Kansai Nerolac Paints Eyes Future Growth and Resilience

Ashwin Thakker

— 2 min read
  • Sales Outlook: The company anticipates improved Q2 sales driven by the festive season. Industrial sales remain strong, supported by infrastructure. Decorative segment volumes are flat with a focus on premiumization. New businesses like waterproofing are key growth drivers, while international performance is mixed, with Bangladesh facing challenges.
  • Margin Outlook: Kansai Nerolac aims for a 13-14% EBITDA margin for FY26. Raw material prices are considered benign overall, but the anti-dumping duty on TiO2 imports is expected to add 1-1.3% inflation to decorative costs. Margin management will rely on a pass-through policy, R&D for cost optimization, and favorable product mix changes amidst competitive intensity.

Kansai Nerolac Paints, a prominent player in the Indian paint industry, is charting a strategic path forward despite current market complexities. Their recent earnings call highlighted a proactive approach to evolving demand, cost pressures, and competitive dynamics. The company outlined its vision for sales growth, margin management, and key strategic initiatives, focusing on maintaining resilience and leadership.

Kansai Nerolac anticipates an improved Q2, driven by the festive season expected to mirror last year’s trends in August and September. While the decorative segment sees stable volumes and a continued focus on premiumization, the industrial business remains robust, significantly aided by ongoing government infrastructure spending. Automotive demand, though described as sluggish relative to the company’s high market share, showed market share gains in Q1.

“quarter 2 should be better as far as decorative is concerned. It is also due to our Diwali being slightly ahead of time than last year.”

New business ventures, including construction chemicals, waterproofing, and premium wood finishes, are performing strongly, contributing significantly to overall sales. Regionally, the North market is performing well, with West showing improvement, but international markets like Bangladesh are currently underperforming, contributing to consolidated net losses. The company is actively working on corrective measures in these underperforming geographies.

Margin Resilience and Strategic Focus

The company’s commitment to maintaining margins is paramount, employing a pass-through policy to counter cost inflation. While raw material prices are generally benign, the anti-dumping duty on TiO2 imports is expected to add about 1% to 1.3% to decorative costs. R&D efforts in formula optimization are crucial for mitigating these cost increases. Kansai Nerolac aims for an EBITDA margin of 13-14% for FY26, with industrial segment margins expected to improve.

“Purely on titanium front, I think it should be contributing to about 1% to 1.3% of the inflation as far as decorative is concerned.”

Strategic investments in green energy, particularly solar and wind, alongside a strong water-positive status, underpin their ESG commitment. This focus on sustainability is expected to enhance long-term operational efficiency and brand value. Network expansion, with direct dealers now exceeding 30,000, and new product launches further strengthen their market presence and competitive edge.

Kansai Nerolac Paints is navigating a complex market with strategic clarity. Despite varied segment performances and cost pressures, the company's focus on premiumization, new business growth, cost management, and ESG initiatives positions it for sustained profitability. Their forward-looking commentary underscores a commitment to resilience and market leadership, adapting to dynamics while pursuing long-term objectives.

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