Financial leverage of top 10 paint company in india

An Assignment on
Strategic Financial Management
TOPIC: Financial Leverage of Top 10 Paint companies in
India
Submitted BY:
Arpita Mehta
(MBA, SEM: 3rd)
Under guidance of:
Saroj Vats
SUBMITTED TO:
DEPARTMENT OF BUSINESS ADMINISTRATION
MAHARAJA KRISHNAKUMARSINHJI UNIVERSITY,
BHAVNAGAR
DATE: SIGNATURE:

Executive Summary
paints in general aredifferentiated into deco-rativeor architectural paints and industrial
paints. Lead is used in paints mainly as a colouring agent. Lead is also used to make
paints moredurableand corrosion resistant.
Lead based paint in older houses has long been associated with elevated blood lead in
children resid-ing there. Repeated studies haveconcluded that lead paint is a significant
sourceof lead poisoning.
Several recent studies haveindicated thepres-enceof lead in high concentrations in
new decorativeenamel paints availablefor purchaseby thepublic in fivecountries (Van
Alphen, 19991
; Clark et al, 20062
; Adebamowo et al, 20073
; Kumar and Gottesfeld, 20084
).
There is an urgent need to determinethelead con-tent of paints in other countries to
document theneed worldwidefor a ban on its continued use. Considering thedangerous
effects of lead on human health, several countries enacted laws to regulatethelead
concentrations in paints. TheUnited States recently revised themaximumallowable
concentra-tion of lead in new paints from 600 ppm to 90ppm.
It is also important to determinetheextent of lead in paints and its contaminationof
household dust in order to develop sound programmes to reduceexposureto lead. A pilot
study in a cross section of houses in Delhi documented very high levels of lead in household
dust.
There is a need for additional such studies else-whereto determinethesources of lead
in the dust, so that remedial programmeswill address themajor con-tributingsources of
lead that areendangering thechildren and pregnant women who spend their longest time
in these houses.
Children are known to eat paint chips. More com-monly lead paints in and around
homes contributeto dust and soil contamination that is often the most sig-nificant source
of exposure for children. Children then ingest lead from playing close to the ground and
having frequent hand-to-mouth contact. Significant exposure may also occur from lead
paint when small-er particles become airborne during sanding and scrapping while
repainting and remodelling. In addi-tion, damaged paint and the weathering of paints on
the exterior of buildings also contribute to lead in soil.

In theUnited States, health authorities recom-menda public health intervention when a
child is found to have a blood lead level of 10 µg/dl or more. Recent body of literature
points out that there may be no safety margin at existing exposures and that chil-dren
exposed to even < 10 µg/dl haveshown intellec-tual impairment. Young children (below six
years old) are recognized as the most susceptible to lead expo-sure even at low levels.
Pregnant women are the sec-ond most vulnerable group. Lead also crosses the pla-centa
and reaches the developing foetus.
The sixth session of the Intergovernmental Forum on Chemical Safety (IFCS), held from
15-19 September 2008 in Dakar, Senegal, adopted a unani-mous resolution to eliminate
lead from paints world-wide.
Toxics Link and International POPs Elimination Network (IPEN) decided to work with
other partner organisations in variousregions of theworld to deter-minethetotal lead (Pb)
concentration in new decora-tive paints available in various developing countries in order
to know the amount of lead being used in devel-oping countries.

Introduction of the topic:
What is 'Leverage'
Leverage is the investment strategy of using borrowed money: specifically, theuseof
various financial instruments or borrowed capital to increasethepotential returnof an
investment. Leverage can also refer to theamount of debt used to finance assets. When
one refers to something (a company, a property or an investment) as "highlyleveraged," it
means that item has moredebt than equity.
What is financial leverage?
Financial leverage refers to the combination of a firm’s debt and equity.
A firm with high amount of debt is said the be highly leveraged where a firm with a low
amount of debt is not.
All else equal, a firm with higher financial leveragewill havehigher than; therefore it will be
more risky than firm with low financial leverage.
A firm that has higher amount of debt also has a higher amount of fixed financial cost in the
form of interest payments must bepaid no matter how well or poor the firm is performing.
These interest payments reduced profit margins therefore decreasing net income.
If a firm does not generate enough revenues to pay for its fixed cost then it could
experience financial distress which also has costs.

Financial leverage:
Year Financial leverage Answer
2015 2010.52 / 1933.57 1.03
2016 2479.56 / 2377.75 1.04
2017 2671.44 / 2658.05 1.00
Type of the company: Public
Incorporated in: 1942
Headquarters: Mumbai
Traded as: BSE: 500820
NSE: ASAINPAINT
Key People: KBSAnand(MD& CEO)
Total InstalledCapacity: ~0.89 MillionMTPA
Employee: Up to 5000
Asian Paint
Asian paints India’s largest and Asia’s 3rd
largest decorative paint
company boasts of dominant market share of more than 45% in
domestic organized sector. It is fastest growing FMCG companies
with sales turnover of INR 10, 418.78 crores.
Despite growing competition from domestic and major foreign
paint companies. Asian paint has managed to its market share,
which is further expected to grow in the years to come backed by
higher sales growth and changing attitude of new age Indian
consumer towards commodities such as decorative paints.
Product & services:
Interior and exterior paints, wood and mental finishes ,
waterproofing, home solutions.
Major Brand:
 Ace & Apex
 Apex
 Apex ultima
 Asian Paint
 Royale
 Ustav
IN Headlines recently because:
Signed an agreement with shareholder of kadisco chemeical
industry PC Ethiopia, to acquire either directly or through its
subsidiaries 51% of its share capital as a strategic move to expand
global footprint.

Degree of Financial leverage: EBIT
EBT Rs incrore
2015 475.40 / 396.25 1.19
2016 607.47 / 536.99 1.13
2017 662.84 / 665.70 0.99
Headquarters: Kolkata
NSE: BERGERPAINT
Key People: AbhijitRoy(MD)
Total InstalledCapacity: ~0.43 MillionMTPA
Berger Paints:
Berger paints is India second largest decorative paint
company in India. The company has an overall market share
of ~ 17%in India. In the latter, the company deals directly with
major projects both in public and private sector.
In have seven manufacturing facilities spread across India and
more than 82 depots besides 4 overseas manufacturing
facilities. Berger has the 2nd distribution network spread
across the country.
Product & Services
Interior & exterior wall coating, metal and wood paints,
protective coatings, undercoats, contraction, and chemicals.
Major Brands:
 Berger slik
 Easy Clean
 Breathe easy
 Rangoli
 Luxol
 Jadoo
In HeadlinesRecentlyBecause:
Bergerispresentlyfocusingtowardspremiumemulsionpaints
categoryand has ropedinthe bestof celebritiesof the countryto
promote itsbrandin thiscategory.

EBIT
Financial leverage: EBT
Rs in crore
2015 444.82 / 398.90 1.12
2016 572.32 / 1064.71 0.53
2017 730.69 / 759.42 0.96
NSE: KANSAINER
Key People: H.M. Bharuka(MD)
Total InstalledCapacity: ~0.03MillionMTPA
Kansai Nerolac:
Kansai nerolac paints, formerly known as godless Nerolac become a
wholly-owned subsidiary of kansai paint company (Japan) after it
tookover entire stake of the company in 1999 and changed its name
in 2006.
The company has presence in both decorative and industrial paints
segmentwhich contributes equally to its revenues. In India, it is the
3rd
largest player in decorative segment and largest player In
Industrial Paints segment with a cumulative market share of around
15%. It enjoys, however, a dominant share in the domestic auto
segment.
Product & Services:
Interior and exterior wall coating, metal and wood paints, and
ancillaries.
Major Brand:
 Impressions
 Impressions Eco Clean
 Impressions Disney
 Wonder wood
 Excel Total
 Suraksha
In Headlines Recently Because:
Kansai Nerolachasreceivedanoverwhelmingresponse for its recent
initiative ‘Paint the Change’ from the consumers across India. The
grouphad undertakenits1st
activityof paintingaone km long stretch
outside the Delhi university wall in February 2013, thereby,
encouragingthe donationof unusedpaintthat would touch the lives
of millions by spreading happiness and cheer.

EBIT
Degree of Financial leverage: EBT Rs in crore
Year Financial
leverage
Answer
2015 261.40 / 275.00 0.95
2016 304.90 / 299.90 1.02
2017 348.80 / 342.30 1.01
Headquarters: Amsterdam,Netherlands
Traded as: Euro next:AKZA
OTCOX: AKZOY
Key People: TonBuchner(CEO)
Total InstalledCapacity: ~0.16MillionMTPA
 Employee : Up to 2500
AKzoNobel
AkzoNobel is a leading global paintsand coatingscompany
and a major producer of specialtychemicals. We supply
industriesand consumersworldwidewith innovative
products and arepassionateaboutdevelopingsustainable
answers for our customers. Ourportfolioincludes well-
known brands such as Dulux, Sikkens, International andEka.
AkzoNobel Indiaknownfor itspremiumsegmentproductdulux has
a marketshare of ~11%. Company’sbusinesscanbe broadly
dividedintodecorative paintandrefinishautopaintwhere later
contributes~15% to itsrevenues.
Product & Services:
Basic andindustrial chemical,decorativepaints,industrial (re)
finishingproducts,coatings.
Major Brands:
 Dulux promise
 Dulux lusterfinish
 Dulux satinfinish
 Dulux Gloss
 Dulux guardian
In Headlinesrecentlybecause:
Akzo Nobel opened new production in Thane, Maharashtra, to
manufacturing coating for the mental packaging and flexible
packaging industry in July 2014.

Degree of Financial leverage: EBIT
EBT
Rs in crore
2015 8.16 / -14.85 -0.55
2016 31.51 / 4.32 7.29
2017 14.42 / -10.28 -1.40
OTCOX: AKZOY
Key People: SameerNagpal (MD& CEO)
Total InstalledCapacity: ~0.058Million
MTPA
Shalimar Paints:
Shalimarpaintsare one of the oldestandleadingpaints
manufacturingcompaniesof India.Shalimarhas3 manufacturingunit
and more than 54 branchesanddepotsall across the country.
The company hasa wide productrangin decorative andindustrial
segments.The architectural Coating32coversbothinteriorand
exteriorsegments.
Product & Services:
Interiorandexterioremulsions,distempersenamels,metal packaging
coating,solutions,andmarine paints.
Major Brands:
 HusainPremiumAcrylicEmulsion
 No. 1 SilkEmulsion
 Xtra Maxima
 Mela Enamel
 Cankote
 TuffKote
In HeadlinesRecentlyBecause:
Shalimarpaintsrecentlydeclaredasuspensionof workatits factory
inHowrah, a move whichhasaffectedaround350 workers.
The company,however,isinthe midstof settingupa newpaintin
Chennai withaninstalledcapacity18,000 tons perannum.

EBIT
Degree of Financial leverage: EBT
Rs incrore
2015 -4.97 / 10.80 -0.46
2016 -9.15 / -10.33 0.89
2017 -2.65 / 3.29 -0.81
Headquarters: Gurgaon, Haryana ( India)
NSE: JENSONICOL
Key People: B.C shrivastva(MD)
Jenson & Nicholson
The company reinventeditselfasa completelyIndiancompanyin
1973 when the foreignholdingwasboughtoverbyS P Sinha,an
industrialistwithinterestincementandhotels.Jenson&Nicholson
manufacturesalmosteverytype of paintforthe decorative and
industrial customers.
2nd
oldestandamongthe top paintcompanyinIndiaJ & N was
launchedinIndia1973. Paintmakerjenson& Nicholson itsmarket
share in Indiais20-25%.
Product:
 Brolac Hi-gloss
 RabbialacSupperoxcide pride
 Safe guard
 Special effects

EBIT
Degree of Financial leverage: EBT
Rs incrore
2015 34.08 / 31.86 1.70
2016 34.97 / 34.95 1.00
2017 37.69 / 47.08 0.80
Headquarters: Osaka,Osaka prefecture,Japan
Key People:Mr.kenji Sakai (CEO)
Total InstalledCapacity:
Nippon
NipponpaintHoldingsCompanylimitedisaJapanese paintand
paintproductsmanufacturingcompany.Itisthe 7th
largestpaint
manufacturergloballybasedonrevenue.
A leadingplayerinthe paintandcoatingindustry.Nipponhas
more than 100 yearsof experience inpaintindustry.Its
innovationandecofriendlyproduct range include decorative
paints.Marine Coating,industrial coatingAutomotive Coating
and fine chemical.
Products:
 Adour-lessairCare
 SatinGLO
 Spot- less ket
 Dura freshexpert
 Weatherbond

Research methodology And Data Analysis:
Research Methodology:
Methodologyof the studywill be an exploratoryand Descriptive research.The nature of the studyis
such that needstohave secondaryresearch.The secondaryresearchwillhelptogainmore andmore
informationaboutdebtand equity.
Reasonfor selectionthe topic:
The mainreasonfor selectionforthe topicisto investigate the effectof financial structure, financial
leverage and profitability on paint industry’s value as a long term strategic analysis that helps to
analyze the predicting future value of the company.
Objectivesofthe study
The mainobjective of the studyistoinvestigate the effectof financial leverage on financial
performance of the company.
The specificobjectivesofthisstudy are:
 To examine the effectof debtequity,Returnon Assets(ROA) of quotedPaintcompaniesin
India.
 To determine whetherdebt- equityratio(DER) have anyeffectonReturnonAssets(ROA) of
quotedPaintcompaniesinIndia.
 To establishif there isanyeffectof interestcoverage ratio(ICR) onReturnonAssets(ROA) of
quotedPaintcompaniesinIndia.
Types ofdata:
Secondary data:
Publishedannual reportof the companyforthe year 2014 -15, 2015-16 andyear 2016-17.
Time period:
The data fora periodof last3 yearsfrom2013-2014 to 2015-2016 has beentakeninto
consideration tosalesrevenue,EBIT&EBT of the company andalso assessthe financial strength
and weaknessesof the company.
Sample size: Top 7 paintcompany
Types ofstudy:
Thisis the comparative studyof the financial leverage of paintscompaniesinlast3years.

Data analysis:
Rs incrore
year 2014-15 2015-16 2016-17
EBIT 2010.52 2479.56 2671.44
EBT 1933.57 2377.57 2658.05
Answer 1.03 1.04 1.00
Interpretation:
Indian’stopPaintscompanyinASIAN PAINTCOMPANYis 2nd
largestdecorative company.Mayhave
calculate isfinancial leverage as2014-2015, 2015-2016 and 2016-2017 respectively.A company’sgiven
data for lastthree yeartheyare calculate underthe financial leverage formula.
Accordingto above thischart the financial leverage of 2014-15 is 1.09, 2015-16 is1.03 and 2016-17 is
1.00. Here the compare to 2014-15 and 2015-16 the 2014-15 isriskyfor the company,because debt
equityishighit’scompare to otheryear.
Nowcompare 2015-16 with2016-17 as per giventhe chart.In thisyear2015-16 isriskyfor the
company,because debtequityishighit’scompare toyear2016-17.
1.09
1.03
1
0.94
0.96
0.98
1
1.02
1.04
1.06
1.08
1.1
2014-15 2015-16 2016-17
FINANCIAL LEVERAGE OF ASIAN PAINT
FINANCIAL LEVERAGE OF ASIAN
PAINT

Rs incrore
year 2014-15 2015-16 2016-17
EBIT 444.82 572.32 730.69
EBT 398.90 1064.71 759.42
Answer 1.12 0.53 0.96
Interpretation:
In India top paints company, kansai Nerolac is 3rd
largest player in decorative segment and largest
player In paint industry in India. Calculated financial leverage as 2014-15 is 1.12, 2015-16 is 0.53 and
2016-17 is 0.96 respectively.
According to above chart is given compared year 2014-15 with year 2015-16 2014-15 is risky for the
company, because in this year its financial leverage is very compare to other year.
Now compared with year 2015-16 and 2016-17 , year 2016-17 is lower risky for the company.
1.12
0.53
0.96
0
0.2
0.4
0.6
0.8
1
1.2
2014-15 2015-16 2016-17
FINANCIAL LEVERAGE OF KANSAI NEROLAC
FINANCIAL LEVERAGE OF
KANSAI NEROLAC

Rs incrore
year 2014-15 2015-16 2016-17
EBIT 261.40 304.90 348.80
EBT 275.00 299.90 342.30
Answer 0.95 1.02 1.01
Interpretation:
AkzoNobel is a leading global paintsand Coatings Company anda major producer of specialty
chemicals.
As per given this chart AkzoNobel paints company’s financial leveragein year2014-15 is
0.95, than year 2015-16 financial leverageis 1.02 and year 2016-17 its financialleverageis
1.01
Now compared to year 2014-15with 2015-16, 2015-16debt equityis high risky for the
company becauseits financialleverageis very highcompareto other years.
0.95
1.02
1.01
0.9
0.92
0.94
0.96
0.98
1
1.02
1.04
2014-15 2015-16 2016-17
FINANCIAL LEVERAGE OF AKZONOBEL PAINT
AKZONOBEL PAINT

Rs incrore
year 2014-15 2015-16 2016-17
EBIT 8.16 31.51 14.42
EBT -14.85 4.32 -10.28
Answer -0.55 7.29 -1.40
Interpretation:
Degree of financial leverage of Shalimarpaint isyear2014-15 is0.55, 2015-16 is7.29 and 2016-17 is-
1.4.
As perabove chart comparedto Year 2014-15 and 2015-16, in year2015-16 itsfinancial leverage isvery
highbecause inthisyearthe debtisveryhighcompare to equity.
Now comparedto year2015-16 and2016-17, inyear2016-17 the financial leverage is -1.4itmeans
companycan not earninignormal profitandalso companycan not give returntoits share holder.
2014-15 2015-16 2016-17
SHALIMAR PAINT
0.55 7.29 -1.4
0.55
7.29
-1.4
-2
-1
0
1
2
3
4
5
6
7
8
FINANCIAL LEVERAGE OF SHALIMAR PAINT

Rs incrore
year 2014-15 2015-16 2016-17
EBIT -4.97 -9.15 -2.65
EBT 10.80 -10.33 3.29
Answer -0.46 0.89 -0.81
Degree of financial leverage of jenson&Nicholsonpaint inyear2014-15 is -0.46, 2015-16 is0.89 and
year2016-17 is-0.81.
Nowcomparisonwith year2014-15 and 2015-16 the year2014 -15 in thisyearcompanycannot get
goodprofit and alsoits debtisveryhigh.So companycannotget returnto itsshare holder.
In comparisonwith year2015-16 and 2016-17 the financial leverage of year2015-16 is lowerriskforthe
company,because inthisyeardebtislower.Andyear2016-17 is unfavorable leverageforthe company.
2014-15 2015-16 2016-17
JENSON & NICHOLSON [AINT
-0.46 0.89 -0.81
-0.46
0.89
-0.81
-1
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
FINANCIAL LEVERAGE OF JENSON &
NICHOLSON PAINT

Rs incrore
Interpretation:
Degree of financial leverage of the Nipponpaintcompanyinyear2014-15 is1.07,2015-16 is 1 and2016-
17 is 0.8.
As perabove chart the comparisonwithyear2014-15 and 2015-16 the financial leverage isriskyinyear
2014-15.because in thisyear the debtishighinthe company.
Andyear 2015-16 isgood for the companybecause inthisyearcompanyget profitand alsoreturnget
returnto itsshare holder.
1.07
1
0.8
0
0.2
0.4
0.6
0.8
1
1.2
2014-15 2015-16 2016-17
FINANCIAL LEVERAGE OF NIPPON PAINT
NIPPON PAINT
year 2014-15 2015-16 2016-17
EBIT 34.08 34.79 37.69
EBT 31.86 34.95 47.08
Answer 1.07 1.00 0.80

Bibliography:
 www.asianpaints.com
 www.bergerpaints.com
 www.akzonobel.com

Financial leverage of top 10 paint company in india

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Financial leverage of top 10 paint company in india

Similar to Financial leverage of top 10 paint company in india (20)

More from Vaza Hitesh

More from Vaza Hitesh (9)

Recently uploaded

Recently uploaded (20)

Financial leverage of top 10 paint company in india