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Kansai Nerolac , amongst the largest paint-makers of the country, is witnessing recoveries in auto coatings sales over the last three months. As a rebound in the paint industry happens, post Unlocking, the company is confident of reporting “double digit growth” for FY-21.
Decorative paints continue to be a growth driver, with rural sales outdoing urban markets for the time being. Urban markets – the primary consumption centres - are on a slow recovery track. Infrastructure and industrial paints, including sales for new real estate projects, continue to be sluggish.
Month-on-month improvement
According to HM Bharuka, Vice-Chairman and Managing Director, Kansai Nerolac Paints Ltd, there has been a “month-on-month improvement” in sales to the auto-OEM verticals. Although there is still a long way to go, the trend is a “positive one”.
In the passenger car and two-wheeler categories, few companies are doing well. The pandemic could in fact accelerate the need for own-vehicles, especially two-wheelers, as people continue to be afraid of contracting the virus while using public transport. However, commercial vehicle sales are on the slower side, he pointed out. Tractor sales have seen an increase.
“For the last 3-5 years, we were on a growth track there. However, the pandemic and financial crises hit the segment and paint-makers catering there. Some recovery is (being) witnessed and there is month-on-month improvement now,” Bharuka told BusinessLine .
Nerolac, which is celebrating 100-years of operations this year, has a strong salience towards decorative and auto-coatings paints. The two together account for majority of its turnover; with projects, infrastructure and general industry sales (which include sales to white goods makers) making up for the rest.
Volume growth
In decorative paints, a washout in April sales notwithstanding, the company saw double digit growth post May. Growth has continued in July and August, indicating sales to be above pre-Covid levels.
With work-from-home and semi-urban areas witnessing a lesser virus-load, repainting demand is expected there (people moving in from cities to smaller hometowns), say market sources. Low penetration of paints in rural areas gives additional scope to larger players.
“Q2 volumes (July-September) are expected to be higher than Q1 (April –June),” Bharuka said, adding: “If you look at our Q1 numbers, then decorative paints saw a double digit growth and there was a negative growth into auto and general industry paint segments. Now growth is being seen in decorative and to auto OEMs also. White goods demand could pick up too in rural areas.”
Expansion plans
Strong focus is put on new segments such as coil coatings, construction chemicals and adhesives. Safe home painting options are being pushed too. Marketing spends at 4-5 per cent of turnover will continue as Nerolac intends to gain market share with new offerings like anti-viral paints.
The company has put on hold its ₹350-crore Greenfield expansion plans in Vizag. Construction will begin “sometime in 2021”. However, other scheduled expansion at Gujarat and Punjab plants will continue at a proposed cost of ₹200 crore.
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