Merrill Lynch India Investor Conference New Delhi February 16, 2016 - - PowerPoint PPT Presentation

Merrill Lynch India Investor Conference

New Delhi

February 16, 2016

Disclaimer

This presentation may contain statements which reflect Management’s current views and estimates and could be construed as forward looking statements. The future involves certain risks and uncertainties that could cause actual results to differ materially from the current views being expressed. Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments. Responses can only be given to questions which are not price sensitive.

Economic Environment – Q3 & 9M FY16 Financial Performance – Q3 & 9M FY16 Business Review – Q3 & 9M FY16 Risks and Outlook

Agenda

Group Overview

• No. 1

Paint Company in India Servicing Consumers in over

65

Countries Part of

30 share

BSE S&P SENSEX Over USD 2 Billion Group revenue Operations in

19

countries

47

Years of Market Leadership in India

26

Paint Manufacturing Plants Forbes Asia’s Fab

50

Company; Four times in a row

3

Times nearest Competitor in India

2rd Largest Paint

Company in Asia

11th Largest Coating

Company In the World

7000+

Employees worldwide Part of NSE Nifty

50

Asian Paints Group Today…

• 2.0

4.0 6.0 8.0 10.0 12.0 14.0 16.0 14.3 11.6 10.0 6.4 4.5 4.4 4.4 3.6 3.1 2.9 2.3 2.3 2.1 2.1 2.0 1.7 1.7 1.5 1.0 1.0 In Billion USD

Global Standing…

* Coatings World – 2015 Top companies report

2nd largest in Asia 11th largest in the World

Worldwide Operations…

Jamaica Barbados Trinidad & Tobago Egypt Oman Bahrain UAE Nepal India Sri Lanka Bangladesh Singapore Solomon Islands Vanuatu Fiji Samoa Tonga Ethiopia Indonesia

Strong Brands…

Aspiration…

“To be the fore runner of inspiring décor and to actively empower customers to create their dream homes”

 Belief in fostering the principles of trust and transparency  Ability to adapt itself to the changing environment  Dynamic professional management team focused towards delivering stakeholder value with highest levels of corporate governance  Innovative strategies in the marketplace  Efficient manufacturing and logistics  Capabilities to effectively harness Information Technology to improve efficiency in

• perations (SAP, i2, etc.)

 Prudent management of financial resources  Focus on Research and Development (dedicated group R & D centre in India at Turbhe near Mumbai)

Stand for…

Innovative Market place Strategies

 Small Packs  Exterior Paint Segment  Consumer and Dealer helpline  Colour Next (Prediction of Colour trends through in-depth research  Special effect and textured paints  Signature Stores  Colour Ideas store  Samplers  Beautiful Homes Guide  Water Proofing and Wallpaper business  Ezycolour Service brand  Home Solutions (Painting solution service)  Colour Consultancy @ Home

Powerful Consumer Connect

• Innovative retailing strategy showcasing latest product and solution offerings

enabling consumers to get inspired, try and decide

• Strong presence in all product segments, servicing over 35,000 dealers

Signature Stores in Metros Colour Ideas Stores

Robust Supply chain and IT

 State of the art Supply Chain system using cutting edge latest technology for efficient management and execution  World Class, large manufacturing facilities with latest automation technologies  Largest single location paint manufacturing capacities at Rohtak (Haryana) and Khandala, (Maharashtra). Both these plants can be scaled up to 4,00,000 KL p.a.  Planning to set up a new, fully-automated manufacturing facility over the next 2-3 years  Strong distribution and logistic network across geographies using modern material storage and handling technologies  Dedicated in-house IT team adding value to business process in terms of higher productivity, lower costs, speed, consistency and standardization

Dedicated R&D

 Dedicated Research and Technology facility at Turbhe (Near Mumbai) with over 150 scientists  Supports company strategy around Technology development, Sustainable new products, Green products, Value re-engineering for productivity improvement and cost optimization  Our scientists had won the Roon award in 2013 – one

• f the highest technical achievements in the coatings

industry

Changing with times

Business Portfolio…

 Decorative Coatings – India  Industrial Coatings – India  PPG Asian Paints  Asian Paints PPG  International Operations  Home Improvement Business – India  Sleek  ESS ESS  Chemical Business FY 2014- 2015

81% 1% 5% 13%

Decorative - India Home Improvement - India Industrial - India International Operations

Decorative Coatings - India

 Largest business unit of the company  Primarily operates in four segments  Interior Wall finishes  Exterior Wall finishes  Metal Finishes (Enamels)  Wood Finishes  Introduced new categories like water-proofing & wallpapers  Product for every price point and requirement

Industrial Coatings - India

 Asian Paints participates in the Industrial Coatings segment, through two 50:50 JVs with PPG Inc. of USA  PPG Asian Paints (For Auto Coatings)  The Auto segment is catered through our JV (PPG AP)  Second largest supplier to the auto segment in India  Now, the largest player in auto refinish segment, post acquisition of ICI India’s 2k auto refinish business in 2007  Commissioned a 3,200 KL / year plant in Chennai, Tamil Nadu in 2008  Asian Paints PPG (For Non Auto Industrial Coatings)  Protective coatings, floor coatings, road marking paints and powder coatings segment catered to by this JV  Services customers in the sectors of Infrastructure, Oil & Gas, Power Plants, White Goods, etc.

International Operations

 Contributes about 13% to the group turnover  Began by establishing presence in Fiji in 1978  Presence in 19 countries spread over 5 regions  Focus on establishing presence and growing in high growth emerging markets  Looking for expansion in key markets of Africa and South East Asia  Acquired 51% stake in Kadisco Chemical Industry PLC, Ethiopia in Feb 2015  Setting up paint manufacturing facility at Indonesia

FY 2014- 2015

11.8% 48.6% 31.0% 7.0% 1.6% Caribbean Middle East Asia South Pacific Africa

Caribbean : Jamaica, Barbados and Trinidad & Tobago Middle East : UAE, Bahrain, Oman & Egypt Asia : Nepal, Sri Lanka, Bangladesh, Singapore & Indonesia South Pacific : Fiji, Tonga, Solomon Islands, Vanuatu & Samoa Africa : Ethiopia

Home Improvement Business - India

 In 2012, Asian Paints announced plans to consider opportunities in the area of Home Improvement and Décor  Entered Kitchen space in India in Aug’13 by acquiring 51% stake in Sleek International  Sleek is a major organized player in the modern kitchen solution space with pan India presence  Engaged in the business of manufacturing, selling and distributing kitchens, kitchen components including wire baskets, cabinets, appliances, accessories etc.  Retail network of more than 30 showrooms including shop-in-shops and 250+ dealers  Entered the Bathroom fitting business in June’14 through acquisition of front end sales business (including brands, network and sales infrastructure) of ESS ESS Bathroom products Pvt Ltd  ESS ESS is a prominent player in the bath business segment in India and has high quality products in this segment

Chemicals

 Asian Paints manufactures Phthalic Anhydride (PAN) and Pentaerythritol (Penta)  PAN manufactured in Gujarat and Penta in Tamil Nadu  More than 50% consumed internally  Contributes about 1% to the group’s consolidated revenue  Contribution to the group’s revenue has been continuously decreasing

Consistent performance…

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 2004-05 2014-15

2,574

14,183 Consolidated Net Sales and Operating Income ( ` Crores)

CAGR 18.6%

200 400 600 800 1,000 1,200 1,400 2004-05 2014-15

174 1,395

Net Profit (` Crores)

CAGR 23.1%

Sustained value creation...

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 2004-05 2014-15

3,751 77,820

Market Cap (` Crores)

CAGR 35.42%

0% 10% 20% 30% 40% 50% 60% 70% 80% 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

60% 73% 52%51%54% 39% 46%47%49%51%53%

Dividend Payout Ratio

Recent Accolades…

 Felicitated as one of the ‘Most Impactful Companies of the Decade’ by CNBC Awaaz in Jan 2015  Included in Forbes India’s List of ‘Super 100 companies in India’ in 2015  Included in Forbes Magazine's – ‘Asia's Fab 50’ List of cos 4 years in a row from 2011 to 2014  Rated as the 6th ‘Most Valuable Brands in India’ – Aug 2014 (Compiled by marketing and brand consultancy Millward Brown and WPP Group)  Ranked as the 4th ‘Most Admired Company’ in the FMCG Sector by Fortune India – Aug 2014  Presented with the ‘Asian Centre for Corporate Governance & Sustainability’ Award for the Best Governed Company in 2011  Asian Paints receives the ‘Best Audit Committee’ Award from the Asian Centre for Corporate Governance & Sustainability in 2011  “Sword of Honour" by the British Safety Council for all the paint plants in India, considered as the pinnacle of achievement in safety across the world

Economic Environment – Q3 & 9M FY16 Financial Performance – Q3 & 9M FY16 Business Review – Q3 & 9M FY16 Risks and Outlook

Presentation structure

Group Overview

Economic Environment

 Challenging business environment with domestic economic activity showing signs of modest improvement  GDP growth projections lowered to 7-7.5% from earlier forecasts of 8%  Industrial production data points to a slow recovery with the Apr’15-Nov’15 industrial growth at 3.9% as against 2.5% in the same period last year  Inflation trend remains soft but has picked up in the third quarter on account of rising food prices  On the global front, uncertainty around US Interest rate hike is finally behind us  However, Chinese economy slowdown has added to volatility, especially in all the emerging markets  Oil Prices continued to fall further and are currently trading at decade low levels

Economic Environment – Q3 & 9M FY16 Financial Performance – Q3 & 9M FY16 Business Review – Q3 & 9M FY16 Risks and Outlook

Presentation structure

Group Overview

Financials : Q3 & 9M FY16

Standalone Revenue Growth Trend

Growth over Last Year

Economic Environment – Q3 & 9M FY16 Financial Performance – Q3 & 9M FY16 Business Review – Q3 & 9M FY16 Risks and Outlook

Presentation structure

Group Overview

Business Review : Q3 & 9M FY16

DECORATIVES BUSINESS

 Decorative Paints business in India registered double digit volume growth in Q3FY16 aided by festival season demand due to a later Diwali  Festival season demand was staggered over second and third quarter in Q3FY15  South India especially Tamil Nadu was adversely affected due to high rainfall  Material prices dropped further in the quarter  No price revision affected in Q1FY16, Q2FY16 & Q3FY16  Cumulative price increase of 0.39% for FY15 against increase of 6.25% in FY14  Increased prices by 1% on 1st May’14 & 1.2% on 1st June’14  Price Reduction of 1.95% wef 11th Feb’15

Business Review : Q3 & 9M FY16

DECORATIVES BUSINESS

 Continued focus on network expansion and opening new ‘Colour Ideas’ store  Over 32,500 Colour Worlds & 270 ‘Colour Ideas’ stores across the country  Waterproofing range of products continues to witness good acceptance in the market  Capex for FY16 estimated at ` 700 crores  Rohtak plant expansion work from 200,000KL/annum to 400,000 KL/annum is in the final stages and expected to be completed by the end of the current financial year

Business Review : Q3 & 9M FY16

INDUSTRIAL BUSINESS

 Automotive coatings JV (PPG-AP), registered decent growth in Auto OEM and Refinish segment in the quarter  The General Industrial business segment continues to lag  Good Pickup was seen in the Industrial Liquid and Powder coatings segment of the Industrial Coatings JV (AP-PPG) in the quarter  Lower material prices aided margins for both these businesses

INTERNATIONAL BUSINESS

 International business reported double digit growth in the quarter aided by contribution from some of the units in Middle East and in Bangladesh  Business in Ethiopia, which was acquired in Feb 2015, also continued to grow well

Business Review: Q3 & 9M FY16

HOME IMPROVEMENT BUSINESS

 The Kitchen (SLEEK) and Bath (ESS ESS) business has been co-branded with Asian Paints  The Kitchen business continues to be impacted by the subdued demand conditions prevailing over the last couple of years

 The management has been working on expanding the network and streamlining the business model. While we have made progress in this direction since acquisition, the pace is slower than what we had envisaged earlier. The management has made an assessment of the fair value of investment made in Sleek taking into account the past business performance, prevailing business conditions and revised expectations of the future performance given the understanding built up since acquisition. Based on the above factors and as matter of prudence, the company has made a provision for diminution in the value of the investment made in Sleek to the tune of ` 65.30 crores. The same is disclosed as exceptional item in the financial results for the Quarter.

 The Bath (ESS ESS) business registered good growth aided by expansion of network

 Unexpectedly high rainfall in some key markets in South India affected the business

Economic Environment – Q3 & 9M FY16 Financial Performance – Q3 & 9M FY16 Business Review – Q3 & 9M FY16 Risks and Outlook

Presentation structure

Group Overview

Risks & Outlook

 Going forward, We continue to remain fairly cautious on the domestic demand outlook  Raw material prices are expected to remain low in the near term and support margins  In the international markets, we need to look out for improvement in certain key markets like Nepal and Egypt to sustain the growth momentum  Additionally, units in Egypt and Ethiopia could be impacted on account of raw material shortage arising out of unavailability of foreign exchange

Thank you

Annexures – Q3 & 9M FY16 Results

Consolidated P&L : Q3 & 9M FY16

(Rs. in Crores) Q3 - FY 16 Q3 - FY 15 Gr % YTD Dec'15 YTD Dec'14 Gr % Total Income from Operations 4,160.0 3,652.6 13.9% 11,562.9 10,647.8 8.6% Material Cost 2,200.4 2,051.7 7.2% 6,178.6 6,029.6 2.5% Employee cost 247.0 231.9 6.5% 741.2 690.7 7.3% Other Expenses 912.1 783.9 16.4% 2,538.1 2,252.0 12.7% PBDIT 800.6 585.0 36.8% 2,104.9 1,675.5 25.6% Depreciation 72.5 67.3 7.7% 212.7 198.8 7.0% Proft from Operations 728.1 517.7 40.6% 1,892.2 1,476.7 28.1% Other Income 35.8 30.5 17.3% 166.8 128.1 30.2% PBIT 763.9 548.2 39.3% 2,059.0 1,604.8 28.3% Finance Cost 7.6 9.8

• 22.2%

25.7 24.6 4.8% PBT before EOI 756.3 538.4 40.5% 2,033.2 1,580.2 28.7% Exceptional Item 52.5

• #DIV/0!

52.5 25.2 108.5% PBT 703.8 538.4 30.7% 1,980.8 1,555.1 27.4%

• Curr. & Def Tax

228.8 166.7 37.2% 623.8 479.7 30.0% PAT before Minority interest 475.0 371.7 27.8% 1,357.0 1,075.3 26.2% Minority Share 11.7 3.5 231.4% 39.5 21.2 86.9% PAT to parent Shareholders 463.3 368.2 25.8% 1,317.5 1,054.2 25.0%

Standalone P&L : Q3 & 9M FY16

(Rs. in Crores) Q3 - FY 16 Q3 - FY 15 Gr % YTD Dec'15 YTD Dec'14 Gr % Total Income from Operations 3,424.0 3,025.4 13.2% 9,426.8 8,761.9 7.6% Material Cost 1,769.3 1,669.7 6.0% 4,922.0 4,879.8 0.9% Employee Remuneration 160.4 153.9 4.2% 485.6 461.4 5.2% Other Expenses 779.6 660.1 18.1% 2,159.8 1,910.8 13.0% PBDIT 714.6 541.7 31.9% 1,859.4 1,509.8 23.2% Depreciation 60.1 56.5 6.3% 176.1 167.6 5.1% Proft from Operations 654.4 485.2 34.9% 1,683.3 1,342.2 25.4% Other Income 47.2 35.4 33.2% 181.7 137.4 32.2% PBIT 701.7 520.7 34.8% 1,865.0 1,479.6 26.0% Interest 5.8 7.8

• 26.1%

13.1 18.5

• 29.3%

PBT before Exceptional Item 695.9 512.8 35.7% 1,851.9 1,461.1 26.7% Exceptional Item 65.3

• #DIV/0!

65.3 25.2 159.5% PBT 630.6 512.8 23.0% 1,786.6 1,435.9 24.4% Taxation 212.4 159.8 32.9% 576.1 448.4 28.5% PAT 418.2 353.1 18.4% 1,210.5 987.6 22.6% EPS 4.4 3.7 12.6 10.3

Key Ratios

For Consolidated results, PAT is before Minority Interest

% to Income from Operations Q3 - FY 16 Q3 - FY 15 YTD Dec'15 YTD Dec'14 Q3 - FY 16 Q3 - FY 15 YTD Dec'15 YTD Dec'14

Material Cost 51.67% 55.19% 52.21% 55.69% 52.89% 56.17% 53.44% 56.63% PBDIT 20.87% 17.91% 19.72% 17.23% 19.24% 16.02% 18.20% 15.74% PBT After Exceptional Item 18.42% 16.95% 18.95% 16.39% 16.92% 14.74% 17.13% 14.60% PAT 12.21% 11.67% 12.84% 11.27% 11.42% 10.18% 11.74% 10.10% Standalone Standalone Consolidated Consolidated