Dani created a model for promoters

In a way, the centrality of technology was central to everything that Asian Paints did. The first supercomputer in India was bought by space agency Isro, the second by Asian Paints in 1970.

Through the 1970s and 80s, Asian Paints got very closely identified as a high-tech company, applying both computer science and cutting-edge chemistry to its products.

I think, at some level, Dani will also be missed as a visionary businessman who, in the 1970s India, dared to take the country close to whatever was the cutting edge of technology at that point in time.

Asian Paints also has a competitive edge through the use of data for marketing distribution—they use computers to predict which paints to sell, when, and where ,across 150,000 dealerships. Four times a day, inventories are exhausted. So, basically you’re doing 600,000 deliveries to shops in various parts of the country. That’s basically big data in its most pure form.

I think he played a central role at Asian Paints in 1996, when Champaklal Choksey (one of the four founders of the company) decided to sell his stake to ICI, its main rival, in 1996. Ashwin Dani stepped into play an important role protecting the company from hostile rivals and in effect became the leader of the business.

Another critical point was in 2008 when the collapse of Lehman Brothers pummelled stock prices around the world, including that of Asian Paints. The Dani family stepped in and increased their stake in the company at a time when everybody in the world was panicking about the state of the global economy. I think that signal came at a critical juncture.

Dani had a major role in ensuring succession went smoothly. The promoters had decided much earlier that they will take the backseat, and the professionals, typically recruited from the IIMs, in their 20s, would run the show.

These professionals were groomed for leadership roles, and they (promoters) have stuck to that. For the last 40 years, all the leaders have come from the IIMs, and the promoters generally have kept an arms-length from the day-to-day management of the business.

The company is growing fast. We struggle to find companies operating at this level of excellence and getting this level of growth over a 50-year period.

It’s quite unbelievable what these people have done. This is truly world-class, both in terms of the quality of professional talent that’s hired, the type of technology used, and the way the promoters have shepherded the business.

This is a very rare company where there are three promoter families. And a lot of credit goes to them. The Choksis, the Danis and the Vakils have been very mature and, notably, they haven’t pushed their children into the business or fought over who runs what. There have been repeated attempts by the world’s largest paint companies to challenge Asian Paints.

The current entry (Grasim building a pan-Indian manufacturing base for paints) is actually quite small in the context of what has taken place historically.

In the 1960s, when Asian Paints started rising, the world leader was ICI, now called Akzo Nobel. It was Asian Paints’ application of technology, both computer science and chemistry, which allowed them to pull away from ICI.

Then in 2006, Sherwin-Williams, the world’s largest paint company, entered India and burned the best part of $2 billion over the next four years. Remember this is $2 billion between 2006 and 2010.

In that context, Grasim, and now JSW, are not doing anything comparable. Sherwin Williams offered dealers two to three times the commission that Asian Paints was offering, and after four years of unsuccessfully trying, exited in 2010.

Such is the technological sophistication of Asian Paints business, such is the quality of talent working in that firm, that it’s very difficult for any other Indian companies to pose a serious challenge.

Now it’s no longer just a paints company, but also the largest home decor business in India by far.

So, by using the cash flows of the paints business, they’ve built the most valuable home décor business in the country, and I would say worth several multiples. A decade later, the home decor business itself will be worth more than what Asian Paints today is worth in the market.

Ashwin Dani was the second generation. Today, the third-generation family members have their own separate businesses elsewhere, and the day-to-day management of the Asian Paints businesses is entirely in the hands of professionals.

Obviously, the promoter families will decide on capital allocation decisions as board members, and therein Ashwin Dani deserves credit for creating a model for many other Indian promoters to follow.

He was the binding force for the three families. It’s difficult to walk away from an asset like that, which gives you 25%, decade after decade. It’s difficult to see why they would walk away, especially if the firm is paying dividends, which is enriching all shareholders, including the promoters and giving them enough cash to pursue whatever other aspirations they might have.

Most people, and most private equity funds and VC funds, aspire to that level of compounding decade after decade.

(As told to Satish John of Mint)

Saurabh Mukherjea is founder and chief investment officer at Marcellus Investment Managers, which holds 10% of its assets in Asian Paints. He is also the author of the book Unusual Billionaires, which featured Asian Paints.

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Updated: 28 Sep 2023, 11:29 PM IST