Kansai Nerolac Paints Limited — Q1 FY26 earnings call

Call held 5 Aug 2025

Management summary

Kansai Nerolac reported a muted Q1 FY26, characterized by flat volumes in the decorative segment due to early monsoons and regional disturbances in North India. While the industrial segment showed resilience with market-leading growth in automotive, overall profitability was pressured by a poor product mix and operating leverage loss. Management remains cautiously optimistic about Q2, citing an early festive season and signs of dealers returning from new competitors.

Highlights

  • Consolidated revenue grew by 1.4% YoY, while standalone revenue increased by 1.8%.

  • Standalone EBITDA declined by 6.7% and PBT fell by 4.1% YoY.

  • Decorative segment volume was flat, with value degrowth in the lower single digits.

  • Industrial segment volume grew in the higher single digits, outperforming the market.

  • Paint+ product range now contributes more than 12% of total decorative sales.

  • Consolidated subsidiaries reported a net loss of ₹11.9 crores, primarily driven by challenges in Bangladesh.

  • Capitalized Jainpur water-based facility, adding 44,000 KL of capacity.

  • Management guided for a full-year EBITDA margin of 13% to 14% for FY26.

Concerns

  • Anti-Dumping Duty on Titanium Dioxide (TiO2)

  • Bangladesh Subsidiary Performance

  • Competitive Intensity in Decorative

Key financials

  1. Revenue Growth (Consolidated) 1.4% +1.4%YoY
  2. EBITDA Growth (Standalone) -6.7% -6.7%YoY
  3. PBT Growth (Standalone) -4.1% -4.1%YoY
  4. Subsidiary Net Loss ₹11.9 Cr
  5. EBITDA Margin (Standalone) 12.8%

What they filed

Q1 FY27: revenue up 10.2%, net profit up 4.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,864 1,842 1,740 2,087 1,871 +0%1,907 +4%1,873 +8%2,300 +10%
EBITDA215 247 178 312 212 −1%247 +0%215 +21%336 +8%
Net profit130 526 123 231 137 +5%131 −75%121 −2%242 +5%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Decorative
    0% Volume Growth-2% Value Growth12% Paint+ Contribution
  • Industrial
    8% Volume Growth5% Auto Growth Guidance

Guidance & targets

Margin

  • EBITDA Margin Margin · FY26 · Medium confidence 13% to 14%
    So Keyur, our objective is that and -- but as far as this year is concerned, I think still we should be 13% to 14%, looking at the current competition -- state of competition.

    — Pravin Chaudhari, Managing Director

Volume

  • Auto Segment Growth Volume · FY26 · Medium confidence mid-single digit
    So I think as far as auto is concerned, we expect now growth to be in mid-single digit.

    — Pravin Chaudhari, Managing Director

  • Non-Auto Industrial Growth Volume · FY26 · Medium confidence higher single digit or double digit
    And as far as non-auto, which is our industrial segment, I think it should be higher single digit or just touching about double digit.

    — Pravin Chaudhari, Managing Director

Other

  • TiO2 Inflation Impact Other · Short term · High confidence 1% to 1.3%
    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.

    — Pravin Chaudhari, Managing Director

Risks & concerns

  • Anti-Dumping Duty on Titanium Dioxide (TiO2)

    high

    ADD on Chinese TiO2 has already started impacting the quarter, estimated to add 1-1.3% to decorative inflation.

    Management acknowledged

  • Bangladesh Subsidiary Performance

    high

    Bangladesh continues to be a major challenge and a primary contributor to the ₹11.9 crore subsidiary loss.

    Both acknowledged

  • Competitive Intensity in Decorative

    high

    Analysts questioned the impact of new players' aggressive incentives; management claims dealers are already returning.

    Analyst downplayed

  • Geopolitical Tension and Supply Chain

    medium

    Volatility in commodity prices and forex, especially since 30-35% of metal/raw materials are imported.

    Management acknowledged

Areas of evasion (2)

  • Specific quantum of incentive increases for painters/influencers.
  • Detailed regional performance beyond North and South.

Q&A highlights

2 direct
Volume vs Value Gap in Decorative Direct
So as I mentioned earlier, our volume has been pretty flat, and our value degrowth was in the lower single digit.

Confirms that the company is facing pricing pressure or a shift toward economy products, leading to value erosion despite stable volumes.

Asked by Ajay Thakur, Anand Rathi Securities

Response to New Competition (10% Extra Grammage) Direct
Our response is not in terms of offering anything free, but it is in terms of offering a better product... whatever action we have taken is doing pretty good. And that is part of our Paint+ product.

Management is choosing to compete on product performance (Paint+) rather than matching the aggressive free-volume tactics of new entrants like Birla Opus.

Asked by Avnish Roy, Nuvama Institutional Equity

Dealers Returning to Nerolac Partial
In fact, many dealers of ours who started batting with competition has now started coming back to us... they are realizing power of Nerolac brand as well as groundwork that our team does.

Suggests that the initial disruption from new competitors may be stabilizing as dealers find the new offerings difficult to sustain or less profitable in the long run.

Asked by Tejash Shah, Avendus Spark

2 min read 5 chapters

Detailed narrative

Industrial Segment Outperforms Decorative

While the decorative segment struggled with flat volumes and lower-single-digit value degrowth, the industrial segment remained a bright spot. Automotive coatings achieved market-leading growth despite a sluggish broader auto market, and protective coatings grew faster than the industry average. Management expects this momentum to continue, guiding for mid-single-digit growth in auto and potential double-digit growth in non-auto industrial segments for the remainder of FY26.

Competitive Dynamics and Dealer Retention

A significant portion of the call focused on the entry of new players (Birla Opus) and their '10% extra grammage' strategy. Management asserted that they are not matching these free-volume offers, instead relying on their 'Paint+' range which offers superior coverage and performance. Crucially, they claimed to see a 'reversal' where dealers who initially experimented with new competitors are now returning to Nerolac due to brand strength and service reliability.

Raw Material Headwinds: The TiO2 Factor

Management highlighted a new risk in the form of anti-dumping duties on Chinese Titanium Dioxide (TiO2). This is expected to contribute approximately 1% to 1.3% to cost inflation in the decorative segment. While crude oil derivatives remain benign, the company is actively using R&D for formula optimization to mitigate these rising costs, though price hikes may be considered if margins are further compromised.

International Subsidiary Struggles

The consolidated performance was dragged down by a ₹11.9 crore net loss from subsidiaries, with Bangladesh identified as the primary culprit. The discretionary nature of paint makes it highly susceptible to the current economic instability in that region. While Nepal continues to perform well, Sri Lanka remains a concern, mirroring the broader macroeconomic challenges in South Asian markets outside of India.

Premiumization Strategy via Paint+

Kansai Nerolac continues to pivot toward premiumization to combat competitive intensity. The 'Paint+' range, which includes innovative products like 'No Heat' and 'Rain Raksha', now accounts for over 12% of decorative sales. Additionally, 'Paint as a Service' has grown to contribute 5% of total business, indicating a strategic shift toward direct consumer engagement and value-added services.

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