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ASIAN PAINTS LTD.

09 December 2016 | 03:09

Industry >> Paints/Varnishes

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ISIN No INE021A01026 52Week High 1227 Book Value (Rs.) 58.44 Face Value 1.00
Bookclosure 02/11/2016 52Week Low 826 EPS 18.00 P/E 52.37
Market Cap. 90404.39 Cr. P/BV 16.13 Div Yield (%) 0.80 Market Lot 1.00

NOTES TO ACCOUNTS

You can view the entire text of Notes to accounts of the company for the latest year
Year End :2016-03 
The Company does not have any geographical segment.

@ As per the records of the Company, including its register of members

As per the Companies Act 2013, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts in the event of liquidation of the Company. However no such preferential amounts exist currently. The distribution will be in proportion to the number of equity shares held by the shareholders.

The Board of Directors at its meeting held on 23rd October, 2015 declared an interim dividend of Rs. 2.20 (Rupees two and paise twenty only) per equity share of Rs. 1 each. A final dividend of Rs. 5.30 (Rupees five and paise thirty only) per equity share of Rs. 1 has been recommended by the Board of Directors at its meeting held on 11th May, 2016, subject to the approval by the shareholders at the ensuing Annual General Meeting. If approved, the total dividend (interim and final dividend) for the financial year 2015-16 will be Rs. 7.50 per equity share of Rs. 1 each (Rs. 6.10 per equity share of Rs. 1 each was paid as total dividend for the previous year). The total dividend appropriation for the year ended 31st March, 2016 amounted toRs. 864.53 crores including corporate dividend tax of Rs. 145.14 crores. (Previous year Rs. 698.07 crores including corporate dividend tax of Rs. 112.95 crores).

Notes:

The Company has partnered with National Skill Development Corporation (NSDC) for undertaking a painter skill development project. Under the arrangement, the Company is granted a financial assistance of Rs. 0.31 crores from NSDC disbursable in five tranches. The assistance is secured by a bank guarantee provided by the Company to NSDC on the outstanding amount. The assistance carries an interest @ 6% p.a and is repayable over a period of nine years including a moratorium of three years on the principal amount, starting from the date of first disbursement. During the year 2014-15, the Company received Rs. 0.06 crores as per the schedule of disbursement and no amounts are repayable during the next one year.

# Interest free loan from The Pradeshiya Industrial Corporation of U.R Limited (PICUP) under Sales Tax Deferment Scheme of Government of Uttar Pradesh was secured by a first charge on the Company's immovable properties of the paint plant at Kasna and by way of hypothecation of all movable properties at the above location. This interest free loan had a deferment period of 10 years and was repayable in 9 yearly installments starting from May, 2007 as per repayment schedule. Out of the total loan of Rs. 30.60 crores, the Company had already repaid Rs. 27.36 crores till 31st March, 2015 and the balance amount of Rs. 3.24 crores was paid during the current year by 31st May, 2015. Pursuant to the repayment of loan, the charge on Company's immovable properties was released.

## The Company is eligible to avail interest free loan in respect of 50% of VAT paid within Haryana on the sale of goods produced at Rohtak plant for a period of 7 financial years beginning from April, 2010. For the year ended 31st March, 2011 and 31st March 2012, the Company has already received the interest free loan ofRs. 3.41 andRs. 5.90 crores respectively. This loan is secured byway of a bank guarantee issued by the Company and is repayable after a period of 5 years from the date of receipt of interest free loan. For the year ended 31st March, 2013, 31st March, 2014 and 31st March, 2015, the Company has made the necessary application to the Haryana Government for the issue of eligibility certificate and for the year ended 31st March, 2016, the Company is in the process of making the necessary application.

### Sales tax deferment scheme- State of Andhra Pradesh represents sales tax deferment availed under the Sales tax deferment scheme of the Government of Andhra Pradesh. It has a deferement period of 14 years and is repayable over 9 years as per repayment schedule starting from April, 2012. Out of the total sales tax deferement loan of Rs. 40.70 crores the Company has already repaid Rs. 12.08 crores till 31st March, 2016 and balance amount of Rs. 28.62 crores is repayable in next 4 years upto February, 2020.

* Default in terms of repayment of principal and interest - NIL (Previous year: NIL)

A. Assets given on operating lease

The Company does not have any assets given on operating lease during the reporting period.

B. Assets taken on operating lease

a. The Company has taken certain assets such as Vehicles, Computers and Information Technology hardware on an operating lease basis. The lease rentals are payable by the Company on a monthly or quarterly basis.

b. Future minimum lease rentals payable as at 31st March, 2016 as per the lease agreements:

c. Lease payments recognised in the Statement of Profit and Loss for the period is Rs. 10.15 crores (Previous year Rs. 9.10 crores).

NOTE 43 : Pursuant to Accounting Standard (AS-27) - Financial Reporting of Interests in Joint Ventures, the disclosures relating to the two Joint Venture Companies viz., PPG Asian Paints Private Limited and Asian Paints PPG Private Limited (both hereinafter referred to as JVs) are as follows:

a) The proportion of interest of the Company in the JVs is by way of equal equity participation with PPG Industries Securities Inc., U.S.A.

1) Short term employee benefits:

The liability towards short-term employee benefits for the year ended 31st March, 2016 has been recognized in the Statement of Profit and Loss.

2) Post-employment benefits:

The following disclosures are made in accordance with AS-15 (Revised) pertaining to Defined Benefit Plans:

Notes:

i) The gratuity fund assets and liabilities are managed by Asian Paints (India) Limited Employees' Gratuity Fund.

ii) The Company estimates that the balance amount to be contributed to the gratuity fund during the financial year 2016-2017 will be Rs. 0.21 crores.

b) Provident Fund:

The Provident Fund assets and liabilities are managed by 'Asian Paints Office Provident Fund' and Asian Paints Factory Employees Provident Fund' in line with The Employees' Provident Fund and Miscellaneous Provisions Act, 1952.

The guidance on Implementing AS 15, Employee Benefits (revised 2005) issued by Accounting Standards Board (ASB) states that benefits involving employer established provident fund, which require interest shortfalls to be recompensed, are to be considered as defined benefit plans. The plan guarantees minimum interest at the rate notified by the Provident Fund Authorities. The contribution by the employer and employee together with the interest accumulated thereon are payable to employees at the time of separation from the Company or retirement, whichever is earlier. The benefit vests immediately on rendering of the services by the employee. In terms of the guidance note issued by the Institute of Actuaries of India for measurement of provident fund liabilities, the actuary has provided a valuation of provident fund liability and based on the assumptions provided below, there is no shortfall as at 31st March, 2016 and 31st March, 2015.

The Company contributed Rs. 10.29 crores and Rs. 9.18 crores towards Asian Paints Office Provident Fund during the year ended 31st March, 2016 and 31st March, 2015 respectively. The Company contributed Rs. 5.52 crores and Rs. 5.26 crores towards Asian Paints Factory Employees Provident Fund during the year ended 31st March, 2016 and 31st March, 2015 respectively.

NOTE 1:

The Company's manufacturing facility at Khandala, Maharashtra has been granted "Mega Project Status" by Government of Maharashtra and hence is eligible for Industrial Promotion Subsidy (IPS) under Package Scheme of Incentive, 2007 in the form of refund of VAT paid to Maharashtra Government, exemption on electricity duty and stamp duty within a period of 9 years from the date of commencement of commercial production, restricted to a maximum of 100% of fixed capital investment as per the Eligibility Certificate issued by Director of Industries, Government of Maharashtra. In terms of the Accounting Standard (AS 12) "Accounting for Government Grants" prescribed by Companies (Accounting Standards) Amendment Rules, 2006, eligible incentive as mentioned above amounting to Rs. 134.11 crores for year ended 31st March, 2016 (Previous Year - Rs. 108.96 crores) is credited to Statement of Profit and Loss under the head "Other operating income" on accrual basis.

NOTE 2 : ACQUISITION OF ESS ESS BATHROOM PRODUCTS PRIVATE LIMITED

During the previous year, the Company acquired the entire front end sales business including brands, network and sales infrastructure of Ess Ess Bathroom Products Private Limited effective 1st June, 2014 for a consideration of Rs. 36.48 crores. As a result of this transaction, intangible assets consisting of Goodwill of Rs. 38.58 crores and Brand of Rs. 4.28 crores has been recognized in the Financials of the Company in the previous year. The financial results of this business for the year ended 31st March, 2016 are reported as a separate segment under 'Home Improvement' in Segment Reporting (Refer Note 49).

NOTE 3 : INFORMATION ON RELATED PARTY TRANSACTIONS AS REQUIRED BY ACCOUNTING STANDARD (AS-18) ON RELATED PARTY DISCLOSURES FOR THE YEAR ENDED 31st MARCH, 2016.

a) Joint Venture: (In which the Company has 50% equity interest)

i. PPG Asian Paints Private Limited.

Wholly owned subsidiaries of PPG Asian Paints Private Limited:

a) Faaber Paints Private Limited.

b) PPG Asian Paints Lanka Private Limited, ii. Asian Paints PPG Private Limited.

* The company has filed an application for striking off the name of Company under the "Fast Track Exit mode" under Section 560 of Companies Act, 1956. (Refer Note 5IB)

# During the year, as part of consolidation of investments in overseas subsidiaries, Asian Paints (International) Limited, Mauritius, a wholly owned subsidiary of the Company, has transferred its entire holding in subsidiaries to its wholly owned subsidiary, Berger International Private Limited , Singapore. This does not have any impact on the financial results.

* PT Asian Paints Color Indonesia has been incorporated in Indonesia as a wholly owned subsidiary of Berger International Private Limited during the year.

@ Berger International Private Limited , Singapore ("BIPL"), a wholly owned indirect subsidiary of the Company, acquired 51% stake in Kadisco Paint and Adhesive Industry Share Company for a consideration of US$ 18.95 million (Rs. 117 crores) in cash, on 9th February, 2015.

- During the previous year, Berger International Private Limited (BIPL) (formerly known as Berger International Limited) has become a wholly owned subsidiary of Asian Paints (International) Limited (APIL).

** During the year, Kitchen Grace India Private Limited has been merged with Sleek International Private Limited pursuant to a scheme of amalgamation approved by Honourable High Court of Bombay, effective 1st April, 2015.

c) Key Managerial Personnel:

Name of the Director Designation

Shri K.B.S. Anand Managing Director & CEO

Shri Jayesh Merchant CFO & Company Secretary, President - Industrial JVs

d) Promoters and their relatives having control:

Directors:

Shri Ashwin Choksi Non-Executive Chairman

Shri Ashwin Dani Non-Executive Vice Chairman

Shri Mahendra Choksi Non-Executive Director

Shri Abhay Vakil Non-Executive Director

Shri Malav Dani Non-Executive Director

Ms. Amrita Vakil Non-Executive Director

Relatives of promoters who are under the employment of the Company:

Shri Jalaj Dani*

Shri Manish Choksi**

Shri Jigish Choksi (upto 3rd April, 2015)

Shri Varun Vakil

Shri Vivek Vakil (upto 29th July, 2015)

* Shri Jalaj Dani, a relative of Company's Non-Executive Vice Chairman was also a Non-Executive Chairman of Berger International Private Limited, till 9th September, 2015, Director on the Board of one of the subsidiary companies and one of the joint venture companies.

** Shri Manish Choksi, a relative of Company's Non-Executive Director is also a Non-Executive Chairman of Berger International Private Limited w.e.f. 10th September, 2015, Director on the Board of some of the subsidiary companies and one of the joint venture companies.

e) Companies controlled by Directors/Relatives of Directors :

AR Intertect Design Pvt. Ltd. Hitech Plast Ltd. Riash Realty Private Ltd.

ARI Designs LLP * Hitech Skills Development P Ltd. Ricinash Oil Mill Ltd.

Asteroids Trading and Investments Pvt. Ltd. Hitech Specialities Solutions (India) Ltd. Rituh Holding and Trading Company Pvt. Ltd.

Avinash Holding and Trading Co. Pvt. Ltd. Hydra Trading Pvt. Ltd. Rupen Investment and Industries Pvt. Ltd.

Canes Venatici Trading Company Pvt. Ltd. ISIS Holding and Trading Co. Pvt. Ltd. S.C. Dani Research Foundation Pvt. Ltd.

Castle Investment and Industries Pvt. Ltd. Jalaj Trading and Investments Pvt. Ltd. Sadavani Investments and Trading Co. Pvt. Ltd.

Centaurus Trading and Investments Pvt. Ltd. Jaldhar Trading and Investments Pvt. Ltd. Sapan Investments Pvt. Ltd.

Clear Mipak Packaging and Solutions Ltd. Kalica Paper Industries Pvt. Ltd. Satyadharma Investments and Trading Co. Pvt. Ltd.

Dani Charitable Foundation Lambodar Investment and Trading Co. Ltd. Smiti Holding and Trading Co. Pvt. Ltd.

Dani Finlease Ltd. Lyon Investment and Industries Pvt. Ltd. Sudhanva Investments and Trading Co. Pvt. Ltd.

Doli Trading and Investments Pvt. Ltd. Murahar Investments and Trading Co. Ltd. Suptaswar Investments and Trading Co. Pvt. Ltd.

Elcid Investments Ltd. Navbharat Packaging Industries Ltd. Suryakant Paint Accessories Pvt. Ltd.

ELF Trading and Chemicals Mfg. Ltd. Nehal Trading and Investments Pvt. Ltd. tlnnati Trading & Investments R Ltd.

Geetanjali Trading and Investments Pvt. Ltd. Paladin Paints and Chemicals Pvt. Ltd. # Vikatmev Containers Ltd.

Germinait Solutions Pvt. Ltd. Parekh Plast India Ltd.

Gujarat Organics Ltd. Pragati Chemicals Ltd.

Hiren Holdings Pvt. Ltd. Rayirth Holding and Trading Co. Pvt. Ltd.

Hitech Insurance Broking Services Ltd. Resins and Plastics Ltd.

* w.e.f. 13th June, 2015

# w.e.f. 22nd April, 2015

f) Employee Benefit Funds where control exists:

Asian Paints Office Provident Fund

Asian Paints Factory Employees' Provident Fund

Asian Paints Management Cadres' Superannuation Scheme

Asian Paints (India) Limited Employees' Gratuity Fund

g) Other entity over which there is a significant influence:

Asian Paints Charitable Trust

NOTE 4 : During the previous year, the Board of Directors of the Company approved the conversion of outstanding loan to Maxbhumi Developers Limited (a wholly owned subsidiary) amounting to Rs. 14.99 crores into 3,57,084 equity shares of Maxbhumi Developers Limited of face value Rs. 10/- per equity share at a premium of Rs. 410/- per equity share based on an independent valuation carried out. In addition to the above, the Company also subscribed to an additional 11,916 equity shares of the face value of Rs. 10/-per equity share at a premium of Rs. 410/- per equity share during the year ended 31st March, 2015.

A. The Company has made an assessment of the fair value of investment made in its subsidiary, Sleek International Private Limited ('Sleek') taking into account the past business performance, prevailing business conditions and revised expectations of the future performance given the understanding built up since acquisition. Based on above factors and as a matter of prudence, the Company has made a provision for diminution in the value of investment made in Sleek to the tune of Rs. 65.30 crores in the year ended 31st March, 2016. The same is disclosed under "Exceptional items" in the Statement of Profit and Loss.

B. The Company's wholly owned non-operating subsidiary company, Multifacet Infrastructure (India) Limited ('Multifacet') has made an application to Registrar of Companies on 21st March, 2016 for strike off under fast track exit mode under the provision of Section 560 of the Companies Act, 1956. Consequently, the Company has made a provision for diminution in the value of investment in Multifacet for Rs. 0.05 crores in the year ended 31st March, 2016. The same is disclosed under "Exceptional items" in the Statement of Profit and Loss.

C. The Company had discontinued the manufacturing activities at its Bhandup Plant with effect from 5th May, 2014. A "Voluntary Retirement / Separation Scheme" along with an alternate option of relocation to other factories/establishments of the Company was offered to all the workmen at the plant in the month of April, 2014. All workmen had accepted either the Voluntary Retirement/ Separation Scheme or relocation to another factory/establishment of the Company. The liability on account of the above amounting to Rs. 25.16 crores was recognized and disclosed in "Exceptional Items" in the Statement of Profit and Loss for the year ended 31st March, 2015.

D. The Company had recognized provision for impairment in respect of Fixed Assets at Bhandup Plant for an amount of Rs. 2.41 crores in the previous year. The same was included under "Impairment" in Note 10 and disclosed in "Exceptional Items" in the Statement of Profit and Loss for the year ended 31st March, 2015.

E. The Company was carrying a provision of Rs. 14.04 crores in respect of the diminution in carrying value of its investment in Asian Paints (International) Limited, Mauritius made in the earlier years. Based on the assessment of the fair value of the investment as at 31st March, 2015, the provision for diminution was reversed in the previous year. The same was disclosed in "Exceptional Items" in the Statement of Profit and loss for the year ended 31st March, 2015.

NOTE 6 : During the year, based on queries received from certain shareholders and the Securities Exchange Board of India ('SEBI'), the Company conducted preliminary internal investigations and discovered certain irregularities at M/s Sharepro Services (India) Private Limited ('Sharepro'), the Company's erstwhile Registrar and Share Transfer Agent. Subsequently the Company has filed a criminal complaint against Sharepro and its employees. Pursuant to the directions issued by SEBI in its interim order dated 22nd March, 2016, the Company has appointed an independent external agency to conduct a thorough audit of the records and systems of Sharepro with respect to the past transactions. The Company will take appropriate steps based on the findings of the audit by the independent external agency and in accordance with the directions of SEBI or any other regulatory authorities.

* Represents actual outflow during the year.

Note 7 : Previous year's figures have been regrouped, reclassified wherever necessary to correspond with the current year classification/disclosure.