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Asian Paints (India) Limited

Investor & Analyst conference

Ashwin Dani Vice Chairman & Managing Director

November 26, 2002

Recognitions
Forbes magazine, USA in its annual survey Best under a Billion ranked Asian Paints amongst the 200 Best Small Companies in the World in 2002

Structure of the presentation

A] Asian Paints group performance : H1-FY03 B] M&A - The growth strategy & our experience C] International operations - The strategy ahead D] Outlook

Structure of the presentation

A] Asian Paints group performance : H1-FY03 B] M&A - The growth strategy & our experience C] International operations - The strategy ahead D] Outlook

Asian Paints (India) Ltd - H1-FY 2003

1H FY 03 Net Sales 7145.13 OPBDIT 1196.87 Non-Operating income 117.74 Other income 92.60 PBDIT 1407.21 Interest 49.00 Depreciation 228.86 PBT 1129.35 Prov. for Current Tax 425.77 Prov. for deferred tax 2.20 Net Profit 701.38 1H FY 02 6194.05 908.48 97.91 48.49 1054.88 100.07 176.20 778.61 255.80 28.80 494.01 (Rs. million) Growth 15.4 % 32.5 % 12.8 % 91.0 % 33.4 % -51.0 % 29.9 % 45.0 % 66.4 % -92.4 % 42.0 %

Unaudited abridged balance sheet of Asian Paints (India) Limited - H1-FY03

FUNDS EMPLOYED (in mn) Shareholders Funds: Share capital 641.86 Resv & Surp 4165.98 Loans: Secured Unsecured APPLN OF FUNDS (in mn) Fixed assets: Gross block Less : Depr CWIP Investments NCA Misc Exp
(to the extent not written off)

754.05 795.74

6068.95 2368.46 34.95 3735.44 628.77 2570.18 36.83 (613.59) 6357.63

Deferred tax liab(Net) TOTAL 6357.63 TOTAL

Explanation of P & L statement : H1-FY03

Other income has increased by 91 % due to:
Royalty income & profit on sale of short terminvestments

Interest cost is lower by 51 % due to

Lower working capital requirements Lower interest rates Part repayment of long term debt

Provision for Current Tax higher due to:

Lower IT depreciation as compared to book depreciation Software expenditure amortised in books was claimed 100% in IT Return in year of actual expenditure

Margin Expansion : 1H FY03

1H FY03 EBITDA/Net Sales 20.02 % RM /Net Sales 55.98 % PBT/ Net Sales 16.07 % PAT/ Net Sales 9.98 % Interest cover 28.7
(PBDIT/ Interest)

1H FY02 17.30 % 57.57 % 12.77 % 8.10 % 10.5

Note: Net Sales is excluding lease rentals & Processing charges

Free cash flow story continues

Higher creditors
Working capital reduction

Sourcing Efficiency R&D Efficiency

Sale volume growth

Fall in inventory levels

Acquisns internally funded

Free Cash Higher Cash Flow from ops

Net Profit growth

Economies of scale

Assets getting sweated more

Lower Capex

Lower interest costs

NCD instalment pmt.

Higher capital productivity

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Pricing strategy
Firmer RM Firmer RM prices (6-8%) prices (6-8%) Price Price increase (1.25%) increase (1.25%) R&D R&D efficiencies efficiencies Sourcing Sourcing efficiencies efficiencies
Growth in premium Growth in premium products maintained products maintained Improved Improved product mix product mix Higher average Higher average selling price selling price

Margin Margin expansion expansion despite despite input input price price increase increase

Improved realisations from chemicals business Improved realisations from chemicals business

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Segment Information- H1-FY03

Net Sales %
11

Paints Business
89

Value : 15.2 % Volume: 16.0 %

PBIT (%)

Others (Chemicals) Business

Value : 30.7 % Volume: 27.7 %
8

92

Paints

Chemicals

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Segment Information- H1-FY03

Pai s Bus nes nt i s

Product categories

All categories posted good growth, viz. Enamels,

Interior wall finishes, Exterior finishes & Wood finishes Exterior segment recorded the highest growth ~ 35 % New products growth more than 35% ACE, Asian Wall Putty doing well, Elastomeric Exterior paint establishing itself

Colour Worlds

Total installations 2850 ColourWorld dealers constitute 50% sales of decorative paints

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Segment Information- H1-FY03

O t s( her Chem i s bus nes ) cal i s
Chemical business registers good margin expansion due to better realisations
Realisations for Phthalic Anhydride increased to Rs. 35.50 /kg in Apr-Sep02 from Rs. 33.0 /kg in Apr-Sep01

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Getting closer to the consumer

Asian Paints Help Line
Still continues to perform well High conversion rate for the company Has helped the corporate brand tremendously

Asian Paints Home Solutions

Launched in six main cities 2300 sites painted by APHS in FY03 till Oct 02 Response has been good and consistent across cities Close linkages with applicators is helping to enhance the knowledge base on paint application practices

Direct marketing by Project Sales aiding growth in exterior segment

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Getting closer to the consumer

Brand Rejuvenation
New look for the Asian Paints brand & packaging:
Transition to a corporate centric Brand Portfolio, to make Asian Paints among the more salient brands To contemporise the brand Asian Paints & the packaging

New advertising campaign:

Increased interest in home dcor - a definitive social trend More involved urban home makers; smaller towns also catching up Homes are high involvement but painting is not Homes involves a lot of emotions Have been successful in appropriating the emotions relating to creation of home dcor

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International operations
All international operations have performed better as compared to H1 of the previous year
Pacific units have shown good growth Turnaround in Sri Lanka and Oman

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Impact of Consolidation in H1-FY03

Net Sales would increase by around Rs. 450 million After writing off goodwill and considering minority interest,
Net Profit on consolidation will have no significant impact on net profit of Asian Paints (India) limited

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Structure of the presentation

A] Asian Paints group performance : H1-FY03 B] M&A - The growth strategy & our experience C] International operations - The strategy ahead D] Outlook

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Growth strategy and M&A

To increase sales growth rate of the group beyond past levels Thus emphasis on organic growth shall continue by means of:
Market expansion e.g. exteriors segment Market share gains, especially from unorganised sector

In addition, inorganic growth, by way of acquisitions, shall also be explored.

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M&A - International
To enter the high-growth emerging markets
Adopt a regional hub approach to international operations Apply the emerging market business model:
Introduce new products suited to local needs Introduce new technology, accordingly Focus to improve all areas of operations, especially supply chain

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M&A - The opportunities

No single MNC is present across emerging markets Asian Paints believes there is plenty of scope to achieve significant presence in targeted countries Plenty niches/segments available for Asian Paints in these markets Vast potential exists for Asian Paints, as most paint companies in these markets operate sub-optimally viz., in Supply chain, manufacturing, technology & marketing

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M&A - The domestic front

Valuations will be the major factor for acquisitions in India Acquisitions like Hawcoplast Chemicals will be done if there is substantial market share to gain in fast-growing segments

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M&A - Funding
Primarily through internal accruals Debt:Equity ratio will be lower than 1
Debt:Equity ratio is 0.23:1 for FY02

Dividend payout ratio to be largely maintained

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M&A - The Asian Paints experience in Sri Lanka

Acquired Delmege Paint in Oct99 for INR 35 mn

Rationalised products Introduced new products Improved supply chain management Restructured debt Introduced Colour Worlds Other marketing initiatives

For Apr-Sep02 , the unit has performed well

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M&A - The Asian Paints experience in India

Acquired Hawcoplast Chemicals in Nov01 for Rs. 220 mn

Gained significant market share gain and emerged among top 3 in the fast growing powder coatings segment Integration process completed within six months of the acquisition Asian Paints was able to leverage the advantages of this acquisition by increasing its sale to OEMs Integration of Hawcoplast experienced manpower & Asian Paints was smooth

Good performance by Asian Paints Industrial coatings in the H1-FY03

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Egypt
Acquisition of SCIB Chemical for Rs. 245 million for 60 % stake 5th largest paint company in Egypt Sales of LE 52 mn (USD 11 mn) in 2001

Opportunities
Size of Egyptian paint market ~ USD 150 mn Egyptian market is in a growth phase No committed MNC in market & leader continuously losing market share SCIB enjoys good brand equity, is considered a dynamic & innovative company

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Berger International Ltd.

Region Countries
Proportion of total sales value Proportion of total sales volume

Caribbean Islands

Jamaica, Barbados, Trinidad & Tobago

47 %

28 %

Middle East & Malta China & S.E. Asia

UAE, Bahrain, Malta China, Singapore, Thailand, Myanmar, Malaysia

27 %

40 %

26 %

32 %

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Financials of BIL for Last 3 Years

Value in '000' of S $ 2001 2000 1999 Sales PBIT PBT PAT Gross Block Net Block Networth Book Value/Share 115,034 130,945 133,173 (3,662) 1,367 (9,162) (6,131) (732) (10,658) (9,417) (5,047) (11,303) 48,041 23,683 14,040 0.14 50,665 28,863 23,956 0.23 49,379 30,270 32,487 0.31

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BIL financial performance : Jan-Jun02

(S$ 000)

Turnover Op.Profit Before Tax Op.Profit after Tax Less minority interests Operating profit after tax after minority int.

H1-FY2002 H1-FY2001 53850 51850 1041 -3610 616 -4223 -250 275 366 -3948

Substantial improvement in H1-FY02 Write back of S$ 1.1 mn : Had write back not been done, the group would have incurred Net loss after tax S$ 1.273 mn (Net loss after tax of S$ 3.948 mn in previous period)

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Berger - The strengths

Berger has a strong brand in all these countries.
Access to the Berger brand and trademark in over 70 countries (India not included)

Sound systems and policies in most countries Excellent margins in the countries where they are leaders

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Berger - The synergies

BILs operations are mostly in emerging markets which synergises with the vision of Asian Paints No overlap of BIL operations with Asian Paints Economies of scale could be achieved especially in Middle East as APIL already has operations in Oman & Egypt Exports to neighboring countries

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Governance of BIL
Total number Board members are six, with three independent directors
Induction of 2 new independent directors on the board Chairman & CEO are from Asian Paints

Committees have been reconstituted for Audit, Remuneration & Appointment

All these committees are now headed by independent directors Majority of the directors are independent on these committees

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Systems instituted by APIL

Moving from operating in 10 countries to 22 countries, International BU has instituted systems in Mumbai for
Adequate controls in areas of Financial reporting, Audit, Legal, secretarial & other compliances

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Structure of the presentation

A] Asian Paints group performance : H1-FY03 B] M&A - The growth strategy & our experience C] International operations - The strategy ahead D] Outlook

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FOOTPRINTS OF ASIAN PAINTS

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International markets
Growth Drivers Egypt Bangladesh Sri Lanka Thailand Malaysia China Singapore UAE Myanmar Malta Market Leaders Fiji Solomon Islands Vanuatu Tonga Barbados Trinidad & Tobago Jamaica Bahrain Nepal
Focus for Turnaround

Mauritius Oman Australia

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International markets - Statistics

Country Australia Bahrain Bangladesh Barbados China Egypt Fiji Popn Vol (MT) Value(In Per capita in mn Tot Mkt USD mn) paint usage 19.44 210,000 550 10.800 0.66 8,240 13.3 12.491 136.59 31,000 57.14 0.227 0.28 3,250 15.24 11.727 1283.41 1,620,000 2421 1.262 73.83 140,000 150 1.896 0.87 3,520 8.07 4.065 Market Share 0.5% 45%* 48%* 5% 42%

* : Decorative market share

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International markets - Statistics

Country Jamaica Malaysia Malta Mauritius Myamnar Nepal Oman Singapore Popn Vol (MT) Value(In Per capita Market in mn Total Mkt USD mn) paint usage Share 2.73 9,500 35.9 3.474 76%* 22.83 94,500 147.4 4.140 4%* 0.40 824 1.89 2.079 13%* 1.21 3,843 7.75 3.184 6% 42.66 20,000 27.2 0.469 10%* 26.11 5,097 5.25 0.195 34% 2.74 9,806 15.87 3.583 5% 4.24 67,500 152.3 15.918 3%

* : Decorative market share

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International markets - Statistics

Country Solomon Islands Sri Lanka Thailand Tonga Trinidad & Tobago UAE Vanuatu Popn Vol (MT) Value(In Per capita Market in mn Total Mkt USD mn) paint usage Share 0.50 198 0.93 0.396 70% 19.74 16,005 34.73 0.811 9% 63.83 105,000 176.5 1.645 2% 0.11 280 0.67 2.619 62% 1.14 5,000 19.59 4.392 36%* 2.45 63,000 85.6 25.740 10% 0.20 201 0.91 1.019 75%

* : Decorative market share

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In these growth drivers, Asian Paints would focus on

Enhancing shareholder value by
Rationalising product ranges Complete the product portfolio Further improving supply chain & working capital management Implementing cost structures for increased plant efficiencies, better overhead management & increased asset productivity Using information technology to maximise efficiency

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In Market Leaders, Asian Paints would focus on

Enter new segments like wood finishes in BIL units Focus on cost efficiencies, supply chain etc Gain market share from competition & maintain margins

W ilf l ocus t m ai ai RO CE i exces of30% i o nt n n s n t e m ar s hes ket

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In the markets of Australia, Oman & Mauritius, Asian Paints would focus to turnaround these units and run them profitably

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The new Asian Paints group

24% 71%

5%
Paints - India Chemicals - India International

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Targets for Asian Paints International

Sales growth of at least 10% in next 2 years Excess of 3% PAT margin by year 2004

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Shareholding pattern
Asian Paints (India) Limited

Asian Paints (SP) Holdings Ltd (100%)

Asian Paints (International) Ltd (100%)

Asian Paints (Mauritius) Ltd (49%)

Asian Paints (Nepal) Ltd (51 %)

Berger International Limited (50.1 %)

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Shareholding pattern
Asian Paints (International) Ltd

Asian Paints (Tonga) Ltd (51%)

Asian Paints (Qld) Ltd (90%) Asian Paints (ME) Ltd (49 %) Asian Paints (SI) Ltd (75 %) Asian Paints (Fiji) Ltd (51%)

Asian Paints (Bgld) Ltd (51%) Asian Paints (Vanuatu) Ltd (60%) Asian Paints (Lanka) Ltd (87%)

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Berger International Limited

Singapore 100% Malaysia 100% China 100% Thailand 75% Myanmar 60% Bahrain UAE Malta Jamaica Trinidad & Tobago Barbados 100% 60% 66.67% 51% 70% 100%

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High per capita paint usage in the region

North America USA Canada South America Argentina Brazil Chile Oceania Australia New Zealand
Asia Japan South Korea Singapore Taiwan Europe Denmark Spain Norway Avg Europe Africa Algeria South Africa Tunisia 13 14.7 17.8 20.2

19 14.5

4.35 5.8 5

17.9 17.9 16.4 12

10.78 8.421

7.15 5.06 5.83

Source : Coatings Agenda

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Structure of the presentation

A] Asian Paints group performance : H1-FY03 B] M&A - The growth strategy & our experience C] International operations - The strategy ahead D] Outlook

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Paint Industry Attractiveness - India

Recent impetus given by Finance Minister to the Housing Industry Increased government focus on infrastructure development Good growth recorded by Housing Finance & Cement sectors More educated consumers & increased aspirations for better homes & lifestyles With general industrial revival - emerging segment for high performance Industrial Coatings Last 13 years industry CAGR ~ 13.6%; Asian Paints sales CAGR ~ 16%

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Targets for Asian Paints (India) Ltd

Net Sales growth 10 - 12 % in 2002-03 Restraint in capex & small improvements expected in working capital Maintain margins ROCE (EBIT/CE) of at least 35 % for next 2 years

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Consolidated outlook - FY03

Asian Paints (India) will perform well, both top-line & bottom-line International operations will generate profit after minority interest
Only 2 months sale of BIL, will be considered Less than one month sale of SCIB Chemical will be considered

Goodwill write off due to new acquisitions ~ Rs. 50 million Asian PPG Industries will add to the bottom-line

Consolidated profits to have no significant impact on APILs net profit

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A s an Pai s w il i nt l
Always remain a company committed to increasing shareholder wealth Always maintain its prudent policies of cash flow management Remain committed to shareholder transparency and good corporate governance

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Our vision
Asian Paints aims to become one of the top five Decorative coatings companies worldwide by leveraging its expertise in the higher growth emerging markets. Simultaneously, the company intends to build long term value in the industrial coatings business through alliances with established global partners.

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End...