I am happy to report to you that in spite of uncertain environment both in India andthe global markets the Company remained on track with its vision of being the mostinspirational decor brand for consumers.
Asian Paints continues to follow highest standards of corporate governance andconsiders it as more of an ethical requisite than a regulatory necessity. It is a matterof great pride that our success over the years has come without ever compromising onintegrity or environmental and social obligations.
Structural changes cause short-term pain
The Indian economy faced headwinds from three directions compounding the impact onbusinesses. The Goods & Services Tax (GST) the long-debated and often delayed taxreform was finally introduced on 1st July 2017. This is the single biggest structuralreform in the country that pushes for creation of a unified common market laying asidethe inefficiencies created by different tax incidences in various states. The Companyworked closely with its partners along its entire supply chain to transition itsoperations to the new tax regime efficiently. This was not without the initial hiccups asthere were challenges around clarity of rules and processes. It led to a temporarydisruption of the trade channel accentuating the impact on demand that was alreadyreeling in the aftermath of demonetisation in the previous fiscal. Along with these thetrade also encountered a difficult credit environment with banks stressed by mountingnon-performing assets and a series of frauds leading to tighter credit controls.
Evolving expanding portfolio
Despite these challenges Asian Paints continued to maintain strong doubledigit growthslightly ahead of the industry. This performance was driven by continuous expansion of thedistribution network an enhanced product portfolio and introduction of new product andservice delivery models. The Company's products are maturing and the waterproofing rangeof products have captured the attention of consumers in a short span.
Asian Paints has been also building capabilities to provide a seamless interface toconsumers by cradling the entire expectation spectrum from 'Inspiration' to'Customisation' to 'Execution'. The Company continued to develop 'beautifulhomes.com' itsdecor website as the most preferred destination for curated decor inspiration. At thesame time the Company expanded 'AP Homes' its flagship multi-category decor storeoffering by opening two new AP Homes stores at Delhi and Kochi in addition to the firstsuch store opened last year in Coimbatore. The expanding 'Colourideas' store network nowspreads over hundreds of towns provides differentiated consumer experience with largefocus on personalised colour and decor consultation. The Company under the 'Paint Total'umbrella a dealer-run painting service programme has now put in place a scalable modelfor meeting the execution requirements of consumers.
The home improvement business spread over the kitchens and bath segment also expandedduring the year notwithstanding the headwinds. Like in the paints business the focus hasbeen to provide a complete bouquet of products and match it with service and qualitylevels that consumers expect from the brand Asian Paints.
The Company's association with PPG Industries Inc.
USA through two joint ventures in the industrial coatings segments continues to buildon the relative strengths of the two partners with the focus on customer relationshipsand new cost-effective product introductions.
Streamlined global presence
It was a challenging year across some of the Company's major markets which were facedwith varied issues such as high inflation forex unavailability and political uncertainty.However at an overall portfolio level the international operations have done reasonablywell and grown although with lower profitability than the previous fiscal. The greenfieldoperations in Indonesia as well as the newly acquired business of Causeway Paints SriLanka have added to the Company's global presence. Having divested completely from thelow growth Caribbean markets your Company is now focused on expanding its internationalportfolio in the emerging markets of Asia and Africa.
Focus on water conservation
The Company continues to uphold its commitment towards environmental sustainabilityirrespective of the business environment. The Company contributed towards waterconservation and helped increase the water available to communities. It has installedrooftop Rainwater Harvesting (RWH) structures promoted integrated watershed developmentdesilted lakes and created awareness on water conservation.
These initiatives and the Company's overall growth in the face of odds bothdomestically and abroad would not have been possible without the unstinted commitment ofthe people the management and the Board. I take this opportunity to thank them as wellas express my gratitude to you and all the stakeholders for the trust and faith that yourepose in us.
Remembering Mr. Dipankar Basu
I am saddened to inform you that one of our long-time Board colleagues Mr. DipankarBasu who had resigned from the Board in January 2017 passed away in February 2018after prolonged illness. The Board and Management remember him fondly and expressgratitude for his immense contribution to the Company. An Independent Director Mr. Basuwas the Chairman of the Audit Committee along with being a part of the Nomination andRemuneration Committee.
India growth story is intact
Going forward the uncertainty is likely to continue in the current financial year aswell. While the economy gradually absorbs the impact of GST impending elections acrossmany states and the general elections will add to the instability. However
I am equally certain of the Company's capabilities to scout for opportunities amidstthis volatility and drive the business forward with temerity and resoluteness. As alwaysconsumer needs and requirements will be at the centre of all our endeavours and I takeconfidence from the continued support provided by all our stakeholders to address them aswe forge ahead.
Ashwin Choksi Chairman