Dear Shareholders,
On 31st March, 2023, I completed one year as the MD of KNPL. I would like to express my
sincerest appreciation for the support and guidance extended to me during this period. As
we move into a new year, it is important to reflect on the challenges we faced and
opportunities we created. This annual report stands as a testament to our achievements,
offering valuable insights into the current state of our business and outlining our
visionary outlook for the future.
Organisation Philosophy - People
The Company embarked on a transformative journey in the past year, placing its
employees at the heart of every endeavour. The core philosophy being that the
Company’s success is strongly connected with its employees’ well being and
growth. Happy employees are more engaged, more productive, have a positive outlook on
one’s work, and contribute better to stakeholder satisfaction. Multiple interventions
were conducted throughout the year to ensure high employee involvement, participation and
engagement in the corporate agenda. As a result, internal surveys indicated a significant
uptick in the internal ‘Employee Happiness’ measured during the year.
Culture of Innovation, Collaboration & Empowerment
I personally believe that culture plays a very important role in shaping the
organisations future. We adopted a culture of innovation, collaboration and empowerment
and took a series of initiatives to build it. Several innovation workshops were conducted
with employees. Idea generation sessions were conducted and cross-function teams were
deployed to implement the identified ideas. The cross-functional approach led to higher
collaboration. During the year, there were several strategy projects identified by the
Company. Employees were entrusted with these projects and were empowered to take decisions
to drive them. During the process, both the individual employee as well as the team of
employees had an experience which capitalised on their expertise and judgement. Thereby
increasing their commitment to the organisation and aiding them to feel empowered and
motivated.
Economic & Business Scenario
In the last few years, businesses have experienced both the highs and lows of the
macroeconomic situations. Inflation on account of material prices peaked and then started
to mellow down during the year. Supply chain challenges eased out, but pockets of
disruptions continued. Volatility in currency also played out during the year and
witnessed a significant Rupee Vs US Dollar peaking. While crude oil prices continued to
decline, the situation seemed volatile due to various geopolitical events playing out.
In India, infrastructure spending, healthy demographics, and push for real estate and
housing supported the paint demand. The Automotive industry recovered from chip shortages
and exhibited strong demand. Services started emerging as an important element in
satisfying end-consumer needs.
Performance Overview
KNPL experienced robust growth across various segments and successfully expanded its
product portfolio, distribution reach, dealer network, and influencer programs.
The Automotive business showcased outstanding demand, while the Performance Coating and
Auto Refinish markets also experienced healthy growth.
In the Decorative business, we observed strong demand in the Projects segment and for
Wood-finishes, Waterproofing, and Construction chemicals. Additionally, our services
offerings was expanded to more cities, receiving a highly positive response from
consumers.
Moreover, we made concerted efforts to promote and sell premium products in both the
Decorative and Industrial sectors. As a result, our topline recorded an impressive
increase of 19%.
On the profitability side, the Company implemented a series of measures. These included
judicious cost control measures, collaborative efforts with value chain partners, price
increase initiatives, and strategically exiting from low-margin product
The board has recommended a dividend of 270% for FY23. portfolios. As a result of these
actions, we achieved significant improvements in financial performance. Notably, our
EBITDA witnessed a remarkable growth of 22.6%, while our PAT experienced an impressive
surge of 29.9%. Reflecting our strong financial position, the board recommended a dividend
of 270% for FY 2022-23.
The Nerolac Story - Our Strengths
With a rich legacy spanning 100 years, the Company boasts a diverse portfolio of
products catering to a wide range of segments within decorative and industrial coatings.
Through our painting solutions, we provide ‘Beauty and Protection’ to everything
that a household uses on a daily, be it paints for homes (Interior & exterior, wood
finishes), automobiles (4-wheeler, 2-wheeler), consumer durables (fans, microwaves,
refrigerators, washing machine), personal use articles (hair clips), and transportation
infrastructure (bridges, metro rail). This is why we say ‘There is a little bit of
Nerolac in everybody’s life’.
Nerolac brand is the 2nd strongest brand in the industry. The enduring Nerolac jingle
continues to strike a chord with consumers, forging a connection that echoes our
illustrious legacy. The Company has strong tie-ups with overseas companies to develop the
best solutions for customers. Through relentless innovation, we strive to introduce
pioneering products that set new benchmarks in the market. Leveraging Japanese technology,
KNPL delivers these distinctive offerings and tailored solutions to cater to the evolving
needs of our customers.
Strategy
In the realm of our Industrial business, where we proudly hold a leadership position,
our primary focus is to achieve profitable growth across all the segments we serve.
To drive this objective, we have introduced cutting-edge technologies such as tin-free
CED and Medium Solid base coats in the Automotive sector. We have made substantial
progress in the new and rapidly growing Electric Vehicle segment.
In the Auto Refinish sector, our emphasis lies on expanding our market share through an
extensive network expansion. In Performance and Powder Coatings, multiple initiatives have
been planned and launched around expanding our product portfolio based on superior
technology. Our access to advanced technology and approvals, facilitated by our
association with Kansai Paint, its entities, and other technical collaborators, has
enabled us to enter new segments and secure approvals from customers within those
segments. We have set a series of initiatives to improve the share of premium products in
the portfolio. We have also consciously exited from low-profitable segments. We
collaborated with customers to deliver sustainable products that fulfil their unique
requirements.
The Company’s growth strategy focusses on delivering a unique customer experience
through NXTGEN painting service, consultation services, increased engagement with
painters, partnerships with architects and interior designers. In Decorative business, we
implemented collaborative strategies and invested in various initiatives to strengthen our
influencer and distribution network. Under the brand Expressions Paint+, the Company
developed unique-to-category products and democratised the segment by launching premium
features at popular price points. Our painter engagement programme ‘Pragati’ was
expanded to reach out to more painters and establish deeper connections with them. We
launched a unique loyalty programme ‘Illuminati’ for architects & interior
designers. The consumer journey was taken to the next level through our Nxtgen Painting
and consultancy services, which provided all services at the doorstep of the consumer with
just a click of a button. The Company expanded its geographical reach by adding more
retail touchpoints and experience stores - Nxtgen Shoppe.
To establish a deeper connection with consumers, the Company made strategic investments
in branding and media campaigns, ensuring a more prominent presence in the market. Various
channels were utilised to promote the brand and its products, including TV commercials,
print advertisements, outdoor hoardings, OTT platforms, and online advertising. A new TV
commercial featuring our brand ambassador Ranveer Singh was launched to promote the
Impressions range of products. Additionally, the Company sponsored prestigious events such
as the IPL (Indian Premier League) and Indian Idol, further enhancing its brand visibility
and reach.
Creating Digital Assets
The Company has made significant strides in the digital realm by launching multiple
digital platforms. These platforms cater to both internal and external stakeholders,
enhancing agility, operational efficiencies, visibility, and real-time information for all
parties involved.
Through the development of a comprehensive digital ecosystem, the Company offers
various applications that deliver a superior experience and enhanced visibility across the
entire value chain. Users, including consumers, can track every stage of the painting
cycle in their homes, starting from the expression of interest to its completion.
Additionally, the Company provides a range of online tools to assist consumers and
influencers in making informed decisions, as well as providing training and educational
resources.
Internally the Company has also launched several digital initiatives to drive value and
efficiency in the areas of manufacturing and logistics. In addition, the Company developed
mobile-based applications for its various go-to- market teams to improve agility.
Building Future Capabilities
To secure its operations, the Company has also invested in Business continuity. We have
invested in a green-field facility in Vizag to meet future demand in Decorative Business.
We have invested into resin manufacturing at Sayakha and emulsion manufacturing at
Amritsar, enhancing our capability to service better. On top of this, we are creating a
robust and responsive supply chain built on a strong IT backbone, ensuring our
customers’ continuity of supplies and business. Agility in replenishment lead time
and small order servicing are emerging focus areas. Planning and has set up a Far DR site
and continues to invest so as to strengthen its security architecture.
KNPL has a strong R&D setup with cutting-edge technologies in diverse business
segments and coating applications. We work closely with our customers to develop
customised solutions and focus on developing sustainable and environment-friendly products
and solutions. We engage with our overseas partners and develop new solutions.
Delivering Long-term Sustainable Value
At KNPL, sustainability is deeply ingrained in our business objectives. We prioritise
protecting and nurturing our triple bottom line of People, Planet, and Profit by adopting
sustainable growth practices. Our consistent focus on ESG ensures we are at the forefront
of sustainable practices. We have identified key materiality areas such as
de-carbonisation, resource use, quality of life, diversity, and governance to drive our
sustainability strategy.
We are committed to becoming a water-positive organisation in the upcoming year and
have become a TCFD supporter. Additionally, we have set carbon emissions reduction targets
for 2030 to limit global warming below 1.5 degree Celsius and submitted them for
validation to the Science Based Targets initiative (SBTi).
As a responsible corporate citizen, we are committed to several important initiatives.
These include providing eco-friendly products, promoting water neutrality, conserving
energy, mitigating climate change, decarbonising, supporting local communities, and
strengthening governance, compliance, and risk management functions. Our sustainability
framework is robust, and we continually seek ways to improve our sustainability efforts.
Through our sustainable practices, we are driving our sustainability efforts and
building a strong foundation for our business to continue generating value for years to
come. To learn more about our specific ESG initiatives, please refer to the later sections
of this integrated report.
Subsidiaries
Our domestic subsidiary Nerofix has become a wholly owned subsidiary of the Company
through the acquisition of 40% of shares of total shareholding from Poygel.
During the year, Nerofix top line grew significantly and also grew its EBITDA.
With regards to international subsidiaries, KNPL was able to turnaround its Sri Lankan
operations and gain market share despite a tough business and economic environment. While
it faced headwinds in Bangladesh, the company was able to get profitable growth. In Nepal,
the company was able to maintain momentum and ensure a healthy bottom line despite the
many challenges in the business climate this year.
Outlook and Way Forward
The business environment is changing more rapidly than ever. Considering the
geo-political tensions, material price movement and currency fluctuations, it is expected
to be challenging. Digitisation will continue to shape our business models and ways of
engagement with our stakeholders. Looking ahead, we will continue to prioritise employee
engagement and well-being, leveraging our strengths in digital platforms and innovation.
Our commitment to sustainability will drive long-term value creation while positively
impacting society and the environment. Through ongoing innovation and collaboration with
our esteemed customers, we endeavour to deliver meaningful value and foster mutually
beneficial partnerships.
I would like to express my heartfelt gratitude to our dedicated employees, who have
shown unwavering commitment and resilience in the face of challenging circumstances. Their
relentless efforts have been instrumental in driving our success. Additionally, I
sincerely appreciate our shareholders, whose trust and unwavering support have been
invaluable to us.
Anuj Jain
Managing Director.