BOARD'S REPORT

Dear Members,

Your Directors have pleasure in presenting the 70th Annual Report of your Company for the financial year ended 31st March, 2016.

OVERVIEW OF COMPANY'S FINANCIAL

PERFOMANCE

Net revenue from operations on standalone basis increased to Rs. 12,645.88 crores as against Rs. 11,648.83 crores in the previous year - a growth of 8.6%. The performance includes results of bath business acquired in June, 2014. Cost of goods sold as a percentage to net revenue from operations decreased to 51.6% as against 55.3% in the previous year. The decrease is on account of reduction in key raw material prices on the back of significant drop in crude prices. Employee cost as a percentage to net revenue from operations increased to 5.3% 664.20 crores) against 5.2% 606.94 crores) in the previous year. Other expenses as a percentage to net revenue from operations increased to 23.5% 2,972.55 crores) as against 22.2% (Rs. 2,591.52 crores) in the previous year.

Your Company has made an assessment of the fair value of investment made in its subsidiary, Sleek International Private Limited ('Sleek') taking into account the past business performance, prevailing business conditions and revised expectations of the future performance given the understanding built up since acquisition. Based on above factors and as a matter of prudence, your Company has made a provision for diminution in the value of investment made in Sleek to the tune of Rs. 65.30 crores in the year ended 31st March, 2016. The same is disclosed under "Exceptional items" in the Statement of Profit and Loss. The details of "Exceptional items" are given in Note [51] to the Standalone Financial Statements and Note [28] to the Consolidated Financial Statements.

The Profit After Tax for the current year is Rs. 1,597.43 crores as against Rs. 1,327.40 crores in the previous year - a growth of 20.3%. The growth in profit is mainly driven by increase in net revenue from operations and softening of input prices during the year.

On a consolidated basis, your Company achieved net revenue of Rs. 15,534.14 crores as against Rs. 14,182.81 crores - a growth of 9.5%. Net profit after minority interest for the group for the current year is Rs. 1,726.21 crores as against Rs. 1,395.15 crores in the previous year - a growth of 23.7%.

There are no material changes and commitments affecting the financial position of your Company which have occurred between the end of the financial year 2015-16 and the date of this report.

CONSOLIDATED ACCOUNTS

The Consolidated Financial Statements of your Company for the financial year 2015-16 are prepared in compliance with applicable provisions of the Companies Act, 2013 read with the Rules issued there under, applicable Accounting Standards and the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as the "Listing Regulations"). The consolidated financial statements have been prepared on the basis of audited financial statements of your Company, its subsidiaries and associate companies, as approved by the respective Board of Directors.

SUBSIDIARIES

A separate statement containing the salient features of financial statements of all subsidiaries of your Company forms part of consolidated financial statements in compliance with Section 129 and other applicable provisions, if any, of the Companies Act, 2013. The financial statements of the subsidiary companies and related information are available for inspection by the members at the Registered Office of your Company during business hours on all days except Saturdays, Sundays and public holidays upto the date of the Annual General Meeting ('AGM') as required under Section 136 of the Companies Act, 2013. Any member desirous of obtaining a copy of the said financial statements may write to the Company Secretary at the Registered Office of your Company. The financial statements including the consolidated financial statements, financial statements of subsidiaries and all other documents required to be attached to this report have been uploaded on the website of your Company (www.asianpaints.com).

During the financial year 2015-16, M/s. Kitchen Grace (India) Private Limited, wholly owned subsidiary of Sleek, has merged with Sleek pursuant to an Order dated 12th February, 2016 passed by the Hon'ble High Court of Bombay. The said Order was filed with the Registrar of Companies, Maharashtra at Mumbai on 30th March, 2016 making the Order effective from the appointed  date of 1st April, 2015.

M/s. Multifacet Infrastructure (India) Limited, your Company's wholly owned non-operative subsidiary, has on 21st March, 2016, filed an application with the Registrar of Companies, Pondicherry, for striking off its name from the Register under Fast Track Exit mode pursuant to Section 560 and any other applicable provisions of the Companies Act, 1956 (including any statutory modification(s) or re-enactment(s) for the time being in force).

The financial performance of each of the subsidiaries and joint venture companies included in the consolidated financial statements of your Company is set out in the Annexure [A] to this Report. Additional details of the performance and operations of the subsidiaries and joint venture companies along with details of the restructuring and investments made by your Company are set out in the Management Discussion and Analysis which also forms part of this report.

MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis forms an integral part of this report and gives details of the overall industry structure, economic developments, performance and state of affairs of your Company's various businesses viz., the decorative business, international operations, industrial and home improvement business, internal controls and their adequacy, risk management systems and other material developments during the financial  year 2015-16.

DIVIDEND

During the financial year 2015-16, your Company declared and paid an interim dividend of Rs. 2.20 (Rupees two and paise twenty only) per equity share of the face value of Rs. 1 (Rupee one) each in the month of October, 2015. In addition, your Directors recommend payment of Rs. 5.30 (Rupees five and paise thirty only) per equity share of the face value of Rs. 1 (Rupee one) each as final dividend for the financial year 2015-16, for the approval of the shareholders at the ensuing AGM. If approved, the total dividend (interim and final dividend) for the financial year 2015-16 will be Rs. 7.50 (Rupees seven and paise fifty only) per equity share of the face value of Rs. 1 (Rupee one) each as against the total dividend of Rs. 6.10 (Rupees six and paise ten only) per equity share of the face value of Rs. 1 (Rupee one) paid for the previous financial year 2014-15.

PUBLIC DEPOSITS

During the year under review, your Company has not accepted any deposit within the meaning of Sections 73 and 74 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 (including any statutory modification(s) or re-enactment(s) for the time being in force).

CORPORATE GOVERNANCE REPORT

In compliance with Regulation 34 of the Listing Regulations, a separate report on Corporate Governance along with a certificate from the Auditors on its compliance, forms an integral part of this report.

BUSINESS RESPONSIBILITY REPORT

A Business Responsibility Report as per Regulation 34 of the Listing Regulations, detailing the various initiatives taken by your Company on the environmental, social and governance front forms an integral part of this report.

INDUSTRIAL RELATIONS

Your Company has always considered its workforce as its valuable asset and continues to invest in their excellence and development programs. Your Company has taken several initiatives for enhancing employee engagement and satisfaction.

During the financial year 2015-16, a strike was called on 28th April, 2015 at your Company's plant situated at Sriperumbudur, Tamil Nadu, leading to cessation of work by the operators belonging to Asian Paints Employees' Union. The operations at the said plant returned to normalcy by 10th July, 2015. During the period of strike, the markets were continued to be serviced from other manufacturing facilities of your Company.

The industrial relations in respect of all other manufacturing facilities and divisions of your Company are normal.

APPOINTMENT OF M/S. TSR DARASHAW LIMITED AS THE REGISTRAR & TRANSFER AGENT OF  YOUR COMPANY

During the financial year 2015-16, your Company discovered certain irregularities at M/s. Sharepro Services (India) Private Limited (hereinafter referred to as "Sharepro"), your Company's erstwhile Registrar & Transfer Agent, with regard to share related and dividend encashment activities. After conducting preliminary investigation, your Company filed a criminal complaint against Sharepro and some of its employees and terminated its services.

The Board of Directors of your Company, at their meeting held on 14th March, 2016, approved the appointment of M/s. TSR Darashaw Limited, as the Registrar & Transfer Agent with effect from 1st April, 2016. Your Company has also sought your consent by way of its Postal Ballot notice dated 14th March, 2016, for shifting the Register and Index of Members and Returns pertaining to the period(s) on or after 1st April, 2003 from the office of Sharepro to the office of M/s. TSR Darashaw Limited.

The Register and Index of Members and Returns pertaining to the period(s) upto 31st March, 2003 would continue to be maintained at the Registered Office of your Company.

In accordance with the Interim Order dated 22nd March, 2016, issued by the Securities and Exchange Board of India (hereinafter referred to as "SEBI") against Sharepro and some of its employees, among other things, all client companies of Sharepro are required to conduct a thorough audit of the records and systems of Sharepro for the past ten years, concerning dividend payments  and transfer of securities to determine whether dividends have been paid to actual/beneficial holders and whether securities have been transferred as per the provisions of law. The audit is required to be completed within three (3) months from the date of the SEBI's Order and the report is required to be submitted to SEBI.

Accordingly, your Company has appointed M/s. Deloitte Touche Tohmatsu India LLP, Chartered Accountants, for conducting the audit and the same is in progress.

Your Company is committed to protecting the interests of its shareholders and has taken necessary steps as per the provisions of law against Sharepro and some of its employees.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Retirement by rotation and subsequent re-appointment:

Shri Mahendra Choksi and Shri Malav Dani, Non-Executive Directors, are liable to retire by rotation at the ensuing AGM pursuant to the provisions of Section 152 of the Companies Act, 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014 and the Articles of Association of your Company and being eligible have offered themselves for re-appointment. Appropriate resolutions for their re-appointment are being placed for your approval at the ensuing AGM. The brief resume of the Directors and other related information has been detailed in the Notice convening the 70th AGM of your Company. Your Directors recommend their re-appointment as Non-Executive Directors of your Company.

The Independent Directors of your Company hold office upto 31st March, 2019 and are not liable to retire by rotation.

Shri K.B.S. Anand, Managing Director & CEO and Shri Jayesh Merchant, CFO & Company Secretary, President - Industrial JVs, are the Key Managerial Personnel of your Company in accordance with the provisions of Sections 2(51), 203 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including any statutory modification(s) or re-enactment(s) for the time being in force).

Disclosure Relating to Remuneration of Directors, Key Managerial Personnel and particulars of Employees:

The remuneration paid to the Directors is in accordance with the Nomination and Remuneration Policy formulated in accordance with Section 178 of the Companies Act, 2013 and Regulation 19 of the Listing Regulations (including any statutory modification(s) or re-enactment(s) for the time being in force). The salient aspects covered in the Nomination and Remuneration Policy have been outlined in the Corporate Governance Report which forms part of this report.

The Managing Director & CEO of your Company does not receive remuneration from any of the subsidiaries of your Company

The information required under Section 197 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of Directors/ employees of your Company is set out in Annexure [B] to this report and is also available on the website of your Company (www.asianpaints.com).

Directors Responsibility Statement:

Pursuant to Section 134(3)(c) of the Companies Act, 2013 (including any statutory modification(s) or re-enactment(s) for the time being in force), the Directors of your Company confirm that:

(a) in the preparation of the annual accounts for the financial year ended 31st March, 2016, the applicable Accounting Standards and Schedule III of the Companies Act, 2013 (including any statutory modification(s) or re-enactment(s) for the time being in force), have been followed and there are no material departures from the same;

(b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company as at 31st March, 2016 and of the profit and loss of the Company for the financial year ended 31st March, 2016;

(c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 (including any statutory modification(s) or re-enactment(s) for the time being in force) for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) the annual accounts have been prepared on a 'going concern' basis;

(e) proper internal financial controls laid down by the Directors were followed by your Company and that such internal financial controls are adequate and operating effectively; and

(f) proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively.

Declaration of Independence:

Your Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under the provisions of the Companies Act, 2013 read with the Schedules and Rules issued thereunder as well as Regulation 16(1)(b) of Lisiting Regulations (including any statutory modification(s) or re-enactment(s) for the time being in force).

Evaluation of Board's Performance:

Pursuant to the provisions of the Companies Act, 2013 read with the Rules issued there under and the Listing Regulations (including any statutory modification(s) or re-enactment(s) for  the time being in force), the process for evaluation of the annual performance of the Directors/ Board/ Committees was carried out. The criteria applied in the evaluation process are detailed in the Corporate Governance Report which forms part of this report.

NUMBER OF MEETINGS OF THE BOARD AND ITS COMMITTEES

The details of the meetings of the Board of Directors and its Committees, convened during the financial year 2015-16 are given in the Corporate Governance Report which forms a part of this report.

AUDITORS AND AUDITORS' REPORT

Statutory Auditors:

At the 69th AGM of your Company, the shareholders had approved the appointment of M/s. B S R & Co. LLP, Chartered Accountants (Firm Registration No. 101248 W/W - 100022) as the Statutory Auditors to hold office till the conclusion of the  70th AGM.

The tenure of office of M/s. B S R & Co. LLP, Chartered Accountants, as Statutory Auditors of the Company will expire with the conclusion of 71st AGM of your Company. M/s. B S R & Co. LLP, Chartered Accountants, have been the Statutory Auditors of your Company since the financial year 2007-08.

In order to ensure smooth transition and handover, the Board of Directors of your Company at their meeting held on 18th January, 2016, have on the recommendations of the Audit Committee and subject to your approval at the ensuing 70th AGM, approved the appointment of:

(a) M/s. B S R & Co. LLP, Chartered Accountants, jointly with M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, as the Joint Statutory Auditors for the financial year 2016-17, till the conclusion of 71st AGM of your Company.

(b) M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration No. 117366W/W - 100018), as the Statutory Auditors, for a period of five (5) years i.e. from the conclusion of the 70th AGM till the conclusion of 75th AGM of your Company.

Your Company has received written consent(s) and certificate(s) of eligibility in accordance with Sections 139, 141 and other applicable provisions of the Companies Act, 2013 and Rules issued there under (including any statutory modification(s) or re-enactment(s) for the time being in force),  from both M/s. Deloitte Haskins & Sells LLP and M/s. B S R  & Co. LLP. Further, both have confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India (ICAI) as required under the Listing Regulations

The Statutory Auditors of the Company have not reported any fraud as specified under the second proviso of Section 143(12) of the Companies Act, 2013 (including any statutory modification(s) or re-enactment(s) for the time being in force).

The Auditors' Report for the financial year ended 31st March, 2016, does not contain any qualification, reservation or adverse remark.

Cost Auditor:

The Board of Directors of your Company, on the recommendations made by the Audit Committee at its meeting held on 11th May, 2016 has approved the appointment of M/s. RA & Co., Cost Accountants, (Firm Registration No. 000242) as the Cost Auditor of your Company to conduct the audit of cost records for the financial year 2016-17. The remuneration proposed to be paid to the Cost Auditor, subject to your ratification at the ensuing 70th AGM, would not exceed Rs. 5.50 lakhs (Rupees five lakhs fifty thousand only) excluding taxes and out of pocket expenses, if  any.

Your Company has received consent from M/s. RA & Co., Cost Accountants, to act as the Cost Auditor for conducting audit of the cost records for the financial year 2016-17 along with a certificate confiming their independence and arm's length relationship.

Secretarial Auditor:

In terms of Section 204 of the Companies Act, 2013, the Board of Directors of your Company at its meeting held on 11th May, 2016 has appointed Dr. K. R. Chandratre, Practicing Company Secretary (Certificate of Practice No. 5144), as the Secretarial Auditor to conduct an audit of the secretarial records, for the financial year 2016-17.

Your Company has received consent from Dr. K. R. Chandratre to act as the auditor for conducting audit of the Secretarial records for the financial year ending 31st March, 2017.

The Secretarial Audit Report for the financial year ended 31st March, 2016 is annexed herewith as Annexure [C] to this report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return as on 31st March, 2016 in Form MGT - 9 in accordance with Section 92(3) of the Companies Act, 2013 read with Companies (Management and Administration) Rules, 2014, are set out herewith as Annexure [D] to this report.

ADOPTION OF NEW ARTICLES OF ASSOCIATION OF YOUR COMPANY

During the financial year 2015-16, new Articles of Association of your Company were adopted in accordance with the provisions of the Companies Act, 2013 read with the Rules issued there under.

RELATED PARTY TRANSACTIONS

During the financial year 2015-16, your Company has entered into transactions with related parties as defined under Section 2(76) of the Companies Act, 2013 read with Companies (Specification of Definitions Details) Rules, 2014, all of which were in the ordinary course of business and on arm's length basis and in accordance with the provisions of the Companies Act, 2013, read with the Rules issued thereunder and the Listing Regulations. Further, there were no transactions with related parties which qualify as material transactions under the Listing Regulations.

All transactions with related parties were reviewed and approved by the Audit Committee. Prior omnibus approvals are granted by the Audit Committee for related party transactions which are of repetitive nature, entered in the ordinary course of business and are on arm's length basis in accordance with the provisions of Companies Act, 2013 read with the Rules issued thereunder and the Listing Regulations.

The details of the related party transactions as per Accounting Standard 18 are set out in Note [48] to the Standalone Financial Statements forming part of this report.

The Form AOC - 2 pursuant to Section 134(3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014 is set out as Annexure [E].

LOANS AND INVESTMENTS

Details of loans, guarantees and investments under the provisions of Section 186 of the Companies Act, 2013 read with the Companies (Meetings of Board and its Powers) Rules, 2014, as on 31st March, 2016, are set out in Note [41] to the Standalone Financial Statements forming part of this report.

RISK MANAGEMENT

Your Company has in place an enterprise-wide risk management (ERM) system which takes care of risk identification, assessment and mitigation. Compliance management has been significantly strengthened by the deployment of an integrated compliance management and governance framework.

As per the requirements of Regulation 21 of the Listing Regulations, your Company has constituted a Risk Management Committee to oversee the risk management efforts in your Company under the Chairmanship of Shri M.K. Sharma, Independent Director. The details of the Committee along with its charter are set out in the Corporate Governance Report forming part of this report.

Risk Management Committee reviews the process of risk management in your Company. The management periodically briefs the Committee on the emerging risks along with the risk mitigation plans put in place. Risk management is interlinked with the annual planning exercise where each function and business carries out a fresh risk identification, assessment and draws up treatment plans.

There are no risks which in the opinion of the Board threaten the existence of your Company. However, some of the risks which may pose challenges are set out in the Management Discussion and Analysis which forms part of this report.

VIGIL MECHANISM

Your Company is committed to highest standards of ethical, moral and legal business conduct. Accordingly, the Board of Directors have formulated a Whistle Blower Policy which is in compliance with the provisions of Section 177(10) of the Companies Act, 2013 and Regulation 22 of the Listing Regulations. Your Company has an ethics hotline managed by a third party which employees of your Company can use to report any violations to the Code of Conduct in an anonymous manner. In addition to the hotline, the third party also provides a portal wherein employees can raise any suspected or actual violations to the Code of Conduct. Specifically, employees can raise concerns regarding any discrimination, harassment, victimization, any other unfair practice being adopted against them or any instances of fraud by or against your Company.

Any incidents that are reported are investigated and suitable action taken in line with the whistle blower policy. The Whistle Blower Policy is also available on your Company's website (www.asianpaints.com).

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The CSR expenditure incurred by your Company during the financial year 2015-16 was Rs. 34.44 crores which was higher than the statutory requirement of 2% of the average profit for the last three financial years.

The CSR initiatives of your Company were under the thrust areas of health & hygiene, education, water management and enhancement of vocational training.

Your Company's CSR Policy statement and annual report on the CSR activities undertaken during the financial year ended 31st March, 2016, in accordance with Section 135 of the Companies Act, 2013 and Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed to this report as Annexure [F].

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as stipulated under Section 134 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, is set out herewith as Annexure [G] to this report.

DETAILS ON INTERNAL FINANCIAL CONTROLS RELATED TO FINANCIAL STATEMENTS

Your Company has put in place adequate internal financial controls with reference to the financial statements, some of which are outlined below.

Your Company has adopted accounting policies which are in line with the Accounting Standards prescribed in the Companies (Accounting Standards) Rules, 2006 that continue to apply under Section 133 and other applicable provisions, if any, of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and relevant provisions of the Companies Act, 1956, to the extent applicable. These are in accordance with generally accepted accounting principles in India. Changes in policies, if any, are approved by the Audit Committee in consultation with the Statutory Auditors.

The policies to ensure uniform accounting treatment are prescribed to the subsidiaries of your Company. The accounts of the subsidiary companies are audited and certified by their respective Statutory Auditors for consolidation.

Your Company operates in SAP, an ERP system, and has many of its accounting records stored in an electronic form and backed up periodically. The ERP system is configured to ensure that all transactions are integrated seamlessly with the underlying books of account. Your Company has automated processes to ensure accurate and timely updation of various master data in the underlying ERP system.

Your Company has a robust financial closure self-certification mechanism wherein the line managers certify adherence to various accounting policies, accounting hygiene and accuracy of provisions and other estimates.

Your Company operates a shared service center which handles all payments made by your Company. This center ensures adherence to all policies laid down by the management.

Your Company in preparing its financial statements makes judgments and estimates based on sound policies and uses external agencies to verify/ validate them as and when appropriate. The basis of such judgments and estimates are also approved by the Statutory Auditors and Audit Committee.

The Management periodically reviews the financial performance of your Company against the approved plans across various parameters and takes necessary action, wherever necessary.

Your Company has a code of conduct applicable to all its employees along with a Whistle Blower Policy which requires  employees to update accounting information accurately and in a timely manner. Any non-compliance noticed is to be reported and actioned upon in line with the Whistle Blower Policy.

Your Company gets its Standalone accounts audited every quarter by its Statutory Auditors.

SIGNIFICANT/MATERIAL ORDERS PASSED BY THE REGULATORS

There are no significant material orders passed by the Regulators or Courts or Tribunals impacting the going concern status of your Company and its operations in future.

GENERAL

a) Your Company has not issued equity shares with differential rights as to dividend, voting or otherwise; and

b) Your Company does not have any ESOP scheme for its employees/Directors.

APPRECIATION

Your Directors wish to convey their gratitude and place on record their appreciation for all the employees at all levels for their hard work, solidarity, cooperation and dedication during the year.

Your Directors sincerely convey their appreciation to customers, shareholders, vendors, bankers, business associates, regulatory and government authorities for their continued support.

For and on behalf of the Board

Ashwin Choksi

Chairman

Place: Mumbai

Date: 11th May, 2016