Asian Paints: The Giant of India’s Paint Industry

Back in 1942, World War II laid a temporary ban on the import of paints in India. At the time, only a few foreign paint companies and an established Indian player, Shalimar paints were available in the market. 

During such intense times, it was extremely challenging to launch a new paint company and compete with the prevailing players, yet a 26-year-old visionary entrepreneur - Champaklal Choksey saw this as an opportunity to make an entry in the market along with three of his friends: Chimanlal Choksi, Suryakant Dani, and Arvind Vakil. All of them initially worked in a small garage at Bombay and finally launched Asian Paints. 

By 1952, Asian Paints had already made an annual turnover of ₹23 Cr, and by 1967, they became India's leading paint manufacturing company - a position it still holds today.

Asian Paints has become a brand that has connected to all Indians, established as India's first-largest and Asia's third-largest company in the paints Industry. 

Creating a Massive Business Empire

The journey of starting from a small garage to launching their own paint company wasn't easy; there were a lot of hidden struggles. Back in the time, the new entrant on the block, Asian Paints, could not convince the big distributors of Bombay. 

Therefore, instead of focussing on volumes in big cities like Bombay, Asian Paints chose to serve a neglected market which was the Indian rural areas. They opened their first direct dealer at Sangli, Satara in Maharashtra. Gradually, after Asian Paints seemed to be winning the market in rural areas, the big distributors of Bombay started contacting them and began stocking up on Asian Paints. 

Currently, the market size of the paint industry is close to Rs 60,000 crore, out of which the organized paint companies have a share of around 70%. Asian Paints, the market leader, has a market share of more than 50%, which is higher than the combined market share of its three closest competitors - Akzo Nobel, Berger Paints, Kansai Nerolac and Shalimar paints. Asian Paints has been the only company to deliver a CAGR of +20% for six decades in the entire world. 

This has all been achieved due to the company's unstoppable focus on creating a strong brand, marketing, and a technology-driven, highly efficient supply chain. Asian Paints has successfully differentiated its products over 75 years in India. It created a remarkable position in the paint industry, just as the brand Colgate created in the toothpaste industry in India.

The overall paint industry has also matured largely due to the credit of the company in developing a differentiated marketing strategy. As a result, the company can charge a premium of 5-10% for most of its products and at the same time, become a cost leader in the decorative paints segment. 

Now, let's have a look at its massive business across the world.

Asian Paints & International Collaborations

As of today, the Asian Paints group operates in 15 countries across the world. It is fundamentally operating across four regions, namely Aisa, Middle East, South Pacific, and Africa through the eight corporate brands: Asian Paints, Asian Paints Berger, SCIB Paints, Apco Coatings, and Taubmans, Causeway Paints, and Kadisco.

The company's eight manufacturing plants across different locations countrywide, with a combined capacity of 1.73 million KL per annum of decorative paint products, feature state of the art technology. Its journey is identified by a steady growth, which is furthered by a perception shift as a premium brand driving innovations. 

The launch of many new products, backed by research, and aimed at fulfilling consumer expectations, adds to this achievement. The exponential increase in its brand equity is helping its global expansion efforts. 

As of today, Asian Paints has:

• 26 manufacturing plants across the globe and servicing consumers in over 65 countries.
• It currently operates in 17 countries, including the USA, Australia, Sri Lanka, and many more. 
• It is servicing 150,000+ retailers in India.
• It is established as the 9th largest paint company in the world and has been the market leader in India for the past 50 years.
• It is Asia's third-largest paint company and has operations in 22 countries worldwide.

Till today, it has done a lot of international collaborations and has maintained its number 1 position in the Paint Industry in India.

Market Share of Asian Paints and other Players

The supply chain of Asian Paints, coupled with a strong brand recall is truly one of its biggest competitive advantages over its competitors.

Business Model & Growth

Asian Paints' robustness has been credited to identifying consumption trends and patterns early and later constructing strategies around them. It targeted the right section of people with the right product and right strategy because of which today, it has a market cap of Rs. 2,54,125.07 crores.

Successful advertising remains the crux of the company's marketing strategy. Back in 1954, when the company introduced its mascot- Gattu, the mischievous kid holding a paintbrush in his hands, it appealed to middle-class Indian consumers. 

Later, the turning point for the company was in the 1970s, when it spent Rs 8cr to purchase a mainframe computer; the 1st private company in India to ever buy a computer which was used for demand forecasting with the help of data analytics and improving service levels across the supply chain in comparison to other few companies which later used computers for only payroll and administration work. 

Asian Paints was always one step ahead in the business, and this was the start of consistent investment and improvement of supply chain efficiency - which remains as the single largest driver of competitive advantage for Asian Paints even today.

Going forward, the IPO proceeds in 1982 were used to expand capacity and launch new products. This helped Asian Paints to establish the best-in-class supply chain practices in the paint industry in India. Asian Paints' sole focus was on the consumer side of the paint industry. This is why it managed to build a strong mother brand and sub-brands like Ultima, Royale, and more.

The company then scaled up its operations and focussed on improving factories & machines, expansion of capacities, and investment in IT. 

In today's time, Asian Paints has now expanded its presence in Bath Fittings, Kitchen and in services like Waterproofing Solutions, Colour Consultancy, Painting Services, and Interior Designing.

Business Innovations 

Home Improvement Business

The company initiated this project six years ago with the aim of offering complete decor solutions and has been stepping up its products consistently to help its customers build their dream houses. It currently operates in the two classes of kitchen and bath fittings comprising a series of modular kitchens and sanitaryware. 

Asian Paints has recently ventured into the closet and wardrobe business. This segment is a focus area for its future growth, as India's real estate market is expected to grow, backed by the rising affordable homes segment drive in the country.

Kitchen Solutions

Asian Paints has entered the kitchen solutions space with the acquisition of Sleek International Pvt Ltd. The paint major has invested Rs 120 crore in picking up a 51 per cent stake. Sleek International's promoters will own the rest. 

The Mumbai-based business is engaged in manufacturing, selling, and distributing kitchen and kitchen components, including wire baskets, cabinets, appliances, and accessories. It has a retail network of over 30 outlets and 250 dealers. 

According to industry experts, the Indian modular kitchen market will continue to record significant growth due to increased housing projects, rising incomes, lifestyle changes, and the emergence of nuclear families.

Sleek is a subsidiary of Asian Paints and provides complete kitchen and wardrobe solutions. It is India's largest modular kitchens brand. Its work is famous for innovative and efficient designs, world-class quality, and excellent craftsmanship, built with the state of the art facilities, engineering, and innovations.

Financial & Stock Performance

Stock Performance

In January of 2000, Asian Paints' stock was trading at Rs 16, and today, the stock price is more than Rs 1600, giving 100x returns (excluding dividends). 

Since 1991, the share price of Asian Paints has increased by 20-25% CAGR. For example, an investment worth Rs 1 lac then, is worth around Rs 3 cr today.

Over the last one year, Asian Paints' share price has moved up from Rs 1,802 to Rs 2,601, registering a Gain of Rs 799.6 or around 44.4%.

Overall, the S&P BSE Sensex is up 13.6% over the year. 

Financials

Annual	Mar’20	Mar’19	Mar’18	Mar’17	Mar’16	Mar’15
Sales (Cr)	20211	19341	16824	15061	14271	14182
Net Profit (Cr)	2728	2171	1981	1940	1769	1427
Reserves & Surplus (Cr)	10034	9423	8314	7507	6429	4646
ROCE (%)	31.30	34.85	36.65	39.33	44.35	44.85

Reserves for Asian Paints have more than doubled in 5 years to 10034 cr, despite the company being in a commodity business operating at a ROCE of > 35 %.  

Looking at the financial performance of the company, it's evident that the management has done great work in allocating capital, identifying gaps in the market, building and sustaining strong supply chain efficiency.

Closing Thought

The success of Asian Paints can be credited to the following:

1. The growth and success of the company can be credited to the fact of creating a successful and strong mother brand, delivered with its strong focus on supply chain management. 
2. Coming up with new strategies of working right from the early days; from choosing to set up its first dealer in a small town in Sangli, Maharashtra to launching new products and advertising with the help of a mascot which emotionally connected to the Indian customers.
3. Investment in IT right from the 1970s helped the company to gain a big competitive advantage over its competitors in the supply chain.

Even in 2020, large investments in digital technologies by Asian Paints are done to keep its supply chain efficient, to maintain cost leadership, and yet charge a premium for its products. 

With growing demand, the company has kept launching new products, attracting existing as well as new customers with the help of effective advertisements, technology innovation, and strong management. All these factors together created a success story for Asian Paints.

All in all, it is amazing to think that a small company that began in a garage would become India's largest paint company, maintaining its number 1 position in the market for more than 50 years and creating a paradigm of wealth creation!