KANSAI NEROLAC PAINTS LIMITED (NSE: KANSAINER) Q1 2026 Earnings Call dated Aug. 05, 2025
Corporate Participants:
Unidentified Speaker
Pravin Digambar Chaudhari — Managing Director
Jason Gonsalves — Director – Corporate Planning IT & Materials
Yash Ahuja — Chief Financial Officer
Analysts:
Unidentified Participant
Aniruddha Joshi — Analyst
Mihir Shah — Analyst
Rehan Saiyyed — Analyst
Aditya Bhartia — Analyst
Ajay Thakur — Analyst
Abneesh Roy — Analyst
Naman Barjatya — Analyst
Pratik — Analyst
Keyur Pandya — Analyst
Avi Mehta — Analyst
Tejas Shah — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to Kangsai Nirolect Q1FY26 earnings conference call hosted by ICICI Securities. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call please signal an operator by pressing Star then zero on your touchstone port. Please note that this conference is being recorded. I now hand the conference over to Mr. Aniruddh Joshi from ICICI Securities. Thank you. And over to you sir.
Aniruddha Joshi — Analyst
Yeah, thanks Shubham. On behalf of ICICI security teams we welcome you all to Q1FY26 results conference call of consigned narrow lap paints. We have with us today senior management represented by Mr. Praveen Chowdhury Managing Director Mr. Yash Ahuja, Chief Financial Officer Designate and Mr. Jason Gonzalez, Director Corporate Planning IT and Materials. Now I hand over the call to Mr. Praveen for his initial comments on the quarterly performance and then we will open the floor for question and answer session. Thanks and over to you sir.
Pravin Digambar Chaudhari — Managing Director
Thank you Nehru and good morning to all and thanks for your continued support and interest in our company. Before we have question and answer let me give brief comments on our quarter one performance. So as far as never lag is concerned, you know I have already mentioned earlier that our purpose is to create environments for healthy and beautiful future and we are constantly growing and building our growth enablers in this direction where we find that NERVLAC is present in our daily lives. We touch across our appliances, walls, cars that we drive and our idea is to enlarge this space and be in the lives of people more and more through our product portfolio.
Our foundation being multinational is also very strong on ESG where we are now water positive. Our emission is reducing year on year and our green energy footprint is also growing and now it is crossing more than 40%. As far as our brand legacy is concerned we are more than 100 years old brand. A strong support of our R and D and various technology tabs in the areas of industrial which offers cutting edge solutions to various applications in this field. In fact our brand strength if you look at despite all the competition we are still recognized as number two brand as far as top of the mind awareness in the country.
We are an error like jingle which is there which is more than three decades old also resonates across age groups. I Think that’s another asset that we created and we are leveraging it as far as innovative security is concerned, backed by Japanese technology which is obviously powering our industrial business. But going forward it will also reflect into our decorative segment where these innovative concepts can be introduced to also support our growing premiumization requirements. As far as decorative is concerned. And paint range which is unique to category products that we launched two, three years back is also another unique proposition that we are offering to the Indian paint consumers.
As far as business environment is concerned, decorative will come in detail as we move forward. But in terms of automotive also demand has been slightly sluggish compared to last year and government focus on the infrastructure continued more vigorously and that is helping our industrial business. There has been also positive movement as far as crude oil is concerned. Though there has been some volatility due to geopolitical the situation around Europe region. But that also looks like to be settled. There has been early onset of monsoon which has impacted our month of May sale. And also there has been rural demand which is quite stable as of now.
Urban demand there is slight uptick but still not sure whether that will continue the momentum on geopolitical situation. I would like to add while there was international issues which have been ongoing for a couple of years, however you’ve also seen this kind of attention closer to our border and that also has impacted our north sale where we are very very strong specifically on decorative. Our paint plus product range has continued to gain momentum and in fact salience has increased. Now it is contributing to more than 12% of our sale. There are more than 28 products which are in the market.
Our new business continued the strong performance both in construction, chemical waterproofing and premium wood finishes. As far as our network expansion is concerned, it has grown by mid single digit and our total footprint direct dealers are more than 30,000 now. In fact our visibility campaign which has received well in the form of Nerolac, NextGen, Shopee and Shopping Shop also we have added another 400 in quarter one. As far as new products are concerned, there are three new products we have launched this quarter and our total new product contribution has crossed 10%. As far as decorative business is concerned, our project and institutional business has done pretty okay.
It has though not as per our expectation because of this monsoon which has come in that impacted project business and it has grown mid single digit. However, exterior texture and waterproofing has seen good growth. Our services business which is paint as a service which offers direct reliable services to our paint consumers is now growing pretty well and now it is contributing to 5% of our total business. As far as new products are concerned. Our new product offering which is in the form of Nerolac Parma no heat offering which offers superior whiteness, excellent dust pickup and more than 15 degree surface temperature reduction which I believe is the best in class in this category.
As far as Rain Soldier which is another brand which is where we have launched this Rain rupture white emulsion which offers unique proposition in the form of 300% elongation and excellent weather resistance and waterproofing performance warranty. Again I believe this is unique in this category. As far as industrial is concerned. Another trend we are seeing in industry is also towards better performance and premiumization. In light of that you will see that in auto four wheeler where we lead we have launched now high gloss Clear coat which is offering excellent workability and which is enhanced appearance which is again best in class as far as gloss is concerned.
In two wheelers also there is a journey of premiumization where we are offering QD2MAT and Nervolac Heat resistant Premier silver lining paint which is also offered to all two wheelers. As far as performance coating which goes into infrastructure there are these new technology paints both in narrow siloxin technology as well as anti carbonation water based system for concrete substrate has been launched and in powder coating thermoplastic is new set of technology where we have introduced now which is offering this antifreeze technology for our wide scoot segment. As for the brand and marketing media campaign investment continued and we are in fact on various brand promotions which has been done both on television as well as on digital platforms.
In fact to reckon this effort we have received many awards in the quarter one including the global winner of ambient media. The best one was from Goa Fest where we received Grand Prix. I think this is the best in the industry and we also received seven baby blue elephant awards. I think that reckons and the effort that marketing team is doing and how the way it is resonating with the consumer. On industrial front as I mentioned earlier auto was slightly sluggish. However our growth has been market leading growth. We outperformed the market through our premium offerings as well as gaining the new accounts.
As far as innovation is concerned we obviously we are entering into newer segments of this auto which is going to increase our total addressable market. As such in case of protective coating we have reported higher than the market growth backed by the lot of infrastructure. New project wins and however Powder boat was slightly muted based on the appliances which was not done pretty well. As far as second half of quarter one is concerned another focus area for us is leveraging on our auto strength. We are also now heavily focusing on the auto refinish segment and that is growing pretty well.
It is growing in higher double digit now and this is also in this also there is a premium segment which is in Pew technology that has started doing well. It is based on the lot of approvals and because of our automotive presence and already having global approach this is becoming now another good traction as far as growth is concerned in industrial also continued with our legacy and high good performance. We have received many awards from the leading auto manufacturers on esg. First time neural participated in Eco Audis assessment and there we secured a bronze medal which is basically top 35% of the assessees which is pretty good recognition to start.
Similarly on CRISIL we have received the strong category award by the CRISIL in S P Johns indices also we are falling in top 80 percentile and in FTAC we are in top 12 percentile and as far as session analytics is concerned we are identified as a low risk. So overall I think our ESG performance is quite recognized. Well as far as local as well as international assessing agencies are concerned. As far as our CapEx in quarter one we have capitalized our Jhempur quarterbase facility which is adding about 44,000-km of the capacity got added. That is backed by the expectation that we should be seeing a good demand.
As far as water based category is concerned on CSR initiatives they continue to be present in education, health and skill area and we are actively pursuing this in terms of contributing back to the society coming to our financial performance. As far as stand alone results are concerned our revenue growth is 1.8%, our EBITDA is minus 6.7% and our PBT 4.1%. On consolidated basis our revenue is 1.4 and our EBITDA is minus 8 and our PBT is minus 4.1% and consolidated or Bangladesh continues to be a challenge and that I think depending on the current situation it is very difficult to estimate that you know how business will move but it has remained challenging.
We are making all the efforts to ensure that we do a sustainable profitable business. However external demand is quite challenging out there. Our another subsidiary Neurofix is doing pretty well now as far as growth is concerned and our overall gross contribution has started improving through our product mix change and we are hopeful that by year end I think that should be performing well and should contribute to our overall consolidated performance. As far as risk and outlook is concerned this geopolitical tension is leading to supply chain disruptions and also leading to volatility in commodity prices especially also foreign exchange.
We are seeing after US announcement on tariff we have seen lot of volatility there so that remains a big risk because our 30 to 35% metal is imported and even there are other raw metals which are also subjected to this intermediate usage of the foreign source material. There is another risk in terms of titanium dioxide actually that has already set in. There is anti dumping duty imposed on all Chinese titanium dioxide and that has already started impacting. As far as this cotton beginning is concerned and outlook front construction activity Based on whatever we saw in month of June we believe that quarter two should be better.
As far as decorative concern it is also due to our Diwali being slightly ahead of time than last year I think we’ll have season August and September I think should be better than what it was last year. In automotive two wheeler and passenger vehicle demand is expected to be stable or subdued depending on how month goes. The tractor segment is expected to do well based on the good monsoon and enhanced agriculture activity. Infrastructure segments such as railway roads, airports, power I think should be doing well and that is where we have a hedge and hopefully both auto and industrial both segments should be contributing pretty well well supported by the upward movement in decorative segment we are quite hopeful that quarter two should be better.
So these are the comments from my side Now I hand it over back to Anvirud for taking questions and answers. Thank you.
Questions and Answers:
operator
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press Star and one on the Touchstone phone. If you wish to remove yourself from the question queue you may press Star. Participants are requested to use handsets while asking a question. The first question comes from the line of Mihir Shah from Nomura. Please go ahead.
Mihir Shah
Hi sir, thank you for taking my question. So firstly if I can ask a bookkeeping question if you can share what is the volume growth in Deco for the quarter and what is the growth in auto and non auto industrials on a value basis? If you can split that will be very helpful.
Pravin Digambar Chaudhari
Good to hear you from me as far as volume in depot is concerned it was close to it was almost flat and as far as industrial is concerned it was higher single digit.
Mihir Shah
Understood sir. First question on Deco. Wanted to know your thoughts on networking expansion. You mentioned mixed single digit growth seems a bit low given the high competitive intensity and I recall your presentation that you made on the strategy some Time back. How should one think about network expansion from your side if you want to maintain your shares also do you require to grow network in double digits also subpart to that is have you seen any impact or losses of you know, dealers or tinting machines? And that is the reason why this network expansion is mid single digits.
Pravin Digambar Chaudhari
Yeah, right Meer. So as far as network expansion is concerned, what I mentioned was the direct dealer edition which was in mid single digit. But there is another initiative of ours which is a distribution. Why distribution? Actually we added higher double digit sub beta network so that is added. The other thing is we are very careful in actually choosing our network addition and obviously we are focusing on our strong areas wherever we are very strong, not spreading ourselves in, especially in south for example. And on your second part where we have lost any CCDs. No, we have not lost any CCDs and in fact we are adding CCD machines every quarter.
Coming back to your question on competition, in fact we are seeing the reversal now. In fact many dealers of ours who started batting with competition has now started coming back to us and that’s a pretty positive sign for us. I think they are realizing power of neuralac brand as well as the groundwork that our team does as well as consumer and activity that we are doing. So I think it seems to be augering well as far as we are concerned.
Mihir Shah
Fantastic. That’s heartening to hear Sir. So sorry, if I can ask just one more sub question on Deco. The dealers are coming back. Has there been any change in dealer margins or there’s an increase in margins that is also leading to them coming back? Sir,
Pravin Digambar Chaudhari
no sir, I think as far as discounting is concerned, I think it is pretty much aligned with the competition. There’s nothing extra being given, so that may not be the reason. I think it is also related to overall, I think ROI which that dealer might be getting from competition versus us and I am referring to new competition now in this context. So I am sure the moment that they might be witnessing there versus what they would have seen with us earlier might be different. And I think that is attracting. But on this conference nothing special that you have done compared to competition and industry.
Mihir Shah
Fantastic. So my second question is on industrials. You know you continue to have a very strong continue to gain market share in industries both in powder and auto coatings and doing quite well and you know better than industry etc. And you did allude to that. There is an expected improvement on that on the revenue front as well. Any any indication of or guidance you can share on how should we think about auto non auto growth numbers and how should we think about margins in that context? I remember margins for industry will also start inching up.
So how to think about both these aspects on the industrial front, which is your key driver for your business.
Pravin Digambar Chaudhari
Yeah. So I think as far as ARPA is concerned, we expect now growth to be in mid single digits. And as far as non auto which is an industrial segment, I think it should be higher single digit or just touching about double digit. I think that is what we’re expecting on margin front. Clearly with our focus on premiumization and technology advanced performance oriented products, our margins have started improving. I mean you will see that you know, compared to market, I mean kind of activities which are happening in decorative. Despite that, I think what we could report was this kind of a performance.
I think that is clearly showing that our industry is also now behaving in a positive direction. And hopefully that should be contributing to our overall target that you said going forward.
Mihir Shah
Got you sir. Thank you very much. Wishing you all the very best.
operator
Thank you. The next question comes from the line of rehan Sayyat from 3netra.
Rehan Saiyyed
Oh yeah. Good morning to everyone and thank you for giving me the opportunity as I my most of the questions are already answered. So I just want one more clarification regarding the ESC fund. Sir, you have on the ESC client Pulsa and has received strong ratings and information recently. So can you talk about applying upcoming ESC capital operational initiatives that could follow structure. See.
Pravin Digambar Chaudhari
Hello, I think. Can you repeat. We are not audio unable to hear you.
Rehan Saiyyed
Yeah, sure, sure, sure. So on the E12 has received strong ratings destination recently. So can you talk about any positioning upcoming ES capital allocation or operations initiatives that pull for the positioning?
Pravin Digambar Chaudhari
Okay, you are asking any further capital allocation? Yes, they are already water positive.
So that already initiative is on. Another big investment that will happen is in the area of green energy where we are increasing our expenditure. As far as you know green power is concerned, it is in the form of solar as well as wind. So that will be further enhanced. In fact now with statewide relaxation happening on the percentage of green energy sourcing. Earlier there was a cap, now they release that cap and as a result there’ll be further investment that we see in the current year as well.
Rehan Saiyyed
Okay, okay. One. One more add on question on the consolidated subsidiary side, like all the consolidated subsidies deposited an ICOs of around 11.9 crore this quarter. Could you specify which geography is contributing most of the losses and what rectums are going to be. Yeah, again sorry, you know you are not at all audible. Yeah, yeah you’re audible. Just you’re audible.
operator
You’re not clear enough.
Rehan Saiyyed
Yeah, sure. I’ll repeat my question. Okay. Supported a net loss of around 1112 9th this quarter. Can you elaborate? Specify which geography is positive and what.
operator
No, actually you’re not.
Pravin Digambar Chaudhari
I only heard 11.9 crore. That’s all
Rehan Saiyyed
I’m asking like which geographies contributed most of this losses and what corrective measures are for this.
Pravin Digambar Chaudhari
Okay, okay. Geography is contributing to major loss. Yeah, I think, yeah it is mainly Bangladesh which is contributing to higher percentage of loss.
operator
Thank you. The next question comes from the line of Aditya Bhatia from Investec. Please go ahead.
Aditya Bhartia
Hi, good morning sir. So just wanted to get the outlook on margin side because you’re seeing some crude and crude derivative prices coming off at the same time there’s anti dumping duty on TIO2 imports from China that you kind of referred to. So how are the two levers playing out and how should we think about margins both on the decorative as well as the industrial side?
Pravin Digambar Chaudhari
Yeah, so as has been our policy based on our contribution profile in each businesses we have a pass through policy. So as long as we have to we try to maintain our margins and if it is getting compromised we will be having a price increase to the next.
Now as far as decorative, this for industrial obviously for decorative also industry has been following similar practice. But looking at the current competitive intensity we’ll have to really be watchful as to what is happening in the industry and how competition is reacting. And based on that we will be obviously taking the action. Having said this, there are a lot of initiatives which our RND keeps taking in terms of, you know, formula optimization. So that activity also will help us to mitigate some kind of increase or inflation that is getting caused because of this tariff.
Aditya Bhartia
Understood sir, but what should be the increase in costing on account of TR to import anti dumping duty and how much of that can be offset by reduction in cost that we have seen for other derivatives.
Pravin Digambar Chaudhari
Yeah, so I think net, net going forward. Right now raw material prices are benign and I don’t see as a whole we’ll able to see any major significant impact as far as titanium is concerned in the short term. Purely on titanium front I think it should be contributing to about 1 to 1.3% of the inflation.
Aditya Bhartia
Perfect, perfect, that’s great to you. My second question is on, on the demand outlook side you spoke about Q2 looking slightly better also on account of an Earlier Diwali. But are you seeing green shoots as far as underlying demand is also concerned, what, what were the trends like in July? If you could kind of speak about that, whether it’s urban or rural, wherein you’re seeing an improvement and if there’s any differences that you’re seeing on a regional basis as well, if you could highlight that, that would be very useful.
Pravin Digambar Chaudhari
So you know, regionally I think north has done pretty okay as far as region is concerned. However, you know, overall monsoon in many places has caused some disturbances that have led to this temporary, I would say stoppages, especially in the area of projects as well as some part of retail. I don’t see any significant difference as far as June exit is concerned as far as in July. But looking at the upcoming festive season, we believe that same trend as what we saw in last year in September and October I think should get repeated. As far as August and September is concerned, there has not been a significant difference as far as underlying demand is concerned.
But as the industry typically has been growing at about GDP and with the current competition also playing its part, I think the whole market share redistribution is happening and that will I think in second half, as I was mentioning earlier, we’ll able to actually see the change that is happening because it will be more of a stable condition as far as industry is concerned. No new players coming and everyone is settled. I think that’s the real time where we’ll able to assess what is happening to the industry and overall growth. But as far as underlying demand is concerned, as far as July is concerned, no significant change.
But we are pretty hopeful as far as August and September is concerned.
Aditya Bhartia
That’s very helpful sir. Thank you so much.
Pravin Digambar Chaudhari
Thank you.
operator
Thank you. The next question comes from the line of Ajay Thakur from Anandra Securities. Please go ahead.
Ajay Thakur
Hi sir. Thanks for taking my question. Sir, I had a few questions. One was wanted to check on value volume mix in the decorative segment. So what would it be for the current quarter and how do you look at this volume value gap in decorative to trend going forward?
Pravin Digambar Chaudhari
Compared to last year our volume value gap has reduced significantly. So as I mentioned earlier, our volume has been pretty flat and our value degrowth was in a lower single digit.
Ajay Thakur
And for going forward we expect a similar trend to be maintained.
Pravin Digambar Chaudhari
Yeah, we are hopeful of that. Yes.
Ajay Thakur
Okay. And what would be the growth outlook for the rest of the FY26 in decorative both in terms of volume and value? For us.
Pravin Digambar Chaudhari
We don’t comment really on the forward as far as numbers are concerned.
Ajay Thakur
Okay, sir, if you can share some insights on our payment program. What would be the additions that we have done for the, for the quarter and how has it been tracking in that context? And have we seen any attrition due to the competition in them.
Pravin Digambar Chaudhari
In influencers,
Ajay Thakur
painters and influencers?
Pravin Digambar Chaudhari
Yeah, so that also, you know what happens is it is very difficult to estimate on quarter on quarter because that mix keep changing because of the nature of the product mix. So slightly difficult to say that. However, rest assured in terms of our top, top category of influences are with us and they’re growing consistently as far as business is concerned.
Ajay Thakur
Okay. And are we kind of incentives, have we increased any incentives for our painters or influencers, you know, in the last one year? Any quantum increase, if you can share.
Pravin Digambar Chaudhari
Anything around that content is difficult to share. However, as far as incentives are concerned. Yes, they have gone up because. Yeah.
Ajay Thakur
Quite helpful. Thank you, sir.
operator
Thank you. The next question comes from the line of from AC Mil Research. Please go ahead.
Unidentified Participant
Hi sir, thank you for taking my question. So firstly you mentioned in the decorative business that north is doing okay, but any color you would like to share on how the west, east or even south, which is a smaller presence for us, but how are those territories working out?
Pravin Digambar Chaudhari
Yeah. So as far as north and east are concerned, both are doing fine in that order. And for us, even west has started doing better since month of May. And south, south continues to be a problem for us because as such we are weak there. And given the onslaught of competition and extra focus on south where most of the leading players there has been the issue for us. And as such that remains to be a concern area for us.
Unidentified Participant
So just a follow up here. So despite the north market being a little bit impacted in this quarter, that has still been the best performing region for us.
Pravin Digambar Chaudhari
Yeah. In terms of, you know, if you take out that one time event of north, what happened and that impacted us April and May, that I’m not taking as a, I’m taking it as exception in one time. But if you take that out, I think other markets where IMR is normally performing has done better.
Unidentified Participant
Okay.
Pravin Digambar Chaudhari
Had that event not happened, I think our performance would have been slightly different this quarter.
Unidentified Participant
Okay. All right, got it. So I’m looking at the consolidated EBITDA margin. So we are seeing a pressure of about 140 basis points on a YUI basis. So is that largely attributed to the share of industrial business increasing.
Pravin Digambar Chaudhari
Drop in the
Unidentified Participant
EBITDA margin?
Pravin Digambar Chaudhari
Yes, yes. So that is also because of, you know, our north impact in the Decredive that I mentioned one time that has led to our loss of. Loss of sale there and that also has reduced our operating leverage. That is a major reason. And also the second reason is also in decorative the kind of mix that was there in the quarter one compared to last year same quarter was slightly. I mean it was towards the more economy kind of a segment. So that has all led to this kind of a drop.
Yeah.
Unidentified Participant
Okay.
Pravin Digambar Chaudhari
Industrial mix that has not impacted.
Unidentified Participant
Okay. So that is not a contributor at all. Okay. Okay, thank you.
operator
Thank you. The next question comes from the line of Avnish Roy from Nuama Institutional Equity. Please go ahead.
Abneesh Roy
Yeah, thanks. My first question is to Praveen. It’s been around three months since you became the CEO of the company. Wanted to understand from a strategy perspective both consumer facing and on the cost side any big changes you have done or there is plan to change anything of that in the coming quarters.
Pravin Digambar Chaudhari
Yeah, Sir Avanish, in terms of change is concerned I think our focus is clearly on choosing our battle in the market which is extremely competitive. So we are very conscious in terms of spreading our wings, focusing on the stronger markets and going more deeper and putting our resources there. That is a strategy and it will take some time because we have to reorganize ourselves in that direction. As far as executive is concerned in industrial, obviously as far as auto, I just mentioned that we are getting to new areas where we will increase our addressable market.
As far as auto is concerned and as far as the industrial which is non auto market is concerned, there are many segments where we are not present and those segments call for lot of global kind of access and technology and approvals. So those are the areas where work has already started happening and going forward we will see more action in that area.
Abneesh Roy
So the one follow up question on the new player, I completely agree with what you are saying and the second paint player and here I’m talking about second paint player as per revenue, not as per capacity. That second player also said that the new player field for the last four months has been stagnating and this was in a media interview. So wanted to understand this 10% extra grage which I think is a key differentiator by the new player how much disruption it is still happening it’s having. And are you also forced to respond to this indirectly at the lower end especially to overcome this extra benefit which mostly end customer is getting? I don’t think the dealer is getting too much out of this maybe in some cases.
But if you could tell us is the dealer Getting the benefit or the end customer. And how are you responding to the 10% extra RAM?
Pravin Digambar Chaudhari
Yeah. So Anish, as I understand it’s a kind of a mixed feedback but I heard that in some market they already started withdrawing anyway. That’s the strategy which will automatically pan out because it is very difficult to sustain with that offering forever. As far as the logic is concerned, I think it was more for a consumer and consumer awareness come pull which obviously goes after this 10% free and they start demanding that kind of a product was the consumer dealers, I don’t think I’ve got anything except for higher enquiries at the counter because that was getting publicized every now and then.
So in the process I don’t think millers and painters have got anything specifically as far as margins are concerned out of 10%. But yeah, in terms of enquiries, yes, they would have got that extra inquiry because of this 10%. As far as our response is concerned, our response is not in terms of offering anything free, but it is in terms of offering the better product which is offering better properties in terms of coverage as well as better performance. So that has been our offering and we’ll be happy to note that that particular area, whatever action you have taken, is doing pretty good and that is part of our pain plus product that we have.
Abneesh Roy
One follow up question I had on your comment you have made in the earning release. It was a bit confusing to me. At least you have said there are some early signs of revival. But when I dissect the statement you have said later part of the quarter got impacted because of monsoon and April got impacted in North India because of the disturbance. So almost the entire quarter there is some issue or the other. So from what basis are you saying there is a early sign? There is science or you have not used the word earlier, you have said science or revival.
What is it based on?
Pravin Digambar Chaudhari
Yeah, so it is based on the exit that we took. You know, so I, I’m. I’m taking out that April north event as exception event that happened and that impacted us largely because we are very strong in Jammu Kashmir, Punjab and that allied region. Now if you look at month on month, the trajectory has been on the increment. Now the expectation that based on the exit that we were trying to get in, May was not there because of monsoon that hit us. So if you really take out this kind of event and monsoon episode that has happened in certain pockets, I think then we can clearly see that there is an improvement which is going to take place as far as quarter Two is concerned.
Abneesh Roy
Thanks. Last week question this on Bangladesh. So Bangladesh, another FMCG company is not a paint company. They have seen a double sales growth in Q1 with a volume growth also. Of course that category is different but still my question is in the same. Economy is paint industry facing some more pain or is it that you are perceived as a India company. So there is some more of the. Hair oil company which I’m seeing or.
Abneesh Roy
The edible oil company. So Kramers can delay which of these is the key reason for your weak performance in Bangladesh versus the hair and edible oil company seeing the double date sales growth in the same quarter in the same country.
Pravin Digambar Chaudhari
So I think it is clearly a discretionary product and that is definitely which is postponeable. That is one definite reason. And I don’t think it has to do anything with India versus Bangladesh. I don’t think that sentiments are playing out. We have not seen or witnessed that as such. But obviously there also with kind of economy state they are into right now. I think priorities and the consumption patterns are also very different and I don’t think even other competitors have done significantly better in terms of performance in this paint segment.
Abneesh Roy
So thanks, that’s all for me.
Thank you.
Pravin Digambar Chaudhari
Thanks Ravnesh.
operator
Thank you. The next question comes from the line of Naman Bhar Jatia from Aum Capital. Please go ahead.
Naman Barjatya
Yeah hi, good morning and thank you for the opportunity. So like most of the doubts have already been answered so I would just request you to kindly like for a better understanding to put some light on your plan to increase your presence in the Indian OEMs. And like how are you going to protect your market share compared to your competitors?
Pravin Digambar Chaudhari
Yeah, Indian OEMs, you know if you see that one is our Japanese customer there, we are very very strong. But even other OEMs which have entered in auto segments there also based on our technology availability, service and supply chain network, I think that has also started gaining traction.
And there also we lead as well as automotive is concerned.
Naman Barjatya
Okay, thank you. Also like considering the geopolitical uncertainty and also the volatility in the commodity prices and the inflationary rates, particularly due to the imposition of tariffs that government. So like how do you plan to weather from the unsettling case moving ahead?
Pravin Digambar Chaudhari
Yeah. So as far as tariffs, as far as India is concerned it is mainly for our incoming material which is titanium dioxin. And as earlier explained, based on our R and D and capability that we have in terms of reformulating and adjusting a formulation to bring down cost, that activity is already underway.
And as a package I’m sure we’ll able to overcome to some extent. And if it is not, obviously then we’ll have to really look for price pass through based on whatever industry dynamics permit us to do.
Naman Barjatya
Okay. And like one last question. Like can you put some color on the company’s future plans to meet the growing time in the construction chemicals?
Pravin Digambar Chaudhari
Yes. As far as we are concerned, our waterproofing segment is obviously doing well. You would have seen that in my commentary also. So that is clearly different that your branch is also addressing further enhanced waterproofing come no heat kind of a proposition.
Another thing that we have done is the CC core that is Mason category has also started. We are focusing on on by creating a separate structure and separate distribution go to market strategy. So hopefully we’ll also see better growth in that particular area which has not been focused till date.
Naman Barjatya
Okay, so yeah, like thank you for answering the question and all the best for your future plans. Thank you.
operator
Thank you. The next question comes from the line of Pratik some HSBC. Please go ahead. Mr. Pratik, your line has been unmuted. Please go ahead.
Pratik
Yes, thank you for the opportunity. I have a couple of questions, please. On dealer incentives, you mentioned that dealer incentives are aligned with competition, largely similar to competition. Can you please help me explain? So in the annual report the difference between your net and gross revenues and that of competitors is a little different. Yours is around 10% while competition is around 15 to 20%. So what am I missing there? Can you please help explain?
Pravin Digambar Chaudhari
One minute. So it is also, you know, because of our industrial being there. That is why you see the difference. Because of.
Pratik
Yes, that does make sense. Pretty much is a little higher than. You guys are
Pravin Digambar Chaudhari
percentage of the mix. If you’re 50, 50 exo. Is not that right? Right.
Pratik
Okay. That’s another part of this question. Thank you. And on competitive intensity, can you please throw some light on why do you think the competition is stalling when in spite of them being so aggressive with higher capacities, higher incentives for painters and influencers, why do you think this is happening?
Pravin Digambar Chaudhari
I mean they are stalling.
Pratik
Yeah. If you say that the business you see dealers interest coming back towards another lakh and basically incumbents are again doing all right. Why do you think new competition has not been able to make a larger dent in spite of putting so much money behind their efforts?
Pravin Digambar Chaudhari
Yeah, I think see it is also to do with what they are trying to follow and what they are exactly trying to do with the network. But broadly see this business as has been Said many times with all of us in the past. Also that it depends on overall brand awareness. Creating your own distribution network which is, which is, which is having higher sellout rate which means your influencers, your consumers all are in sync with the all your marketing and brand matrixes. I think that whole thing takes time. So I think by creating capacity I don’t think that can be achieved.
But I think maybe that is where things will settle as far as maybe this year is concerned and will really know what is going to be the state of affairs going forward. But really you can’t comment on their strategy. What we are seeing in the market I just narrated.
Pratik
Thank you.
Pravin Digambar Chaudhari
Thank you.
operator
Thank you. Next question comes from the line of Kur Pandya from ICICI Prudential Life Insurance. Please go ahead.
Keyur Pandya
Thank you for the opportunity sir. On the profitability question, so earlier you have guided for higher margins over next two, three years at the company level and current quarter’s margin looks higher than last three quarters. So should we attribute that to the seasonality or we should expect a quarter one kind of EBITDA margin to be sustainable for subsequent quarters. And your earlier guidance of higher margin over next three years. If you can just identify specific steps that have already been taken in that journey, that would be helpful. Thank you.
Pravin Digambar Chaudhari
So as far as quarterly margin profile is concerned, it varies because quarter one is slightly different product mix. Quarter two remains challenging because of product mix being slightly different. So you find that profile being changing. That is the first question. And second thing in terms of next three years, I have already explained earlier that our in case of industrial business decorative obviously we are going to focus on a strong market and trying to deliver growth there. In terms of auto we are pretty strong and that is where all new accounts lines and all advanced technologies which are coming which will offer us better realization.
That is second in terms of industrial is concerned. We have already initiated the process where segment entry has been planned, where we are not present and those segments need global approvals which means that there is a high entry barrier and which also means slightly better realization. So these are the three areas where we will start. We already started working and obviously we will appreciate that these things take slightly longer time because we have to go through the process of approvals. We have to start entry, start trials and all that. So I’m sure you’ll see the improvement as going forward.
Keyur Pandya
Okay, just one follow up. So I mean if we consider FY25 as a full year, we’ll be seeing margin expansion in FY26. Considering where the RM prices are as a basket which are trading lower than last year. So basically culmination of RM prices and competitive intensity, should we see margin expansion in FY26?
Pravin Digambar Chaudhari
So you know, our objective is that and, but as far as this year is concerned, I think still we should be 13 to 14. Looking at the current competition, state of competition.
Keyur Pandya
What is 12% last year? Correct?
Pravin Digambar Chaudhari
Yeah, 12.8.
Keyur Pandya
Okay. Okay. Okay. Thanks a lot sir, and all the best.
Pravin Digambar Chaudhari
Thank you.
operator
Thank you. The next question comes from the line of Avi Mehta from Macquarie Capital. Please go ahead.
Avi Mehta
Yeah, hi sir, I just had one. Question on the auto side, are we. Seeing any change in the competitive intensity? Because you know, I’m just confused because there is, you have said a sluggish demand environment while the other players said that there is an auto industry buoyancy. So would love to understand how trends are behaving and how are you seeing competition in that segment. Thank you.
Pravin Digambar Chaudhari
So as far as you know, auto segment is concerned, when I say sluggish demand, it is also to do with, you know, are set of more than, you know, 50, 60 market share. So from that point of view. Yes. And compared to
Avi Mehta
OEM only, right sir, sorry, just to clarify, it’s the OEM. That you’re talking about, right? Auto oem. Yes. Okay, sorry, please continue sir, I’m sorry.
Pravin Digambar Chaudhari
So it was in that context sluggish demand as far as expectations are concerned versus what is happening. And that was also slightly forward looking in terms of what we saw in domestic market as far as June is concerned. So that is how it was. If you look at market performance versus our performance, we have clearly gained market share even the quarter. So it’s not.
Avi Mehta
So just to clarify, it’s not a case of some accounts doing much better and our salience being higher. It’s not an account specific, is that how. It is? Not that way. Okay. And sir, lastly on the international side you’ve given comments on Bangladesh. Could you also comment on the other geographies, how things are behaving?
Pravin Digambar Chaudhari
Yeah, yeah. So Nepal has done pretty good I think. Nepal consistently for last three years has been doing well and we are performing well there. As far as Lanka is concerned. Yeah, it remains to be a concern area for us and like Bangladesh, even Lanka is not delivering as per the expectation.
Avi Mehta
Okay sir, that’s all from my side. Thank you very much.
Pravin Digambar Chaudhari
Thank you Avi.
operator
Thank you. The next question comes from the line of Tejas Shah from Event. Please go ahead.
Tejas Shah
Hi, thanks for the opportunity. Sir, you made an interesting remark in one of the answers that dealers are returning back. So just wanted to know what specific disappointment are they registering when they are coming back? Is it largely to do with on the consumer side or is it more of a dealer side servicing or other issues.
Pravin Digambar Chaudhari
So what we are seeing, you know, is interesting question also let me first see because as far as what we are understanding, I don’t think it is more from consumer side but it is from a dealer side see as I mean a competition might offer many things which are free, higher, bigger, better, everything but somewhere, you know, you have to settle with the norm or you know, try to ultimately come to terms with what you want to achieve. End up two, three years as was stated. Now when that starts happening, you know, and you realize that the throughput that you get because of all these initiatives not matching what was expected and what is meeting a target, you start sort of stabilizing or withdrawing. And once that start happening, obviously you know, then there is a dissatisfaction or then the comparison that, that what is the difference between you and others. So might as well I go to my old brother and then start dealing with it. So that’s, that’s our understanding and that’s what we understand from what set that you got back.
Tejas Shah
Perfect competition impact has been clear and relatively easier for relatively it’s easier for us to track. But slowing industry growth has been a question which you all are puzzling for a while now. And being a veteran, what’s your take on this? And obviously there has been false starts once in a while in last two, three years that we believe that things are there are green shoots but they hardly grow. So what’s your assessment on why things are not sustainably improving for Bains?
Pravin Digambar Chaudhari
I mean difficult. We have been frankly we are also puzzled with this and we try to answer it ourselves by saying, you know that looking at the sometime back it was food inflation, overall inflation, then also looking at the salary rises that I mean all this is published data.
So we try to put all this together to say that okay, this might be the reason and the other biggest disadvantage for I think paint industries because the discretionary item I think that is also leading to this kind of push. So that I think is a general answer that I can give at this stage.
Tejas Shah
Lastly, onto side some of the OEMs have warned that owing to rare earth shortage there will be a very massive production disruption by October or September. Do you expect that to hurt us and are you kind of budgeting for that when you are guiding for or planning for second half of this year
Pravin Digambar Chaudhari
as of now you know, based on our interaction, we are not sensed that it will lead to major disruptions.
It might have some impact as far as EVs are concerned. But that EV percentage to total production is pretty small. So I don’t see there are no red flags raised as yet which is going to cause some serious disruptions. So that’s what we are at right now.
Tejas Shah
Perfect. That’s all from my side. Thanks. And all the best.
Pravin Digambar Chaudhari
Thank you.
operator
Thank you. The next question comes from the line of under Joshi from ICICI securities. Please go ahead.
Aniruddha Joshi
Yeah sir, the, the point that you raised that the dealers have started coming back so is it across seen across the board means like across the entire India we are seeing this phenomena or are we seeing this in some of the pockets? And also means like the sample size would be I guess relatively material or you’re seeing in this issue happening in these things happening in certain pockets. So that is question number one and question number two. Now. I guess the market leader will also very soon start the backward integration projects. So once they start those projects they will have additional margins to play with and it may result in either them getting aggressive on the pricing or maybe looking at gaining more market share also. So what will be the strategy of Kansai when the competitive intensity will increase from that angle as well? Yeah, that’s it from my side. Thank you.
Pravin Digambar Chaudhari
So on your first question we are seeing this obviously in some pockets and obviously my pocket, when I say it’s about my strong areas where I saw this change that is happening. I don’t know whether it is also being witnessed by competition and pan India, all regions, all towns, etc. But as far as our strong areas are concerned, we are seeing this happening. On your second question, see this backward integration is also a double edged sword because all this, what is backward integration happens? These are the commodity items and this commodity item has a big cycle, you know, so two years up, two years down.
So really one has to see on a longer period whether really it offers competitive advantage or not. I mean there are times when people are offering products even at the below cost kind of a thing which are, which is also seen in the past. If you study that longer period then we really doubt whether that really makes sense. Sense or not. But that’s a competition to decide what they are planning. As far as we are concerned, obviously our offerings to the market will be, will be richer, higher, better. That’s what our plan is. And obviously we’ll try and defend our territories through the product offering and try to mitigate any advantage that competition might get in a particular category.
I mean, and we have also studied this, and I don’t think it will be a very, very substantial, substantial kind of a difference that we’re anticipating. It will be some difference, but I don’t think it will be a substantial one.
Aniruddha Joshi
Oh, sure, sir. Very helpful. Many thanks.
operator
Thank you. As there are no further questions from the participants. And now hand the conference over to the management for closing comments. Thank you. And over to you, sir.
Pravin Digambar Chaudhari
Thank you for attending this conference and wishing you advanced festive greetings. Have a nice time and see you in November. Thank you so much.
operator
Thank you. On behalf of ICICI Securities. That concludes this conference. Thank you for joining us. And you may now disconnect your line. Thank you.