An analysis of Balance Sheet and Income Statement of Asian Paints to check whether the company is worthy of securing a loan or not. (Only for Academic Use)

1. FINANCIAL ANALYSIS

2. Company Analysis: An Introduction
Process of evaluating a company’s profitability, profile and products or services.
1. Qualitative Factors of Analysis:
● Competitive Advantage
● Management
● Past Performance
● Corporate Governance
1. Quantitative Factors of Analysis
● The Balance Sheet
● The Income Statement

3. ● Asian Paints Limited was established way back on February 1, 1942.
● India’s largest and Asia’s third largest paint company.
● It operates in 17 countries and has 25 paint manufacturing facilities in the world servicing
consumers in over 65 countries.
Asian Paints: Company Profile

4. Management View – An Analysis
“For over 75 years, we have put our hearts to embellishing and enriching millions of homes
across Asia, the Middle East, Africa and the South Pacific.
Our forte in all these years has been unwavering consumer focus and a relentless zest for
innovation. Since 1942, Asian Paints has remained a reliable partner in making dream homes a
vibrant reality.
We not only manufacture a wide range of paints for decorative and industrial use, but also offer
end-to-end painting and designing services, colour and décor consultancy, waterproofing
solutions and much more.
Highest standards of ethics, professionalism, stakeholder transparency and a deep desire to
excel in whatever we do have fuelled our fast-track growth and helped us build an industry-
leading brand recall.”
(Source: Asian Paints Annual Report 2020)

5. Business Model
The Group’s business model objective for managing the financial asset is achieved by
❖ Collecting contractual cash flows and selling the financial assets
❖ The contractual terms of the financial asset give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal amount outstanding.

6. Financial Analysis Based on Bar Graphs (2017-18 to 2019-20)

7. Financial Analysis Based on Bar Graphs (2017-18 to 2019-20)

8. Financial Analysis Based on Bar Graphs (2017-18 to 2019-20)

9. Financial Analysis Based on Bar Graphs (2017-18 to 2019-20)

10. Alarming Signals from Company’s Financials
● The Interest Coverage Ratio has been decreasing over the years which indicates that the
company may default on its loan payments.
● The company is facing an Inventory pile up over the years. So, either their consumption is
not as per the market standards or maybe they are producing much more than the
requirements. Both don’t augur well for the company.

11. In determining the cost of raw materials, packing materials, stock-in-trade, stores, spares,
components and consumables, weighted average cost method is used.
Key features of Accounting policy with respect to Depreciation
Depreciation on each item of property, plant and equipment is provided using the
Straight-Line Method based on the useful lives of the assets as estimated by the management
Key features of Accounting policy with respect to Inventory

12. ● Capital structure describes the mix of a firm's long-term capital, which consists of a
combination of debt and equity. Capital structure is a permanent type of funding that
supports a company's growth and related assets.
● The capital structure of Asian Paints consists of 99.5 crore of Authorised Equity Share
Capital of face value of Re. 1 each. The issued equity share capital is of 95.92 crore.
● The capital structure also consists of debt, which includes secured and unsecured
borrowings such as term loans from banks, loan from State of Haryana, loans repayable on
demand from banks and financial institutions, cash credit and overdraft accounts.
Potential securities in the capital structure

13. 1. Companies need to Grow - Sales growth of 10.3% CAGR which is a good sign
2. Maintain or Improve Profitability
a. OPM stayed constant at 18%
b. NPM increased at a CAGR of 13% from 12.31 to 13.84
3. Convert profits into free cash - Has a reserve of more than 10,000 crores
4. Use this free cash to fund future growth - Using resources and trying not to pile-up huge
loans
Operating Performance of the Company and Conclusion

14. The Team
Rohan Agarwal | Prachi Singh | Rishab Adarsh | Sangeet Khandelwal | Prerna Agarwal | Raghav Khandelwal
Based on the discussed parameter, we have decided to give loan to the company as per their
requirement.