition in the industrial segment was fierce. High volumes made up for relatively low
margins. This segment generated demand13
from the automobile sector (OEMs and component
manufacturers; about 45%) and a few non-automobile sectors including manufacturing equipment (high
performance coating; about 25%), consumer durables (powder coating; about 15%), and some others (e.g.
marine). Products as well as paint application and delivery equipment typically had to be customized and
jointly developed with the customer. Consequently, this segment was more technology-intensive than the
decorative segment, and required considerable balance sheet strength (for R&D and capex) on the part of
the paint manufacturer. It was, therefore, dominated by the organized sector. Strong client relationships that
often spanned multiple geographies were critical. Investing in customized products commanded
considerable loyalty from customers, and unlike in the decorative segment, distribution strength was not a
key differentiator. However, a minimum reach was required to provide efficient after-sales service.
GROWTH DRIVERS
Rising consumer aspirations were a key growth driver. Increasing disposable incomes resulted in shorter
repainting cycles. In urban centers, repainting cycles shortened from 5-6 years a decade earlier to 2-4 years,
driven, in part, by the introduction of end-to-end painting service solutions by paint companies. Similarly,
rural cycles decreased from 7-8 years to 5-6 years. Consumers also tended to spend more per cycle than
earlier (e.g. upgrading from limewash, locally known as chuna, to more expensive products). As DS Rawat,
Secretary General, ASSOCHAM,vi
pointed out:14
The Indian paint industry has seen a gradual shift in the preferences of people from the
traditional whitewash to higher quality paints like emulsions and enamel paints.
Increasing urbanization and greater awareness about the protective benefits of decorative paints were also
expected to drive demand in tier-2 and tier-3 towns and rural areas. Conversion of kuchha houses
(temporary; made of weak materials such as mud or clay) to pucca ones (permanent; solid) in the rural
sector – an outcome of higher rural disposable incomes – also benefited the paint industry's growth.
Government schemes such as “Housing for all” (by 2022), “Smart Cities Mission”, and “Shyama Prasad
Mukherji Rurban Mission” were also expected to give fillip to the demand for decorative paints.
In the industrial paints segment, India’s growing automotive market was a major factor driving growth.
Going forward, the growing consumer durables (e.g. refrigerators) sector was also likely to play an
important role. The government’s “Make in India” campaign and the push for infrastructure development
(ports, roads, power, etc.) would also drive demand.
vi
Associated Chambers of Commerce and Industry of India.
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APL’S COLORFUL JOURNEY
APL was founded in 1942 by four young entrepreneurs – Champaklal Choksey, Chimanlal Choksi,
Suryaknat Dani, and Arvind Vakil – in a garage in Foras Road in Mumbai. Realizing that it would be hard
to compete against the multinational incumbents in the industrial segment, APL opted to focus on the
decorative segment. It sought to differentiate itself in terms of product (vibrant colors versus the light shades
on offer back then), packaging (small packs that allowed customers to paint just the front end of the house),
and target markets (focus on semi-urban and rural areas that remained below the radar of the incumbents).
The focus on semi-urban and rural areas required APL to develop and invest in a strong dealer network, a
practice that it continued to follow. Success with its initial advertising efforts and innovative promotional
campaigns (that targeted, for example, local festivals such as Pola during which Maharashtrian farmers
decorate their bulls) eventually led to the creation of the mascot Gattu. It became one of India's most
recognizable advertising symbols, and more importantly, fostered a strong belief (that persisted) within the
company on building strong brands and effective messaging. Product innovations such as washable
distemper – which were significantly better quality, and less expensive vis-à-vis traditional dry distempers
(limewash), but of inferior quality than plastic emulsion paints – spurred the company to market leadership.
By 1967, APL was the largest paint company in India.
SUSTAINING LEADERSHIP
The 1970s and 1980s were periods of high growth for APL. The company modernized its existing
manufacturing facilities (its plant in Mumbai (Western India) reportedly became the largest single paint
factory in the country), and later expanded its manufacturing footprint by setting up plants in Patancheru
near Hyderabad (South India) and Kasna, Uttar Pradesh (North India). It also backward integrated into
production of resins and other raw materials used in paint production.
In 1982, APL raised money from public capital markets to fund growth. It was among the first businesses
in India to buy a state-of-the-art mainframe computer, and used it to improve demand forecasting,
production planning, reduce inventory and working capital, and improve service levels to dealers. A color
computer imported in 1979 helped dramatically reduce the tinting time from 5-6 days to 4 hours.
To grow and strengthen its talent pool, APL departed from the traditional practice among Indian family-
managed businesses of leveraging the family network. Instead, it started hiring graduates from premier
engineering (Indian Institutes of Technology) and business schools (Indian Institutes of Management). This
was yet another practice it followed even in 2018. It encouraged these hires to take ownership of problems
and assigned significant responsibilities to them early in their career. According to Jalaj Dani, a member of
one of the founding families, “it was never a crime to make mistakes at Asian Paints and the company still
believes so.”15
A structured process of taking feedback from dealers and its sales force resulted in the launch of the highly
successful Mera Wala Color (my choice of color) marketing campaign in 1992
(https://www.youtube.com/watch?v=t91ZeSkKbac). The campaign showcased the company’s extensive
Page 6 of 25

range of colors on offer, and made the consumer feel that she was in charge by enabling her to pick the
exact shade that she considered perfect for her. Amit Syngle, Chief Operating Officer, observed:16
The tagline became so popular that people would go up to stores and ask for mera wala
blue or mera wala green ... It became a generic term and showed the involvement of people
with the campaign.
A year later, building on the insight that people paint their houses on festive occasions and family events
such as weddings, APL launched the Khushi Ke Rang (colors of happiness) campaign
(https://www.youtube.com/watch?v=H-Yy-MrmuP8). It sought to establish a strong emotional connect
with the consumers by linking itself to the spirit of joy and festivity. These efforts clearly helped. For the
first time in 1997, the company – traditionally a leader in the middle and lower segments of the market –
gained leadership of the premium segment. Its Royale brand dislodged the long-standing leader Dulux from
ICI India, the Indian subsidiary of ICI Plc.
Growth of the passenger car market in India, following the entry of Maruti Suzuki, prompted Asian Paints
to foray into the automotive segment. Though the company entered into a technical tie with Nippon Paints
of Japan to source the requisite technology, it failed to gain much traction. Meanwhile, the automotive
sector continued to grow, driven by the entry of global majors in both the two-wheeler and passenger car
segments. In a change of strategy, APL set up a joint venture called PPG Asian Paints with PPG Inc
(formerly Pittsburgh Plate Glass) – the world’s largest coatings company – in 1997 to cater to the
automotive OEM segment. The joint venture became the second largest player behind Kansai Nerolac in
the OEM segment, and the largest in the auto refinish segment (after acquisition of ICI India’s auto refinish
business in 2007). APL and PPG formed another joint venture in 2012 called Asian Paints PPG for non-
automotive industrial coatings.
BATTLE FOR CONTROL
The year 1997 also found the promoters battling for control of the company. After falling out with the other
promoter families over plans for the company’s future and certain governance matters, Atul Choksey – the
then Managing Director and son of co-founder Champaklal Choksey – sold the family’s 9.1% stake to
Kotak Mahindra Capital Company, which further sold it to ICI Plc. The other three co-founders and the
company’s Board viewed this as a takeover threat and refused, as permitted by the then prevailing laws, to
ratify the transfer of the shares to ICI Plc. The British major, however, maintained that this was not a hostile
bid and contended that it sought to acquire the stake with the twin objectives of (a) pre-empting another
competitor (reportedly PPG) from buying it, and (b) exploring a strategic alliance with Asian Paints to
leverage its strength in the middle and lower segments of the market where ICI had little presence. ICI
Chairman AS Ganguly (ex-Chairman, Hindustan Lever Limited) also stated that “[the company] will
explore any position whereby it will be able to gain a dominant position in the market.”17
Ashwin Dani, who took over as Vice Chairman and Managing Director following the exit of Atul Choksey,
viewed the entire process as a hostile effort to take over the company. He said:18
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We have the best of technology and the marketing expertise. We do not see any scope for
ICI helping us in our business.
Later, reflecting on the development, he added:19
Value for money is embedded deeply in the psyche of the Indian consumer. No other
market in the world is as deep rooted as India in terms of value for money … [ICI] does
not have distemper paints. And we sell huge quantities of distemper paints. This is poor
man’s paints. Globally not many players sell distemper ... They service only class. We
service class and mass both. What’s more, I am making reasonable profit from distemper
sales and there is growth too in that segment.
After ICI failed to receive permission from the Indian government (which could not do so without the
consent of the APL Board), Kotak Mahindra Capital Company sold half of its stake to UTI (a mutual fund)
and the other half back to the other three promoters, thereby ending the corporate battle.vii
CONSOLIDATING LEADERSHIP
APL hired strategy consulting firm Booz Allen Hamilton in 1997-1998 to help achieve its new and
ambitious growth plans, and to put in a place a structure that separated the roles of ownership, governance
and management. Based on the recommendations, the company restructured its business into three Strategic
Business Units (Decorative Paints, Industrial Paints, and International Operations). Since APL considered
itself to be a promoter-driven but professionally managed company, each new SBU was to be headed by a
professional manager. Ashwin Dani said:20
We have a perfect blend of entrepreneurial and professional management. If a manager has
a bright idea, he has the full independence and support to develop it: he becomes the owner
of the management process.
The promoters also agreed among themselves that sale of shares by any one of them should have the consent
of the other two. Also, all major decisions were to be taken by consensus. With this new understanding, the
management set about consolidating the company’s leadership position.viii
STRENGTHENING DISTRIBUTION
The company followed up on the success of the Mera Wala Color campaign by installing CCDs at dealer
outlets and branded these outlets as Asian Paints Colorworld. Customers could match different shades with
the help of interactive touch screens and specially designed display panels. If a customer wanted a shade
vii
APL bought a 9.2% stake in ICI India in 2003. It offloaded a part of this in 2009 but a 4.3% in what had become AkzoNobel India – the Indian
subsidiary of Dutch chemicals major AkzoNobel, which had acquired ICI Plc in 2008.
viii
In 2009, the three promoters decided to step down from managerial roles and took up non-executive positions. Since then, the company’s CEOs
have been non-family professionals.
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that was a combination of two defined shades, the dealer could immediately mix it to her satisfaction using
the state-of-the art equipment. Bharat Puri, then General Manager of Marketing, said:21
Our Mera Wala concept was tailored according to consumer research findings that revealed
that the consumer was becoming more aware and was willing to pay more for some value
addition. At this point in time, we realized that the shade card was the most effective tool
of communication between the company and the customer.
CCDs revolutionized the way paints were sold, and transformed the paint dealer from a trader into a retailer.
Positive reception from customers encouraged the company to scale its Colorworld outlets. In 2018, about
80% of the company’s outlets were Colorworlds. The rollout was enabled, in large part, by the company’s
innovative efforts in helping dealers finance the investment in CCDs. APL orchestrated three-way
agreements wherein banks funded the dealer, who repaid the loan to the bank over time. This way, the
investments were not reflected in the company's balance sheet. Earlier, APL used to bear the initial
investment, which the dealer would repay through lease arrangements. Such support from the company
fostered strong dealer loyalty and further reinforced APL’s distribution network, which grew from 15,000
dealers in 2001 to 52,000 in 2018.
APL was also the first paint company to shift from a manufacturing and distribution focus to a service focus
when it launched Home Solutions, an end-to-end painting service. This service traced its origins to feedback
from a telephone helpline that was started in 1998, where it emerged that 40% of the calls were for turnkey
contract services. By 2018, this helpline was used as a single communication point for Home Solutions. A
customer called and requested a salesperson to visit her house. Once the paints were chosen, APL took care
of the rest of the job including scrubbing and cleaning. While an authorized contractor undertook the actual
painting, APL’s supervisors made regular visits for quality checks. The company also subsequently started
painter training academies to educate and train painters. KBS Anand noted:22
The helpline helped us realize the fact that customers didn't want to take the trouble of
selecting the right color, deciding which paint to buy and from where.
Other innovations (see Exhibit 5) included its signature store Color with Asian Paints in Mumbai set up in
2009. With an area of 7500 sq. ft., this experiential flagship store did not sell paint. Instead, the aim was to
inspire Indian consumers to be more confident with color in their homes and position APL as their home
décor and color experts. KBS Anand explained:23
We wanted to de-mystify the painting category, remove the hassle and make our customers
feel like experts in color and home décor.
The company also operated more than 2000 Ezy Color stores and 380 Color Idea stores all over the country
for end-to-end solutions (color personalization to painting execution), and launched a new format called
AP Homes where customers could have an integrated experience including paints, wall papers, bath fittings,
kitchen, sanitary ware, etc.
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RENEWING BRAND AND PRODUCT PORTFOLIO
India’s economic growth spurred changes in consumer behavior. On average, consumers had greater
disposable incomes and were more engaged in the home decoration process, driven by a desire to express
their personality and distinctiveness. Realizing this, APL launched the memorable Har Ghar Kucch Kehta
Hai (every home speaks a story) campaign (https://www.youtube.com/watch?v=Gv-3pqAlRZE and
https://www.youtube.com/watch?v=b_u5C749aKQ). It helped move the APL brand from a color-focused
positioning (Mera Wala Color) to one that invoked pride in one’s home. Over the years, this positioning
helped the company expand its product portfolio to include wallpapers, water-proofing solutions, wood
coatings and more recently kitchens and bathrooms as well. Amit Syngle said:24
Har Ghar Kucch Kehta Hai is a summation of our positioning and an expression which is
timeless and is as relevant today as it was before … [Asian Paints] owns the emotion of
home more powerfully than any other brand in India.
In keeping with this goal of connecting deeply with the customer’s home-related aspirations, the company
launched a new red and yellow (colors chosen to denote warmth) logo in 2002 with the letter `p' in the
company’s name presented in the form of a brush stroke (see Exhibit 6). Gattu, the lovable mascot, was
quietly relegated to just the packaging.ix
. Created by the legendary cartoonist RK Laxman in 1954, Gattu
had helped position Asian Paints as a consumer brand; the mischievous boy got the end consumer interested
in what was then a low involvement category controlled by painters. Even though Gattu’s mass market
appeal was increasingly becoming out of sync with the premium-appeal seeking consumers, the decision to
relegate Gattu to the background was a bold one. Vipul Prakash, Senior VP (Beverages) at PepsiCo India,
who was then at Asian Paints, observed:25
[the company] had the gumption to drop the mascot … We questioned the decision at the
time, but now feel it was right … Asian Paints never dropped its focus on the core offering
… the general tendency is: “The big guys are coming: let’s diversify into A, B or C.”
Instead, it took on the global leaders …. It left them to play catch up.
APL invested heavily in building its brands (see Exhibit 7). Its advertising spend, in absolute terms, was
the highest in the industry. Lower share of the capex-intensive industrial business (which constituted less
than 10% of APL’s revenue) allowed it to aggressively back the decorative portfolio that had expanded
significantly as the company catered to the changing needs of consumers. The launch of Tractor Emulsion
enabled consumers to upgrade from distempers to emulsions. Likewise, the company helped accelerate the
use of paints for exterior applications (paint was traditionally used mainly for interiors) with yet another
clutter-breaking campaign – Wah Sunil Babu (kudos Mr. Sunil) – that used humor to bring to life the durable
nature of its exterior wall paints (https://www.youtube.com/watch?v=qFyN5j16-l0). Yet another example
of APL’s innovation and creativity was the launch of Tractor Emulsion Varna Maalai – a special color
ix
This was the first of two makeovers. Here, the emphasis shifted from a lovable icon to a corporate identity. The second makeover in 2012 is the
present-day flowing ribbon logo.
Page 10 of 25

combination guide designed exclusively for the people of Tamil Nadu based on rooms seen in popular TV
serials. Amit Syngle said:26
With this color combination guide we have taken the brand position even further by helping
consumers choose the right color combinations for their home. It recommends color
combinations that are trendy and that will help their homes stand out.
Critically, APL was among the first companies to identify the premiumization trend among consumers in
India. It enabled the company to build a strong product portfolio in the premium segment (see Exhibit 8),
and shape consumer aspirations of a dream home with its Beautiful Home Guide campaign
(https://www.youtube.com/watch?v=YyPk4OkcpG8). KBS Anand asserted:27
There’s been a massive transformation in the Indian consumer. Earlier, people used to paint
when walls were peeling. Now, it’s about décor. We perceived this before most of our
competition.
The company’s brand equity, in addition to making it top-of-mind for consumers, provided the company
with considerable pricing power (see Exhibit 9). KBS Anand explained:28
Price increases are purely dependent on costs – raw materials and other operating costs. As
these vary depending on the strength of the rupee and international commodity prices, price
changes are entirely based on these in a highly competitive environment. If commodity
prices rise, yes there would be further price increases.
GROWING AND OPTIMIZING OPERATIONS
To realize its ambitious growth plans APL increased its manufacturing capacity aggressively. Over two
decades, it increased its decorative capacity over six-fold (from 180,000 Klpax
in 1999 to 1,130,000 Klpa
in 2018) and expanded its footprint to six paint manufacturing locations (see Exhibit 10). The company
also operated two plants for manufacturing industrial paints and one for chemicals.
Complexity of APL’s operations also grew manifold due to a number of factors: greater scale, more
locations, larger portfolio (brands, faster pace of new product launches), shift in product technology mix
(greater share of water-based paints vs. solvent-based paints), and changes in production pattern (from
producing shades to producing more bases, due to the growing numbers of CCDs at dealer outlets). To
manage the increased complexity, the company systematically leveraged information technology. It
implemented an Enterprise Resource Planning (ERP) system that helped standardize processes and create
a common enterprise-wide platform. Data from shop floor control systems (the new manufacturing plants
were fully automated) and warehouses was linked to the ERP system, thereby enabling operational
efficiencies. A B2B portal linking suppliers drove further efficiencies in the supply chain.
x
Kiloliters per annum. 1 kiloliter = 1000 liters.
Page 11 of 25

The company also centralized its order taking process into a corporate call center. Doing so allowed the
sales team, now armed with mobile devices to monitor dealer performance data, to focus on strengthening
dealer relationships, rather than on routine order collection.
Customer-centric digital initiatives to aid their decision process came next. These included an inspiration
gallery and creative design ideas for end users; sharing, learning and discovery tools for designers; and
simple yet innovative tools such as a budget calculator and a visualization app. The effort was to go
“phygital” – delivering traditionally physical experiences of space, scale, touch and feel digitally – and
making the customer’s world a colorful place.
EXPANDING SCOPE
APL first forayed into international markets (“to test its ability”) when it entered Fiji in 1978. Despite
meeting with success, the company did not expand further as it remained firmly focused on the Indian
market. Ashwin Dani commented:29
No company can operate at international level unless it has a strong home base … If we are
not strong here, we can't operate elsewhere. To be strong in India, we have to deploy a lot
of capital. Had we deployed the same capital overseas 15 years ago, we would have
weakened our position. In the last 15 years, we have continuously gained market share.
By the late 1990s, however, the company’s strong position in the domestic market prompted the leadership
to again explore international markets. The strategy was to acquire loss-making companies – typically those
with valuable assets (brands, customer base, technology, and distribution) – in emerging markets, introduce
operating efficiencies, launch new products and turn these companies around.30
By 2018, APL was present
in 15 countries across four regions: Middle East (UAE, Bahrain, and Oman), Africa (Egypt and Ethiopia),
Asia (Nepal, Sri Lanka, Bangladesh, Singapore, and Indonesia), and South Pacific (Fiji, Tonga, Solomon
Islands, Vanuatu, and Samoa).
The performance of APL’s international business had been a mixed bag. Results were often hit by adverse
currency movements and political turmoil in some of its markets. The company, thus, calibrated its
international footprint suitably; exit from the Caribbean in 2017 (due to low growth) being a case in point.
The company also expanded its product scope when it diversified into home improvement and décor in the
year 2013. As with paints, increased focus on home aesthetics, rising income levels and urbanization were
expected to drive growth in these segments. KBS Anand asserted:31
Home improvement is an aligned business. The basic customer is the same – the
homeowner. This is a large potential market that’s growing. Eventually, we want to be in
all areas of home improvement – from furnishings to bathrooms.
Page 12 of 25

To tap the home improvement opportunity (see Exhibit 11), APL aimed to leverage its distribution network
and brand equity. Through its acquisition of Sleek International in 2013, APL entered the modular kitchen
and wardrobe segments. Through its acquisition of Ess Ess Bathroom Products in 2014, APL entered the
bathroom fittings market and in 2018, launched sanitary ware as well. It sold luxury sanitary ware under
the brand Bathsense, the premium range of bath fittings was branded Royale, and the economy range was
sold under the brand Ess Ess (see Exhibit 12). Its third entry was into the adhesive business (dominated by
Pidilite with over 70% market share) through a distribution tie-up with Henkel (leading adhesive solutions
provider globally). The goal was to leverage network synergy and gain access to thousands of hardware
and décor stores. APL launched three products under the Loctite brand, which was focused on industrial
customers to start with, and was extended to the retail market in certain regions.
THE FINAL COAT
Asian Paints got off to a good start in FY19. Standalone revenuesxi
during the first quarter grew about 16%
year-on-year to ₹3,700 Cr,32
driven by double-digit (14%) volume growth in the decorative paints segment.
The company expected the recent reduction (July 2018) in GST rate (from 28% to 18%) to spur demand
from small consumers and keep volume growth strong. EBITDA for the standalone business increased 38%
year-on-year to ₹820 Cr33
, and PAT went up 35% to ₹540 Cr. Meanwhile, the company’s shares at the close
of business on August 31, 2018, after hitting a 52-week high of ₹1,490, were trading at ₹1,372 (market
capitalization ₹132,000 Cr).
xi
As per the accounting norms in the Companies Act 2013, GST, VAT, etc. (unlike excise duties) are not part of revenue. Accordingly, 1QFY18
revenue adjusted to be net of excise for the purpose of this comparison.
Page 13 of 25

Exhibit 1
Financial Performance (Standalone business) – Last 10 years
RESULTS FOR THE FINANCIAL
INCOME STATEMENT
YEAR FY18** FY17** FY16** FY15^ FY14^ FY13^ FY12^ FY11^ FY10 FY09 FY08
Gross Revenue 16,002 14,360 13,273 13,484 12,043 10,405 9,064 7,202 5,754 5,003 4,063
Net Revenue from Operations 14,154 12,723 11,830 11,649 10,419 8,960 7,964 6,336 5,134 4,279 3,426
Materials Cost 7,983 6,944 6,585 6,440 5,940 5,163 4,746 3,647 2,840 2,607 1,956
Overheads 3,251 3,108 2,769 3,198 2,702 2,249 1,866 1,532 1,275 1,104 908
Operating Profit (EBITDA) 3,198 2,971 2,726 2,197 1,951 1,673 1,493 1,232 1,154 619 615
% to Net Revenue from Operations (%) 22.6 23.4 23.0 18.9 18.7 18.7 18.7 19.4 22.5 14.5 18.0
Finance Costs 21 19 23 27 26 31 31 15 14 10 8
Depreciation 311 295 235 223 212 127 99 94 61 57 44
Profit Before Tax & Exceptional items 2,866 2,657 2,468 1,947 1,713 1,516 1,363 1,122 1,105 546 563
Exceptional item 0 0 (65) (14) (10) 0 0 0 25 (6) 0
Profit Before Tax & after Exceptional items 2,866 2,657 2,403 1,934 1,703 1,516 1,363 1,122 1,105 546 563
Profit After Tax
Return on avg capital employed (ROCE)
Return on avg net worth (RONW) (%)
BALANCE SHEET
(%)
1,895
39
25
1,802
41
28
1,623
45
30
1,327
50
34
1,169
52
35
1,050
54
38
958
59
43
775
62
44
775
78
58
362
51
36
375
61
45
Share Capital 96 96 96 96 96 96 96 96 96 96 96
Reserves and Surplus 7,702 6,999 5,830 4,134 3,505 2,926 2,392 1,879 1,461 999 833
Deferred Tax Liability (Net) 270 261 217 168 177 143 81 76 48 48 32
Borrowings 15 17 38 40 48 54 168 66 69 75 95
Fixed Assets 3,960 2,824 2,722 2,105 2,050 2,154 1,612 1,097 1,088 712 539
Investments
Debt-Equity Ratio
Market Capitalization
CASH FLOW STATEMENT^^
2,577
0.002:1
107,469
2,914
0.002:1
102,970
2,797
0.01:1
83,297
1,894
0.01:1
77,820
1,671
0.01:1
52,559
873
0.02:1
47,139
914
0.07:1
31,056
1,035
0.03:1
24,238
704
0.04: 1
19,593
235
0.07: 1
7,539
423
0.09: 1
11,510
Net cash generated from Operating activities 2,136 1,420 1,980 1,144 1,371 1,081 880 743 848 325 457
Net cash (used in) Investing activities (1,371) (585) (863) (292) (618) (440) (592) (410) (242) (214) (332)
Net cash (used
PER SHARE
in) Financing
DATA
activities (1,239) (956) (704) (728) (560) (591) (297) (320) (239) (222) (127)
Earnings Per Share (EPS)(₹) # *19.8 *18.8 *16.9 *13.8 *12.2 10.9 10.0 8.1 *8.1 * 3.8 3.9
Dividend (%) 870 1,030 750.0 610 530.0 460.0 400.0 320.0 270.0 175.0 170.0
Book Value (₹)
OTHER INFORMATION
81.3 74.0 61.8 44.1 37.5 31.5 25.9 20.6 16.2 11.4 9.7
Number of Employees 6,238 6,156 6,067 5,897 5,555 5,236 4,937 4,640 4,382 4,260 3,924
Number of Shareholders 191,561 202,988 165,986 147,143 87,997 54,813 60,537 59,280 48,290 49,074 47,573
* EPS calculated on Net Profit after Exceptional items.
# With effect from August 1, 2013, face value of the company’s equity share has been subdivided from ₹10 per equity share to ₹1 per equity share and accordingly the EPS and book value for
all comparative periods have been restated.
^ Figures regrouped as per Revised Schedule VI to the Companies Act, 1956. Hence these numbers are not comparable with previous years.
^^ Figures replicated as is (i.e. no adjustments made) from respective annual reports.
** Figures for these years are as per new accounting standards (Ind AS) and Schedule III of Companies Act, 2013. However, Revenue from operations in periods prior to GST implementation
adjusted suitably for Excise duty on sale of goods, to enable comparability of Revenue from operations for these years. ROCE and RONW for these years computed on the basis of figures as
per Ind AS. Hence, these numbers are not comparable with previous years.
Source: Company annual reports
Page 14 of 25

Exhibit 2
Paint Majors – Market Share (by Revenue)
(₹ Cr) FY09 FY12 FY15 FY18
Industry size estimate 20,800 30,400 40,000 50,000
Asian Paints - Revenue 4,079 7,595 11,110 14,154
Berger Paints - Revenue 1,464 2,561 3,655 4,724
Kansai Nerolac - Revenue 1,362 2,562 3,489 4,659
Akzo Nobel - Revenue 900 1,988 2,527 2,719
Paint majors: Total 7,804 14,706 20,782 26,256
Paint majors: Share 37.5% 48.4% 52.0% 52.5%
Source: Company reports, analyst reports, authors’ analysis
Note: Revenue figures are for the standalone entities, excluding non-operating income (e.g. interest income), and net of excise duties and
discounts.
Exhibit 3
Product Segments
Paint Industry
Decorative Industrial
Automotive
Protective coatings
Non-Automotive
Powder coatings Others
Woods Walls Metals
Exterior Interior
Cement paints Emulsions Solvent-based Water-based
Enamels Lusters Distempers Emulsions
Source: Analyst reports, authors’ analysis
Page 15 of 25

Exhibit 4
Paint Majors – Dealer Network
FY01 FY07 FY12 FY16 FY18
Asian Paints
No.
No.
of
of
dealers
CCDs
15,000
2,000
18,000
9,000
28,200
18,000
38,000
29,500
~52,000
~42,000
Berger Paints
No.
No.
of
of
dealers
CCDs
n/a
n/a
10,000
n/a
16,000
9,000
19,000
18,000
~25,000
~20,000
Kansai Nerolac
No.
No.
of
of
dealers
CCDs
8,000
1,200
n/a
n/a
12,000
8,000
12,000
7,800
~20,500
~14,000+
Akzo Nobel
No.
No.
of
of
dealers
CCDs
n/a
n/a
n/a
n/a
8,000
4,000
11,000
8,000
~11,000
~8,000
Exhibit 5
Innovations in Service Delivery
Innovation Service
Color Next
Predicting color trends by comprehensive trend-mapping exercise conducted
across India with inputs from experts
Special effects/
Textured paints
Creative texture paints with special effects for interior and exterior
requirements
Signature stores Exploring color ideas to get color consultancy by experts
Color Ideas stores
Shop-in-shop format wherein customers can browse through painted/textured
panels and new colors and finishes. Consultancy and visualizer also available
Home Solutions End-to-end painting service, involving expert advice and execution
Color consultancy
@ Home
Expert color consultants to provide advice on colors and designs at home
The New AP Home Store in Coimbatore
Source: Company reports, IDFC Securities report on Indian paint sector (April 2016)
Page 16 of 25

Exhibit 6
Logos over the years
Source: Analyst reports
Exhibit 7
Paint Majors – Advertising spend
FY09 FY12 FY15 FY18
Asian Paints
A&P spend (₹ Cr)
A&P as % of sales
197
4.8%
339
4.5%
597
5.4%
558
3.9%
Berger Paints
A&P spend (₹ Cr)
A&P as % of sales
64
4.3%
137
5.3%
259
7.1%
222
4.7%
Kansai Nerolac
A&P spend (₹ Cr)
A&P as % of sales
47
3.4%
100
3.9%
147
4.2%
275
5.9%
Akzo Nobel
A&P spend (₹ Cr)
A&P as % of sales
66
7.3%
113
5.7%
107
4.2%
108
4.0%
Source: Company reports, analyst reports, authors’ analysis)
Notes:
1. A&P spend excludes cash discounts.
2. Sales figure is for the standalone entities, excluding non-operating income (e.g. interest income), and net of excise duties and discounts.
3. A new accounting standard (IND AS) was implemented during FY16. It impacted how the A&P spend was to be reported.
Page 17 of 25

Exhibit 8
Emulsion Paint – Premium Range (Interior Wall Finish)
Source:Company reports, analyst reports, authors’ analysis
Exhibit 9
Pricing Power
Page 18 of 25

Exhibit 10
Paints Majors – Manufacturing Footprint
Asian Paints
Berger India
Kansai Nerolac
Akzo Nobel India
500,000 Klpa
Operational
Under development
Industrial paints/Chemicals
600,000 Klpa
Note: Industrial-decorative distinction
is shown if specified by the company
FY11
Capacity
(Klpa)
No. of
plants
Current
Capacity
(Klpa)
Avg.
plant
capacity
No. of
plants
Expected in future
Avg.
Capacity
plant
(Klpa)
capacity
Asian Paints ~600,000 8 ~1,150,000 ~144,000 10 ~2,250,000 ~225,000
Berger Paints ~250,000 13 ~610,000 ~47,000 14 ~850,000 ~60,000
Kansai Nerolac ~220,000 4 ~430,000 ~108,000 7 ~544,000 ~78,000
Akzo Nobel ~90,000 5 n/a n/a 6 n/a n/a
Notes:
1. APL’s 6,720 MT chemical plant in Tamil Nadu not included in the table, but shown on the map.
For the purpose of this analysis, the capacity of Asian Paints' 7,200 MT industrial paints plant in Gujarat converted to 4,800 Klpa assuming specific
gravity of 1.5 g/cm3
.
Page 19 of 25

Exhibit 11
Home Improvement Opportunity Size
Customer Estimated
Lifetime Value market size Type of market
(₹) (₹ Cr)
Paints 1,400,000 50,000 Organized
Modular kitchens 1,200,000
Hardware n/a 5,000-6,000 Organized share about 40%
Appliances n/a 1,000 Organized
Accessories n/a n/a Unorganized
Solutions n/a 700-800 Local carpenters gradually losing share
Bathroom sanitary
600,000 8,000 Organized share
ware and fittings
about 60%
Source: Analyst reports, authors’ analysis
Exhibit 12
Consolidated Revenue Distribution – FY18
India
FY18 (₹ Cr)
14,662
% of Total
87.0%
Deco-India 13,925 82.7%
Industrial Paints 407 2.4%
Home Improvement
International
330
2,182
2.0%
13.0%
Asia (ex-India)
Middle East
1,035
539
6.1%
3.2%
Africa 467 2.8%
South Pacific 141 0.8%
Total Group 16,844 100.0%
Notes:
1. “India” numbers are not the same as the “Standalone” figures from Exhibit 1 since the former includes parts of certain other businesses, as
described below.
2. “Deco-India” segment includes decorative paints, adhesives and wall coverings, but the contribution of adhesives and wall coverings within
the segment is <5%.
3. The two industrial JVs are accounted for differently:
a. The first JV (automotive) is accounted as an associate, i.e. not consolidated from the top-line. Only the bottom-line gets consolidated in
the APL consolidated results.
b. The second JV (non-automotive) is accounted as a subsidiary, i.e. consolidated right from top-line up to bottom-line in the APL
consolidated results.
4. Ess Ess is part of APL standalone operations and its results are included in “Standalone” figures.
5. Sleek is a 100% subsidiary and it gets consolidated into APL consolidated results.
Page 20 of 25

Appendix
Competitor profiles (2018)
Berger Paints India
(₹ Cr)xii
FY09 FY12 FY15 FY18
Revenue 1,464 2,561 3,655 4,724
EBITDA 153 308 510 790
EBITDA margin 10% 12% 14% 17%
PAT 89 177 266 432
PAT margin 6% 7% 7% 9%
Market capitalization (August 31, 2018) = ₹32,000 Cr
Kolkata-based Berger Paints (“Berger”) was India’s secondxiii
largest paint company. It was the second
largest player in the decorative segment and third largest in industrial paints. The company’s FY18
standalone revenue and EBITDA were about ₹4,700 Cr and ₹790 Cr, respectively. Its international business
was restricted to a few countries (Bangladesh, Nepal, Poland, and Russia) and accounted for less than 10%
of its consolidated sales.
Until the early 2000s, Berger’s decorative portfolio was aligned more towards the economy segment.
Consequently, the company’s revenue growth lagged behind the industry leader, APL, due to a limited
portfolio of premium products as well as loss of market share in the economy segment as competitors
increased focus on it. Since then, the company gained share in decoratives by making a strong play into
premium emulsions, investing aggressively in brands (Breathe Easy, Silk, WeatherCoat and Allguard) and
expanding distribution. It also acquired the decorative business of Sherwin Williams in 2013 that now
operated as BJN Paints India Ltd. and specialized in textured coatings. Decorative paints now constituted
~80% of its domestic sales, and its dealer network had grown from 10,000 in FY07 to 25,000 currently.
Berger operated a total of 13 manufacturing units in India. It supported its decorative push by increasing
capacity from 250,000 Klpa in FY12 to 609,000 in FY1834
. The company supplemented its strong presence
in North and East India by expanding into West and South India; it expanded its water-based paint Goa
plant and set up a new facility at Hindupur, Andhra Pradesh. It was also setting up a new 200,000 Klpa35
plant at Lucknow, Uttar Pradesh to cater to demand in the Uttar Pradesh-Bihar region.
Berger, over the years, acquired several companies (e.g. Saboo Coatings in 2017, ICI’s motors and
industrial business in 2006), and formed a number of joint ventures (e.g. with Nippon Automotive Paints
in 2007, with Becker – through Berger’s acquisition of Rajdoot Paints – for coil coatings in 1998) and
technical collaboration agreements (e.g. with Tigerwerke for auto refinish in 2004, with Sherwin Williams
for wood coatings in 2013, with Chugoku for marine coatings in 2017) to grow its industrial paints business.
xii
Revenue for standalone business, excluding non-operating income, and net of excise and discounts. EBITDA and PAT taken from annual reports
without any adjustments (Source: Company reports, authors’ analysis).
xiii
Based on consolidated FY18 incomes (including excise duty) of ₹5,328 Cr for Berger and ₹4,879 Cr for KNPL.
Page 21 of 25

It was the market leader in protective coatings. Its products were used by the Indian Railways, power plants,
oil & gas installations, airports, etc. It also manufactured and sold construction chemicals (e.g. waterproof
putty), which are specialty products that extend the structural life of buildings.
In 2015 Berger launched a coloring initiative called Express Painting to provide services of trained painters
(equipped with mechanized tools) for residential units. The company set up training centers, and launched
new products for application through this channel. The strategy was to become an aggregator, create a large
inventory of trained contractors, and premiumize the entire painting process through automated tools. It
also provided value-added services through its protection consultancy services.
The company went through a number of ownership changes in its nearly 100-year history. Started in
Calcutta in 1923 as Hadfield’s (India) Ltd. by an Englishman named George Hadfield, it was acquired first
by British Paints in 1947 and then by Celanese Corp (of US) who in turn sold it to Berger Jenson &
Nicholson (of UK) in 1969. A few years later, the UB Group acquired a controlling stake in the company,
which was bought out by its current promoters, the Dhingras, in 1991. The company claimed to be managed
professionally with the promoter family not a part of day-to-day management.
Kansai Nerolac
(₹ Cr)xiv
FY09 FY12 FY15 FY18
Revenue 1,362 2,562 3,489 4,659
EBITDA 283 362 597 862
PAT 166 216 356 516
PAT margin 12% 8% 10% 11%
Kansai Nerolac Paints Limited (“KNPL”) was the third largest paint company in India. It was the market
leader in industrial paints and third largest in the decorative segment. By investing in marketing, new
product launches and distribution, the company had increased focus on the decorative segment. It derived
about 57% of the ₹4,700 Cr total revenue (FY18) from decorative paints and the balance from the industrial
segment. Revenue had grown at a steady pace, increasing by 50% over the last five years. Over the same
period, EBITDA had more than doubled, and was now approximately ₹850 Cr (FY18).
The company operated four manufacturing facilities in India, located at Lote (Maharashtra; Western India),
Bawal (Haryana; North India), Jainpur (Uttar Pradesh; North India), and Hosur (Tamil Nadu; South India).
It was also setting up three new plants in Amritsar (Punjab; North India), Vishakhapatnam (Andhra Pradesh;
South-East India), and Gujarat (West India). Its production capacity was 431,000 Klpa, which was expected
to increase to 544,000 Klpa by FY2036
. KNPL’s distribution network consisted of 20,500 dealers of which
xiv
without any adjustments, except FY15 PAT (adjusted for one-off exceptional item) (Source: Company reports, authors’ analysis).
Page 22 of 25

14,000+ had CCDs installed. The company also operated in Nepal and Sri Lanka through joint ventures
with Kansai Nepal and Capital Holdings Maharaja Group, respectively.
KNPL started as Gahagan Paints & Varnish Co. Ltd. at Lower Parel in Mumbai in the 1920s and went
public in 1957, establishing itself as Goodlass Nerolac Paints (“GNP”). For a long period of time, GNP
played second fiddle to Asian Paints. In the 1970s, it created a brand around its mascot tiger Goody, possibly
in response to Asian Paints’ Gattu. In 1976, GNP became a part of the Tata Forbes Group. In 1983, it
entered into a technical collaboration agreement with Kansai Paint of Japan, the paint supplier to Suzuki.
GNP leveraged this tie-up to obtain the Maruti contract for automobile painting, and experienced rapid
growth in this segment. In the late 1990s, Kansai Paint took over the entire stake of the Tata Forbes Group
and GNP became a subsidiary of Kansai Paint.
During this period, KNPL also became the leader in sub-contracting production of decorative paints. It
bought goods from the unorganized sector, branded them and sold them through its own retail outlets. The
high excise duty regime prevalent at the time made this an attractive option to increase sales without having
to invest in new production facilities. As part of its growth strategy, the company also set up several joint
ventures such as Polycoat Powders (with Valspar Corporation of USA) for powder coatings and Chemguard
Coatings (with Ameron Coatings of USA) for high performance coatings. The company changed its name
from Goodlass Nerolac Paints to Kansai Nerolac Paints Ltd. in 2006.
KNPL’s parent company, Kansai Paint, was founded in Amagasaki City, Japan in 1918. It was present in
over 80 countries, and with gross sales of over $3 Bn, it was the ninth largest paint company worldwide.
Akzo Nobel India
(₹ Cr)xv
FY09 FY12 FY15 FY18
Revenue 900 1,988 2,527 2,719
EBITDA 203 287 326 339
PAT 95 202 186 206
PAT margin 11% 10% 7% 8%
Akzo Nobel India (“ANI”), despite its strong parentage, had remained a distant number four player in the
Indian paints market. Its revenue for FY18 was about ₹2,700 Cr (of which decorative paints contributed
55%) and EBITDA was approximately ₹340 Cr.
ANI became a (73%) subsidiary of Akzo Nobel (one of the two largest coating companies globally) when
the latter acquired ICI Plc (including its India entity, ICI India Ltd) for $16 Bn in 2008. Three years later,
Akzo Nobel consolidated its India footprint into one listed entity that houses all its India paints and specialty
xv
without any adjustments, except FY09 PAT (adjusted for one-off exceptional item). FY18 figures are for continuing operations only (Source:
Company reports, authors’ analysis).
Page 23 of 25

chemicals businesses. Management’s vision at the time was to achieve €1 Bn revenue by 2015. However,
over the next two years, ANI’s revenue grew at a CAGR of only 10% on account of a slowdown in the
industrial segment and loss of share to the top two players in the decorative segment. EBITDA margin
declined by 100 bps over this period. The company then shifted its focus, at the expense of revenue growth,
to improving profitability.
In 2018, it operated in the decorative market through the Dulux brand, and managed a distribution network
of 11,000 dealers, 8,000 of which had CCDs installed. The company had, in the past, attempted to tap the
mass distemper segment through ICI Magik, though it failed to gain adequate traction. Additionally, most
of its products were as per US/European standards, and generally over-engineered for the Indian market. It
had to re-engineer these to plug gaps in the product portfolio, and subsequently launched several new
products (e.g. Weathershield portfolio). It also increased its focus on brand building, and invested in retail
modernization under the brand Dulux Decorator Centre by setting up over 200 paint outlets in North and
South India. These outlets provided customers an enhanced buying experience through unique initiatives
like visualize your home (customers could upload photographs of their homes and visualize the walls).
The company had five paint manufacturing plants in India – at Mohali (Punjab), Bhind (Madhya Pradesh),
Mumbai (Maharashtra), Hyderabad (Telangana) and Bengaluru (Karnataka), of which the plants at Mohali,
Bhind and Hyderabad manufactured decorative paints. It was also setting up a new 7,000 MT powder
coating plant at Thane (Maharashtra).
Akzo Nobel was a Netherlands-based coating company and was present in over 80 countries, with 200
production sites and leadership in many markets. It recently sold its specialty chemicals operations to
private equity investors to focus solely on the paints and coatings business.
Other international players
Nippon Paints India
Nippon Paints (Japan), Asia’s largest coatings company, entered India in 2006 by setting up a
manufacturing unit in Chennai and has since further augmented its capacity. However, it had not been able
to develop a robust distribution network to grow its decorative business. With respect to its industrial paints
business, in 2015, Nippon Paint Automotive Coatings Company and Berger India agreed to transfer some
of their automotive paints businesses to their existing joint venture, BNB Coating India. Berger transferred
its three- and four-wheeler paints business, while Nippon Paints (India) Pvt. Ltd. transferred its four-
wheeler paints business, other than commercial vehicles, auto parts, and ancillaries, to the joint venture.
Nippon Paint Automotive held a 51% stake in the venture and Berger owned the rest. BNB was mainly
engaged in the business of coatings for plastic substrate of automobiles.
Page 24 of 25

Jotun India
Norway-based Jotun Group established its presence in India in 2005 when it set up a manufacturing unit in
Pune. As with Nippon India, its market share in the domestic paints market was minimal.
Sherwin Williams
Sherwin Williams acquired the paints unit of the Nitco Group in 2006, but had not been able to scale up its
operations in India since then. It sold its decorative business to Berger India in 2013.
ENDNOTES
1
Asian Paints Annual report FY18
2
Ambit Capital report on Asian Paints, February 2017
3
Ambit Capital report on Asian Paints, May 2017
4
Antique Stocking Broking report on Indian Paint Sector report, March 2016
5
“At the Crossroads – The Battle for Colour” Change and Competition in the Indian Paint Industry at the Turn of
the Century, Prof. S. Chandrashekar, June 2004
6
IDFC Securities report on Indian paint sector, April 2016
7
Berger Paints Corporate presentation, 3QFY18
8
Spark report on Indian paint sector, October 2016
9
HDFC Securities report on Berger Paints, July 2017
10
Antique Stocking Broking report on Indian paint sector, March 2016
11
Spark Capital report in Indian paint sector, October 2016
12
Antique Stocking Broking report on Indian paint sector, March 2016
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IDFC Securities report on Indian paint sector, April 2016
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Antique Stocking Broking report on Indian Paint Sector report, March 2016
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HR Katha, April 2017
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Economic Times, January 2011
17
India Today, September 1997
18
Business Line, The Hindu, September 1997
19
DNA, August 2007
20
Economic Times, November 1997
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Economic Times, February 1998
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Business Standard, November 2004
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Images Retail, July 2009
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Best Media Info, January 2018
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ET Brand Equity, August 2018
26
Press Trust of India, November 2014
27
Forbes, August 2013
28
Financial Express, June 2013
29
Hindu, February 2001
30
Economic Times, January 2006
31
Edelweiss Securities report on Asian Paints, May 2014
32
ICICI Securities report on Asian Paints, July 2018
33
IDFC Securities report on Asian Paints, July 2018
34
Business Standard, March 2018
35
Economic Times, February 2018
36
Kansai Nerolac Paints Corporate presentation, March 2018
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