Kansai Nerolac paints held a conference call on 3 August 2022 to discuss the results for the quarter ended June'22 and way forward. Mr. Anuj Jain- Managing Director, Mr. Prashant Pai- Director (Finance), Mr. Jason Gonsalves- Director (Corporate Planning, IT & Materials) of the company addressed the call.

Highlights of the Concall

• The company recorded top line growth of 47.1% in Q1FY23 compared to Q1FY22. Industrial growth is slightly higher than decorative growth.

• Overall volume growth was more than double digit in Q1FY23.

• The company has taken approximately 2% price increase in Q1FY23.

• The company had increased its market share in industrials in FY22 and that trend continues.

• The company had taken 18% price hike in FY22 which was also not adequate to mitigate the inflation.

• The company had been earlier extending technologically superior products like Monocoat, medium to high solids. And in addition, it has expanded its range to very high technology product, which really helps customers in terms of their Capex goes down and is energy efficient. So it is environment friendly and also it helps in terms of reducing the cost and increasing the productivity atbthe customer front. Margins are better for these products.

• The company exited around 10% of its performance coatings businesswhere it was very low margins and increased its focus towards high-technology products where the margins are better.

• The company also left around 30% of its business in coil coatings where it was not profitable and moved towards higher margin technology products and appliances.

• The company has also introduced superior products in powder coating business where it is a market leader but has a lower market share in premium category

• The company also launched differentiated products in decorative segment. Mica marble strech and sheen which was launched in Q4FY22 is now available all India. The company also introduced Nerolac impression Kashmir and polyresin enamel in Q1FY23.

• The company had higher market share in relatively economy and popular category but weak in premium category. So it plans to add more and more products every quarter in premium and super premium category.

• The company has doubled its sales in project institutional business in Q1FY23.

• Decorative segment forms around 55% of revenues while industrials form around 45% of total revenues. Within Industrial 70% revenues is auto and 30% is non auto.

• The company mentioned that it had reduced marketing expenditure in last few years which impacted its sales but it shall now increase the marketing expenditure.

• The company distribution reach was around 27000-28000 total dealers at the end of FY22 and growth in last 2-3 years was around 7-8%. In Q1 growth in distribution was higher than double digit.

• Capacity utilization was around 64-65% in Q1FY23.

• The company has approved two capex projects of Rs 290 crore, both in decorative segment which will happen over a period of 25-30 months. For industrial and automotive, it has the capacity for the next 2-3 years.