A water dispersion varnish suitable for electrodepositon is prepared by a process comprising reacting:The reaction product ofA. a polyesterimide having a carboxyl group in its chain or at the terminus of the chain and having an ester group and an imide group in its repeating unit or a polyesteramideimide having a carboxyl group in its chain or at the terminus of the chain and having an ester group, an imide group and an amide group in its repeating unit andB. an organic compound having at least two hydroxyl groups withC. a polybasic acid or its anhydride in the presence or absence of a solvent yielding a modified polyesterimide or polyesteramideimide;Dissolving said modified polyesterimide or polyesteramideimide in an organic solvent;Dispersing said modified polyesterimide or polyesteramideimide solution in an aqueous solution containing a surfactant and a volatile base; and removing the volatile components.