Kansai Nerolac Paints Limited (NSE: KNPL) released its unaudited financial results for the third quarter of fiscal year 2025-26 on February 3, 2026. The company reported consolidated net revenue increased 3.1% year-over-year as automotive demand offset a subdued decorative segment.
The company recorded a non-recurring exceptional charge of ₹447.2 million related to new government labor regulations. The company reported a consolidated net revenue of ₹19,819.9 million, compared to ₹19,218.9 million in the corresponding quarter of the previous year. Growth was primarily driven by strong performance in the industrial coatings segment, while the decorative business faced challenges from an extended monsoon and a shorter festive period.
Key Development
The Board of Directors approved results showing a consolidated profit after tax (PAT) of ₹1,170.5 million for the quarter. A major impact on the bottom line was a non-recurring exceptional item of ₹447.2 million. This charge stems from an increase in gratuity and leave liabilities following the government’s notification of four new Labor Codes on November 21, 2025. These codes consolidate 29 existing laws, leading the company to adjust its financial provisions based on current legal guidance.
Product Highlights
KNPL continues to pursue innovation through its “Paint+” decorative range and advanced industrial coatings. New decorative launches include Excel Everlast 20, which offers 20-year weather resistance, and the water-based Excel Total Floor coat designed for paver blocks. In the industrial sector, the company introduced BTX-free metallic monocoats for car interiors and low-bake epoxy coatings aimed at reducing energy consumption in commercial vehicle manufacturing. The dealer network expanded by more than 3,500 members in the year-to-date period.
Financial Performance
Quarterly Results (Consolidated):
Net revenue rose 3.1% YoY to ₹19,819.9 million. PBDIT (Profit Before Depreciation, Interest, and Taxes) grew 2.0% to ₹2,396.9 million, though the PBDIT margin slightly compressed to 12.1% from 12.2%. PBT (Profit Before Tax) before exceptional items fell 3.7% to ₹2,061.3 million.
Nine-Month Results (Consolidated):
Year-to-date net revenue reached ₹60,982.0 million, a 1.5% increase over the previous year. PBDIT for this period decreased by 2.4% to ₹7,581.0 million.
Expenses and Balance Sheet:
Consolidated material costs for the quarter were ₹12,745.5 million, while operating expenses stood at ₹4,677.5 million. The company maintains a paid-up equity share capital of ₹80.85 million.
Leadership Change
The company informed that its Managing Director, Mr. Anuj Jain, will retire from the services at the close of the financial year ending March 31, 2025, pursuant to a mutual agreement between the Board and Mr. Jain.
Mr. Jain has been associated with the Company for over 35 years and has served as Managing Director and CEO for the past three years. He will remain available to support a smooth transition to the new leadership and provide advice, as required.
The Board has approved the appointment of Mr. Pravin Chaudhari as Managing Director with effect from April 1, 2025. Mr. Chaudhari is currently a nominee of Kansai Paint Japan on the Board and serves as Head of India Operations. He has been associated with the Company since 1993 and has previously held senior leadership roles, including Executive Director during the period from 2008 to 2018.
Investment Thesis: Bull vs. Bear
Bull Case:
- Company demonstrates resilience through its market leadership in industrial paints, which recorded strong growth fueled by GST-related demand and automotive OEM orders.
- The “Paint+” premium segment now contributes double-digit percentages to the decorative business, aiding margins in a competitive environment.
- High ESG ratings; ranking in the top 12% of the chemical industry group, enhance its appeal to institutional investors.
Bear Case:
- The decorative segment, a key driver for the broader industry, remains subdued with only a gradual recovery anticipated.
- Profitability is under pressure, as evidenced by the 3.7% decline in consolidated PBT before exceptional items.
- External risks include volatility in crude oil-linked raw material prices, rupee depreciation increasing import costs, and potential supply chain disruptions from geopolitical tensions.
Business Outlook & Strategy
Management intends to maintain growth momentum in the automotive and performance coatings segments. The stated strategy involves expanding the distribution network and transitioning from solvent-borne to waterborne paint systems. The company is also leveraging its “Nerolac NextGen” digital tools, such as the ColorMySpace app, to enhance consumer engagement. Capital allocation remains focused on R&D to increase the total addressable market through new technology.
Sector & Macro Context
The Indian domestic paint industry is estimated at ₹77,500 crores as of March 2025. Long-term demand is expected to be supported by government infrastructure spending on roads, railways, and airports. While the automotive sector shows robust demand, the broader industry must navigate a complex macroeconomic environment characterized by currency fluctuations and global inflationary risks.