Set up in 1942, the Asian Paints group is the largest paint manufacturer in India also engaged in the business of manufacturing of varnishes, enamels or lacquers, surfacing preparation, organic composite solvents and thinners. It operates in 15 countries and has 26 paint manufacturing facilities in the world serving consumers in over 60 countries.

Besides Asian Paints, the group operates around the world through its various brands viz. Asian Paints Berger, Apco Coatings, SCIB Paints, Taubmans, Causeway Paints and Kadisco Asian Paints.

It also manufactures metal sanitary ware such as bath, sinks, washbasins and similar articles. Recently introduced Lightings, Furnishings and Furniture thus adding more products in the Home décor and Interior Design category.

Asian paints is the only business  in the history of the planet which has grown revenues at 20% per annum for the last six decades now. Asian paints went public in 1982 and from 1982 to till today it has given a *return of 1800 times at 28% CAGR.* The business of Asian Paints doubles in every three year.

The company was founded by Mr Champak Lal Chowksi. He built a great *money machine* which cannot be matched till today. Till 1969, paint was sold as a FMCG product. Logistics chain of selling used to be a whole seller, a distributor and a dealer or retailer. The whole seller and distributor where taking almost 20% margins. The dealer or retailer were getting only 3%.  Asian Paints removed whole seller and distributor and started selling directly to dealer. Dealers were not ready for this new change. They protested that they didnt have so much off space and money to store so much of inventory. Mr Champak Lal Chowksi offered dealers that every three hours Asian paints truck will come and replenish the inventory. People thought, he has gone out of his minds. How can you replenish four times a day. You have forty thousands dealers and how on earth would you deliver hundred and sixty thousands times a day. Remaining 28 years of his life, what Champak Lal Chowksi built was so powerful that even after 22 years after his death, nobody in their right minds  can think of competing with Asian Paints across the globe. What did he actually do to build this kind of business which has created unprecedented competitive advantage and great MOAT? He made Paint, the only product in our country which goes directly from the factory to the dealer near your house. He ensured that there is no intermediary in between. He made the Paint, the only product which stocked and restocked 4 times a day and 28 times a week. Everything else you and I buy, is replenished once a week or maximum twice a week.

Asian paints is the only firm in India which takes home 97% of the MRP. 3% goes to the dealer. Every other product in India, 30-40% of MRP goes to this logistic channel and 60% is taken by the manufacturer. So, *60% for everybody else and 97% for Asian Paints*. Today, they have more than *seventy thousand* dealers and they deliver almost three lakhs times a day. Number two company Berger delivers forty times a day and number three company Akzo Noble delivers ten thousand times a day. How does Asian Paints does it in a country where infrastructure and logistics are nothing to talk about atleast till the last decade. Asian Paints does it with the help of technology. In 1970, Champak Lal Chowksi spent rupees 8 crores to buy first super computer of India, 10 years before ISRO or any  IIT and 20 years before any other company in India. The world finest ERP implementation is NOT Amazon or Walmart but Asian Paints. What they could achieve is simply amazing and unmatched.

Behind this remarkable network architected by Champaklal Choksey, is  50 years of proprietary data on paint demand for each neighbourhood in India, for every hour of the day, for every day of the year. That allows Asian Paints to forecast your paint demand just like Amazon can second guess what you will buy when you visit their website next. What colours are selling, what quantities are selling and what tin sizes are selling. This mountain of data is their selling machine and with every passing day this data is going up and up. With this kind of data and logistics, the smartest people in the paint industry say that nobody in their right mind should think about competing with Asian Paints.  Their data gives them the power to predict sales of every dealer with more than 95% accuracy. It is all automated. Asian Paints’ proprietary data, its forecasting ability and its distribution network give them a working capital cycle of 8 days. From raw material to cash in bank in 8 days. Nobody else in the paint sector comes remotely close to Asian Paints on this metric. The next nearest competitor Berger Paints, who is one third in top line(sales) than Asian Paints; working capital cycle is 45 days. Asian Paints ROCE is between 35-40, Berger Paints ROCE is between 20-25. Akzo Noble( earlier ICI) is one tenth the size of Asian Paints; working capital cycle is 105 days and ROCE is 16%. The above story has been told very passionately by Mr Saurabh Mukherjea of Marcellus Investments, in his many TV shows.

While Nerolac and Berger together deploy about 46,000 tinting machines through their dealer network, Asian Paints alone has 50,500 machines.

You will be surprised to note that the best paint in India is made by Akzo Noble but best paint company in India is Asian Paints.

The company is also focused on R&D and introduces 25 colour additions every year. They also have installed paint dispensing (NNG) machines with almost all retailers which saves them warehousing and encourage retailers to sell Asian Paint products. This also acts as a solid moat. Therefore, Economic Moat category gets 5 stars in Asian Paints shares fundamental analysis.

KEY POINTS

KEY PARAMETERS

HISTORICAL DATA

CONCLUSION

No company can sit on the laurels and performance of the past. It is a highly competitive market and to maintain the leadership position, the company has to keep innovating and expand the business in the related field. Asian Paints has remained focused through its journey and kept on entering the business of tiles, kitchenwares and bath and sanitaryware which are all related to paint business. The company has never tried a new business where they don't have any expertise and knowledge. Businesses fail when the promoters start foraying into unrelated fields where they have no expertise and knowledge. The glaring examples of failure are unitech foraying into the field of telecom. ADAG group entering all kinds of businesses. Sun Pharma's founder Dilip Shanghvi buying 23% stake for 1800 Cr in Suzlon, JP Associates started entering all kinds of businesses with very high leverage. There are many more examples.

Presently, the stock is highly priced. But you will never find such consistent compounders under priced. It has always been trading at higher valuations than its peers.  You need to be patient or to have a strategy to buy such stocks.

Asian Paints is a leader in an industry that’s mature and fairly stable. Today, the company earns more than ₹ 21,000 crore in revenue, more than the combined revenue of the three largest incumbents. It earns the highest margins in the industry and commands a market share of more than 50%. No wonder then that people pay such high premiums for the stock. It's not a gem but a KOHINOOR of Indian Stock Market.

REFERENCES

https://finshots.in/markets/the-asian-paints-story/

https://www.google.com/amp/s/finception.in/stocks/asian-paints/index.html

https://youtu.be/u6sHSOQJrmQ

https://youtu.be/jlSUboLofA4

https://youtu.be/ieqE7umO6To

https://www.topstockresearch.com/INDIAN_STOCKS/PAINTS/FundamentalAnalysisOfAsian_Paints_Ltd.html

https://marcellus.in/blogs/marcellus-unusual-billionaires-flip-the-competitive-paradigm/

https://investyadnya.in/stock-o-meter/asian-paints

DISCLAIMER

STEP#1 : HAVE A 7+ YEAR INVESTMENT TIME FRAME

It is believed that equity markets usually do well over 7+ year timeframes and this has been proven with the usage from historical data. When you invest with 1 year timeframe, in the past 22+ years, the Nifty 50 TRI has delivered over 10% annualized returns just 58% of the times. Chances improve to 80% for more than over 10% realized returns within a 7 year time frame. Best part is that there are no instances of negative returns for investment period of 7 year time frame. In worst case, annual returns were >5% when invested for 7 years.

The above illustration for lump sum investment also applies to Equity SIP. In fact, incase of SIP, because of Rupee Cost averaging, returns are far in excess, i.e., minimum 7% CAGR. Therefore, best Equity SIP investments should be for at least 7 years, i.e., 84 instalments in case of monthly SIP.

STEP#2 : DIVERSIFY YOUR EQUITY PORTFOLIO USING 5 FINGER STRATEGY

Different investment styles, market cap segments and geographies do well during different market phases. Hence, it becomes important to diversify across them. Unique equity portfolio construction strategy ‘5 Finger Framework’ has been built keeping this in mind. Five Finger Framework aims to deliver consistent outperformance with lower downsides over longer timeframes. The portfolio should be diversified across different investment styles like

- Quality,

- Value,

- Focus

- Growth at Reasonable Price,

- Large Cap

- Mid Cap

- Small Cap

In the last 10 years, the 5 Finger Portfolio has outperformed the Nifty 50 TRI by 4% on an annualized basis.

STEP#3 : PREPARE MENTALLY FOR THE 3 COMMON POINTS OF FAILURE

Equity markets have historically provided superior returns over longer time frames. The initial years of investing journey can be very difficult as intermittent market falls lead to a sharp dip in equity returns. The real challenge is to survive the three temporary but inevitable phases of failure that happen during the initial years, most likely in the first 5 years of equity investing.

1. The Disappointment Phase : The phase where the returns are subpar (7-10%).

2. The Irritation Phase : The phase where the returns are much lower than our expectations (0-7%).

3. The Panic Phase :The phase where the returns are negative (below 0%).

These phases happen as a result of equity market volatility. In the last 42+ years of Indian market history it has been shown that temporary market falls of 10-20% happen almost every year and 30-60% falls can be expected once every 7-10 years.  Though such phases cannot be avoided but always remember that these falls are temporary in nature. Historically, the equity markets have always recovered and the returns improved significantly in the next 1-3 years after the great falls, rise of 2020 and 2009 are recent example. The historical data of NIFTY 50 TRI for SIP returns shows that for 7 year investment horizon, there is no panic zone for returns below zero.

STEP#4 : INCREASE YOUR SIP AMOUNT AFTER EVERY 1 YEAR!

Even a small increase in your Equity SIP amount every year can make a huge difference to your final portfolio value over the long run. An increase in SIP amount every year helps you to reach your financial goals faster.  Expand your financial goals over a 20 year period. Your portfolio value, when you increase your SIP amount every year by 10%, is almost twice the original portfolio with a constant SIP amount every year! Thus, following 7-5-3-1 rule, you are sure to make significant wealth with your equity investment through SIP.

REFERENCES :

https://www.thehindu.com/brandhub/fundsindias-7-5-3-1-rule-for-successful-equity-sip-investing/article65550234.ece

https://www.abplive.com/business/the-7-5-3-1-rule-for-successful-equity-sip-investing-know-details-here-2147658

https://youtu.be/Uq8U9dqx2EE

DISCLAIMER : The above information is available on public domain and has been taken  mostly  from  above   websites   and  YouTube  videos  freely  available  on internet. The opinion  expressed above is in no way recommendation of buying or selling.  You must consult your financial advisor before making any fresh investment in equity market.

We (Investor First) are an  investment firm and Mutual Fund Distributor (MFD).  For any kind of mutual fund investments, you can contact us at the following address :

Website: https://investorfirst.co.in/

Head Office : Investor First, 2nd Floor, 159/129/96, Sri Krishna Tower, Near Hotel Ramada, Ballupur Road, Dehradun-248001, Uttarakhand.

Sensex was 100 in1979 and 65000 in 2023. A gain of 650 times in 44 years (CAGR of 14.5 to 15%).  That is the power of compounding. Look at the short term and long term chart. Short term chart is zig-zag  but long term chart is linear(red line) and going from South to North consistently, inspite of all the hiccups, scams, assassinations, calamities, black swan events and other headwinds. No other asset class can give better returns in long term (at least 7-10 years) with full transparency and liquidity. Equity is the asset class, one can't miss now. With country expected to grow at 6-7% GDP, 14-15% equity returns are highly manageable. It is easy to invest but difficult to sit tight on that investment. Your investment advisor can help you sail through difficult times in bear market and control your emotions during bull runs.

₹01 lakh as lumpsum in a Largecap or Multicap fund, started in 1979, would have grown to ₹6.5 crores in 44 years without doing anything.  ₹3000/- SIP in a Largecap or multicap fund, started in 1979, would have grown to 17.12 crores in 44 years with CAGR of 15%. This is power of long term investing and the magic of power of compounding. It's never too late in life. Markets will remain here only. Make up your mind and prepare a financial plan for all your goals in life. We can help you achieve your future goals by preparing a comprehensive financial plan at INVESTOR FIRST with no cost.

We are operating an investment firm Investor First. We are one of the highest ranking  investment firms in Uttarakhand and Dehradun. Rest assured that your interests and benefits will always be first and foremost. For any kind of investment planning, you can contact us at the following address :

Website: https://investorfirst.co.in/

Head Office : 2nd Floor, 159/129/96, Sri Krishna Tower, Near Hotel Ramada, Ballupur Road, Dehradun-248001, Uttarakhand.

 Value Vs Growth: Two approaches to stock investing

Growth and value are two fundamental approaches, or styles, in stock and stock mutual fund investing. Growth investors seek companies that offer strong earnings growth while value investors seek stocks that appear to be undervalued in the marketplace. 

Cusp of Change.

We are on the cusp of change. This pandemic has changed the entire working culture of  industry today. The world and its working have become almost virtual. There is a huge shift the way companies used to work. Today companies are more lean and thin and running the business with super efficiency. They are investing in technology and logistics to build a "moat" which can give them very high competitive advantage and barriers to entry by others.  The technology is coming in a big way to help industry to reduce cost and increase profitability. Companies which understand the technology and logistics will grow leaps and bounds. Companies with high "moat" and having high competitive advantage, dealing with items of basic day today needs, which you and me need every day, have created huge barriers to entry, well run promoters, not stealing money from it and not living flashy lifestyle like owning a  jet, or buying a cricket franchise or a football team or been seen around in the cricket and football matches but rather concentrating on the business and not always seen in the power of corridors, will definitely do well. We have many....

In one of the RBI reports, it is highlighted that 95% of Indian house hold savings are in physical assets like gold, silver, land, flats and only 5% in financial assets. This may be because of no financial inclusion in lower strata of population. Most of the Indian people reside in villages where bank accounts were never heard of. But now with Jan dhan accounts and direct subsidy transfer, almost everyone at every place has a bank account and an aadhaar/Pan card. So, the financial inclusion has already started. This will shift the household savings from physical assets to financial assets. In the 2019 financial year, Indians held around 168 trillion rupees in physical assets as part of individual wealth. This was a big jump in asset valuation compared to the previous financial year's 156 trillion rupees' worth of physical assets (Published by Statista Research Department, Mar 8, 2021).  So, there is a huge scope of this shifting from physical assets to financial assets. Even a 10% shift will be very very huge. The banks will automatically get capitalised and will have more cash to disburse. The business will have more lending and capex will increase. This is how the economy improves. So, how do we benefit from this physical shift to financial assets. The need of the hour is to shift focus from physical to financial. By not investing in financial assets, you are missing the India's growth story. 

The people from lower strata of society will go for bank deposits, you and me who have better understanding and more educated, must look for better financial products. Where is the opportunity? Can you start a new venture at your own? Can you start a business. NO.... Then what??? We all can participate in the well run businesses by investing in equity market. There are around six thousands listed companies. Yes, you can become a shareholder of any company by investing even a Rs 100 per month. *Companies have grown from few crores to thousands and lakhs of crores of market cap today.* You name it, reliance, TCS, Infosys, HDFCs pedigree, HUL, ITC, Bata, MRF,  godrejs, nestle, HCLs, Maruties, Eichers, Gillets, Page, Reddy's, Heros, L&Ts, Asian Paints, Berger Paints, Havels,  Aditya Birla group,  battery gaints like like Exide and Amarraja, Muthoot, mannapuram, lux, ttk, symphony, wipro, Mindtree, Mittal's telecom, titans, pidilites, daburs, maricos, Britannias, bajajs, Abbots, divis, other pharma companies, the new kids on the block like India Mart, CAMS, Dixon tech, route mobile, affle india, happiest minds etc etc etc....when their market cap and earnings are increasing over the years why will not your wealth.  Also, on the other side, companies like Satyam of Raju's, kingfisher airlines, jet airways, Suzlon, JPs, Unitech, GVKs, GMRs, ADAG group, vodaphone, Yes Bank, DHFL, Gitanjali gems of Choksi's, Deccan Chronicle and many many more have completely decimated the investors wealth. The world is highly competitive. The greedy, over ambitious and selfish promoters will surely destroy their companies and shareholders wealth. 

Are Indians shifting their savings from Physical Assets to Financial Assets???

Jeevan Anand Maturity Calculations

Yearly Premium - Rs. 1.5 Lakhs

Tenure of Policy - 15 Years

Sum Assured -18 Lakhs

Maturity Value  = Sum Assured + Reversionary Bonus (Added every year) + One Time Terminal Bonus

Current Reversionary Bonus(CRB) Rates are - Rs. 41 per thousand Sum Assured 

(Formula for CRB - Sum Assured * Bonus Per Thousand Sum Assured*No. of Years)

Current One Time Terminal Bonus (TB) for this policy - Rs. 35 per thousand Sum Assured for 15 years policy 

(Formula for TB - Sum Assured * Bonus Per Thousand Sum Assured)

Maturity Value = Rs. 18,00,000 + Rs. (41/1000)* Rs 18 Lakhs*15 Years+ Rs. (35/1000)* Rs 18,00,000

= Rs 18,00,000+Rs 11,07,000+Rs 63,000 = Rs 29,70,000

Your family will get a sum assured of 18 Lakhs if you die in between.

Do you know how much is the Rate of Return in Jeevan Anand Policy - less than 5%. Rs 1.5 lakhs per annum at around 4.5% CAGR for 15 years, will get you Rs 29.70 lakhs.

If  you do the same calculation for PPF, you will get around Rs 48 Lakhs in 15 years at 8% CAGR, which is the current rate of interest in PPF. The only advantage in insurance policy can be that you will get the sum assured of 18 Lakhs, even if you die in the first year. It is better to  buy a Term Insurance policy of Rs 50 Lakhs (much more than Rs18 lakhs) by paying a premium of only Rs 7,000 per annum). You deduct the premium and invest the remaining amount of Rs 1.43 Lakhs in PPF or in Equity Mutual Fund, you will get  much more. 

PPF Maturity Calculations

Yearly Premium - Rs. 1.43 Lakhs (at the beginning of year)

Tenure of Policy - 15 Years

Current Interest rate- 8%

Amount after 15 years - Rs 42 Lakhs

Difference of 12.30 Lakhs (42.00-29.70) in 15 years.

Therefore, If the same amount (Rs 1.43 lakhs) is invested in PPF for 15 years, the return would be around Rs 42 lakhs with current interest rate of 8% per annum.

Also, there is option of partial withdrawal available in Jeevan Anand whereas in PPF, one can withdraw partial amount after 6 years.

Equity Mutual Fund Calculations

Yearly investment - Rs 1.43 Lakhs 

No of years - 15 Years

Expected Rate of Return- 15%

Amount after 15 years - Rs 80 Lakhs (approximately)

Difference of  Rs 50.30 Lakhs (80.00-29.70) in 15 years.

Hence, If the same amount (Rs 1.43 lakhs) is invested in equity mutual fund for 15 years, the return would be around Rs 80 lakhs with expected rate of return of 15% per annum.

So, you should never combine your insurance with investment. You will always be a loser. Any insurance agent selling you the endowment plan, please ask him the same calculations. Always buy a pure Term Insurance Plan for insurance and invest in Equity Mutual funds for long term investment and Debt Mutual Funds for short term investment. Equity mutual funds have given an average CAGR of 15% in the last 40 years. There is no reason the same will not happen in next forty years.