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Paint Wars: ICI’s Bid to Purchase Asian Paints Introduction It was 8 AM on November 1st 1997, Raj Purohit, a new associate at Kotak Mahindra Capital Company (KMCC) was complaining about the traffic to a taxi driver as they were headed to the KMCC headquarters at Nariman Point, Bombay. Deep within, he knew that his frustrations were due to the events that had transpired during the last few months. During the last week Raj had studied all the company documentation and news articles regarding the ICI-Asian Paints fiasco. In particular, he had spent the last week studying the valuations, the business case, and the due-diligence report for ICI’s bid to purchase 9.1% of Asian Paints. After recently receiving his MBA from the Fuqua School of Business at Duke University, Raj had accepted an offer with KMCC in Bombay. KMCC is one of India’s largest full service financial institutions, and is the investment banking joint venture between Kotak Mahindra Finance Limited and Goldman Sachs Group. They serve more than 500 Indian and international firms and have more than 550 employees in 30 offices. After a brief training period Raj was assigned to the ICI team. Several thoughts and concerns raced through his mind as the taxi driver cut across four lanes all at once and made the rather sharp turn into ‘Nariman Bhavan’, the high-rise headquarters of KMCC. Raj was convinced that the valuation methodology used to price Asian Paints was flawed. As he thought back to his Emerging Markets class, he recalled the international finance principles instilled in him by his professor. At best, he would describe the KMCC methodology as na?ve. As he stood waiting for the elevator he rehearsed in his mind the conversation he was going to have with Mr. Win Erwee, the Director on the ICI team. Indian Economic Reform In 1991, Prime Minister P. V. Narasimha Rao began the process of economic reform. The previous $1.8 billion loan from the International Monetary Fund (IMF) had been exha