Akzo Nobel

Akzo Nobel India reported a standalone revenue of ₹907.7 crore for Q3 FY26, representing an approximate 1% decline. However, on a like-to-like basis, excluding carved-out businesses such as powder coating, IRC, and certain exports (which impacted revenue by approximately ₹200 crores annually or ₹25 crores per quarter), the domestic business grew by almost 2%. The company achieved a blended volume growth of 6% across decorative and industrial segments, with the decorative segment showing a strong 8% volume growth. Gross margins were largely protected, improving by 80 basis points sequentially, and EBITDA stood at 14.9% before exceptional item^📎s. Excluding exceptional item^📎s, PAT grew by approximately 5.9% year-on-year.

Management emphasized a strategic shift towards prioritizing volume and revenue growth, moving beyond a sole focus on margins. Internal analysis revealed that the company's premium brands were previously overpriced by 5-9%, contributing to volume erosion. To counter this, strategic pricing adjustments have been implemented, particularly in the premium segment, aiming to regain market share and drive volume growth without significant margin dilution. This approach is designed to be intelligent and strategic, not merely tactical discounting.

The market continues to be highly competitive, with new entrants like Birla Opus offering prices 12-18% lower than existing players, alongside additional discounts and specific pack sizes (e.g., 3-liter). This aggressive pricing environment is expected to persist for another 2-3 quarters. Akzo Nobel is focusing on enriching its premium primers and strategically competing in the Mass Economy Primer (MEP) segment. The company plans to leverage its product quality and scientific approach to maintain its position, acknowledging that pricing is a key lever but not the sole driver for growth.

Following the acquisition of the decorative IP in June 2025, the Dulux brand is now owned by Akzo Nobel India Limited, and the company is integrating with the JSW Group. Management expressed a clear intent to become a top player in the Indian paints market, aiming for the number two position within 3-4 years. While specific revenue synergies are still being evaluated due to confidentiality, potential areas include leveraging JSW's strong presence in southern markets and Akzo Nobel's strengths in other regions, as well as opportunities in industrial coatings. Cultural integration and talent retention are key focus areas for a successful merger.

The cessation of royalty payments for the decorative IP, now owned by the listed entity, is expected to result in annual savings of approximately ₹60-65 crores, depending on revenue trajectory. These savings are committed to be redeployed towards growth initiatives and market share expansion, rather than flowing directly to the bottom line. The company currently holds ₹200-225 crores in free cash, which is earmarked to fund future growth initiatives and CAPEX. For industrial coatings, Akzo Nobel will continue its technological partnership and royalty payments as per previous agreements.

Akzo Nobel India currently operates with a strong distributor network, comprising 153 distributors, with over 82% having been partners for more than 10 years. While the distributor model has been effective since its implementation in 2013, management is now evaluating an optimal mix of direct and distributor models for certain markets. This strategic review aims to further invest in the brand and drive off-take, particularly when competing with larger players. A decision on the best model is expected within a couple of quarters.

After a subdued October, influenced by rain and an early Diwali, demand for decorative paints rebounded significantly in November. Management anticipates Q4 FY26 to be a 'pretty strong quarter from a volume perspective' for the decorative segment, provided there are no unforeseen external events or climate impacts. This positive outlook aligns with broader industry expectations, suggesting a favorable demand environment for the upcoming quarter and continued recovery in consumer spending.