Asian Paints Ltd FY23 Annual Report Notes

Asian Paints Ltd

• Industry/Economy 

  • Indian Paint industry, which is projected to reach a market size of 100,000 Crores within the next five years. With the rise of per capita consumption of paint in India through our various initiatives. The company feels there is enough space for all the companies to co-exist and bring more innovation and opportunities to the Paint Industry. 

  • Global perspective Inflation continues to remain elevated, exceeding the comfort zone of the monetary authorities. The company has a positive outlook for the Indian economy to continue the momentum of growth.

    • Demand in both – the urban as well as rural markets, picking up which is positive for FY24.

• CAPEX

  • The company is setting up a manufacturing facility for VAE (Vinyl Acetate Ethylene Emulsion) and VAM (Vinyl Acetate Monomer) in India 

    • Investment of approximately 2,100 Crores over a period of 3 years.

    • The installed capacity of the manufacturing facility would be 1 Lakhs tonnes per annum for VAM and 1.5 Lakhs tonnes per annum for VAE.

  • We have entered into a JV to establish a 2.65 Lakhs MT per annum manufacturing facility in Fujairah, UAE. 

    • The overall investment would be approximately 550 Crores, to be invested over the next 2 years.

    • In addition, clinker grinding units would be set up in India as well. 

  • Brownfield expansions at our existing decorative paint plants with other regular capex.

    • will entail outflow of. 3,400 Crores supporting the growth plan over the next 3 years 

    • which will add 5.40 Lakhs KL per annum to our existing capacity.

      • This capacity addition is not considerable considering the size in dedicate no major volume growth from CAPEX is required for the company.

    • 2,670,000 KL/annum Expected In-house paint capacity after expansion

  • New water-based paint manufacturing facility with a capacity of 4 Lakhs KL per annum 

    • at an approximate investment of. 2,000 Crores. 

    • This facility is expected to commission in 3 years after the acquisition of land

• Segments

  • Decorative Business in India

    • Strategically, the company went to T3 and T4 towns to partner with new painters and contractors

    • The distribution structure has also been revamped to lower the costs of distribution. Reducing the number of distributors, Introducing a new direct-to-retail (D2R) model, and Investing in technology have helped the company to achieve it.

  • International

    • Outside India, Asian Paints has operations in 14 countries across four regions of the world

    • With high inflation, US Dollar shortages, and record interest rate hikes, a series of price increases were pushed through all markets to ensure margins are not significantly impacted. 

      • The Middle East region was untouched by the currency issues inflicting other markets and supported the overall international portfolio positively

  • Industrial Business in India

    • Asian Paints operates in the Industrial Coatings segment through two 50:50 JVs with PPG Industries Inc. USA – PPG Asian Paints Pvt. Ltd.

      • PPG Industries Inc. USA is one of the largest industrial coatings suppliers in India

    • [Non-Auto] AP-PPG, the second 50:50 JV of the Company with PPG Industries Inc. USA, serves the non-auto industrial coatings market of India operating in protective coatings, powder coatings, floor coatings, and road markings segments.

Summary: The company is focussing on backward integration to control the overall manufacturing process with no major capacity addition in the pant capacity as such. Definitely, the future outlook is margin improvement and improving the service to retailers, and focussing on the industrial paint segment for another growth path.