Asian Paints lost ground on selling pressure from market players.

Between 2 and 9 May 2003, the scrip of the largest Indian paints company plunged 6 per cent to Rs 338.80 from Rs 360. Prior to that, between 24 April and 2 May 2003, it rose 11.8 per cent to Rs 360 from Rs 322.

Dealers said the fall in the stock was due to offloading of stake by institutions. As per market buzz, Unit Trust of India was actively selling in the stock last week.

There apparently is concern over the company's future growth following the rise in competition from contemporaries like Goodlass Nerolac. Fears that the company's March 2003 quarter results may be bad also contributed to the decline. The quarterly performance is expected to be impacted by the the rise in crude oil prices during the January-March quarter due to the US-Iraq war. Crude oil is a major raw material for paints.

Some analysts felt the decline was just due to profit booking after the stock had seen a solid rally over the last few sessions. They contend that the company's future growth is on a sound footing following the rise in housing activity.

Meanwhile, Crisil has reaffirmed ratings of paint majors. It expects the paints industry to witness a compounded annual growth rate of 8.5 per cent for 2002-2007 and a 15-20 per cent increase in capacity in the next three years. Crisil has reaffirmed the AAA rating for Asian Paints (India)'s Rs 36.75 crore (Rs 367 million) non-convertible debenture issue and P1+ rating for its commercial paper programme.

APL is India's largest manufacturer of paints. With a 44 per cent marketshare in the domestic paints market. The company has now set its eyes on overseas markets. APL ranks among the top 15 decorative coatings companies in the world.

Recently, APL successfully managed to turn around its Singapore-based subsidiary, Berger International, within two months of acquiring management control of the company.

For the year ended 31 December 2002, Berger International posted an operational profit of Singapore dollars (S$) 4.1 million or Rs 11.1 crore compared to a loss of S$2.6 million (Rs 9.86 crore). The company also managed to inch back into the black by making a net profit of S$0.6 million (Rs 1.61 crore) from a net loss of S$9.4 million (Rs 25.50 crore). Berger International has also substantially brought down its net losses after minority interests to S$ 1.1 million (Rs 2.88 crore) from S$ 11.1 million (Rs 29.78 crore) in 2001.

For Berger, moving out of the red entailed improvements in supply-chain management, introduction of new technologies and strict control of overhead costs. Going forward, APL's efforts would be to turn around the operations of individual units by adopting best practices across emerging markets. The focus would continue to be on emerging markets, as these are the fastest growing paint markets in the world with low per capita paint consumption.

While the Europe and Mediterranean region registered a negative sales growth of 13 per cent, the Middle East, Caribbean and east Asia have posted a growth between 3 per cent and 5 per cent.

Berger International recently bought Sultan Bin Sulayem's 40 per cent stake in the Dubai-based Berger Emirates. Berger International already holds 60 per cent in Berger Emirates. The cost of acquisition was not known. Asian Paints (International) has funded the acquisition.

Earlier, APL had announced that it was transforming itself into a global major in the decorative paints business, with particular focus on emerging markets, following its acquisition of controlling stake in Berger International of Singapore and SCIB Chemical SAE of Egypt. The total investment made by the company in both these acquisitions amounted to around US$ 16.80 million.

The acquisition fits in well with APL's strategy, since Dubai is the hub of its operations in the Middle East. The company's export volumes to the Middle East are quite large. Its Middle East operations are located in Bahrain, Egypt and the UAE.

Berger's Middle East region has recorded a sales growth of 5 per cent during the financial year ended 31 December 2002. Berger Emirates controls around 10 per cent of the total 65,000 mt UAE market.

APL acquired a controlling stake in Berger International in November 2002. The company had control of Berger International for only two months in the previous financial year. Only in this financial year (2003-04) the full impact of its two acquisitions, i.e., Berger International and SCIB Chemical, Egypt, would be seen. Through its operating subsidiaries and associate companies, Berger International is engaged in the manufacture and distribution of paints and has manufacturing plants in Singapore, Malaysia, Thailand, Myanmar, China, Malta, Bahrain, the UAE, Jamaica, Trinidad and Barbados.

The Union Budget for 2003-04 has been quite favourable to the company, as peak customs duties were reduced from 30 per cent to 25 per cent. APL is likely to benefit from this, as 40-50 per cent of the company's raw materials are imported.

For the quarter ended 31 December 2002, APL recorded a rise in net profit by 27 per cent to Rs 43.66 crore (Rs 34.34 crore) on a 10.33 per cent increase in net sales to Rs 413.36 crore (Rs 374.67 crore).

As on 31 March 2003, the promoters held 42.6% equity stake in APL, while the public, local and foreign institutions held 19.92 per cent, 15.26 per cent and 21.25 per cent respectively.