KANSAI NEROLAC PAINTS LIMITED (NSE: KANSAINER) Q4 2025 Earnings Call dated May. 07, 2025
Corporate Participants:
Unidentified Speaker
Hirokazu Kotera — Executive Director
Pravin Chaudhari — Managing Director
Amrit Rekhi — Vice President, Head of Sales
Rohit Malkani — Chief Business Officer
Tomioka Takashi — Director of the Board, Managing Executive Officer
Analysts:
Nishiyama San — Analyst
Obina San — Analyst
Unidentified Participant
Yoshida San — Analyst
Chou San — Analyst
Shintani San — Analyst
Okazaki San — Analyst
Avi San — Analyst
Aniruddha — Analyst
Presentation:
Unidentified Speaker
(Starts Abruptly) But that’s okay good afternoon. A warm welcome to all of you for Paints Investor Meet FY ’24-’25. First of all, thank you very much for it coming and making your presence. I know it was a short notice, but thanks a lot for making it for this conference. At the outset, let me introduce
Hirokazu Kotera — Executive Director
Having worked closely with him, I can say with my confidence that his leadership consistently reflects the values and principles as shown here. So with his integrity, clear vision and also the deep commitment to people, I do believe that he is exceptionally well suited to lead us forward further.
And we are confident that that under his guidance we should be able to reach new heights and create lasting value. So now I will hand it over to Vladimir.
Pravin Chaudhari — Managing Director
Yeah, thank you. So as you can see, India long term growth story continues and it is supported by some of the features which are listed here. I’ll touch upon some of them. India offers a rich demographic dividend with median age of 24 years and and young and working age population. These are the factors which will support growth in the coming years.
Further urbanization and infrastructure push and make in India which government of India announced and going well is also fueling long term demand. India GDP growth remains resilient at 6 to 7% and it is expected to do so in short term driven by strong domestic demand. Overall, India remains a strategic quoting market for Kansai Group and it’s offering massive potential in construction, industrial for infrastructure and automotive as a whole.
Next please. So this slide has been presented earlier also in our investor conferences. However, there is one change which you see on the top with a vision now pre Christian by for a concept group which is enriched live with happiness. So you can see that cancer group is transforming itself and and redefining its positioning as we go forward in this victim plan. You can see from the picture neuralac touches lives in many forms and ways.
Aim of neuralac henceforth is to bring happiness by being solutions company going beyond just colors and beauty. Expanding portfolio and this shift will add to diversity and resilience to our portfolio beyond decorative coating. Next. Yeah, this slide actually tells us our segment wise penetration and you can see that we are present across all major coating verticals and have a very diversified portfolio having unhindered access to global resources.
You can also see our position so in two categories Auto and powder we are number one and in deco general industrial high performance we are number three and only an auto finish because we entered late we are number four. But there also we are catching up fast. Our vision here is not just volume expansion but it’s a strategic market ship market share leadership across all segments. Our emphasis. On in house innovation ensures long term differentiations and margin protection. The footprint strategy here focuses on targeted presence where there is a higher growth potential in the market. Next, as far as our vision is concerned which I explained earlier here, strategy is not a brand new but I think we are embarking on a transformation mission. We are activating dual levers of growth which will consist of market products and segments and enablers which will be supported by processes, governance and digitalization. Under road drivers, we’ll be investing in fast growing segments of industrial coating and we look at expanding our presence in infrastructure base one Kansai approach which is defined by our Kansai Headquarters. This approach will ensure a cross functional alignment across the group and portfolio efficiency across various verticals of coating business that we have. We are also leveraging our past acquisitions in India which especially in the construction chemical area to aggressively widen our presence in the mason lead and repair category. Under operational improvement, our agile resource allocation and a global purchasing will help strengthen our competitiveness. Improving speed to market through digitalization. Digitalizing all sales, operations and supply chain will be our focus and in terms of efficiency it will be focusing on cash conversion cycle, mainly focusing on the inventory. Next please. Yeah, so this is a summary slide of our midterm plan which aims at balancing three imperatives of growth, innovation and stability. Industrial will be our growth segment. Automotive will thrive on our innovative technological advanced solutions and strong customer relationship. In short term, Decorative business will focus on strengthening strong geographies, project segment and premiumizing our overall portfolio mix. Now I hand over to Amrud Reiki. He’ll take you through our industrial and auto strategy slightly in detail.
Amrit Rekhi — Vice President, Head of Sales
Thank you. I will be taking you through a perspective of Indian industrial coating business and would be sharing details about our presence and plans for this business line. Consign Nerolac maintains a strong presence across all segments of industrial coating business in India. In the automotive segment, our company maintains a strong leadership position with significant market share in powder coating business.
Our company is the largest player commanding a high market share in the other industrial business segments of general industrial, high performance and auto refinishment. We are among the fast growing players. These segments represent a good opportunity for us to grow further in the future. Next. Next slide please. Yeah, the automotive business is a core business for us and let us look at it in some more detail. The auto business has four sub segments. Passenger vehicles, two wheelers, commercial vehicles and tractors. There has been a steady increase in production across all four sub segments since the recovery from COVID pandemic. Most of the automotive companies are bullish about growth prospects in India and are planning to expand production capacity. This growth trend is supported by favorable macroeconomic activity in India as well as increasing trend in car exports from India. As a market leader, we are well positioned to capitalize on the growing demand for automotive coatings driven by increased production and capacity expansion by automajers. Next slide please. In the previous slide, we have seen the emerging trends in automotive production. Let us now see the implications of this growth on our revenue and market share. Over the last five years we have been able to leverage our strengths and have doubled our sales across all automotive sub segments. In terms of market share expansion, we have outpaced market growth achieving a significant increase in market share. Next. Next slide. In this slide, we would like to highlight some of the core strengths that we have which have led us to this leadership position. Some of our strengths are global technology from Kansai, Japan which enables us to offer high quality innovative products tailored to market needs. Strong connect with leading Japanese and Indian OEMs has ensured a steady demand for and preferred supplier status. Enhanced R and D capabilities in India allow us to provide customized solutions and faster innovation. And lastly, strategically located multi location plants enable us to give seamless service, reduce operational risk and enhance business continuity with our customers. These trends have helped us to enter new segments and expand our presence in in new categories such as electric vehicles. In this slide, we are providing a pictorial representation of our presence across various segments and expansion plants. For the powder business, we have a strong presence in the White, Good and Furniture segments and our aim is to expand its. Into newer segments such as alloy wheels and rebar. Similarly, in the general industry and high performance coating business we are present across many segments under further enhancing our presence in bridges and coil coatings. Next, this slide outlines our roadmap for expanding our industrial business, particularly powder, gi, general industrial, high performance and auto refinish. The key strategy levers for expansion are premiumization, network expansion, new technologies and new approvals. If we look at this segment wise, our powder business has recorded a growth of 40% over the last three years and we want to keep the same momentum going in the future as well. In the general industry and high performance coating we have grown by over 50% in the last three years and we have outpaced market growth. Similarly, in the auto refinish business We’ve grown by 70% over the last three years and our intent is to continue to grow better than the market. To summarize, we aim to solidify our position as category leader in industrial 14 market. We will be achieving this by strengthening our core auto business and aggressively expanding our other industrial segment with a clear vision to outpace market growth. Thank you and I now hand over to Rohit for his talk on the deco strategy.
Rohit Malkani — Chief Business Officer
Thank you. I will continue the presentation and cover Decorative Paints Our decorative paints business caters to both retail and projects customers that is both B2C and B2B across our categories of paint, construction, chemicals and premium wood finishes. Specific to each category in paint, we have a wide range of products that are used for different stages of the painting process from undercoats which are pattis and primers to top coats which are emulsions and enamels.
Apart from this, the range also has products that are both water based and solvent based. The range also covers all substrates like masonry surfaces, metal and wood. In construction chemicals, we are consolidating our range across waterproofing, tiling and admixtures. In wood finishes, our range includes high performance protective coatings for wood paneling used largely in homes with wardrobes and kitchens.
Both polyurethane and waterborne products are present with clear and pigmented options for customers. Next slide please. We have been strengthening our business in the faster growing categories of products. Projects, construction, chemicals and premium wood finishes in the last three years. In these there is still greater headroom for growth in projects. Growth is being fueled by the vertical growth of cities where there is a shift from individual homes to larger format high rise developments. Also, government boost to infrastructure is having a spillover effect with newer construction practices and materials. Construction chemicals are being added to or replacing cement in building and construction techniques across the country. Premium wood finishes are increasingly replacing mica based laminates and conventional solvent based paints in homes giving both these categories a faster trajectory. We have been successful in growing our business faster than the market in these categories in the last three years and are confident we can continue to do so. Next slide please. Our strategy for growth is built on key actions in each category. In retail we will continue to strengthen our direct contact connect with both influencers and consumers through service and increase our direct contact with them as well as influencers. New product launches will continue to focus on functionality as well as differentiation. In projects we will grow our presence and increase reach in more towns. Apart from this, we will strengthen our internal systems and processes to address this growing segment. Lastly, expanding our range of project specific products to manage specific customer needs will be critical. In construction, chemicals and wood, we will continue to expand our product range and fill in gaps. We will increase our distribution of these products in key markets and continue to improve Connect with Influencers. Next slide please. In retail we will also strengthen the core through initiatives to improve the sale or throughput per store with increased competition. This is very important at our weighted or large customers. Using painting service, different store models, influencers, new products in different combinations, basis priority of customer and markets is how we plan to improve our sales here. Apart from this we will add direct dealers with a focus on quality of dealers as well as fill white spaces through new distributors in smaller towns and under penetrated districts. In the current environment, we will focus our consumer marketing efforts to strengthen our brand in key geographies. Next slide please. The Nerolac brand is strong with consumers and has maintained the second position in terms of top of mind awareness even with competition aggression at unprecedented levels. Our advertisement jingle is very well recognized. And is our strongest and most unique brand asset. We will leverage our strengths to our advantage. In order to achieve this, we will invest in building the brand to drive premiumization with a strong focus on our Japanese technology as well as a diverse portfolio of differentiated products. Next slide please. The last part in our decorative strategy is on products. New products launched in the last three years have approximately 10% salience to the decorative business and this will continue on the back of a healthy pipeline of concepts as well as new products. This is our PainPlus range of products. The promise of this range is differentiation, high performance and quality with a warranty. As part of our PaintPlus strategy, we know that bringing new to market concepts is key and must continue on this track. We can already see good sales of many of these products, for example, our wow Whites range and others. This will drive a stronger brand imagery for us amongst our dealers and painters. Thank you for your time and kind attention to this presentation. With this I hand over to our managing director Mr. Chaudhary.
Pravin Chaudhari — Managing Director
Yeah, so that is what we had to share from our side. Now open up floor to question and answers. Only one request and since our quarter four result is not yet out we would like your question restricted to basically factory part and not about quarter four results related questions. Thank you.
Questions and Answers:
Operator
We would now like to proceed to Q and A. Please utilize the raise hand button. If you wish to ask a question, please wait for your name to be called and when you are called, please unmute and ask your question. This is Tomioka. We have many hands up so let’s work together. Let’s have one question each and if we finish we can have a second round as well. So please be organized. Suki Group Nishima Please go ahead. This is Nishiyama of Citigroup Securities.
Nishiyama San
I have a question regarding page 11. This map is very easy to understand. Comparing yourself against a competition for Otho and Paul De number of players are limited but going forward D and E could enter into the areas of your strength. Is there such a risk? Berger Paint CEO said that the agent Paint is taking share and he said that there is going to be intensified competition in the new. New Year. So how. What is your evaluation of the competitive landscape? Please evaluate the further. Please elaborate further.
Pravin Chaudhari
Okay, thank you. Yeah, your question is valid. I mean there is always a competition which, which. Which is there and which might come in the future also. But if you look at our strength positions of auto and powder we are number one. We are holding this position for more than three decades.
And similarly if you look at our other positions also we are improving from our number four. We are actually moved up to number three now. And with Kansai groups now homogeneous which is happening through one Kansai I think there is a global access which is available to us compared to I would say other group companies in India and I think that will bring in lot of premiumization efforts to fruit.
Another thing, you know if you look at Indian infrastructure and industrial space now as India is maturing and their economy is growing there’s a lot of requirements which are coming which are in the premium segment and that is where a lot of approval specifications and global know how requirement is required and that Kansa Group has.
So I would say from barrier perspective I think we are well placed. But obviously there will be a competition which might come in which has come in the past also. And obviously we are ready through our network supply chain R and D that we have here strong R and D and technical service. I think we’ll be ready to fight out competition as we go forward.
Nishiyama San
Thank you very much. But how is that reflected in the midterm plan? On page 23 you have four segments in deco. What is the competitive environment in these four areas? On page 23 it seems that your market share is about one digit level. But what kind of market share do you hope to achieve in three years down the road for these segments? For these areas,
Pravin Chaudhari
Yeah. So as far as declarative is concerned in short term yes definitely there is a intensified competition but we believe that in near term I think this competition intensity will settle and there’ll be a level playing field which will be arrived at and there’ll be redistribution of market share that might happen. Given the legacy of neurolak pains and the market connect that we have. I’m sure there’ll be enough opportunity for us to grow.
And currently in the short term to tie over this we are focusing on the project segment construction, chemical and good finish where we are actually outpacing the market. And as far as retail is concerned we have very strong areas in north and east and where our large share of sale comes from. That is where. Our focus will be entirely in terms of stabilizing the market and not losing anything further. So I think this is a year where there’ll be competition which will be aggressive. Our aim is to stabilize and hold on to our market position and then start investing in the growth through our leverage and through our levers that we have.
Operator
Thank you very much. That’s all from me. But Tomioko san, would you also like to evaluate the situation as well?
Unidentified Speaker
Yes, I would also like to weigh in to your first question. I would say that there is possibility that the competition will enter the market. But compared to Decorative, the business model, there are many common factors. Therefore the barrier is lower. But for industrial, it is more difficult for competitors to enter.
So we have advantage and therefore we feel that this is solid, not like what we are facing in Decorative. In terms of the market, especially for Decorative, the competitive environment could is similar to berger. Up until 2025, up until the first half, it’s going to be very intensified. There are various measures that will be implemented by the competition. However, I think it is going to run its course at the entry level and this is likely to happen in 2025.
Furthermore, regarding the second point, I would like to men mention that in the midterm plan for 18, what we have explained have already been reflected. And in order to achieve the midterm management plan, we are implementing the measures that we have outlined today.
Nishiyama San
Thank you very much.
Operator
Next UBS securities, please go ahead.
Obina San
It yeah right so as far as for each segment I would say you know this for decorative in the short term actually what we are seeing is actually opposite of what you are sort of expecting there’s a lot of drown trading that is happening in the current situation because of pressures in the urban areas and rural area historically has been leaning towards economy so that that I believe is a short term trend but overall I think in decorative volume and value should match
I think going forward as far as industrial is concerned yes definitely there’ll be premiumization push and hence our value growth will be higher than the value volume growth that is our expectation and auto I believe it will be a steady there will not be much of a change as far as auto is concerned
Unidentified Speaker
Even in deco we are trying to move towards emulsion more focus on emulsion which give us better value realization and of course focus on premiumization no not really at this stage Next I get a sound of condensate securities it.
Unidentified Speaker
So at this stage there’s no thinking on this. I think we believe decorative has enough potential because our per capita consumption in India is just about 3 and a half kilograms compared to global average of 9. So if India has to become third global economy in years to come, I think this per capita also is likely to grow.
And decorative business obviously is likely to grow in that direction. And as earlier mentioned, this competitive intensity I think should settle in this year. I think it will run its course and with that happening, I think our redistributed market share companies will try to grow. Historically they have been growing at one, two and a half times of gdp.
I think that growth rate will return and there will be space enough space available for the players. So at this stage with this thinking in mind, I don’t think there’s any discussion regarding spinning of decorative. And obviously we’ll be continuing to focus on a strong area as far as depth is concerned.
Pravin Chaudhari
Yeah, I think a very good question. As far as industrial and decorative, there are some parts where there is a synergy especially in the project. And now in fact there is a cross. There is a team which is formed in Nerolac which will be focusing on this project into end to end for digitalization. So whenever the project is kicked off the right from construction, chemical till interior, exterior painting till floor coating, I think all segments where we are present will be will be attacked.
And I think there will be complete synergy which will produce between these two divisions. Auto is something unique because of different application requirements and outer B2B requirement. It’s a separate channel, separate team. But industrial and decorative. Yes, there is a synergy as far as project segment discussed.
Unidentified Participant
Thank you.
Operator
Thank you very much. From Mizuho Securities, Yoshida san, please go ahead.
Yoshida San
This is Yoshida from Mizuho securities. Thank you very much for your presentation. Within the India business, I would like to know how you think about the necessity for MNA. Page 13, what is shown. Right here. Especially the growth area you are showing industrial it seems that it’s going to grow by large for this part. Are you going to actively utilize M and A? Do you have such thoughts? That’s my first question. And also the other areas for Otto and Deco, are you thinking about conducting an M and A in those areas as well? Thank you.
Tomioka Takashi
First of all I would like to answer first and then followed by Kevin as you have asked. Within the industrial the bolt on type M and A is what we would like to aim for and for Deco and Auto for us the priority is low. Specific numbers are not reflected yet. For us we’re at the stage of finding a good partner. So Praveen, if you have any additions or corrections please comment.
Pravin Chaudhari
Yeah, I think Tomikasan mentioned it correctly. Will definitely be keen on Bolton M and A. Obviously we’ll keep synergies and gaps in mind and also valuation that matters the most because we’ll be also looking at profitability and PMI possibilities. So with that in mind if there are opportunities which will come across definitely we’ll be considering.
Yoshida San
All depends on if you will have a good deal. But regarding the size of it or the timing of it, are you considering in specific terms?
Tomioka Takashi
As long as we can find a good partner we would like to do it within this medium term but in terms of size I don’t think it exists and we’re not aiming for that. And with industrial market many, many small size competitors are are competing with each other. So within that market situation we would like to thoroughly look for a partner that will fill in our gaps and we’re not going to force ourselves to acquire a company to increase the sales but rather if we find a partner that’s going to improve or enhance the value of Neverlock we would like to go into the M and A.
We have us multiple contacts right now so we would like to put our efforts so that we will be able to expect good news. But at this point we don’t have any specifics but the contacts or the size that we have in mind is not going to be that large. It’s several hundred million yen is the scale. So Praveen San, if you can you add.
Pravin Chaudhari
No, I think you’re right. I think that’s how our view is also
Yoshida San
. Okay, understood. Thank you very much. That’s all.
Pravin Chaudhari
Thank you. Thank you very much.
Chou San
This is Cho of CLSA Securities. I have a question regarding page 16 and page 17. First of all, regarding page 16, you said that there is a two wheel as well as a four wheel is very high. But in the case of automobile and two wheelers, can you give me a breakdown of the two? And regarding margins, I am understanding that the margins are higher for automobile.
For passenger, is that the case of pay 17? The share has gone up to 58% which is very high. For us, China and Europe you have a very high share. But number one make. Is there a possibility that the Korean maker share will increase going forward? Is there a possibility that the the share could decline going forward?
Province Son, would you like to answer this question about share?
Pravin Chaudhari
Yeah. So as far as share is concerned, I think India for last three, four decades have been dominated by Japanese manufacturers and in fact in between there was a time when Korean players have actually improved. But now if you look at recently actually it is again Indians who have taken the charge and they are leading the show.
So our Indian manufacturers after Japanese are the key players now and they are. They both together hold significant market share as far as two wheeler and four wheeler is concerned. And with both I think Narolac has extremely strong position and I think we have been sustaining it and continuously improving our share through clearly through our infrastructure, R D and technical services that we offer. I think that is what is reflecting here.
So Koreans and others I think are pretty marginal at this stage. In future we don’t know, we can’t predict what will happen. But I think given the situation, I think we are ready to offer solutions and everyone, I think even Koreans might look for localization tomorrow and we are always there to offer our solutions to them also.
Tomioka Takashi
Thank you. I would also like to weigh in. The two wheel and three wheels are very significant. But compared to the four wheels, the. Painted surface is much less and India has regulation but the profitability is not inferior. Compared to automobile, the volume is very significant but the painted surface area is not large. So compared to the four wheel, the four wheel is making significant contribution to revenues in terms of the auto parts. This is area where we can pursue further. I think there is more opportunity in auto parts as well. Ev new companies will also be promoted. Therefore there is so much to look forward to for our company in India going forward.
Chou San
Thank you.
Operator
Thank you very much. SMBC Nico Securities Shintani San Please go ahead Shintani from SMBC Nico Securities
Shintani San
I have a question regarding page 23 where it says project I want to confirm so retail and project the percentage of each one of them Your project is 10 to 20% within the decorative. So what is the percentage within the market and and also in your company and for decorative you are expecting a 1.5 times of the GDP.
But with Project and retail is there going to be a difference or the retail and projects competitive environment are there any differences and what are you working on to respond to that situation is what I would like to know. So Previn son, can you answer that question please?
Pravin Chaudhari
Sure. So as far as project is concerned typically for industry it is about 15 to 20% and Nerolac is also hovering around that percentage. As far as project is concerned, Construction chemical is also in that range and growing. Both are growing at a faster pace and the reason for project growing faster is because of urbanization and high rise buildings which are coming. I think as a result of which this project segment is getting a good traction now.
One of the reason why Nerolac is also able to do well in project is also because of our industrial exposure and our dealing with B2B expertise. I think this whole key account management and the whole approach of managing leads is very very superlative compared to competition. I think that is one of the reason also why despite entering late, I think we are trying to catch up and grow faster than the market. I think these are the main things retail I think will remain as far as. Individual housing painting is concerned. But as a mix, if you see, I think going forward retail will reduce and project channel and construction chemical as a segment which got added into decorative will be will enhance its presence in the overall mix.
Shintani San
Okay, understood, thank you. I have a follow up question. Recently there is a difference in the demand trend by region. But if we look at the next fiscal year in the rural areas or in certain regions, the income will increase. But are you seeing expecting differences in performance depending on the region or area?
Pravin Chaudhari
Yeah, difficult to predict at this stage Till December what we saw is actually urban areas were not doing well and rural has started picking up. So historically I think both have been doing well. But because of our rural population and prosperity and government scheme which are supporting, we have seen slightly higher growth in the rural area.
Shintani San
And I believe that is the trend which should continue going forward. Also incidentally, that’s the area where Nerv lakh has a very, very strong presence. And I think that should augur well as we go forward. Ramen Song, can you answer in a more specific way of answering? If you answer in like north, south, north, east, west.
Pravin Chaudhari
Okay, fine. So if you look at our strong areas are north and east, where we are strong, where large share comes, followed by west and south. So these are the two regions, you know, where we are very, very strong. And that’s where our hope in terms of, you know, growth will come as we go forward. And as explained, you know, our initiatives are also lined up focusing on these territories.
Unidentified Speaker
Yeah. So north as far as north accounts for 50% of our recording business and east followed by east about 30%. So these are the strong markets. So of course we are relatively weak in south, but we are a lot of initiatives have been taken to shore up our south business as well. So fully in the coming years we’ll be doing there well as there also obviously with this, our overall growth will be much better in the coming years.
Shintani San
Thank you very much for a detailed question. Thank you.
Operator
Thank you very much. Next, Nominal securities.
Okazaki San
My name is Okasaki of Nominal securities. Thank you very much for this opportunity. Today I have a follow up confirmation and question regarding confirmation regarding page 23 for deco. The red bar is the revenue of your company. Is that a correct understanding? What is the red bar signifying?
Pravin Chaudhari
Yes, I have seen.
Okazaki San
And now for my question. Several times in the past in the Deco market you said that up until the first half of 25 is going to be difficult. But from the second half of 2025 there’s going to be stability in the market according to Tomioka san’s remarks. What is the reason why you think that is the case? Are you seeing signs of recovery? Please elaborate further. That’s my question. Ravinson, can you take this question?
Pravin Chaudhari
Yeah. Right. So from 2025 second half we believe that one is market likely to improve from the current slowdown that we had seen last year and half. The second was also because of competition which has come in. Obviously existing players have actually got impacted to the extent of 2 to 3% and every, every player in the industry got impacted and shared redistribution has happened.
Now having seen this, you know we believe that competition will reach and peak out in the, in this year and that’s, that’s where you know, we believe that you know, this whole thing will be stabilized in the second half.
Okazaki San
So. So I want to know why you think this is going to stabilize. Are there already signs visible in the market that the market is stabilizing? Can you be more specific?
Pravin Chaudhari
Yeah. So as far as quarter four is concerned, we have seen, you know, from competition perspective their overall sale has stabilized and they are not able to increase further. And we believe that numeric distribution which has happened I think is almost over now. There’s no further dealer expansion that is possible now.
The levers of brand and influencer management will kick in and which I believe is not so easy to leverage in just year and a half presence in the market. I think that’s where. We believe there’ll be a lot of challenge and some advantage to the existing player through their own network and through their relationship, I think they’re able to add more value as far as this segment is concerned. Would you like to add?
Rohit Malkani
I think that is largely it also with, you know, hopefully positive monsoon will also help, you know, the overall demand situation.
Operator
Yeah, right. Tomioka san, do you also have additional comments on this?
Tomioka Takashi
Well, I will discuss this with the members later but what they are saying in Japanese. Let me elaborate. There have been lots of new entries, there have been confusion but all the strategies have run its course for new entrants. And in terms of overall demand there have been a slowdown continuing. But this year onward we are seeing expectations for improvement. The new entrance threat has already finished its first stage and now there is likely to be more stability in the market and the weak demand is likely to recover from the second half. That is the gist of the explanation.
Operator
Thank you. Avisan from Macquarie.
Avi San
Yeah, hi, am I audible?
Pravin Chaudhari
Yeah, you’re audible. Y
Avi San
Yes, yes. Hi sir. Sir, traditionally the industrial margin, you know, has been more volatile versus decorative with our focus being a lot more and it seems from the presentation to increase salience of industrial. Should we expect a higher volatility in margin profile and if not, why
Pravin Chaudhari
So we. I think we have been saying that in case of industrial also we are moving from low value items to premium products. We have exited most of the non profit making items skus to our profitable items. So that’s reason we are very confident that going forward our industrial margins will improve. So from that point of view, even if my industrial sales go down, overall margins will not go down because we are very confident that industrial margins going forward we do better.
Avi San
Okay, sir. And so just related to that, your target of reaching 14 to 15% margin over the next two to three years from current around 13%. Is there a path or a split in terms of is it largely through gross margin, Is it more? Could you give us some sense on how should we look at this expansion panning out?
Unidentified Speaker
So yeah, there are a lot of initiatives already planned. For example, there’s a lot of cost optimization we already started. And also through global sourcing, that is global sourcing, we are getting a lot of benefits on the raw material front and also on the manufacturing side, a lot of automation and yield improvement projects have taken and at the same time we are also on the decorative front. We are trying to premiumize our products, focus on more emulsions and try to get better margins overall. As I also mentioned industrial, we are virtually weeded out all the low margin items.
So all these efforts which we have planned I think definitely will put us in a better margin portfolio going forward.
Avi San
Got it sir. That’s all from my side.
Operator
Thank you. Next. Namra Mihal San, please.
Unidentified Participant
Hi sir, good afternoon. I hope I’m audible.
Pravin Chaudhari
Yeah, me if you are audible.
Unidentified Participant
Thank you for taking my question. So my first question, so firstly congratulations on a significant performance on improving market share in the industrial and auto side of the business. I think there were a lot of questions historically that you know, while Kansa is strong there were you losing market share. But I think with the clarity that you’ve come out with and the display that you have grown in all the businesses in within the auto segment is quite remarkable.
So I wanted to check again on the margin profile within the industrial and Deco and auto all the three because you are now splitting it between three versus two what we used to historically understand. So if you can, you know, kindly highlight if the company average is X, what would be the, you know, margin for auto and industrial and both on gross and EBITA level and within those also I see you’re focusing more on projects and construction, chemicals and waterproofing within Deco, which I again thought probably were margin dilutive than the deco business.
So I’m unable to triangulate how are you going to move your margin from 14 to 18%. So maybe some insights on that.
Pravin Chaudhari
Yeah. So historically you are aware that at gross margin level, decoder margins were always higher compared to industrial. Okay. And what happened in the early 2323 years back because of the high inflation, industrial margins went as low as single digit. But for the last two years we have been able to do a lot of work on industrial margins based on. On raw material front as well as various initiatives on manufacturing, we have been able to scale up the industrial margins. So now at EBITDA level they are more or less on very close to each other. So that there is no major concern as far as we are concerned on the margin front right now. Having taken all these initiatives, I believe we believe that we should be able to do better going forward because there are a lot of initiatives in pipeline which we believe that should augur well for all of us for the company. And one more addition on sales side, if you look at this high performance coating as well as powder, there are many, many segments in that and there are segments which Bancai was not present which are actually premium in nature. And that’s where now technology infusion is happening. To support this, Ransai Japan we also acquired a company in Europe which is specialized only in railways, specialized in heat resistant coating, non stick coating. So these were the, these were the segments where we were not present at all. Neither we had any technology or approvals. They also acquired one powder coating company which has very, very good technology bandwidth available both in premium as well as auto auto sector. So I think all this technology portfolio which is available to us now and with this approach of one kansa, I think this portfolio leverage that I can do, I think will add significant top line as well as bottom line as we move forward.
Unidentified Participant
Understood. So then that, that’s quite helpful and makes a lot of sense and thank you for that clarification. So my second question is on the growth profile. I mean we have seen 40, 50 and 70% growth in the, in the industrial and auto part of the business. Can, can one assume that the low hanging fruits are now and maybe growth from here on probably at the previous slide I think yeah, this one probably, you know low hanging fruits are now kind of achieved and growth from here on while there is a dotted line which is continuing to go up.
But, but any elaboration on this slide if you can just talk about give to give us confidence that this will continue to grow in that linear manner. Y
Amrit Rekhi
Yeah, so Mehit, you know we were earlier focused on auto but you know in the last few years we have now called out it’s not auto business powder. We’ve always been strong traditionally but where we are focusing on most is the kind of a new focus on the GI PC part and also on the ARF part.
Now while we have grown very well, there still is a lot of room to grow for us. So. And also our shares are not that high as they are in powder and auto. So it naturally means our focus and good momentum in the market means that there’s still significant, you know, growth possible there and. We built a very good base and structure now and we need to just leverage that and grow further. So I, I feel that we are fairly confident that the same trajectory will continue.
Unidentified Participant
Got it. So thank. That gives a lot of confidence. Thank you very much and wishing the entire new team all the very best. Thank you.
Operator
Thank you very much. I see from icic, please go ahead.
Pravin Chaudhari
Yeah. You’re not audible slightly louder. Yeah. Better.
Aniruddha
Yeah. Yeah. So on your first question, see we look at the powder arf, GIHPC auto as a segment. Likewise depot is a segment. So we are not getting into product mix of each segment as you would have noticed. So at this stage I think we’ll restrict to this and yeah, I mean that’s, that’s the approach we would like to take as far as segment play is concerned.
And as far as the second question on softening of crude is concerned, I think yeah, overall raw material situation indeed is benign. But if you look at against crude, I think our dollar is pretty volatile. That being one second thing is also if you look at our global geopolitical situation, especially with tariffs and supply chain slight issue which is hanging around, I think those uncertainties are still there.
So we believe whatever softness that comes in and delivered to us through RM situation, I’m sure we’ll be able to improve Profitability, that is our major focus as of now. Decorative as stated earlier I think will be clearly focused on a strong market on north and east and it will not be all India play and you know trying to protect the situation everywhere. So wherever we are strong definitely there will be investment and we definitely would like to grow as far as those strong markets are concerned. Thank you.
Operator
Thank you citizen please.
Unidentified Participant
Yeah. Hi Praveen and team. Thanks for the opportunity. It is really insightful. Two questions. If I believe industrial is a very good strong wicked for us and we have been leaders in auto segments. Can you share how the share of top three players in the particularly auto segment has moved over last three years?
I mean business contribution. And my second question is that if, if you have any, any road map in the industrial if it is going to be stronger how you look at the new customer acquisition has changed over last two, three years and is there any meaningful new customer admit acquisition has happened over last 15 odd months or is there anything, something which is pipeline which will drive this business?
Amrit Rekhi
Yeah, yeah, that’s interesting. So you know industrial has always been our strength and in automotive, you know though we have a very strong market share for the last few years we have, we have, you know post Covid acquired a significant market share means we’ve increased our share where we were present.
So that is what has led up to this, you know, improved trajectory market share that you’re saying there. We believe we will continue to the next two years continue to increase our share because we have a very focused plan of acquiring, you know, higher share and we are bringing in new technology and products so that we are always ahead of the curve.
So auto is something which we are, is a core to our business. As I mentioned in powder coating, you know which is the second biggest business we have, we have a clear plan of premiumization there and you know we are entering into newer segments such as alloy wheels which is you know on the premium side of the business and you know other functional coatings like you know rebar and pipe we are getting into.
So that is the second part, the third part, you know the high performance coating which is a very fast growing segment. As I as I mentioned we are doing very well and we have a lot long way to go there. We have put a very focused plan of network expansion and getting new approvals and accordingly we have You know, aligned our teams also in such a way that we are able to take advantage of the, you know, spend that is happening by the government in infrastructure. And we’ve got a very nice pipeline of projects that are there with us currently. And we see that that will be a route forward by, by, by approvals by, by new technologies to, to acquire new customers and grow Y.
Unidentified Participant
Okay, that’s helpful. Just one follow up in the powder coating business. What kind of spreads in terms of geographies you would have and maybe if you can give little more more color. How much is between that powder coating in terms of various segments where you are stronger and which are the growth parameters, which are you applying based on the technology and going forward the customer acquisition.
Amrit Rekhi
So powder coating is you know, gaining prominence because it is a very eco friendly coating. It doesn’t have solvents as that is why it is being preferred by more and more customers. And a lot of people are migrating also from liquid to powder, particularly on the automotive side.
You know and you know while we are so we being leaders, we are double the size of our nearest competitor and you know, across white goods, furniture, ACs and electricals we have a very, very good presence. This is across segments and also across geography. So the big markets for powder coating are basically north and west and in both the places we are, we are very strong.
We also have a unique advantage of being the only company with several plants to cater to demand and that gives us a very unique position to be close to the customers and as well as service the requirement. So service the customer requirement fast. So you know this has been a traditional strength area for us and we want to continue to expand in powder. Voting in a digital.
Unidentified Participant
That’s really helpful. Thank you Praveen and all the best.
Pravin Chaudhari
Thank you Suresh.
Unidentified Participant
Thank you. Hello. Am I audible?
Pravin Chaudhari
Yes. Yeah.
Unidentified Participant
Yeah. Thank you. Thanks a lot for the opportunity and congratulations to the new team. My question is regarding the decorative business. So given that the increasing competitive intensity, so what differently Kansai is now planning to do or what would be the strategy here to protect the market share or to go aggressively in gaining the market share, how would the plan pan out going forward?
Rohit Malkani
So Roshan, you know like we had mentioned in, in our presentation, right where there is headroom for. For us to do much better. Those, those segments we will be driving more aggressively. That is you know in the project segment in construction, chemicals and wood finishes. In retail we will be following up more of a protect and you know a more stable approach. And like we have said we will focus on select geographies to ensure that we are, you know we are able to take care of any, any aggression that competition comes up with in these areas. Y
Unidentified Participant
Yeah, right, understood. That’s helpful. And the next question is given that the crude oil prices are softening which will potentially lead to expansion in gross margins going forward. So how do you see that? I mean in the near term maybe can we see increase in the advertising spend spends going up maybe utilizing those benefits to increase the advertising spends. How do you look at it?
Rohit Malkani
So you know, see advertising spends, we will, you know we will continue in line with whatever we have been managing so far. Like we have said that our, you know our top of mind awareness is number two. So we will not be going extremely aggressive on that front. But we are very cognizant of the fact that we have to maintain that number two position and strengthen what Nerolac has always stood for. Right.
So like we have said that you know Japanese technology and high quality products is what we will continue to build through what we do in this area.
Pravin Chaudhari
And additionally Roshan whatever Roet has mentioned, the mix of this advertising itself is undergoing change and we are also going to change from media to digital to influencer management. So I think that mix I think will be fine tuned to our strength markets. But as far as overall spend is concerned. Yes. As Rohit mentioned we’ll be maintaining our TOMA to support that TOMA level. Definitely spend will be in line.
Unidentified Participant
Understood. That’s helpful. Thanks a lot and wish you all the best. Thank you.
Pravin Chaudhari
Thank you.
Operator
Thank you very much. Aditya San, you are the last person to ask a question. Please go ahead.
Unidentified Speaker
Thanks for this informative presentation sir. So in the challenges you have highlighted that margin pressure is inevitable, a decline in profit margins is inevitable, inevitable as you can see on this particular screen itself. But when we look at the, the KPIs, the financial KPIs that you have said for three years as well as for FY13, there’s hardly any margin pressure that we are kind of building it.
Unidentified Participant
So if you could just firstly tell us why do you feel that margins from here could come under pressure. And secondly, how should we reconcile this concern with the KPIs that you have? Yeah. Thank you sir.
Pravin Chaudhari
Thank you. So this particular thing is mentioned as far as depo is concerned and these challenges are right now what is persisting in the industry would have seen whole industries re rated and their margins have come down. Those are playing in the decorative. So these are I would say short term challenge. But the levers that you just told you about industrial and whole premiumization story is one that will support overall company margins.
Second thing is our operational efficiency program which already is underway right now that also should help us building and improving our efficiency and some margins specifically for decorative. If you look at our focus will not be pan India. It will be very targeted, focused and helps to maximize our input output ratio.
And we believe through that over midterm trajectory of next three, three years, I think we should be reaching our profit margin that we have already stated. Sure, sir. And just one clarification. These profit margins that you have stated, EBITDA margins that you compute, those include other income as well? No, these are purely operating ebitda.
Unidentified Participant
Yeah. Operating ebitda. Yeah. Perfect. Perfect. That’s helpful sir. Thank you so much.
Pravin Chaudhari
Thank you.
Operator
Thank you very much. With this we would like to conclude the India strategy briefing for Kansai Naralaka Paints. Please respond to the survey and if there are any questions you can also write in your question in the survey. Thank you very much once again for your participation today.