Basic Company Details

Parameters DetailsCompany Asian PaintsIndustry PaintsBusiness (As you understand it, in simple words) XYZCurrent Stock Price (Rs) 4,665 Face Value (Rs) 10 No. of Shares (Crore) 10 Market Capitalization (Rs Crore) 44,747 Promoter Shareholding (Latest Quarter) 52.8%Promoter Pledged Shareholding (Latest Quarter) 17.7%

Key Financials (Last 10-Years)Parameters DetailsSales Growth (10-Year CAGR) 20.4%Gross Profit Growth (10-Year CAGR) 18.1%Net Profit Growth (10-Year CAGR) 24.4%Average Debt/Equity (x) 0.3 Average Return on Equity 35.4%

Year 2006 2007 2008 2009No.Of Companies 19 17 15 11Key RatiosDebt-Equity Ratio 0.61 0.51 0.41 0.31Long Term Debt-Equity Ratio 0.36 0.3 0.23 0.16Current Ratio 1.07 1.13 1.14 1.14Turnover Ratios

3.59 3.93 4.12 3.987.65 7.5 7.58 8.09

10.56 9.85 10.09 10.85Interest Cover Ratio 8.55 23.14 24.01 19.39PBIDTM (%) 12.38 12.24 13.05 11.14PBITM (%) 10.47 10.64 11.56 9.69PBDTM (%) 11.16 11.78 12.57 10.64CPM (%) 7.57 8.61 9.05 7.78APATM (%) 5.65 7.02 7.56 6.33ROCE (%) 31.04 31.53 33.7 27.87RONW (%) 26.74 31.52 31.39 23.92http://www.capitaline.com

  Fixed Assets  Inventory  Debtors

2010 2011 2012 2013 2014 201513 19 15 9 6 43

0.3 0.24 0.23 0.19 0.13 0.220.17 0.18 0.22 0.19 0.13 0.21.04 1.15 1.37 1.34 1.28 1.27

4.02 4.41 4.72 4.13 3.86 3.88.43 7.81 7.4 6.98 7.11 7.01

11.95 12.96 12.5 11.46 11.8 10.6940.82 39.8 27.2 24.93 30.43 21.9315.62 14.89 13.68 12.87 13.12 12.6614.19 13.31 12.23 11.56 11.45 10.9115.28 14.56 13.23 12.4 12.75 12.1611.21 10.64 9.88 8.99 9.34 8.85

9.78 9.06 8.44 7.68 7.67 7.139.4 38.59 36.72 33.92 34.95 32.7435.4 32.77 31.23 26.98 26.53 26.04

Mar-06 Mar-07 Mar-08 Mar-09 Mar-10Sources of funds

Cash profit 221.02 307.63 412.97 419.51 835.24Increase in equity 0.00 0.00 0.00 0.00 0.00Increase in other networth 0.00 0.00 0.00 0.00 0.00Increase in loan funds 2.84 34.59 0.00 0.00 0.00Decrease in gross block 0.00 0.00 0.00 0.00 0.00Decrease in investments 0.00 0.00 0.00 188.11 0.00Decrease in working capital 0.00 0.00 127.73 0.00 388.52Others 0.00 0.00 0.00 0.00 0.00Total Inflow 223.86 342.22 540.70 607.62 1,223.76http://www.capitaline.com

Cash loss 0 0 0 0 0Decrease in networth 16.82 25.55 27.72 28.53 52.77Decrease in loan funds 0 0 30.97 20.17 5.94Increase in gross block 38.5 58.34 230.46 229.7 437.15Increase in investments 16.12 59.84 88.49 0 468.92Increase in working capital 32.52 73.79 0 161.36 0Dividend 119.9 124.7 163.06 167.86 258.98Others 0 0 0 0 0Total Outflow 223.86 342.22 540.7 607.62 1223.76http://www.capitaline.com

 Year

Mar-11 Mar-12 Mar-13 Mar-14 Mar-15

842.25 1,054.83 1,159.95 1,377.53 1,495.790.00 0.00 0.00 0.00 0.000.00 0.00 0.00 0.00 0.00

76.42 91.99 0.00 0.00 9.890.00 0.00 0.00 0.00 0.00

155.86 5.61 77.52 0.00 0.000.00 0.00 36.38 539.74 0.000.00 0.00 0.00 0.00 0.00

1,074.53 1,152.43 1,273.85 1,917.27 1,505.68

0 0 0 0 050.11 62.24 74.29 82.02 112.95

0 0 105.82 16.25 075.78 611.46 652.51 104.18 179.55

0 0 0 1206.45 222.63641.7 95.04 0 0 361.71

306.94 383.69 441.23 508.37 585.120 0 0 0 43.72

1074.53 1152.43 1273.85 1917.27 1505.68

DuPont Analysis of Asian Paints Ltd.

Financial Statement Data ($ millions) 2009 2010 2011Sales 4,478.25 5,372.73 6,621.01EBIT 561.84 1,123.77 1,138.67Interest Expense (Non-0perating) 15.91 19.1 16.34Tax Expense 183.57 330.17 347.18Net Income (Income for Primary EPS) 362.36 774.5 775.15Assets 946.54 1791.87 1644.69Equity 1,094.47 1,557.22 1,975.32

Three-Step DuPont Model:2009 2010 20118.1% 14.4% 11.7%3.27 3.13 3.491.03 0.97 0.85

Return on Equity 27.3% 43.8% 34.7%

Five-Step DuPont Model:2009 2010 2011

12.5% 20.9% 17.2%3.27 3.13 3.49

97.2% 98.3% 98.6%66.4% 70.1% 69.1%

1.03 0.97 0.85Return on Equity 27.3% 43.8% 34.7%

Financial Leverage of Competitors 2009 2010 2011Kansai Nerolac Paints 1.14 1.14 1.11Berger Paints 1.19 1.04 1.16Asian paints 1.03 0.97 0.85

Net Profit Margin (Net Income ÷ Sales)Asset Turnover (Sales ÷ Average Assets)Equity Multiplier (Average Assets ÷ Average Equity)

Pre-Interest Pretax Margin (EBIT ÷ Sales)Asset Turnover (Sales ÷ Average Assets)Interest Burden [(EBIT - Interest Expense) ÷ EBIT]Tax Efficiency [1 - (Tax Expense ÷ (EBIT - Interest Expense))]Equity Multiplier (Average Assets ÷ Average Equity)

2012 2013 2014 20158,335.32 9,394.03 10,925.22 12,263.771,394.24 1,549.81 1,731.54 1,964.73

31.31 33.93 28.97 31.16404.54 465.88 533.51 606.17958.39 1,050.00 1,169.06 1,327.402154.1 2619.14 3721.3 3998.81

2,487.78 3,022.26 3,600.93 4,230.26

2012 2013 201411.5% 11.2% 10.7%

3.49 2.96 2.830.87 0.96 0.99

34.8% 31.7% 29.9%

2012 2013 201416.7% 16.5% 15.8%

3.49 2.96 2.8397.8% 97.8% 98.3%70.3% 69.3% 68.7%

0.87 0.96 0.9934.8% 31.7% 29.9%

2012 2013 20141.08 1.06 1.041.21 1.32 1.280.87 0.96 0.99

Asian Paints - Balance Sheet

Year / Rs Crore FY05-06 FY06-07 FY07-08SOURCES OF FUNDS / EQUITY & LIABILITIESShare Capital 64 96 96 Reserves & Surplus 413 434 471 Shareholder's Funds / Equity 478 529 567

Minority Interest 75 70 64

Non-Current LiabilitiesLong-Term Borrowings 197 160 240

Current Liabilities 514 581 618 Short-Term Borrowings - 9 - Trade Payables 232 272 295 Other Current Liabilities 177 163 206 Short-Term Provisions 105 136 117

APPLICATION OF FUNDS / ASSETSNon-Current Assets 35 34 37 Tangible Assets 20 22 24 Intangible Assets 5 6 6 Capital Work-in-Progress 5 1 1 Non-Current Investments 5 6 6

Current Assets 737 772 950 Current Investments - 12 27 Inventories 322 318 455 Trade Receivables 256 265 296 Cash and Bank Balance 68 70 61 Short-Term Loans and Advances 55 76 80 Other Current Assets 35 31 32

Asian Paints - Balance Sheet

FY08-09 FY09-10 FY10-11 FY11-12 FY12-13 FY13-14 FY14-15

96 96 96 96 96 96 96 550 682 886 1,107 1,614 2,092 2,653 646 778 982 1,203 1,710 2,187 2,749

60 60 57 76 94 110 137

261 180 179 152 104 147 148

705 979 1,248 2,517 3,315 2,081 2,771 - 126 96 157 125 - - 330 449 572 554 718 1,087 1,297 249 339 414 461 661 703 1,107 126 66 166 1,345 1,810 290 367

41 45 49 54 59 65 72 27 29 32 35 39 43 47 7 7 8 9 10 11 12 1 1 1 1 1 1 1 7 7 8 9 10 11 12

1,120 1,406 1,692 2,966 3,871 3,068 3,560 75 114 198 - 532 367 285 489 598 714 769 956 1,305 1,599 348 421 460 572 543 573 781 73 105 111 210 106 626 624 74 98 153 1,365 1,670 106 186 61 69 56 50 65 90 84

Asian Paints - P&L Account

Year / Rs Crore FY05-06 FY06-07 FY07-08 FY08-09 FY09-10Net Sales 1,817 2,373 2,574 3,021 3,670

ExpenditureIncrease/Decrease in Stock (38) 2 (61) (10) (70)Raw Material Consumed 975 1,290 1,563 1,803 2,269 Employee Cost 120 183 199 219 257 Other Manufacturing Expenses 66 74 86 96 112 General and Administration Expenses 60 84 87 99 122 Selling and Distribution Expenses 301 358 297 345 411 Miscellaneous Expenses 56 85 68 79 85 Total Expenditure 1,540 2,076 2,239 2,630 3,187 Gross Profit 815 1,007 985 1,133 1,358 Operating Profit / EBITDA 278 297 335 391 483 Other Income 11 27 32 32 40 Depreciation 49 71 69 68 61 Profit Before Interest & Tax (PBIT) 240 253 298 354 462 Interest 14 15 11 11 24 Exceptional Income / Expenses - - - - (8)Profit Before Tax 226 238 287 343 430 Provision for Tax 86 94 106 132 147 Profit After Tax 140 144 181 211 283 Minority Interest (1) (3) (7) 2 (2)Share of Associate - 4 0 (1) (0)Consolidated Profit After Tax (PAT) 139 145 174 212 281 Diluted EPS (Rs) 14.5 15.1 18.1 22.1 29.3 Interim Equity Dividend 29 34 38 67 115 Proposed Equity Dividend 42 48 53 53 10 Total Equity Dividend 70 82 91 120 125

Asian Paints - P&L Account

FY10-11 FY11-12 FY12-13 FY13-14 FY14-15 CAGR 4,407 5,464 6,681 7,722 9,632 20.4%

(36) (27) (102) (151) (173) 2,613 2,866 3,227 3,906 5,099 301 365 433 454 526 122 682 797 922 1,073 145 167 200 206 269 535 646 801 969 1,207 63 91 89 85 120 3,743 4,790 5,445 6,391 8,122 20.3% 1,708 1,943 2,758 3,045 3,633 18.1% 664 674 1,236 1,331 1,510 20.7% 60 51 141 68 108 59 74 84 113 121 665 651 1,293 1,286 1,497 22.6% 26 32 37 26 43 (7) (1) 1 - - 631 617 1,257 1,260 1,454 23.0% 203 197 373 378 434 428 419 884 881 1,021 24.7% (19) (22) (48) (38) (32) - - - - - 409 398 836 843 989 24.4% 42.7 41.5 87.1 87.9 103.1 62 62 82 82 91 101 106 177 225 293 163 168 259 307 384 20.8%

Asian Paints - Cash Flow Statement

Year / Rs Crore FY05-06 FY06-07Net cash (used in) / generated from operating activities 154 249 Payment for purchase of fixed assets (40) (44)Free Cash Flow 114 205 Net cash (used in) / generated from investing activities (70) (113)Net cash (used in) / generated from financing activities (59) (134)Net increase in cash and cash equivalents 24 2

Asian Paints - Cash Flow Statement

FY07-08 FY08-09 FY09-10 FY10-11 FY11-12 FY12-13 FY13-14 FY14-15 111 179 258 480 389 1,063 762 826 (97) (87) (82) (308) (310) (395) (156) (673) 14 92 176 172 79 668 606 153 (74) (125) (109) (335) (270) (299) (440) (512) (42) (42) (111) (134) (230) (332) (334) (327) (5) 12 38 11 (111) 432 (12) (12)

Asian Paints - Key Ratios

Operational & Financial Ratios FY05-06 FY06-07 FY07-08 FY08-09 FY09-10Diluted Earnings Per Share (Rs) 14.5 15.1 18.1 22.1 29.3 Diluted Book Value Per Share (Rs) 49.8 55.2 59.1 67.4 81.1 Tax Rate (%) 38% 40% 37% 39% 34%Dividend Per Share (Rs) 7.3 8.5 9.5 12.5 13.0 Dividend Pay Out Ratio (%) 50% 56% 52% 57% 44%

Profitability Ratios FY05-06 FY06-07 FY07-08 FY08-09 FY09-10Gross Margin (%) 45% 42% 38% 38% 37%EBITDA Margin (%) 15% 13% 13% 13% 13%EBIT Margin (%) 13% 11% 12% 12% 13%Net Profit Margin (%) 8% 6% 7% 7% 8%

Performance Ratios FY05-06 FY06-07 FY07-08 FY08-09 FY09-10Return on Equity (%) 29% 27% 31% 33% 36%Return on Capital Employed (%) 60% 70% 52% 49% 66%Return on Invested Capital (%) 24% 25% 26% 29% 35%Sales/Working Capital (x) 8.2 12.4 7.8 7.3 8.6

Efficiency Ratios FY05-06 FY06-07 FY07-08 FY08-09 FY09-10Receivable Days 51 41 42 42 42 Inventory Days 65 49 64 59 59 Payable Days 47 42 42 40 45

Growth Ratios FY05-06 FY06-07 FY07-08 FY08-09 FY09-10Net Sales Growth (%) 31% 8% 17% 21%EBITDA Growth (%) 7% 13% 17% 24%PBIT Growth (%) 6% 18% 19% 30%PAT Growth (%) 4% 20% 22% 32%

Financial Stability Ratios FY05-06 FY06-07 FY07-08 FY08-09 FY09-10Total Debt/Equity (x) 0.4 0.3 0.4 0.4 0.4 Debt Burden (x) 1.7 0.8 16.7 2.8 1.0 Current Ratio (x) 1.4 1.3 1.5 1.6 1.4 Quick Ratio (x) 0.8 0.8 0.8 0.9 0.8 Interest Cover (x) 17.5 16.6 27.5 31.0 19.3

Asian Paints - Key Ratios

FY10-11 FY11-12 FY12-13 FY13-14 FY14-15 42.7 41.5 87.1 87.9 103.1 102.4 125.4 178.3 228.0 286.5

32% 32% 30% 30% 30% 17.0 17.5 27.0 32.0 40.0

40% 42% 31% 36% 39%

FY10-11 FY11-12 FY12-13 FY13-14 FY14-1539% 36% 41% 39% 38%15% 12% 18% 17% 16%15% 12% 19% 17% 16%

9% 7% 13% 11% 10%

FY10-11 FY11-12 FY12-13 FY13-14 FY14-1542% 33% 49% 39% 36%93% 90% 150% 86% 124%47% 34% 70% 67% 53%

9.9 12.2 12.0 7.8 12.2

FY10-11 FY11-12 FY12-13 FY13-14 FY14-15 38 38 30 27 30 59 51 52 62 61 47 37 39 51 49

FY10-11 FY11-12 FY12-13 FY13-14 FY14-1520% 24% 22% 16% 25%37% 1% 83% 8% 13%44% -2% 99% -1% 16%46% -3% 110% 1% 17%

FY10-11 FY11-12 FY12-13 FY13-14 FY14-15 0.3 0.3 0.1 0.1 0.1 1.0 1.9 0.2 0.2 1.0 1.4 1.2 1.2 1.5 1.3 0.8 0.9 0.9 0.8 0.7 25.2 20.0 35.2 49.5 34.5

Income Tax 30%

Debt/equity Tax rate

Asian paints 1.11

Peers

Shalimar paints 0.73 1.39 0.3

Nerolac paints 0.27 0.03 0.3

Berger paints 0.38 0.24 0.3

Average D/E 0.55

Paint Divison Rf(30 yr. govt bonds)(30 yr bonds) 8.10

0.44Return from market( 10 years CAGR of nifty) 14.46

10.92Share of equity in the capital structure 99.70%Share of debt in the capital structure 0.30%

Cost of debt (De)interest expense 0

Equity Beta (last 5 years)

Average βunlevered

Relevered for paints βequity

βequity of paints

Re

Book value of debt 238cr.Cost of debt 0

Wacc for the firm's paint division 10.89

WACC for the home improvementTotal sales 11711Sales of paints 11629Sales of home improvement 82% share of paints 99.30% shareof home improvments 0.70WACC for the home improvement 10.89

₹(in crores)

NOTE-As the home improvement division is less than a percent of the total revenues that is earned by the company we are assuming the WACC of the paint division to be the WACC for the home improvement as well

0.37

0.26

0.33

0.32

0.44384679

βunlevered

Asian Paints: 2-Stage DCF

Initial Cash Flow 476

Years 1-5 6-10FCF Growth Rate 15% 12%Discount Rate 10.89%Terminal Growth Rate 2%

Shares Outstanding (Crore) 10 Net Debt Level (762)

Year FCF Growth Present Value1 547 15% 493 2 629 15% 512 3 724 15% 531 4 832 15% 550 5 957 15% 571 6 1,072 12% 576 7 1,200 12% 582 8 1,345 12% 588 9 1,506 12% 594

10 1,687 12% 600

Terminal Year 1,720 PV of Year 1-10 Cash Flows 5,598 Terminal Value 6,883 Total PV of Cash Flows 12,481 Number of Shares 10 DCF Value / Share (Rs) 1,381

Final Calculations(OVERALL)

Paint HousingInitial cash flow 472.48 3.33

Years 1-5 6-10FCF Growth Rate 15% 12%Discount Rate 10.89%Terminal Growth Rate 2%

Shares Outstanding (Crore) 10 Net Debt Level (762)PAINT DIVISION

Year FCF Growth Present Value1 543 15% 490 2 621 15% 505 3 710 15% 521 4 811 15% 537 5 927 15% 553 6 1,032 12% 555 7 1,149 12% 557 8 1,279 12% 559 9 1,423 12% 561

10 1,584 12% 563

Terminal Year 1,616 PV of Year 1-10 Cash Flows 5,402 Terminal Value 6,464 Total PV of Cash Flows 11,866 Number of Shares 10 DCF Value / Share (Rs) 1,237

Final Calculations(PAINT DIVISION)

HOME DIVISIONYear FCF Growth Present Value

1 4 15% 3 2 8 15% 7 3 14 15% 10 4 21 15% 14 5 30 15% 18 6 40 12% 21 7 52 12% 25 8 66 12% 29 9 83 12% 33

10 103 12% 37

Terminal Year 103 PV of Year 1-10 Cash Flows 196 Terminal Value 411 Total PV of Cash Flows 607 Number of Shares 10 DCF Value / Share (Rs) 63

Final Calculations(HOME DIVISION)