ASIAN PAINTS Chairmans Speech

Dear Shareholders,

The one characteristic that has defined the global economy over the last decade or so, is “uncertainty” - uncertainty that has brought its share of challenges and opportunities. The year 2016-17 had its share of uncertainty which affected the performance of the Company, both domestically as well as in the international markets where the Company operates. Let me take this opportunity to take you through the key highlights of the Company''''s performance during the financial year 2016-17.

The single biggest event that left its mark on each and every sector of the domestic economy was “demonetization”. Coming at a time when the economy was just beginning to look up, the Central Government''''s decision to demonetize almost 86% of the currency notes in circulation, caused severe cash shortage in the domestic economy, which prefers cash as the mode of payments, even today. This cash shortage led to a strain on the consumption demand and business activity for a greater part of the second half of the year. Stressed loans plaguing the banking sector and the stretched corporate balance sheets continued to be a drag on capital investments, which have remained much below the trends over the past few years. Low inflation and a largely accommodative monetary policy, though, provided support in an otherwise difficult growth environment. On the global front, the Brexit vote and the surprise election outcome in US, further underlined the uncertainty that persists across the markets. While such events might appear to have limited direct consequences for our domestic economy, the inter-linkages of global trade and financial markets mean that no economy is totally insulated. The large capital flight away from emerging markets, including India, in the aftermath of the US election results on the hopes of strong pro-US growth policy rollouts by the new US dispensation and the subsequent swift and massive reversal back into the emerging markets towards the close of the financial year, highlight the fickleness of today''''s uncertain times.

Against this uncertain backdrop and the demonetization move right after the festive season, the Company has managed to register good growth in the domestic market. The Company had a strong focus on consumer up gradation thereby improving the product mix and also continued to work on expanding its product portfolio. The Company leads with the vision of being the forerunner of inspiring decor & partnering with consumers in transforming their living spaces. The Company is looking at scaling up its flagship AP Homes store concept which was launched at Coimbatore last year. AP Homes is a multi-category decor store where a consumer can avail an integrated decor consultancy across categories ranging from paints, bath fittings, kitchen, sanitary ware, wallpapers, furniture, etc. The Company also launched - an online decor magazine that will feature inspirational Indian homes and workspaces, practical decor tips, accessible design ideas and Do It Yourself (DIY) guides to further support the decor needs of the consumers. These initiatives would help drive differentiation and enhance the leadership position of the Company in the domestic market. With the vision of being a complete decor solutions provider, the Company had forayed in the Home Improvement segment with investments in the Kitchen and Bath business. While demand conditions in both these businesses were impacted due to demonetization and slowdown in real estate and construction arena, the Company has taken steps to improve its capability to drive these businesses over the coming years.

The Company''''s two joint ventures with PPG Industries Inc, USA in the Industrial and Automotive coatings segments fared well during the year. Profitability of these businesses improved on the back of favorable raw material prices and aided by better sourcing and localization strategies.

In the international operations, some of the key markets faced challenging business conditions due to the subdued economic environment in those countries. However, most of our units in those countries managed to tide over the challenges and delivered strong performance. The Company started commercial operations in Indonesia through tie-ups with business partners and is also working on completing the setting up of its own manufacturing facility with an initial capacity of 5,000 KL per annum. The Company has recently acquired 100% stake in Causeway Paints Lanka (Pvt) Ltd., Sri Lanka - a leading player in the Sri Lankan coatings market and this would help it further strengthen its international footprint.

While the Company weathered its way through the uncertain environment, it continued to drive its commitment on social responsibility agenda in areas like Education, Health & Hygiene and Water Management. Lot of work has been undertaken at the manufacturing facilities in the area of environmental sustainability like achieving water-neutrality by investing in community rainwater harvesting structures, reducing no process fresh water consumption and reducing trade-effluent and waste generation. During the year, the Company made further investments in renewable energy to reduce its carbon footprint and drive sustainability. Almost 22% of the power requirement at the manufacturing facilities is being met through renewable energy sources.

The new accounting standards - Ind AS, have become effective from 1st April, 2016 and the financial statements presented in this Annual Report comply with these new accounting standards.

The Company has further strengthened its internal controls and governance framework by rolling out a comprehensive compliance requirement guideline to its international subsidiaries.

As always, the Company strives to enhance its internal controls and governance standards as a matter of ethical responsibility to all its stakeholders and not merely as a regulatory requirement.

The new financial year has started on an encouraging note with the Government seen keenly pushing the implementation of the Goods and Services Tax (GST) from the second quarter of the financial year. GST is being looked at as the single biggest indirect tax reform and is poised to push India''''s economic growth forward by creating a single national market and enhancing the efficiency of inter-state movement of goods and services. However, given the wide scale of implementation, it is likely to cause some disruptions in the initial period and the Company will have to face this hurdle as it adapts to this new landscape. The initial forecasts on monsoon are also encouraging and this gives hope for a strong consumption demand from the rural segment. On the other hand, raw material prices have moved up significantly over the last few quarters putting pressure on margins. In the International markets, political stability in key markets of Egypt, Bangladesh and Nepal would be the key for sustained performance.

As we move forward, the vagaries of uncertain environment would continue to confront all the businesses. The Company is confident of navigating these uncertainties and would continue to invest in its capabilities to understand and deliver offerings to satisfy the consumer needs in our quest to deliver sustainable long-term performance. I take this opportunity to thank all our stakeholders for the faith reposed in the Company and look forward to your continued support in this journey.

Yours truly,

Ashwin Choksi

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.

Disclaimer: There is no guarantee of profits or no exceptions from losses. The investment advice provided are solely the personal views of the research team. You are advised to rely on your own judgment while making investment / Trading decisions. Past performance is not an indicator of future returns. Investment is subject to market risks. You should read and understand the Risk Disclosure Documents before trading/Investing.

Disclosure: We, Dynamic Equities Private Limited are also engaged in Proprietory Trading apart from Client Business. In case of any complaints/grievances, clients may write to us at

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