Asian Paints

Dear Shareholders,
 
 These are extraordinary times that we are living in! All major
 economies of the world are under severe stress because of the collapse
 of their economic growth. The dramatic scale and speed of the global
 fnancial tsunami has far exceeded anybodys imagination. The policy
 response across countries to stall the downward spiral has been
 unprecedented. How the economies would react to these stimuli and when
 they would stabilize is anybodys guess.
 
 A similar theme has been underway in India, emphasizing the fact that
 we are well and truly coupled with the global environment.  There has
 been a demand slowdown impacting both, exports as well as domestic
 consumption. Services sector, especially I T, has been severely
 impacted due to the protectionist policies now being resorted to in
 developed world. The domestic credit market has also seen a relative
 freeze, raising the funding cost for corporates. The Government of
 Indias stimulus packages, to spur economic activity, has led to
 widening of fiscal and trade deficits. All this has meant that the
 surging Indian economy has seen a relative slowdown in 2008-09 and in
 all probability will grow at around 6.5% compared to 9% in 2007-08.
 
 The global financial turmoil has had an adverse impact even in other
 markets where the group operates in, especially in the Gulf region. It
 has also resulted in extreme volatility in exchange rates as well as
 commodity and chemical prices. Crude oil prices spiralled to dizzy
 height and then crashed with the same ferocity, key raw materials like
 pigments and monomers saw major increase in prices. Rupee exhibited
 extreme volatility and traded between high of Rs. 39 to the US$ and low
 of Rs. 52 to the US$ during the year. These extreme conditions
 necessitated drastic reactions. In the domestic market, paint prices
 had to be increased six times and then reduced thrice, which has been
 unprecedented.
 
 In these difficult times, your Company has done well to grow its
 consolidated sales by 24% in value terms to Rs. 5463 crores in FY
 2008-09. After a very buoyant first half, demand conditions were
 sluggish in the third quarter of FY 2008-09. But the speed with which
 we were able to recover in the fourth quarter has only strengthened my
 confidence in our ability to take things in our stride. We consciously
 pursued a strategy of growth with reduced margins in domestic paints
 business. Consequently, the consolidated PAT after minority interest
 for the full year reduced by 2.8% to Rs. 398 crores.
 
 Over the years, we have successfully undertaken several initiatives in
 line with our basic strategy of adopting a more consumer centric
 approach for meeting the customers ever changing expectations. We have
 been building on the strong existing dealer network to provide a more
 appropriate shopping ambience and expertise in colour and decor
 marketing to the consumers. A prime example of this approach is our
 Colour with Asian Paints, the international award winning and unique
 Asian Paints Signature Store in Bandra (West), Mumbai, which I would
 urge each one of you to visit and get inspired by.
 
 In my letter to you as early as in June 1999, I had mentioned that
 Companies with good board governance practices are regarded as
 companies with shareholder value focus where long term values are not
 sacrificed at the altar of short term returns. The truth of this
 statement was brought home rudely when gigantic corporations crumbled
 and investors lost their confidence in them due to their disregard for
 good corporate governance practices and lack of openness, integrity and
 accountability. This has not only vindicated our long standing belief
 in fostering the principles of trust and transparency within the
 organization, but has made our resolve to purse this path even
 stronger.
 
 Looking ahead, the world economy is expected to witness contraction in
 2009. Given the inter-link with global markets, growth in India would
 depend on how the global scenario unfolds.  The decisive mandate in the
 national general elections would help in allaying the fears of
 political instability and would boost the sentiments in the domestic
 economy. The GDP growth forecast for India is being placed between
 5-6%. Paint demand would depend on the overall economic situation,
 which is currently reasonably buoyant in Tier II and Tier III towns.
 Growth would be a challenge in the industrial and automotive paints
 segment while the chemical business would continue to be managed for
 value.  In the International markets, the strategy would be to review
 the portfolio and grow the top line with focus on profitability and
 credit risk. Middle East and South Asia regions are expected to drive
 growth performance.
 
 An organizations future is as certain as its ability to mould itself
 to the changing environment. A disposition to change thus signals a
 potential to grow. Hence, in this dynamically changing environment, the
 Board of your Company took a momentous decision of appointing Mr. P. M.
 Murty an Asian Paints veteran of 38 years, as the Managing Director &
 CEO with effect from 1st April, 2009. It is a change that represents
 the ongoing process of corporate transformation in response to the
 contextual realities. It is also a change that ensures continuity and
 further enhances the symbiotic relationship between the entrepreneurs
 and the professionals towards delivering stakeholder value with highest
 levels of corporate governance.
 
 I am confident that your Company, under the able leadership of Mr. P.
 M. Marty, will convert adversities into opportunities and continue its
 forward surge. This confidence also arises from the knowledge that your
 Company has an immensely talented pool of people at all levels who have
 withstood the challenges of the ever changing environment and have
 contributed consistently to the remarkable growth of your Company.
 
 Last but not the least, I along with my colleagues, thank you for your
 continued support and confidence shown during all these years, which
 have been a source of great inspiration to us.
 
 Warm regards,
 
 Ashwin Choksi
 Chairman