FM PROJECT

ON

“FINANCIAL STATEMENT ANALYSIS

OF
ASIAN PAINTS”

SUBMITTED BY:

ASHWINI 09BSHYD0191
AVNISH 09BSHYD0202
NEETISH 09BSHYD0491
SWATI 09BSHYD0906
RHEA 09BSHYD0656

Section-A

ICFAI BUSINESS SCHOOL (IBS HYDERABAD)

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 AUTHORIZATION

This report is submitted as a part of Financial Management (Semester II) of MBA program at
ICFAI Business School, Hyderabad.

Date: December 25, 2009

Authors

ASHWINI
AVNISH
NEETISH
SWATI
RHEA

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Contents
COMMON SIZE ANALYSIS:..............................................................................................................4
Q.1 What is my inference from Common size analysis of Asian paints and Berger paints?.................4
INFERENCE FROM FUND FLOW STATEMENT:.................................................................................4
Schedule of changes in working capital:.........................................................................................4
Funds Flow Statement of ASIAN paints:.........................................................................................4
Q.2: What is my inference from the fund flow statement?.................................................................4
RATIO ANALYSIS:.............................................................................................................................4
Q.3 What is the liquidity position of the company?............................................................................4
Q.4 What is the inference on the capital structure of the firm?..........................................................4
Q.5 What is the inference from the profitability ratios of the firm?....................................................4
BALANCE SHEET (Asian Paints).......................................................................................................4
PROFIT and LOSS Statement (Asian paints)....................................................................................4
BALANCE SHEET (Berger Paints).....................................................................................................4
PROFIT and LOSS Statement (Berger paints)..................................................................................4
REFERENCES...................................................................................................................................4

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COMMON SIZE ANALYSIS:
Common Size Analysis of the Financials of Asian Paints & Berger Paints India
As of March 2009
  Asian Paints Berger Paints India
Liabilities:
Equity Capital 8.270676692 12.67314533
Share Application Money 0 1.967447684
Preference Capital 0 0
Reserves 86.09971028 69.62976212
Revaluation Reserves 0 0.216617977
Shareholder's Funds 94.37038698 84.27035513
Secured loans 2.120266262 15.50110296
Unsecured loans 3.509346761 0.011923925
Total Debt 5.629613023 15.51302689
Total funds employed 100 100
     
Assets:
Gross Block 96.30699455 64.12559618
Accumulated Depreciation 42.59674415 31.8700318
Net block 53.7102504 32.25556439
CWIP 14.19604056 3.740063593
Investments 20.24298131 5.86645469
Inventory(Total) 47.1399255 52.9272655
Sundry Debtors 26.81761744 35.84658188
Cash & Bank Balance 11.04107746 4.761526232
Loans & advances 16.06970408 12.24165342
Deposits 0.018107195 1.571939587
Total current assets 101.0864317 107.3489666
Current Liabilities 73.21169897 43.69833068
Provisions 16.02400497 5.512718601
Total current liabilities & Provisions 89.23570394 49.21104928
Net current assets/Working Capital 11.85072774 58.13791733
Misc. Expenses not w/o 0 0
Total assets 100 100

Q.1 What is my inference from Common size analysis of Asian paints and Berger paints?
ANS:

1. Long term debt is higher for Berger paints.

2. Current liabilities and provisions is higher in case of Asian paints.

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 3. We can also observe that Asian paints is on a investment spree which is indicated by
the fact that its investment and capital work in progress is at the higher end.
4. Berger paints has a higher working capital as compared to Asian paints because its
current liabilities are less as compared to Asian paints.

INFERENCE FROM FUND FLOW STATEMENT:

Schedule of changes in working capital:

  2008 2009 Effect on working capital

Current Assets     Increase Decrease

Inventories 538.97 546.71 7.74  
Sundry Debtors 251.9 311.02 59.12  
Cash and cash balance 41.33 128.05 86.72  
Loans and advances 203 186.37   16.63
Fixed deposits 0.02 0.21 0.19  
Total(A) 1035.22 1172.36    
Current Liabilities        
Liabilities 850.79 849.08 1.71  
Provisions 166.49 185.84   19.35
Total(B) 1017.28 1034.92    
Decrease in working capital(A-B) 17.94 137.44    
Increase in working Capital 119.5     119.5
  137.44 137.44 155.48 155.48

Funds Flow Statement of ASIAN paints:

Sources Amount Uses Amount
Fund from
operation+Depriciation 419.51 Dividend 196.39
Investment 188.11 secured loans 12.11
    Assets purchase 179.04
    CWIP 28.39
    Misc 72.19
    Increase in NWC 119.5
  607.62   607.62

Q.2: What is my inference from the fund flow statement?

Ans: The firm has raised no fresh capital from equity or debt for financing its working
capital requirements. It has solely utilized its internal sources being that of profits from

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operations and investments and also managed to give away dividends worth 196.39 cr. to
its equity shareholders. This is representative of the fact that it is self sufficient in terms of
capital requirements.

RATIO ANALYSIS:

Q.3 What is the liquidity position of the company?

Ans: Liquidity position of the company can be deciphered using the currenty ratio,quick
ratio and inventory turnover ratio.
  Asian paints Berger Paints
Current Ratio 1.13 2.18
Quick ratio 0.6 1.05
Inventory Turnover
Ratio 7.3 5.3

 The current ratio and quick ratio of Asian paints is not very healthy in comparison
with Berger paints.
 However this could be negligible in assessing the actual liquidity of the firm because
it has a leadership position in the industry.
 Asian paints also has a higher inventory turnover ratio which indicates that its
inventory is moving faster compared to Berger paints. This requires an efficient
sales and distribution network. This is supported by the fact that the income
statement shows that the firm has very high sales and administration expenses.

Q.4 What is the inference on the capital structure of the firm?

Ans:

  Asian paints Berger Paints

D/E 0.68 1.22
D/A 0.05 0.14
Interest Coverage Ratio 35.23 8.65

Asian paints has a very little debt component in its capital structure as compared to berger paints, this
means that it has lower fixed liabilities and also high cost of capital. In order to reduce the overall cost of
capital Asian paints can deploy more leverage in its capital structure because it also has a high turnover
year on year and there is a bleak chance of business risk.

Interest Coverage ratio in case of Asian paints is far greater than Berger Paints, this indicates that its
ability to handle financial burdens in terms of interest payments better than Berger paints.

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Q.5 What is the inference from the profitability ratios of the firm?
Ans.

  Asian paints Berger Paints

Gross profit Margin
Ratio 0.136 0.1012
Net profit Margin Ratio 0.08 0.05
Return On Equity 0.33 0.21
Earning Power 0.4782 0.2455
Asset Turnover Ratio 4.3 3.12

 Gross profit margin shows the efficiency of the production operation, The efficiency of asian
paints is higher because of their large scale production and continous improvement due to large
scale investment in R&D and manpower training.
 Net Profit margin shows the earnings left for shareholders as a percentage of net sales.
 ROE measures the profitability of equity funds invested in the firm. ROE is higher is case of Asian
paints, from a stockholders perspective it is returns are higher on investing in Asian paints. In
spite of being low on debt, their return on equity is higher because net profit is much greater.
 Earning power is a measure of operating business performance irrespective of interest and tax
payments. Earning power is also higher for Asian Paints.
 Asset turnover indicates the amount of asset that the firm uses to generate sales. This means
that Asian Paints’ ability to generate sales through its assets is greater than Berger paints

BALANCE SHEET (Asian Paints)

Balance Sheet of Asian Paints ------------------- in Rs. Cr. -------------------  
  Mar '05 Mar '06 Mar '07 Mar '08 Mar '09
           

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 Sources Of Funds          
Total Share Capital 95.92 95.92 95.92 95.92 95.92
Equity Share Capital 95.92 95.92 95.92 95.92 95.92
Share Application Money 0 0 0 0 0
Preference Share Capital 0 0 0 0 0
Reserves 476.3 526.36 648.16 832.58 998.55
Revaluation Reserves 0 0 0 0 0
Networth 572.22 622.28 744.08 928.5 1094.47
Secured Loans 28.37 31.88 66.9 36.7 24.59
Unsecured Loans 36.68 40.7 40.7 40.7 40.7
Total Debt 65.05 72.58 107.6 77.4 65.29
Total Liabilities 637.27 694.86 851.68 1005.9 1159.76
Application Of Funds          
Gross Block 712.7 736.14 806.2 937.89 1116.93
Less: Accum. Depreciation 401.47 435.71 471.29 509.06 494.02
Net Block 311.23 300.43 334.91 428.83 622.91
Capital Work in Progress 12.53 5.87 16.31 136.25 164.64
Investments 258.43 274.55 334.39 422.88 234.77
Inventories 330.79 348.79 434.07 538.97 546.71
Sundry Debtors 148.96 185.11 235.96 251.9 311.02
Cash and Bank Balance 20.78 28.17 42.47 41.33 128.05
Total Current Assets 500.53 562.07 712.5 832.2 985.78
Loans and Advances 96.67 123.87 156.69 203 186.37
Fixed Deposits 0.26 0.21 0.02 0.02 0.21
Total CA, Loans & Advances 597.46 686.15 869.21 1035.22 1172.36
Deffered Credit 0 0 0 0 0
Current Liabilities 430.68 489.11 649 850.79 849.08
Provisions 111.7 107.29 54.15 166.49 185.84
Total CL & Provisions 542.38 596.4 703.15 1017.28 1034.92
Net Current Assets 55.08 89.75 166.06 17.94 137.44
Miscellaneous Expenses 0 24.26 0 0 0
Total Assets 637.27 694.86 851.67 1005.9 1159.76

PROFIT and LOSS Statement (Asian paints)

------------------
- in Rs. Cr.
------------------
Profit & Loss account of Asian Paints -        
  Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

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Income          
2,807.0 3,389.7 4,092.3 5,042.4
Sales Turnover 2,366.15 6 9 6 0
Excise Duty 313.87 359.28 436.42 496.83 532.28
2,447.7 2,953.3 3,595.5 4,510.1
Net Sales 2,052.28 8 7 3 2
Other Income 22.54 -9.4 34.38 52.29 23.86
Stock Adjustments 74.92 -1.48 71.5 33.9 0.61
2,436.9 3,059.2 3,681.7 4,534.5
Total Income 2,149.74 0 5 2 9
Expenditure          
1,363.8 1,733.2 2,003.3 2,641.0
Raw Materials 1,200.33 2 8 7 9
Power & Fuel Cost 25.44 27.3 33.3 35.86 45.78
Employee Cost 118.35 129.43 155.6 195.54 239.77
Other Manufacturing Expenses 23.9 25.75 31.53 39.26 40.45
Selling and Admin Expenses 438.36 518.72 620.77 771.66 939.16
Miscellaneous Expenses 16.09 15.25 14.11 14.25 10.55
Preoperative Exp Capitalised 0 0 0 0 0
2,080.2 2,588.5 3,059.9 3,916.8
Total Expenses 1,822.47 7 9 4 0
Operating Profit 304.73 366.03 436.28 569.49 593.93
PBDIT 327.27 356.63 470.66 621.78 617.79
Interest 6.58 8.16 15.34 13.46 15.91
PBDT 320.69 348.47 455.32 608.32 601.88
Depreciation 47.61 45.53 45.42 43.77 57.15
Other Written Off 2.29 0 0 0 0
Profit Before Tax 270.79 302.94 409.9 564.55 544.73
Extra-ordinary items -0.33 0.91 2.12 -2.69 3.6
PBT (Post Extra-ord Items) 270.46 303.85 412.02 561.86 548.33
Tax 96.98 117.08 139.99 186.66 185.97
Reported Net Profit 173.48 187.81 272.05 375.2 362.36
1,056.5 1,275.7
Total Value Addition 622.14 716.43 855.31 7 1
Preference Dividend 0 0 0 0 0
Equity Dividend 91.13 119.9 124.7 163.06 167.86
Corporate Dividend Tax 12.54 16.82 17.77 27.72 28.53
Per share data (annualised)          
Shares in issue (lakhs) 959.2 959.2 959.2 959.2 959.2
Earning Per Share (Rs) 18.09 19.58 28.36 39.12 37.78
Equity Dividend (%) 95 125 130 170 175
Book Value (Rs) 59.66 64.88 77.57 96.8 114.1

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BALANCE SHEET (Berger Paints)
Balance Sheet of Berger Paints India ------------------- in Rs. Cr. -------------------  
  Mar '05 Mar '06 Mar '07 Mar '08 Mar '09
           
Sources Of Funds          
Total Share Capital 39.86 39.86 63.77 63.77 63.77
Equity Share Capital 39.86 39.86 63.77 63.77 63.77
Share Application Money 0 0 0 0 9.9
Preference Share Capital 0 0 0 0 0
Reserves 163.44 188.27 210.69 284 350.37
Revaluation Reserves 1.66 1.52 1.38 1.24 1.09
Networth 204.96 229.65 275.84 349.01 425.13
Secured Loans 6.68 7.62 86.03 99.84 78
Unsecured Loans 57.73 35.15 29.28 21.08 0.06
Total Debt 64.41 42.77 115.31 120.92 78.06
Total Liabilities 269.37 272.42 391.15 469.93 503.19
Application Of Funds          
Gross Block 188.9 226.26 244.94 275.22 322.68
Less: Accum. Depreciation 92.47 108.96 124.14 141.51 160.37
Net Block 96.43 117.3 120.8 133.71 162.31
Capital Work in Progress 11.57 11.05 13.71 24.71 18.82
Investments 10.91 12.82 12.82 21.85 29.52
Inventories 166.84 199.58 252.07 269.1 266.33
Sundry Debtors 84.65 109.51 143.52 158.44 180.38
Cash and Bank Balance 21.76 25.14 21.5 39.51 23.96
Total Current Assets 273.25 334.23 417.09 467.05 470.67
Loans and Advances 26.77 52.37 48.02 61.24 61.6
Fixed Deposits 0.21 0.19 0.24 0.39 7.91
Total CA, Loans & Advances 300.23 386.79 465.35 528.68 540.18
Deffered Credit 0 0 0 0 0
Current Liabilities 134.18 209.18 206.48 220.18 219.89
Provisions 15.91 46.53 15.12 18.82 27.74
Total CL & Provisions 150.09 255.71 221.6 239 247.63
Net Current Assets 150.14 131.08 243.75 289.68 292.55
Miscellaneous Expenses 0.33 0.18 0.08 0 0
Total Assets 269.38 272.43 391.16 469.95 503.2

PROFIT and LOSS Statement (Berger paints)

Profit & Loss account of Berger Paints ------------------        
India - in Rs. Cr.

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 ------------------
-
  Mar '05 Mar '06 Mar '07 Mar '08 Mar '09
Income          
1,117.6 1,322.1 1,521.8 1,688.6
Sales Turnover 948.17 3 8 0 6
Excise Duty 122.99 137.66 162.3 182.4 177.7
1,159.8 1,339.4 1,510.9
Net Sales 825.18 979.97 8 0 6
Other Income 6.39 14.17 14.49 15.22 25.64
Stock Adjustments 24.63 13.86 33.36 12.81 14.16
1,008.0 1,207.7 1,367.4 1,550.7
Total Income 856.2 0 3 3 6
Expenditure          
1,027.6
Raw Materials 556.69 643.44 791.51 886.65 4
Power & Fuel Cost 10.1 12.32 13.2 15.05 17.18
Employee Cost 46.61 49.23 58.06 68.19 77.21
Other Manufacturing Expenses 16.1 15.8 17.02 19.81 20.5
Selling and Admin Expenses 123.62 152.47 173.76 200.02 224.84
Miscellaneous Expenses 16.81 18.99 23.92 27.44 30.33
1,077.4 1,217.1 1,397.7
Total Expenses 769.93 892.25 7 6 0
Operating Profit 79.88 101.58 115.77 135.05 127.42
PBDIT 86.27 115.75 130.26 150.27 153.06
Interest 4.01 6.57 10.11 12.78 15.33
PBDT 82.26 109.18 120.15 137.49 137.73
Depreciation 15.69 17.39 17.8 18.65 20.4
Other Written Off 0.29 0.15 0.11 0.08 0
Profit Before Tax 66.28 91.64 102.24 118.76 117.33
Extra-ordinary items 0.4 0 0 0 5.42
PBT (Post Extra-ord Items) 66.68 91.64 102.24 118.76 122.75
Tax 14.56 21.35 19.17 26.7 34
Reported Net Profit 52.12 70.29 83.07 92.08 88.76
Total Value Addition 213.23 248.79 285.96 330.51 370.06
Equity Dividend 27.9 39.86 31.89 15.94 19.13
Corporate Dividend Tax 3.81 5.59 4.85 2.71 3.25
1,992.9 3,188.7 3,188.7 3,188.7
Shares in issue (lakhs) 1,992.94 0 2 2 2
Earning Per Share (Rs) 2.62 3.53 2.61 2.89 2.78
Equity Dividend (%) 70 100 50 25 30
Book Value (Rs) 10.2 11.45 8.61 10.91 12.99

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REFERENCES

Books:
IM PANDEY

R.P Rustagi

Sites:
www.bseindia.com

www.moneycontrol.com

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