Kansai Nerolac Paints held a conference call on 03 November 2023 to discuss the results for the quarter ended September 23 and way forward. Mr. Anuj Jain, Managing Director, Mr. Prashant Pai, Director Finance and Mr. Jason Gonsalves, Director – Corporate Planning, IT & Materials of the company addressed the call.

Highlights of the Concall

• Decorative demand was subdued during the quarter mainly because of erratic monsoon and a delayed festival season. The company mentioned that generally whenever Diwali is in the month of November there's a shift of demand towards the third quarter.

• Industrial demand has been decent. In industrial automotive and liquid performance coating has registered good growth

• The quarter saw decent demand for automotive though it was lower than Q1. While demand for performance coatings was relatively better, demand for powder coatings remained subdued.

• Raw material prices were stable despite volatility in crude. Gross margins improved over the corresponding quarter last year. The company continues to make progress on various initiatives in the areas on feet-on-street, digital, influencer outreach, new product launches, approvals and projects and positive traction is seen in them. During the quarter, product mix improved due to sale of premium products.

• In decorative segment new product saliency is on an uptick. The company had introduced few products in last one year and those products have helped in increasing the mix of the premium items. So there has a there has been a positive change in the mix and this also helped maintaining the average selling price despite that there has been a demand of the lower end products also but this helped it in maintaining the average selling price in the quarter.

• The company continued the launches of some of the more unique products during the quarter. It introduced Beauty little Master Sheen which is a very unique product having an excellent Sheen. Generally the high Sheen is available in a very premium range.

• Passenger vehicle segment continued its steady growth trend at single digit which got carried forward from Q1 and it expects SUV and new model to continue to drive demand. The company saw notable growth in M&HCV segment. Two wheelers de-grew during the quarter while the company expects a better demand going forward. De-growth in tractor continues from Q1.

• The company saw good trajectory in premium segment in Auto refinish which is after paint market and improved its presence in A Class body shops

• In performance coating division which is a non-auto industrial category the company has gradually come out of businesses which have been very very low margins and focused on high technology products and premium. As a result salience from the premium business is increasing.

• Current capacity utilization was 65% and its expansion project at Visakhapatnam and Jainpur are on track. In the Tamil Nadu Hosur the expansion has been completed as per the plan.

• The company mentioned that there may be some impact in margins due to volatility in crude oil prices and forex in H2FY24. However it may be compensated with higher growth.