Nerolac Paints: Charting FY26 Growth and Margin Resilience

Ashwin Thakker

— 2 min read

Key Facts:

  • Sales Outlook:
    • Q2 FY26 expected to improve due to earlier Diwali and post-monsoon recovery.
    • H2 FY26 anticipates stable industry conditions and market share redistribution.
    • Decorative segment volume-value gap reduced, expected to maintain trend.
    • Industrial business supported by infrastructure focus.
    • International markets: Nepal strong, Bangladesh and Sri Lanka remain concerns, with Bangladesh contributing to losses.
    • Automotive OEM demand perceived as 'sluggish' by the company, despite Q1 market share gains.
  • Margin Outlook:
    • Commitment to maintain margins through a pass-through policy and strategic price increases.
    • Overall benign raw material prices, despite 1-1.3% inflation from TiO2 antidumping duty for decorative.
    • Targeting 13-14% margin expansion for FY26.

Kansai Nerolac Paints, a leading player, is proactively charting its course for FY26, emphasizing resilience amidst dynamic market conditions. The company's recent earnings call highlighted strategic plans to navigate competitive intensity and commodity price fluctuations. Their forward-looking commentary points to a clear focus on market share, margin expansion, and sustainable growth initiatives across segments.

Market Outlook and Segmental Performance

Kansai Nerolac Paints expects an improved Q2 FY26, partly due to an earlier Diwali and post-monsoon recovery. Management noted,

'Q2 looking slightly better also on account of an earlier Diwali.'

The company anticipates similar positive trends for the upcoming festive season in August and September. While the overall industry continues to grow at GDP rates, H2 FY26 is expected to bring more stable conditions and market share redistribution among existing players. New products are vital, contributing over 10% to decorative sales. The 'Paint as a Service' segment now accounts for 5% of total business. Internationally, Nepal shows strong performance, contrasting with challenges in Bangladesh and Sri Lanka, where Bangladesh contributed to a reported INR 11.9 crore loss this quarter.

Margin Strategy and Growth Drivers

The company maintains a strong focus on margin resilience. It employs a pass-through policy and will implement price increases if margins are compromised. Despite potential 1-1.3% inflation from TiO2 import antidumping duties, overall raw material prices are currently benign. Management stated,

'Raw material prices are benign.'

Kansai Nerolac is targeting a 13-14% margin expansion for FY26. Strategic initiatives like R&D-led formula optimization and significant investment in green energy, specifically solar and wind, are key to mitigating costs and enhancing profitability. These efforts underscore a balanced approach to growth, combining market adaptability with a focus on operational efficiency and environmental stewardship.

Kansai Nerolac Paints is navigating FY26 with a clear strategy focused on market growth, margin protection, and sustainable practices. Despite mixed regional and segment-specific challenges, the company's proactive approach to pricing, product innovation, and operational efficiency positions it for resilient performance. Their continued investment in green energy and customer-centric services underscores a commitment to long-term value creation and adapting to market shifts.

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