Kansai Nerolac Paints Limited — Q4 FY25 earnings call

Call held 7 May 2025

Management summary

Kansai Nerolac reported modest growth in a challenging environment characterized by intense competition in the decorative segment and volatile raw material costs. While the industrial business remains a dominant growth driver, the company is pivoting its decorative strategy toward 'Paint+' premiumization and digital-first marketing to protect market share. Management is maintaining a cautious but optimistic outlook, supported by capacity expansions and a stable 13-14% margin guidance.

Highlights

  • Standalone revenue grew 4.7% in Q4 FY25; full-year standalone growth stood at 1.4%.

  • Consolidated net revenue for Q4 increased by 2.7%, while full-year consolidated growth was 0.3%.

  • Standalone PBDIT saw a slight dip of approximately 4.8% for the full year FY25.

  • Paint+ (premium differentiated range) achieved double-digit salience, improving by 190 bps over the last year.

  • Dividend maintained at 375%, reflecting organizational confidence despite competitive pressures.

  • Manufacturing capacity exceeds 600 million litres with the commissioning of Vizag Phase 1 and upcoming Jainpur expansion.

  • Industrial segment remains a stronghold with double-digit growth in 2-wheelers and 3-wheelers.

  • Management provided EBITDA margin guidance of 13-14% for the upcoming fiscal year.

Concerns

  • Rupee Depreciation

  • Competitive Intensity in Decorative

Key financials

2 periods

Headline

  • Standalone Revenue Growth (FY)
    1.4%
    YoY +1.4%
  • Standalone PBDIT Growth (FY)
    -4.8%
    YoY -4.8%
  • Dividend
    375%
    YoY 0%

Q4

  • Standalone Revenue Growth
    4.7%
    YoY +4.7%
  • Consolidated Revenue Growth
    2.7%
    YoY +2.7%

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
    190 bps Paint+ Salience Improvement20 New Product Launches
  • Industrial
    6% Passenger Vehicle Segment Growth0.1 double-digit 2W and 3W Segment Growth

Guidance & targets

Margin

  • EBITDA Margin Margin · FY26 · High confidence 13-14%
    I think next year, I think our guidance has been always 13 to 14. I think we stick to that.

    — Mr. Pravin Chaudhari, Managing Director

Volume

  • Volume Growth Volume · Q4 FY25 - Q2 FY26 · Medium confidence mid-single digit
    our estimate is that it will be about mid-single digit volume growth is our expectation. As far as quarter one and quarter two concern, it should be in the same range.

    — Mr. Pravin Chaudhari, Managing Director

Revenue

  • Decorative Growth Revenue · H2 FY26 · Medium confidence Better than H1
    So, I think 2nd half will be definitely better compared to I think first half as far as decorative is concerned.

    — Mr. Pravin Chaudhari, Managing Director

Risks & concerns

  • Rupee Depreciation

    high

    Management identified the sharp decline in the rupee and forex volatility as a primary risk offsetting raw material benefits.

    Management acknowledged

  • Competitive Intensity in Decorative

    high

    The entry of Birla Opus and JSW Paints is forcing higher upfront investments in advertising and influencer programs.

    Both acknowledged

  • Subsidiary Performance Stress

    medium

    Local issues in Sri Lanka and Bangladesh are creating stress on consolidated results.

    Management acknowledged

Areas of evasion (2)

  • Specific absolute margin differences between 2-wheelers and 4-wheelers.
  • Quantifiable impact of a $10 crude correction on EBITDA margins.

Q&A highlights

2 direct
EBITDA Margin Contraction since 2019 Direct
EBITDA margin contraction... has been primarily driven by the RM thing... and in decorative, obviously, because of competitive competition intensity being very high, there has been lot of upfront investment.

Explains the structural pressure on margins from both raw material inflation and the need to defend market share against new entrants.

Asked by Avi Mehta, Macquarie Group

Competition from Birla Opus Direct
No, they copied our strategy. Right? I mean, we are here for the last 3, 4 decades and our old GTM was exactly the same what possibly they copied... Now the question is, how long you sustain.

Management dismisses the uniqueness of the new competitor's strategy, suggesting that sustainability of high-spend entry tactics is the real challenge.

Asked by Unidentified Participant

Crude Oil Price Benefit Partial
Whatever crude benefit that we got actually got offsetted by the dollar... it is very difficult to know that whether it will be sustained or whether dollar will be where it is.

Highlights that gross margin expansion from lower crude prices is currently being neutralized by currency depreciation.

Asked by Ajay Thakur, Anand Rathi Securities

2 min read 5 chapters

Detailed narrative

Industrial Dominance and Automotive Recovery

Kansai Nerolac continues to leverage its position as the undisputed leader in the industrial segment, which accounts for roughly 30-50% of its business depending on the metric. The company saw double-digit growth in the 2-wheeler and 3-wheeler segments, while passenger vehicles grew by 6% in line with SIAM reports. Management is focusing on premiumizing industrial coatings, particularly in the railway segment, where more sophisticated, high-warranty paints are being requested.

Defending Decorative Turf Against New Entrants

With the entry of Birla Opus and JSW Paints, Nerolac is focusing on its strongholds in North and East India. Management noted that while competitors are 'copying' their Go-To-Market strategy, Nerolac's 100-year legacy and brand awareness (ranked No. 2) provide a significant moat. To counter competition, the company is shifting ad spend toward targeted digital platforms rather than mass media, maintaining overall spend levels while increasing efficiency.

The 'Paint+' Premiumization Pivot

A key pillar of the decorative strategy is the 'Paint+' range, which focuses on Japanese technology and differentiated product features. This range now has double-digit salience and grew by 190 basis points in the last year. By launching 20+ new products annually, Nerolac aims to move away from pure commodity pricing and improve realizations, helping to narrow the volume-value gap that has plagued the industry.

Capacity Expansion and Digitalization

The company is aggressively expanding its manufacturing footprint, with total capacity now exceeding 600 million litres. The Vizag plant Phase 1 is commissioned, and expansion at Jainpur is nearing completion. Beyond physical capacity, Nerolac is implementing a 'whole new digital solution' for its supply chain and has reinvented its dealer app to improve agility and vendor procurement.

Margin Stability Amidst Macro Volatility

Despite a 100 bps margin contraction since 2019, management has guided for a stable 13-14% EBITDA margin for FY26. While crude oil prices have softened to the $60-65 range, the benefits are currently being offset by rupee depreciation and the need for high marketing investments. Management expects the 'volume-value gap' to continue improving as the competitive intensity eventually settles.

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