Berger Paints India Ltd - NSE

GICS Industry : Chemicalsl Sub Industry : Commodity Chemicalsl Website : www. bergerpaints.com

Berger Paints India Ltd Key Stock Indicators NSE Ticker : Bloomberg Ticker : Face value / Share: Div. Yield (%):

BERGEPAINT BRGR:IN 2.0 1.4

CMP (as on 14 Feb 2011 Rs/Share) 52-weekrange up to 14 Feb 2011 (Rs)(H/L): Market Cap as on 14 Feb 2011 (Rs Mn): Enterprise Value as on 14 Feb 2011 (Rs Mn): Div. Yield (%): 0.0

80.0 118.3/54.4 27,686 29,947

Shares outstanding (mn) : Free Float (%) : Average daily volumes (12 months) : Beta (2 year) :

Berger Paints India Ltd (BPIL) was incorporated in 1923 and is headquartered at Kolkata .It is present across all product segments, i.e. decorative and industrial (automotive, protective and powder coatings) paints. The company is a leader in the non-auto industrial segment and is an established player in other paint segments. The employee strength of BPIL is over 2300 employees. BPIL has manufacturing facilities in Goa, Howrah (Kolkata), Secunderabad, Jammu, Rishra (West Bengal), Pondicherry and Jammu & Kashmir.

KEY HIGHLIGHTS BPIL is a market leader in protective paints segment Through its Joint Venture, BNB Coatings India Ltd (BNB) and Berger Becker Coatings, BPIL has acquired a competitive advantage over its competitors. The company has well established relationship with customers and also has access to superior technology on account of which it is a market leader in the protective paint segment.. The market share of BPIL in protective coatings is around 29 %. BPIL plans to expand its capacity BPIL plans to set up a new water-based paint plant at Hindupur (Andhra Pradesh) having a capacity of 150,000 Kilo Litre(KL) per annum and it will be commissioned in 2012. The company plans to expand the capacity of existing water based paint plants namely the Kundaim (Goa)and Rishra (West Bengal) with capacities of 72,000 KL per annum and 60,000 KL per annum respectively and they would be commissioned in March 2011 and March 2012 respectively. The company also expanded the capacity of its resin plant in Kundaim by 6,000 KL per annum in August 2010.BPIL also plans to set up a industrial coating plant in Jejuri,Pune .The company is also planning to expand the capacity of powder coating plant at Jammu by another 1,000 MT per annum. BPIL has a strong distribution network The company has strong presence in the northern and the eastern part of India as majority of its dealers are located in those parts. The company has more than 12000 dealers and more than 4000 color tinting machines and 82 depots in India. The company has developed an alternate distribution channel by tying with Ultra Tech’s building solution stores and Tata Tiscon for increasing its presence in the retail sector.

346.1 24.4 392,246 0.7

Key Financial Indicators Revenue (Rs mn) EBITDA ma rgins (%) PAT (Rs mn) PAT ma rgins (%) Gea ring (x) EPS (Rs /s ha re) PE (x) P/BV (x) RoCE (%) RoE (%) EV/EBITDA (x)

Mar-08 14,161.0 10.7 928.8 6.6 0.4 2.9 12.4 3.2 29.0 28.8 8.1

Mar-09 16,504.4 9.2 828.4 5.0 1.7 2.6 13.4 5.4 25.9 29.3 9.4

Mar-10 19,197.6 11.5 1,203.9 6.3 0.6 3.5 23.0 6.7 29.4 38.8 13.6

n.m. : Not meaningful

Shareholding (As on Dec 31,2010) FII 7% DII 4% Others 13%

Promoter 76%

KEY RISKS •Volatility of crude oil prices •Stiff competition from organized players •Limited pricing flexibility in decorative paints

Indexed price chart (index) 250 200

3-m

12-m

150

-20

-15

45

100

3

-4

-11

14

50

Volumes (RHS)

BERGEPAINT

Dec-10

Nov-10

Oct-10

Sep-10

Aug-10

Jul-10

Jun-10

Apr-10

0 May-10

Note: 1) YTD returns are since Apr 01, 2010 to Feb 14, 2011. 2) 1-m, 3-m and 12-m returns are up to Feb 14, 2011.

1-m

33

Feb-10

NIFTY

YTD

Mar-10

Returns (%)

BERGEPAINT

('000) 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 Jan-11

Stock Performances vis-à-vis market

NIFTY

CRISIL COMPANY REPORT | 1

Berger Paints India Ltd BACKGROUND BPIL was incorporated in 1923 and is headquartered at Kolkata .It is present across all product segments, i.e. decorative (exterior and interior wall paints, wooden finishing) and industrial (automotive, protective and powder coatings) paints. The company is a leader in the non-auto industrial segment and an established player in other paint segments. It’s the 2nd largest paint company in India as far consolidated sales turnover is concerned. The company has strong brands like Jadoo, Illusion,Weathercoat and Rangoli. Exports formed less than 1 % of the revenue for the company in FY10. The installed capacity as in FY10 for synthetic resin was 32,287 Metric Ton (MT) per annum while paints, varnishes and enamel together have an installed capacity of 240,315 MT per annum. BPIL has four direct subsidiaries, two step-down subsidiaries and two joint ventures. Its subsidiaries are located in India, Russia, Nepal and Europe whereas it has joint ventures with Becker Acroma (Italy) and Nippon Bee Chemicals Co Ltd (Japan).

COMPETITIVE POSITION Peer Comparison

Revenue (Rs mn) EBITDA ma rgins (%) PAT (Rs mn) PAT ma rgins (%) Gea ring (x) EPS (Rs /s ha re) PE (x) P/BV (x) RoCE (%) RoE (%) EV/EBITDA (x)

Berger Paints India Ltd. Mar-10 19,197.7 11.5 1,203.9 6.3 0.7 3.8 25.3 4.7 26.8 30.1 16.0

Asian Paints Ltd Mar-10 69,629.0 18.1 8,839.1 12.7 0.1 92.2 28.7 19.2 71.7 59.6 20.3

Akzo Nobel India Ltd. Mar-10 10,426.0 11.5 1,593.0 15.3 43.3 16.2 2.6 20.4 16.3 21.5

Kansai Nerolac Paints Ltd. Mar-09 15,011.8 10.5 1,013.6 6.8 0.1 32.5 27.7 5.5 18.8 15.3 30.8

n.m: Not meaningful

FINANCIAL PROFILE

Key Financial Indicators Units

Mar-08

Mar-09

Mar-10

Revenue

Rs million

14,161.0

16,504.4

19,197.6

EBITDA margins

Per cent

10.7

9.2

11.5

PAT

Rs million

928.8

828.4

1,203.9

PAT margins

Per cent

6.6

5.0

6.3

Revenue growth

Per cent

15.0

16.5

16.3

EBITDA growth

Per cent

15.9

-0.5

45.8

PAT growth

Per cent

5.9

-10.8

45.3

Gearing

Times

0.4

1.7

0.6

RoCE

Per cent

29.0

25.9

29.4

RoE

Per cent

28.8

29.3

38.8

Increase in top line, operating margin and PAT for FY10 The top line of the company grew from 16.5 billion (bn) in FY09 to 19.2 bn in FY10, a rise of ~16% on account of increased volumes. The operating margin of the company increased by 230 basis points (bps) due to decrease in raw material costs (crude oil derivative prices) by ~370 bps. The PAT of the company increased by ~45% from Rs 828.4 mn in FY09 to Rs 1203.9 mn in FY10 because of decrease in finance and interest charges from Rs 217 mn in FY09 to Rs 172 mn in FY10.

INDUSTRY PROFILE Paints The paints industry is broadly categorised into – Decorative paints and Industrial paints. While decorative paints mainly find their utility in the construction sector, application of industrial paints are confined to industries such as automobiles, auto ancillaries, consumer durables, marine vessels, and industrial plant and machinery. Decorative paints account for a lion’s share of the market with 90 per cent of total paint volumes. The organized paints industry sector accounts for around 65 per cent of the domestic paints industry (value-wise) making this industry fairly organized. The period between 2005-2010 witnessed the organized industry registering a healthy CAGR of 15 per cent driven largely growth in the construction, housing, automobiles and consumer durables sector. However the global crisis during mid 2008 affected growth in this sector. With the economic revival post mid 2009, growth prospects in this sector have brightened. While demand for industrial paints is expected to be driven by a revival in the automobile and OEM sector, growth in construction and real estate is likely to provide a fillip to the decorative paints segment.

CRISIL COMPANY REPORT | 2

Berger Paints India Ltd ANNUAL RESULTS Income Statement (Rs million ) Net Sales Operating Income EBITDA EBITDA Margin

Mar-08 14,011.0 14,161.0

Mar-09 16,323.1 16,504.4

Mar-10 18,981.4 19,197.6

1,522.0 10.7

1,514.3 9.2

2,208.2 11.5

201.0 136.9 20.3

250.7 216.9 81.8

358.2 172.0 42.4

1,199.0 928.8

1,179.0 828.4

1,720.3 1,203.9

6.6

5.0

6.3

318.9

318.9

346.1

2.9

2.6

3.5

Mar-08 1,204.4 -272.4 201.0 -285.6

Mar-09 1,128.5 -190.9 250.7 -169.2

Mar-10 1,720.5 -486.3 358.2 293.7

847.4 -490.9 0.0

1,019.1 -2,728.2 -32.1

1,886.1 -637.9 -1,237.1

Depreciation Interest Other Income PBT PAT PAT Margin No. of shares (Mn No.) Earnings per share (EPS) Cash flow (Rs million ) Pre-tax profit Total tax paid Depreciation Change in working capital

Balance sheet (Rs million ) Equity share capital Reserves and surplus Tangible net worth Deferred tax liablity:|asset| Long-term debt Short-term-debt Total debt Current liabilities Total provisions Total liabilities Gross block Net fixed assets Investments Current assets Receivables Inventories Cash Total assets

Mar-08 637.7 2,953.1 3,590.9 74.3 0.2 1,329.1 1,329.3 2,224.3 186.5 7,405.3 3,064.9 1,833.6 12.5 5,559.3 1,690.3 2,864.9 436.0 7,405.4

Mar-09 637.7 1,420.9 2,058.7 234.1 0.6 3,501.6 3,502.2 2,496.3 279.9 8,571.2 4,240.7 2,505.0 44.6 6,021.5 2,196.4 2,944.5 363.8 8,571.1

Mar-10 692.1 3,462.2 4,154.4 264.2 0.5 2,673.3 2,673.7 3,031.1 535.0 10,658.4 4,797.6 2,810.1 1,281.6 6,566.6 2,423.2 3,298.6 412.6 10,658.3

Revenue growth (%) EBITDA growth(%) PAT growth(%)

Mar-08 15.0 15.9 5.9

Mar-09 16.5 -0.5 -10.8

Mar-10 16.3 45.8 45.3

EBITDA margins(%) Tax rate (%) PAT margins (%)

10.7 22.7 6.6

9.2 28.5 5.0

11.5 28.3 6.3

Dividend payout (%) Dividend per share (Rs) BV (Rs) Return on Equity (%) Return on capital employed (%)

17.2 0.5 11.3 28.8 29.0

23.1 0.6 6.5 29.3 25.9

31.6 1.1 12.0 38.8 29.4

Gearing (x) Interest coverage (x) Debt/EBITDA (x)

0.4 11.1 0.9

1.7 7.0 2.3

0.6 12.8 1.2

5.0 1.5

4.5 1.0

4.2 1.3

141

132

124

Ratio

Cash flow from operating activities Capital Expenditure Investments and others

Cash flow from investing activities Equity raised/(repaid) Debt raised/(repaid) Dividend (incl. tax) Others (incl extraordinaries)

-490.9 0.0 45.4 -186.5 -9.5

-2,760.3 0.0 2,172.9 -223.8 -280.2

-1,875.0 1,353.6 -828.4 -443.9 -43.6

Cash flow from financing activities Change in cash position Opening cash

-150.6 205.9 230.1

1,668.9 -72.3 436.0

37.7 48.8 363.8

Asset turnover (x) Current ratio (x)

436.0

363.8

412.6

Gross current assets (days)

Closing cash

QUARTERLY RESULTS Profit and loss account (Rs million) No of Months Revenue

Sep-10

% of Rev

3

Sep-09 % of Rev 3

Jun-10

% of Rev

3

Sep-10 % of Rev 6

Sep-09

% of Rev

6

5,255.9

100.0

4,581.3

100.0

4,979.9

100.0

10,235.8

100.0

8,339.5

100.0

EBITDA

622.7

11.8

559.8

12.2

607.5

12.2

1,230.2

12.0

1,024.6

12.3

Interes t

31.3

0.6

10.7

0.2

9.1

0.2

40.4

0.4

16.5

0.2

Depreci a tion

72.1

1.4

64.2

1.4

71.4

1.4

143.5

1.4

125.4

1.5

PBT

519.3

9.9

484.9

10.6

527.0

10.6

1,046.3

10.2

882.7

10.6

PAT

367.4

7.0

348.0

7.6

370.2

7.4

737.6

7.2

631.8

7.6

CRISIL COMPANY REPORT | 3

Berger Paints India Ltd FOCUS CHARTS & TABLES

Sales

Sales growth y-o-y (RHS)

Rs/share 1.2

Net Profit

Per cent 14

EPS

Sep-10

Jun-10

Mar-10

Dec-09

Sep-10

Jun-10

Mar-10

Dec-09

Sep-09

Jun-09

Mar-09

Dec-08

Mar-08

Jun-08

Sep-08

0

Sep-09

5 0 -5

1,000

Jun-09

2,000

Mar-09

3,000

Dec-08

25 20 15 10

4,000

Per cent 100 80 60 40 20 0 -20 -40 -60

Quarterly PAT & y-o-y growth

Sep-08

5,000

Rs mn 400 350 300 250 200 150 100 50 0 Jun-08

Per cent 35 30

Quarterly sales & y-o-y growth

Mar-08

Rs mn 6,000

Net profit growth y-o-y (RHS)

Movement in operating and net margins

12

1

10 0.8

8

0.6

6

0.4

4 2

0.2

Sep 2010 75.6 7.1 4.5 12.8

Dec 2010 75.6 7.1 4.4 12.9

OPM

Board of Directors Director Name Kul dip Singh Dhingra (Mr.) Gurba cha n Singh Dhingra (Mr.) Subi r Bos e (Mr.) Gera ld Kenneth Ada ms (Mr.) Ani l Bha l la (Mr.)

Sep-10

Jun-10

Mar-10

Dec-09

Sep-09

Jun-09

Mar-09

Dec-08

Sep-08

Jun-08

Mar-08

Sep-10

Jun-10

Mar-10

Dec-09

Sep-09

Jun-09

Mar-09

Dec-08

Sep-08

Jun-08

Mar-08

Dec-07

Shareholding Pattern (Per cent) Mar 2010 Jun 2010 Promoter 75.6 75.6 FII 6.0 6.2 DII 4.7 4.7 Others 13.7 13.6

Dec-07

0 0

NPM

Designation Non-Executive Cha i rma n, PromoterDirector Vice Cha i rma n, Non-Exe cutive Director, Ma na gi ngPromoter-Director Di rector Non-Executive Di rector Non-Executive Di rector

Gurcha ra n Da s (Mr.)

Non-Executive Di rector

Ka ma l Ra nja n Da s (Mr.)

Non-Executive Di rector

Na res h Gujra l (Mr.) Pul a k Cha nda n Pra s a d (Mr.)

Non-Executive Di rector Non-Executive Di rector

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CRISIL COMPANY REPORT | 4