Asian Paints raises staff salaries to boost morale

Instead of slashing pay and jobs - standard industry responses to the current situation due to the coronavirus - Asian Paints, India's biggest paints maker is raising salaries to boost staff morale.

Its scope of assistance to the sales channel includes hospitalisation and insurance, full sanitisation facilities for partner stores, and direct cash support, reports The Economic Times.

Asian Paints also transferred Rs40 crore into the accounts of its contractors.

"We have to set an example of true leadership and an organisation that takes care of all its stakeholders. I have been updating the board regularly on all such initiatives and have received their approval for these actions," Asian Paints Managing Director and CEO Amit Syngle said.

"I see this as a big opportunity to step in and interact with every single employee and assuage their concerns in an uncertain marketplace. We are not in the hire and fire business and as a mature brand have reassured employees that we all are together in this."

The company has donated Rs35 crores toward the Central and State Covid 19 Relief funds. Asian Paints is also making sanitizers to aid the nation's fight against the virus.

"The germination of the idea of sanitizers came from the Indian Ministry of Chemicals, nudging us to make them….We came out with a range of hand and surface sanitizers under the brand name Viroprotek. This launch also resonated with our health & hygiene space foray where we already have Royale Health shield, an anti-bacterial and anti-asthma paint."

Expanding its product range into sanitizers would allow Asian Paints to have a greater share of the customer wallet, with a range of sanitizers for various surfaces.

However, Asian Paints is keeping a watch on cash flows, deferring expenses where it can.

"We have been debt free for years and are quite comfortably placed even if the uncertainty goes on for the next four or five months. The company had announced a huge dividend payout in March and shareholder return is our top priority," Syngle said.

Asian Paints has a good return on equity (ROE) track record with 3 years ROE of 25.49 percent.

It has been maintaining a healthy dividend pay out of over 46 percent. However, the paint major has delivered a low sales growth of 9.62 percent CAGR and profits growth of 12 percent CAGR over the past five years.

Although the slump in crude prices to below $30 per barrel benefits the company as crude oil derivatives form 30-35 percent of its raw material costs, coronavirus related disruptions are likely to have a material negative impact on sales volume and pricing.

The stock is currently trading at 14.51 times its book value or 47 times its FY22 estimated PE.