Asian Paints Ltd Ratio Analysis

PROFITABILITY RATIO:

Material prices during the year saw an inflationary trend and profitability was impacted due to inability to take price increases commensurate with increase in material prices. The impact of inflation was mitigated to some extent by formulation re-engineering, economies of scale in purchasing and reducing losses in manufacturing. Despite the long term positive growth prospects in the Indian economy, the year ahead appears challenging due to the challenging market conditions, increased competition, volatile foreign exchange, high interest rates, inflation and rising crude oil prices. Even then the Asian paint has maintained a steady net profit margin percentage.

COVERAGE RATIO:

RBI has followed a tight monetary policy during the last financial year. However, it has started FY 2012-13 by cutting lending rates by 50 bps. There are expectations of further reduction in interest rates during FY 2012-13.

However, if inflation continues to flare and interest rates are not cut down further, it can have an impact on the overall growth and investment climate in the country which might also adversely impact the paint demand. Finally interest rates gone down thereby the higher the ratio, the more the company is not burdened by debt expense.

LIQUIDITY RATIO:

In 2013, Asian Paints Ltd increased its cash reserves by 22.47%, or 1.38bn. The company earned 12.18bn from its operations for a Cash Flow Margin of 10.98%. In addition the company used 4.84bn on investing activities and also paid 6.01bn in financing cash flows

SOLVENCY RATIO:

Asian PPG Industries Limited, a joint venture between the parent company and PPG Industries Securities Inc., U.S.A., wherein the parent company has 50% equity participation. Asian Paints PPG Ltd.* (incorporated in August,