If you wanted to have a paint company, you’d want to be in an industrialising country, where millions were joining the middle class and buying their first homes. And you would have started it decades ago, lining up paint dealers in every town so you’d have a lock on the market when the country takes off. To keep your head start, you’d obsess about customer service, stay on top of technology and hire managers trained at the best schools. This is how Asian Paints came to dominate the walls and ceilings of India, creating three billionaires along the way.
Asian Paints started in 1942, reached the top of the Indian market in 1967 and has stayed there ever since. It now sells through 35,000 dealers across India. Over the last five years its revenue has nearly doubled, to $2 billion for the year ended March 31. Profits have more than doubled over the same period, to $205 million for that year. And the stock has jumped 140 percent since August 2008, giving it a market capitalisation of $6.3 billion.
It ’s now Asia’s third-largest paint company, behind Japan’s Kansai and Nippon (see table), and the world’s 13th largest. This year it appears on the Fab 50 for the third time in a row. “The company knows its customers well,” says Adrian Lim, senior investment manager at Aberdeen Asset Management, a UK firm that owns 1.6 percent of Asian Paints. “It has resilient business plans, healthy cash flows and a strong balance sheet.”
The Mumbai company—which sells paint and similar products—has been refashioning itself into a home decor company, hoping to benefit from India’s soaring urbanisation. “There’s been a massive transformation in the Indian consumer,” says KBS Anand, Asian Paints’s managing director and chief executive. “Earlier, people used to paint when the walls were peeling. Now it’s about decor.”
To capitalise on the trend, the company launched a premium range of paint in 2004 called Royale Play. Each paint adds a different special effect to interior walls, lending them a metallic luster, a soft sheen or a stucco finish, for example.
Stores too have gone upmarket. In 2009 the company introduced dealer-owned Colour Idea stores and now has 100 of them. Unlike traditional dealers who sell through hardware stores, the new stores focus on matching customers to the right colour.
They’re outfitted with boards displaying samples of interior and exterior finishes, and there’s a consultant who provides computer visuals showing how a room will look when painted. Asian Paints also runs two high-end showcase stores, in Mumbai and New Delhi. These don’t sell any paint, but have walls of displays showing various shades and textures under different light settings.
The company’s four founders sure weren’t thinking signature stores when they began making paint during World War II. With the war curtailing paint imports, Suryakant Dani, Champaklal Choksey, Chimanlal Choksi and Arvind Vakil decided to make paint locally. Today Asian Paints does business in 17 countries in the Middle East, South and Southeast Asia, the Caribbean and the South Pacific, and operates 25 paintmaking plants—10 in India and 15 overseas.
Descendants of three of the four founders—the Danis, Choksis and Vakils—own more than half the company, each with fortunes crossing $1 billion. The Chokseys exited in the late 1990s.
Anand, 58, took charge in April 2012 and is now spearheading three initiatives: A foray into the home improvement segment, bolstering the industrial paint division and boosting the international business. Last month Asian Paints bought a 51 percent stake, for $20 million, in Indian kitchen company Sleek International, which sells modular kitchens and kitchen accessories. “This is an aligned business,” says Anand. “The basic customer is the same—the homeowner. Eventually we want to be in all areas of home improvement.”
With industrial paint Asian Paints last year forged a second joint venture with the US’s PPG to make industrial coatings, which include floor coatings and road markings. (The first JV was in 1997 for automotive coatings.) Industrial paint comprises only 6 percent of revenue, but is important for diversification.
As for the international business, which contributes 13 percent of revenue, the company is looking to do more business in emerging markets such as Bangladesh and Nepal—and in the Middle East, which supplies half its overseas revenue. It wants 25 percent of revenue to come from international operations eventually.
Back in India, the economy has been slowing for three years. Another challenge is the falling rupee, because the company imports most of its raw materials. It raised prices by 5 percent last year and has announced three price hikes for this fiscal year.
Company executives are philosophical about the slowdown. “If the economy doesn’t grow [faster] and purchasing power is reduced, I don’t think paint is the most important thing that you’ll buy,” agrees Anand, who has seen many down cycles in his 34-year stint. “We’ll have to learn to live with lower growth.”
But the long-term story is solid. India’s urban areas are expected to gain 200 million people by 2030, meaning more construction and more paint. The Indian market certainly has room to grow: Annual paint consumption is 1.9 kilos a person, as opposed to 5.5 kilos for the Asia-Pacific region. Consumption in rural areas is growing even faster, and that’s where the company has long been the strongest—Asian Paints wooed small shopkeepers in villages and tiny towns early on because foreign companies dominated paint sales in the cities.