Kansai Nerolac Q1 FY 2026-27: Growth holds up, but pricing and competition stay tough

Kansai Nerolac Paints Limited reported a steady start to FY 2026-27, with growth supported by industrial demand and sustained investments in decorative distribution and new product launches. On a consolidated basis, net revenue rose to INR2,373.59 crore in Q1 FY 2026-27 from INR2,162.03 crore a year ago, a 9.8 percent increase. Profit after tax also moved up to INR228.41 crore from INR215.59 crore. Operating profitability was broadly stable, with PBDIT margin at 13.8 percent versus 14.0 percent last year.

Standalone numbers showed a similar picture. Net revenue grew 10.2 percent year on year to INR2,299.52 crore, while PAT increased to INR242.34 crore from INR230.85 crore. The company attributed the quarter’s margin profile to a combination of sharp raw material inflation, rupee depreciation, and the usual lag in industrial pricing pass through.

Management’s commentary was consistent on one point: competitive intensity in decorative paints remains high. At the same time, the company is choosing not to chase low margin volumes, focusing instead on premium mix improvement and conversion at retail counters.

A quarter shaped by macro headwinds and automotive demand

The company described six big themes in the operating environment: a significant rise in crude prices, sharp rupee depreciation, geopolitical disruptions linked to West Asia, good demand in automotive, continued government focus on infrastructure, and a delayed onset of monsoon.

These factors matter because a large portion of paint raw materials are crude linked, and several inputs and intermediates are imported. Management also highlighted that solvents saw significant inflation, and the company typically carries only around 15 days of solvent inventory, limiting the ability to smooth price spikes.

Despite this, Q1 remained growth positive. Management stated consolidated pricing in Q1 was about 5 percent, and indicated that additional pricing should flow through in Q2 for both decorative and industrial.

Decorative: premiumisation focus, but volumes remain softer

In decorative paints, management described growth as high single digit in value terms, but clarified that volume growth was low single digit. The reason given was strategic: the company is deprioritising low margin, high volume products to improve the mix toward premium emulsions.

The decorative strategy was presented as a six pillar approach covering new products, branding and media spend, projects business, influencer programs, construction chemicals (waterproofing and wood finishes), and network expansion with focus geographies. Execution is supported by internal systems such as CRM, scheme management, integrated business planning, and distributor management software.

There were also operational datapoints indicating distribution push:

• Dealers added in the quarter: 1,700 plus
• Project and institutional business: management reported double digit growth, with reach in 80 plus cities
• Services contribution: NXTGEN and AID services are said to contribute a mid single digit percentage to the decorative business

Retail formats expanded as well. The transcript cited 186 NXTGEN Shoppe stores, 275 Shop in Shop outlets, and 385 Nerolac Paint plus Zones.

New decorative products launched in the quarter were positioned around differentiated performance warranties:

• Excel Everlast 20: exterior paint with a 20 year performance warranty, positioned as an industry first
• Excel Total Floor Coat: premium water based exterior emulsion for floor tiles and cement surfaces with a 2 year performance warranty
• Perma NoDamp NXT: fibre reinforced elastomeric waterproof coating with a 10 year performance warranty

Management also pointed to large digital campaigns, including the Excel Everlast campaign and the No Heat campaign, and stated the company executed 160 plus out of home hoardings across 27 cities.

Industrial: strong segments, but price increases take time

Industrial coatings remain a structural strength for Kansai Nerolac, supported by global technology tie ups, including Japan. The company highlighted continued focus on innovation and technology development, including water based systems, high solids, and low bake technology.

Key industrial themes in the quarter included:

• Automotive coatings: management stated the auto segment witnessed strong growth and reiterated a thrust on EVs
• New segments: seam sealer and underbody black, alloy wheels, pretreatment and booth chemicals
• Performance coating liquids: management stated strong growth, led by construction equipment, drums and barrels, and coil coatings
• Powder coatings: described as robust growth, with strong demand in auto ancillary, AC and electrical segments; metallic powders were specifically mentioned as healthy
• Auto refinish: growth described as flattish; premium PU saw notable body shop wins, and the conversion from solvent borne to waterborne systems is progressing as planned

On pricing, management said industrial price increases are negotiated at a customer level. In response to a question, management indicated that the company had achieved about 5 percent industrial price increases so far, with further discussions expected to add more in Q2. Management also indicated that industrial pricing typically follows with a lag of one to two quarters.

Financial summary: growth positive, margins stable

Note: Source is the investor presentation tables; INR million converted to INR crore.

Capex and capacity expansion: INR600 crore over about two plus years

A key strategic announcement was capacity expansion across multiple plants.

• Sayakha plant: automotive, powder coating, resin
• Bawal plant: automotive
• Hosur plant: automotive

The presentation stated capacity expansion at these sites of about INR600 crore. The transcript cited INR601 crore. Total capacity addition was stated as 65,880 KL per year for paint plus powder and 9,780 KL per year for resin.

Management added that the INR600 crore capex would be spread over about two plus years. It also clarified that typical annual capex is about INR150 to INR200 crore, and that the INR600 crore program would be additive to that baseline.

On backward integration, management said the resin investment is effectively backward integration for automotive paint requirements, and also stated the company manufactures a full range of resins and intermediates for automotive coatings. However, it clarified that backward integration into raw materials is not planned at this stage.

Guidance, pricing and what to watch next

While the company did not offer a formal revenue or profit guidance range, management did provide directional and numeric comments on pricing and margins.

• Management said Q2 could see an additional 3 percent pricing flow through in decorative.
• Management also said industrial could see another 3 to 5 percent pricing in Q2.
• The company’s endeavour is to maintain FY27 margin levels, with a mid term endeavour to reach the higher end of 14 percent plus margins over the next 2 to 3 years.

Competition remains a key swing factor. Management stated that competitive intensity has not reduced, with no change observed in pricing discipline or schemes versus the prior year.

The near term setup therefore looks like this: industrial demand is supportive, decorative is being reshaped toward premiumisation, but margins will depend on how quickly pricing catches up with the sharp movement in crude linked inputs and the rupee.

Takeaway

Kansai Nerolac’s Q1 FY 2026-27 reflected steady growth in a difficult cost environment. The company is investing in distribution, premium product differentiation, and capacity expansion in industrial coatings. The biggest near term variables remain input inflation and the timing of price pass through in industrial, alongside a decorative market where competition and trade schemes continue to be intense.