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Introduction:
Asian Paints is India's largest paint company and Asia's third largest paint company, with a
It is one of the largest paint companies in the world and operates in 17 countries. Consist
International, SCIB Paints Egypt, Asian Paints, Apco Coatings and Taubmans.
Products:
Ancilliaries
Automotive
Decorative Paints
Industrial
Industry:
Asian paints ltd. has been the market leader in the paint industry of India for a very long
period of time.
Cost Analysis
Asian paints being a listed paint manufacturing company releases its annual report and we
can take sufficient data to analyze the costs of the company, as it does not release its cost
audit report to the public. The reasons for not releasing the cost audit report to the public will
Total Expenses
This is the graph depicting the value of expenses and total revenue
9000
8000
7000
6000
5000
4000
3000
2000
2015
5100
0
2014
0
2013
-1000 2012
From the above table we can infer that the total revenue is the highest in 2015 and lowest in
2012 and theres a stark rise. Consequently the cost of materials consumed are also the
highest in 2015. Purchases of stock in trade, work in progress, employee benefit expense
have all remained more or less the same over the years and show no drastic change in value.
Revenue to Expense Ratio:
This ratio gives us how much return is the company getting for every rupee they spend as
expenses.
For Asian paints the ratio has decreased the past TWO years.
1.28
1.26
1.24 Revenue
expense
1.22 ratio
1.20
1.18
1.16
0 1 2 3 4 5
Direct Expenses
processing charges 49.18 41.67
Overheads
Production Overhead
Indirect Material
Consumption of stores, spares and consumables 23.48 24.99
Power and fuel 74.29 65.98
Total indirect material cost in Production Overhead 97.77 90.97
Indirect Expenses
Reapirs and maintainance
Buildings 6.33 8.16
Machinery 9.18 8.61
Other assets 19.35 17.79
Total Indirect Expenses in production overhead 34.86 34.56
Indirect Labour
Commission to non-executive directors 1.88 1.89
directors sitting fees 0.25 0.17
Auditors remuneration 1.19 1.11
Total Indirect labour cost in Office and administrative
Overhead 3.32 3.17
Indirect Expenses
Rates and taxes 19.7 14.56
Bank charges 0.49 0.99
legal and professional expenses 10.9 11.14
Total Indirect Expenses in Office and Administrative
Overhead 31.09 26.69
Indirect Materials
Packing materials consumed 699.2 600
Total Indirect Material Costs in Selling and Distribution
Overhead 699.2 600
Indirect Expenses
travelling expenses 41.25 33.69
freight and handling expenses 346.5 269.22
advt and sales promotion expenses 338.59 282.35
cash discount 369.03 291.82
bad debts written off 2.96 1.43
Provision for doubtful debts and advances -1.5 -0.19
Total Indirect Expenses in Selling and Distribution
Overhead 1096.83 878.32
Material
Printing stationery and communication expenses 31.7 24.57
Total material which can come under both Prime and OH
Costs 31.7 24.57
Labour
Salaries and wages 293.23 257.22
Contribution to PF and other funds 24.61 25.13
Staff welfare expenses 23.79 18.1
training and recruitment 8.42 6.55
Total labour which can come under both Prime and OH
Costs 350.05 307
Expenses
Rent 72.13 50.36
Insurance 5.34 4.7
information technology expenses 18.69 11.18
miscelleneous expenses 62.67 53.68
premium on forward exchange contract amortized 0.72 0.58
Net loss on foreign currency transactions and
translations 26.34 0
Donations 0.87 1.87
Total Expenses which can come under both Prime and
OH Costs 186.76 122.37
If we do a vertical Analysis on what percentage of total cost are prime and over head cost we
100.00
90.00
80.00
70.00
60.00
50.00
540.0 2015
0
30.00 2014
20.00
10.00
0.00
Total prime Cost Total Over Total Costs
Head which Total Cost
can come
Cost under
both prime and
OH
Costs
Efforts of company to reduce costs:
Costs of key raw materials like Titanium Dioxide have been on rise for some time now due to
their relative shortage, inadequate investment in fresh capacities and buoyant demand
conditions. There is risk of the prices not coming down anytime soon.
Inflation was a challenge in India during the last year. Although it has reduced during the last
quarter of FY 2014-15, there are risks that Inflation might inch up again during the second
The Rupee was very volatile during FY 2014-15. Since the Company imports a significant
portion of its raw material requirements, currency volatility can have financial implications
on your Company.
Here, we can clearly observe from the Management discussion and analysis that there are
many external factors which are affecting the companys costs and the company can hardly
do anything about it. External factors as mentioned above include Inflation, Raw material
And when the company is in the verge of expanding its domestic and international market
It can be seen that earlier that some of the costs have come down for the company like
Changes in inventories of finished goods, WIP and stock in trade has gone down in the past
Two years.
Conclusion
The company has started to penetrate deep into the Domestic as well as International markets.
But the company has to take care it does not invest in markets, which do not have any long
The company has to concentrate more on the repainting sector of households rather than new
projects which have a high risk of bursting of the real estate bubble which already has
contributed its part in slowing down the growth of the company as well as Paint industry.
According to me, the company has to stick to its basics of network expansion and increasing
of sales without decreasing the margins. The biggest advantage of the company is its brand
The company in order to expand its domestic network is rapidly growing its selling and
At the outset Asian Paints Ltd. has been growing very well over the years and is one of the
best companies for investor returns and dividends and I hope the company continues to
perform in the same way no matter what macro economic conditions prevail in the market.
References
www.wikipedia.com
www.asianpaints.com