Kansai Nerolac Paints Ltd Management Discussions

INTRODUCTION

Kansai Nerolac Paints Limited (referred to as KNPL, the Company, or We), established in 1920, is a subsidiary of Kansai Paint Co., Ltd., Japan. In addition to our primary operations in India, we have established a presence in Nepal, Sri Lanka, and Bangladesh through a combination of strategic acquisitions and joint ventures. As one of the largest manufacturers of paints and coatings in India, we have established a strong leadership position in the decorative and industrial coatings sector. The Company continues to lead the automotive and powder coating segments and commandssignificantmarket share in performance coatings backed by deep technical expertise and longstanding industry partnerships. In the decorative segment, we are recognised as the third-largest paint manufacturer in India. Our strong market position is driven by sustained investments in intellectual and human capital, complemented by access to advanced global technologies. This enables us to deliver differentiated, environmentally responsible, and innovation-led solutions, tailored to the evolving needs of Indian consumers.

As a trusted name in the industry, KNPL is committed to designing solutions that protect, inspire, and touch lives every day. Our painting solutions provide Beauty and Protection to a wide array of applications, including decorative paints (interior and exterior, wood coating, construction chemicals, tile adhesives), automotive coatings (for 2,3, and 4-wheelers, electric vehicles, commercial vehicles, and tractors), emerging segments (underbody coatings, alloy wheels, and seam sealers), consumer durables (fans, microwaves, refrigerators, washing machines), personal items (hair clips, artificial jewellery), and transportation infrastructure (bridges, metro rail). This commitment is encapsulated in our belief that There is a little bit of Nerolac in everybodys life.

At KNPL, we remain firmly committed to our purpose of transforming spaces and enriching lives by offering high-quality paints that enhance everyday environments and make a positive contribution to the world around us. Guided by innovation and a relentless pursuit of excellence, we strive to deliver solutions that not only inspire and protect but also leave a meaningful, lasting impact on our stakeholders and the communities we serve.

As we look ahead to FY 2025-26, we remain firmly focussed on building upon the momentum of recent years to further reinforce our market position. This continued drive is rooted in our long-standing commitment to innovation and customer-centricity: principles that have consistently defined our journey and underpinned our success over the decades. This year, the competitive landscape has undergone a marked shift, presenting us with both new challenges and emerging opportunities. Throughout this period of change, we have remained focussed on meeting evolving customer expectations. This continued emphasis has enabled us to launch products that directly address consumer needs, enhance engagement through better service delivery, and reinforce our position in the market.

Industry Progress

In FY 2024-25, the Indian paints industry demonstrated resilience in the face of subdued demand and intensifying competitive pressures. Rural demand remained muted for much of the year, with signs of recovery emerging towards Q3. The entry of new players into the marketfurtherintensifiedcompetition, prompting more aggressive pricing strategies. Additionally, an extended monsoon season impacted demand during the second quarter, affecting both retail and project sales.

The automotive coatings segment recorded healthy growth, driven largely by the launch of new passenger vehicle models. Meanwhile, industrial coatings experienced stable demand, supported by ongoing infrastructure development and government-led stimulus measures. Demand in the performance coatings segment was primarily driven by strong growth in high-performance protective coatings, particularly within the oil and gas sector. Powder coatings saw subdued demand while general industrial paints registered healthy traction, especially in applications related to pre-engineered buildings and other industrial products.

The industrys focus on premiumisation has continued to strengthen, supported by increased investments in innovation and responsiveness to evolving consumer preferences. This strategic shift highlights the sectors adaptability and sustained commitment to long-term growth.

FINANCIALS

FINANCIAL HIGHLIGHTS

A summary of KNPLs standalone financial results for the year ended 31st March, 2025

(FY 2024-25) compared to the standalone financial results for the previous year, FY 2023-24, is as follows:

in Crores

Particulars	FY 2024-25	FY 2023-24
Revenue from Operations	7,496.71	7,393.30
Profit before Depreciation, Interest, Exceptional Item, and Tax (PBDIT)	974.13	1,022.88
Less: Depreciation and Amortisation	193.68	179.96
Profit Before Interest, Exceptional Item, and Tax (Operating Profit)	780.45	842.92
Less: Interest	15.09	12.46
Add: Other Income	142.06	93.11
Profit Before Exceptional Item and Tax	907.42	923.57
Add: Exceptional Item	479.19	642.25
Profit Before Tax (PBT)	1,386.61	1,565.82
Less: Tax Expenses	365.37	382.95
Profit after Tax	1,021.24	1,182.87
Other Comprehensive Income	(3.46)	(3.77)
Total Comprehensive Income for the Year	1,017.78	1,179.10

Revenue from operations for the year aggregated to 7,496.71 Crores as compared to 7,393.30 Crores for the previous year, reflecting a growth of 1.4%.

While average crude oil prices declined compared to the previous year, the impact was partially offset by currency depreciation during the same period. As a result, overall raw material prices remained largely stable throughout the year. We continued our efforts to control overheads, with all departments working on their tasks and achieving positive results.

PBDIT for the year stood at 974.13 Crores,or material orders registering a decline from 1,022.88 Crores in the previous year, reflecting a degrowth of 4.8%. On the other hand, other income rose to 142.06 Crores, a notable increase from 93.11 Crores recorded in the previous year. During the year, the Company sold its factory land and building at Lower Parel, Mumbai and a gain of 665.4 Crores was accounted. Due to the continued losses incurred by our subsidiaries in Sri Lanka and Bangladesh, the Company has recognised an impairment loss of 186.25 Crores in the year. The net amount of 479.19 Crores is shown as an exceptional item.

PBT for the year stood at 907.42 Crores, marginally lower than 923.57 Crores (before exceptional items) in the previous year, reflectinga degrowth of 1.7%. PAT declined to 1,021.24 Crores from 1,182.87 Crores in the previous year, marking a degrowth of 13.7%.

Return on net worth (excluding exceptional items) for the year is 11.3% as compared to 13.4%.

During the year, KNPL did not accept any deposits covered under Chapter V of the Companies Act, 2013. There are no passed by any regulators, courts, significant or tribunals against us that could impact our going concern status or our operations in the future.

There has been no change in the nature of our business during the year. Additionally, there have been no material changes or commitments affecting our financial position that occurred between the end of the financial year to which the financial statements relate and the date of this report.

DIVIDEND

The Board has recommended dividend of 375% ( 3.75 per share) including special dividend of 125% ( 1.25 per share) for the financial year ended 31st March, 2025. This compared with a final dividend of 375%( 3.75 per share) including special dividend of 125% ( 1.25 per share) declared last year.

Key Ratios	FY 2024-25	FY 2023-24	Difference	% Change
Debtors Turnover (No. of Days)	47	46	1.4	3.1%
Inventory Turnover (No. of Days)	121	125	3.7	2.9%
Interest Coverage Ratio	65	82	17.5	21.3%
Current Ratio	4.02	3.48	0.5	15.5%
Debt Equity Ratio	-	-	-	-
Operating Profit Margin (%)	13.0	13.8	0.8	5.9%
Net Profit Margin (%)	13.7	16.1	2.4	15.0%
Return on Equity (%)	17.0	23.1	6.1	26.3%

SUBSIDIARIES AND CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI Listing Regulations), the Board has approved a policy for determining material subsidiaries. The policy is available on the website of KNPL at: www.nerolac.com. Further, based on this policy, we do not have any material subsidiaries.

Indian Subsidiary

Nerofix Private

The Companys turnover was recorded at 125.33 Crores, compared to 132.8 Crores the previous year. The Company recorded a loss of 15.26 Crores, compared to 2.74 Crores in the previous year. Strategic initiatives have also been taken to revamp the business.

The consolidated financial statements of KNPL, as of 31st March, 2025, are prepared in accordance with applicable accounting standards and form a part of this report. All subsidiaries of the Company as of 31st March, 2025, have been considered in the preparation of consolidated financial statements. Additionally, a separate statement in Form

AOC-1, highlighting the key features of the financial statements of the Companys subsidiaries, is included in this report.

Furthermore, the Annual Audited Financial Statements of all

KNPL subsidiaries are available on the Companys website at: www.nerolac.com.

Overseas Subsidiaries

Operations in Nepal

During the year, the turnover of KNP Japan Private Limited, our subsidiary in Nepal, rose to 69.43 Crores, up from 65.92 Crores in the previous year. Profit after tax stood at 5.97 Crores, as compared to 5.49 Crores in the previous year.

Operations in Bangladesh

Kansai Nerolac Paints (Bangladesh) Limited, our subsidiary in Bangladesh, registered a turnover of 143.18 Crores for the year, as compared to 202.27 Crores in the previous year. The Company incurred a loss of 30.95 Crores during the year, compared to a loss of 17.52 Crores in the previous year.

Operations in Sri Lanka

The turnover of our subsidiary in Sri Lanka, Kansai Paints Lanka (Private) Limited, for the year stood at 2.03 Crores, compared to 34.25 Crores the previous year. The Company incurred a loss of 19.89 Crores during the year, as compared to 7.21 Crores in the previous year.

SEGMENT-WISE PERFORMANCE

We have only one segment of activity, namely ‘paints, in accordance with the definition of ‘Segment covered under the Indian Accounting Standards (Ind AS) 108 on Operating Segments. The performance of the Company is discussed in this report.

Decorative

Business

OVERVIEW

In FY 2024-25, we continued to build on our rich legacy of over 100 years in delivering a comprehensive range of painting solutions that embodied both ‘Beauty and Protection.

In our commitment towards meeting the evolving needs of our customers, we launched 22 new products in the decorative segment and 10 new products in the Paint+ category. The idea was to create unique products with differentiated features.

Recognising the rising consumer preference for value- added services, we expanded our Nerolac NxtGen Painting Services to over 250 towns, positively impacting a broader ecosystem of consumers, painters, and channel partners. In line with this expansion, our Premium Wood Coating and Construction Chemicals segments sustained its strong performance throughout the year. The project business also maintained its growth momentum in FY 2024-25. We also increased our showroom concepts as well as shop-in- shop outlets and expanded to more towns in a bid towards providing consumers with superior retail experience. Our Programme for Architects and Interior Designers saw increased momentum, fuelled by targeted engagement initiatives led by exhibitions and seminars centred around the Companys strong emphasis on sustainability.

PAINT+ AND NEW PRODUCT LAUNCHES

Value Creation at Every Step

In the reporting year, we remained firmly committed to our strategic growth agenda and strengthening our position as a market leader. Under the Paint+ category, we continued to emphasise unique product offerings that enhance our market presence. We also introduced the Wow Whites range (Whitest of White), across both interior and exterior emulsions that provides best-in-class whiteness along with 15% more coverage.

As part of our efforts to strengthen the exterior product portfolio, we launched Excel No Dust, an acrylic emulsion paint designed to deliver superior performance. We further expanded this range with the introduction of Nerolac Excel Mica Marble Stretch and Sheen NXT, a highly durable, water-based, high-performance exterior paint. Additional launches in this category included Neu Latex Exterior White and Nerolac Suraksha Primer, broadening our offerings to meet varied customer needs.

In the Interior Range, we launched the Nerolac Beauty Gold Washable NXT and Impressions Sheen Emulsion, which provides a radiant sheen and smooth finish. The other new products in the interior range are Kansai Select Shikisai and Neu Latex Interior White.

These product introductions not only strengthen our portfolio but also reaffirm our commitment to delivering high-quality, differentiated solutions that align with evolving customer expectations.

Consumer Services

The NxtGen Painting Service Programme continued to offer a seamless, digitally enabled experience through its streamlined, end-to-end processes designed for ease and efficiency. This year, we continued to uphold our commitment to delivering exceptional value by connecting homeowners with trained professionals and offering affordable solutions that significantly enhance customer satisfaction.

Our strong growth and adaptability are reflected in the continued expansion of our painting services, now spanning over 250 cities across the country and serving over 25,000 customers.

Through the expansion of our Contractor Service across diverse geographies, we have built strong partnerships with trained contractors who serve as trusted contributors within their local communities. This approach not only enables us to provide our customers with cost-effective painting solutions but also fosters a sense of trust and reliability.

Superior Retail Experience

We have enhanced customer experience through our NxtGen Premium Shoppe concepts customised to meet retailer requirements. These platforms provide a solution based comprehensive approach to home renovation including repair, waterproofing and painting. AI based colour recommendations, an industry first, basis existing furnishings and furniture is the unique feature across all our format.

As of FY 2024-25, we have increased our Nerolac NxtGen Shoppe outlets to 100+ and Shop in Shop outlets to 200+ across the country.

Influencer Engagement

Programme

Pragati Programme for Painters

Our Painter Loyalty Programme, Pragati, is a key element of our strategy to drive engagement and derive higher share of wallet from the painting contractor segment. Our focus is on capability building and skill development influencersthat thissetofkey impact the final delivery of the finished product. We trained over 80,000 painters in paint application through classroom and hands-on sessions, further enhancing their skills and expertise. This year, through our existing programmes of Shop Meets and Expos we upskilled our existing loyalists as well as built awareness of the KNPL range of products and services across key markets. The entire engagement for this category is driven by our digital app called ‘Pragati, which established the foundation for our Painter Training Academies. Additionally, we utilised artificial intelligence to gain insights into painters purchasing behaviours, leading to product recommendations from our side that meet their specific needs. This personalised approach not only improved the painter experience but also boosted sales.

Illuminati Programme for Architects and Interior Designers

At KNPL, we recognise the indispensable role of architects and interior designers in shaping our environment, crafting spaces that were both functional and visually captivating.

Over the past two years, we successfully engaged with 8,000+ professionals across the country, cultivating trust and loyalty through our Lunch & Learn presentations. To further support their creative process, we provided colour consultancy services and ensured that our shade palettes were seamlessly integrated into their 3D design rendering software.

We also actively participated in leading exhibitions, such as FOAID Delhi and Mumbai, providing a platform to showcase our diverse offerings, engage meaningfully with the design community, and stay attuned to emerging market trends. All these strategic initiatives have enabled us to grow our brand awareness and brand equity among this set of future influencers.

Growth Businesses

Wood Coating

The wood coating business delivered good growth for KNPL over the past year, notably outperforming broader market trends. This expansion can be attributed to several key factors, including our strategic partnership with ICRO which allows us to bring the latest trend in this segment from Italy.

In the reporting year, we have significantly increased our demand for economical polyurethane (PU) finishes. New product introductions specific to key markets of Jammu & Kashmir as well as expanding our retail footprint across the country have been the key drivers for our gains in this segment.

Moreover, we have strengthened our connections with contractors by building trust and recognising their contributions through the PU+ Loyalty Programme, which rewards their efforts and fosters long-term relationships.

Construction Chemicals and Waterproofing

In FY 2024-25, we sustained robust performance in the construction chemicals and waterproofing segment, reinforcing our position in this growing category. The introduction of new products, coupled with increased engagement from contractors, significantly contributed to the overall salesgrowth within the Decorative Segment.

During the current year, we entered the high-performance waterproofing segment of membranes and new technologies through tie-ups. The groundwork to build core waterproofing segment across industries based on specifications and approvals is gaining momentum. Furthermore, our existing product range, including Nerolac Perma No Damp and Nerolac Perma No Damp+ gained significant share across markets.

Projects

At KNPL, our projects business showed excellent growth trajectory in FY 2024-25. Our business strategy during the year centred on expanding geographical reach, strengthening our presence in the builder segment (fresh painting), and accelerating growth in the housing society repainting segment, alongside deepening engagement with the government sector. The governments increased investment in infrastructure development also contributed positively to the growth of our projects business.

We increased our presence across 80+ towns, resulting in additional business and increased brand visibility. To ensure a robust pipeline of future opportunities, we reinforced our project team, demonstrating a proactive stance in identifying and securing upcoming business prospects.

We executed marquee projects such as the India International Convention Centre – Yashobhoomi (Delhi) and the Airport Flyover in Varanasi (UP), while also contributing to the preservation of cultural heritage through our involvement in the transformation of the National Rail Museum in Delhi.

Marketing and Branding

In our ongoing efforts to strengthen brand connections and enhance visibility, we launched several impactful campaigns throughout the year. To complement these campaigns, we substantially ramped up our digital marketing initiatives, targeting both top- and bottom-expansion, funnel activities, with a strong focus on promoting NxtGen Painting Services.

Our strategies included collaborations with third-party third-party platforms and robust social media engagement, leading to a remarkable 40% increase in website traffic.

We also integrated our iconic Nerolac jingle across all consumer communications and collaborated with our brand ambassador, Ranveer Singh, to further strengthen brand appeal.

To transform the lives of vendors involved in the Mahakumbh, KNPL helped their businesses blend with beauty by providing them with Dukan-It-Yourself (DIY) shade card-inspired store.

Our efforts to expand our presence by marketing campaigns have been recognised by various awards and certifications. In the reporting year, we were recognised by Quora for executing the platforms most impactful campaign, while our performance marketing efforts earned

KNPL a Bronze Medal from Front Benchers.

Industrial Business Overview

India is experiencingsignificantinvestment in infrastructure development, which in turn is driving demand for industrial paints. Simultaneously, as one of the largest automotive markets globally, the country is witnessing rapid growth in the sector, fuelled by rising domestic demand for passenger vehicles and a surge in vehicle exports to international markets.

The powder coating segment experienced steady growth, primarily driven by demand from the white goods and electrical appliances sectors. The liquid coatings market saw fuelled by the increasing adoption of significant high-performance coatings that cater to specialised industrial applications.

The industrial paints business caters to a large variety of industrial customers like automotive OEMs, auto refinish body shops, general industrial customers and high-performance coatings users such as oil and gas, chemical plants, power plants, and infrastructure companies.

Technological advancements played a crucial role in shaping the industrial paints market, with innovations in application techniques and product formulations. Our state-of-the-art R&D centre has been instrumental in solidifying our leadership position within the industry.

As we navigate this vibrant landscape, we remain committed to innovation and excellence, ensuring that we continue to meet the demands of a rapidly evolving industry.

Automotive Business

OVERVIEW

Building on an already substantial presence in the automotive segment, we successfully gained additional market share and maintained our position as the dominant leader in this category during the year. Our strategy focussed on the development of technologically advanced products and the introduction of sustainable technologies, which align with our customers evolving requirements.

The passenger vehicles and 2-wheelers segment witnessed good growth during the festive season. In contrast, the commercial vehicles segment witnessed a subdued demand.

The launch of new models by car manufacturers further reinforced this momentum, driving consumer interest and supporting the continued expansion of the passenger vehicles market. This growth was supported by rising demand in the small car segment, a growing preference for sustainable alternatives, and increasing income levels across the Indian population, all of which contributed to higher automotive demand.

As we move forward, our focus on innovation, strategic partnerships, and sustainability will continue to drive our growth in the automotive sector. We are well-positioned to capitalise on emerging opportunities and maintain our leadership in this dynamic industry.

NEW SEGMENT IN THE AUTOMOTIVE BUSINESS

In FY 2024-25, we achieved notable progress across our automotive segments, showcasing our commitment to innovation and quality. By strategically investing in new business segments, advancing product development, and upgrading our technologies, we have effectively enhanced our market position. In addition, we have concentrated our efforts on new segments, including seam sealer, underbody coatings, and alloy wheels. The successful implementation of these initiatives has significantly contributed to our overall performance.

Passenger Vehicles

The passenger vehicle segment recorded good growth during the year, driven by rising demand across both urban and rural markets. In line with this growth and evolving consumer needs, we have consistently been introducing new, high-functionality products within this segment.

Furthermore, we remain committed to sustainability by offering solutions that support energy conservation and optimise paint usage, reinforcing our focus on technological innovation and operational efficiency.

Two-Wheeler

The 2-wheeler segment experienced good growth in FY 2024-25. This can be attributed to increased demand for newly launched variants from manufacturers and a heightened consumer focus on EVs, across both urban and rural markets.

The rise in demand for two-wheelers has led to an increased need for paints and coatings. In response, KNPL has introduced a range of innovative solutions in FY 2024-25 to strengthen its competitive position in this dynamic market.

For 2-wheelers, we have prioritised solutions that deliver a superior gloss finish. Our Special PU clear product is engineered to provide an exceptional finish and anti-stain properties.

Overall, we remain dedicated to meeting the evolving needs of the 2-wheeler market through continuous innovation and a focus on quality, reinforcing our position as one of the leaders in the industry.

Commercial Vehicles and Tractors

The commercial vehicles segment experienced subdued demand during the year. In response to specific industry needs, KNPL introduced a high-performance casting sealer for tractors, offering superior corrosion resistance. Engineered to withstand harsh conditions, particularly during puddling operations involving fertilisers, this solution helps prevent paint peeling and enhances long-term durability.

Automotive Coating - Commercial Vehicles

Electric Vehicles (EVs)

Amid growing emphasis on environmental sustainability, the EV segment haswitnessedsignificantgrowth across all categories of mobility. As a market leader in automotive coatings, we have strategically enhanced our presence in this segment, successfully maintaining a strong market share and leadership position in the EV sector.

In the reporting year, we achieved remarkable growth in the electric 2-wheeler segment, accompanied by a similar upward trajectory in the electric 3-wheeler space. By leveraging advanced technologies such as our Super Durable Topcoat and a range of energy-efficient solutions, we remained focussed on effectively addressing the evolving needs of this fast-growing market.

Performance Coating

BUSINESS OVERVIEW

The performance coatings business delivered strong growth, led by the high-performance coatings segment, which recorded robust demand across the various industries it serves. This momentum was largely fuelled by an uptick in infrastructure development projects, which drove the need for high-quality, premium-grade paint solutions. The general industrial paints and coil coating segments witnessed marginal and strong growth respectively, driven by the premium category. Additionally, the powder coating segment also experienced modest growth.

During the year, we prioritised the expansion of our business in the performance coating segment to enhance our market share. We are also consistently enhancing our offerings in high-end coatings for railways, bridges, and the oil and gas sector through the adoption of advanced technologies.

Looking ahead, we are introducing a series of new products that further strengthen our portfolio. These innovations reflect our continued commitment to addressing evolving market needs while reinforcing our leadership position within the industry.

Powder Coating

In FY 2024-25, the Company achieved modest growth in the powder coating segment, due to the demand from white goods and electrical appliances. The segment continues to cater to diverse industries, including rebar, pipe coating, alloy wheels, and construction equipment, with a focus on delivering premium solutions. Customers are also transitioning from liquid paints to environmentally friendly (zero VOC) powder coatings.

At KNPL, we also focussed on innovation and premium offerings to meet evolving customer needs, including the introduction of pigmented primer-cum-basecoats to enhance both performance and aesthetics. Additionally, we launched breakthrough product to deliver one-shot matt black finishes without the need for a matting agent. Another key innovation was Monocoat metallic coatings for 4W ancillary applications.

Liquid Coating

The liquid coatings segment at KNPL sustained its growth momentum in FY 2024-25, supported by strong performance in high-performance coatings, driven by increased infrastructure activity and rising demand for durable, high-quality solutions.

During this period, we witnessed strong growth in the premium segment driven by demand from oil & gas and heavy engineering segments. We also focussed on enhancing our product range with an emphasis on the premium segment.

Technologically, we remain well-equipped to navigate the evolving market landscape, ensuring our continued success in delivering cutting-edge solutions to our customers.

Auto

Refinish

In the auto refinish segment, KNPL achieved good growth during FY 2024-25 with the overall momentum being driven by strong growth in premium category.

Responding to evolving customer preferences, the Company observed a notable shift towards sustainable products. We also focussed on providing water-based solutions over traditional solvent-based options, reinforcing our commitment to sustainability.

Additionally, the Company implemented a digital platform for Body Shop Management during the reporting year. This innovative platform is designed to enhance customer experience and engagement, ensuring streamlined operations and superior service delivery in the auto refinish domain.

These initiatives underscore our dedication to meeting market demands while fostering sustainable practices and technological advancement.

Research & Development (R&D)

OVERVIEW

In recent years, we have maintained our position as one of the leaders in the coatings industry. The Companys

R&D team is dedicated to creating innovative solutions that address the evolving needs of our customers while aligning with our sustainability objectives. During the year, we successfully filed 24 patents related to paint composition and the processes involved in paint preparation.

A notable achievement was the introduction of groundbreaking technologies that meet the stringent requirements of the industry. KNPL has excelled in automotive coatings, achieving significant success by implementing technologies that reduce resource consumption and energy usage. We have engineered high-performance products that are entirely free of heavy metals, ensuring both superior functionality and adherence to stringent environmental regulations.

In our performance coatings business, we introduced advanced, application-specific solutions, including a high-performance coating system developed for semi high-speed railway coaches. These innovations reflect our ongoing commitment to addressing critical industry challenges through targeted technological advancement. Our R&D team continues to work closely with value chain partners, with a strong focus on value engineering, localisation, and mitigating supply-side risks.

Collaboration with Kansai Paint, Japan, Kansai Paint Group Companies

Over the years, we have maintained our technological leadership in the industrial coatings sector by consistently staying ahead of competition. Our partnership with Kansai Paint Co., Ltd. (KPJ), a prominent global leader with extensive experience in technology design and development, has been instrumental in this endeavour. Through close collaboration with KPJ, we have successfully developed customised paint and resin formulations specifically tailored to meet the needs of

Indian customers.

Among our notable innovations are tin-free cathodic electrodeposition (CED) coatings and stoving primers for 4-wheeler body applications, along with several other products that excel in both aesthetics and functional performance. KPJ also brings deep insights into emerging global colour trends and extends robust technical support to our clients in India, leveraging its rich international expertisetoaddsignificantvalue across engagements. Furthermore, KNPL also collaborates with KPJ Group companies worldwide to deliver differentiated technologies to Indian customers across a diverse range of end-user industries, including industrial coatings, coil coatings, auto refinish, and decorative paints.

1 Key Developments in Decorative Paints

Aligned with our Paint+ strategy, which focusses on delivering products with distinct, value-added features, our R&D team has made meaningful progress in developing innovative solutions tailored to evolving customer needs. During the year, we further strengthened our portfolio with several strategic product introductions.

We launched Kansai Select Shikisai, inspired by the natural beauty of stones, which offers a sophisticated matte finish embodying elegance and luxury.

Additionally, our Wow White Range features superior whiteness and provides 15% greater coverage. In the wood coating category, we launched Nerolac Wonderwood Gloria NXT, an offering that stands out for its high-gloss finish and superior resistance to scratches and stains. These advancements underscore our commitment to innovation and our responsiveness to the evolving preferences of our customers.

2 Key Developments in Automotive Segment

Passenger Vehicles Segment

The Companyhasmadesignificantstrides in the passenger vehicles segment, with the launch of innovative low flash off compact 3C-1B system for roof painting. This solution offers a range of sustainability benefits, including the elimination of one baking cycle, resulting in energy conservation, and a low film build that enables reduced paint consumption.

Additionally, we introduced Everlast Matt clear coat for one of the countrys leading passenger vehicle manufacturers. The product offers superior workability and enhances functional performance.

Two-Wheeler Segment

In the 2-wheeler segment, we have introduced several noteworthy products that cater to the evolving needs of the market. These innovative products stand out as a vibrant two-coat shade developed in Monocoat for excellent workability. Our versatile low-bake product suitable for both metal and plastic substrates, further expands application possibilities. Furthermore, our economical solution for the general OEM market, provides high-quality performance at a competitive price. These innovations reflect KNPLs commitment to meeting the specific requirements of the 2-wheeler industry.

Commercial Vehicles Segment

In the commercial vehicles segment, the Company introduced several key products that enhance performance and durability. Our casting sealer provides excellent corrosion resistance, making it ideal for harsh environments encountered in commercial applications. Our high-solid paint recognised for its exceptional durability, is suitable for demanding commercial uses. In addition to it, the combination of Texture Primer and Topcoat offers a unique textured finish enhancing aesthetic appeal and ensuring robust protection.

These developments highlight KNPLs commitment to innovation and quality in the commercial vehicles sector.

3 Key Developments in Performance Coating Segment

In the performance coatings segment, we have introduced several impressive products that enhance durability and functionality. In coil coating application, we have introduced a highly resilient product capable of withstanding QUV test conditions. Additionally, the newly introduced products offer exceptional flexibility on high-thickness substrates. Additionally, the Antidust Lacquer is perfect for electrical appliances, maintaining a sleek matte finish.

These advancements solidifies KNPLs commitment to sustainability and customer satisfaction within the performance coatings sector for FY 2024-25. We have launched special high build epoxy paint for the highly humid areas and jetties in the tidal zone application.

4 Key Developments in Powder Coatings

In the powder coatings segment, we have made significant advancements by introducing innovative products that cater to diverse market needs. Notably, we developed a new pigmented primer-cum-basecoat specifically designed for alloy wheels, enhancing both performance and aesthetics. We also introduced a specialised anti-static coating technology tailored for ESD applications. These new products exemplify our commitment to innovation and quality, reinforcing KNPLs position as a trusted provider of powder coating solutions in the market.

5 Key Developments in Coil Coatings

With regard to coil coatings, we have developed a high-build system engineered for enhanced durability and longevity, specifically suited for applications such as puff panels used in high-rise buildings, airports, and similar infrastructure. This innovative product is suitable for both domestic and international markets, addressing the increasing demand for coated metals in infrastructure development and construction projects.

6 Key Developments in Auto Refinish

In FY 2024-25, we launched an Economy Range Product crafted as an affordable alternative in the automotive refinish segment, delivering consistent results where cost-efficiency matters.

Supply Chain

The supply chain landscape continues to undergo rapid shifts, shaped by geopolitical uncertainties, crude oil price volatility, foreign exchange fluctuations, and import-related logistical constraints. At KNPL, we view these disruptions not as setbacks, but as catalysts, driving us to strengthen our supply chain resilience through proactive innovation and strategic adaptation. Over the years, our supply chain has remained a critical pillar of our competitive edge, enabling us to uphold the highest standards of quality and deliver reliable customer service. Our extensive network comprises nine owned manufacturing facilities that produce our products using materials and services from over 500 key suppliers.

We efficiently reached dealers and distributors nationwide, through a robust distribution system of 114 depots and 7 RDCs. At KNPL, our long-term performance and brand value are deeply anchored in the strength and agility of our supply chain. To meet these objectives, we place strong emphasis on close collaboration and foster trusted, mutually rewarding partnerships across our supply chain ecosystem. Our Annual Suppliers Conference enables us to engage with all our suppliers, recognise their excellence, and foster open communication.

We also recognise the importance of inclusive growth among all our stakeholders. During FY 2024-25, approximately 20% of our input materials were sourced from MSMEs, supporting inclusive growth initiatives. Additionally, to promote local sourcing, 75% of our input material was sourced within India. Furthermore, to engage our suppliers in our commitment to sustainability, we initiated a ‘Value Chain Sustainability programme. This includes training many of our suppliers on climate change awareness and greenhouse gas (GHG) inventorisation.

As a proactive step, KNPL has begun engaging with suppliers on emissions management.

The end-to-end digital transformation of our supply chain, coupled with purpose-led partnerships, will enable us to create a future-fit supply chain that is resilient, efficient, and sustainable.

Information Technology

In recent years, we have made substantial enhancements to our information technology capabilities across all operational functions by deploying a suite of new applications. Our IT ecosystem extends seamlessly to both internal and external stakeholders, with customised solutions developed specifically for dealers, painters, architects, interior designers, and our frontline sales teams. While managing a diverse array of applications, KNPL is committed to upholding the highest standards of security, as an essential and non-negotiable component of our operations. We utilise state-of-the-art tools and processes to safeguard our intellectual property and IT infrastructure. Through advanced threat monitoring and prevention measures overseen by the Corporate Information Security Steering Committee, we are committed to ensuring the early detection and mitigation of cyber threats across the Company.

Furthermore, we have made cybersecurity training mandatory for all the employees to keep them aware of potential threats and security concerns. We routinely disseminate cybersecurity awareness materials to employees, offering practical guidance on digital security best practices, spam and fraud prevention, safe usage of AI tools, and other key aspects of cyber hygiene. These initiatives collectively ensure that we are well-prepared to face future challenges, safeguard our valuable information, and support our continuous growth.

We are making significant progress on our digital ecosystem, including transforming our IT landscape by digitalising our operations. This is being done through the implementation of the latest technologies in core processes, supply chain, and procurement, among others.

People

At KNPL, we are committed to the holistic development of our employees and translating this belief into tangible actions through various initiatives and activities. The Company prioritises the health, safety, and overall well-being of the workforce while fostering a diverse and inclusive environment where individuals from all backgrounds feel valued and respected. As of the end of FY 2024-25, we are driving KNPLs transformation with the strength of 3,859 dedicated NEROLITEs, who take pride in being part of the ‘I AM Nerolac family.

Innovation (AVINYA)

Building on the success of previous years, we launched two innovation seasons, each targeting specific strategic agendas aligned with our organisational goals.

In addition to promoting innovation, we have prioritised culture building among employees through cross-functional participation, training, and development initiatives.

By continuing to promote a collaborative environment for idea generation and execution, our AVINYA platform empowers employees to take ownership of their innovations, driving success and positioning the Company for future growth.

Employee Well-being

At KNPL, we remain steadfast in our commitment to enhancing the well-being of our employees, recognising them as the cornerstone of organisational success. One of the key initiatives in this regard is the Wellness Corner App, which serves as a comprehensive platform for both physical and mental well-being.

Through our Wellness Wednesday Sessions, we consistently raise awareness among employees around mental and physical health, productivity, emotional intelligence, and work-life balance. Additionally, our monthly newsletter, ‘Impressions, features Nerolites sharing their experiences in maintaining a healthy lifestyle.

These initiatives reflect our unwavering dedication to creating a supportive and thriving workplace environment where employees feel valued, empowered, and inspired to excel.

Capability Building

Our initiative, TAJ 2.0 (Tap-Abhyaas-Jap), exemplifies our dedication to nurturing leadership potential. By collaborating with world-class organisations, this programme is aimed at building a strong leadership pipeline. Additionally, through Abhyaas, new joinees are introduced to all our products. For our sales front-liners, we rolled out Advanced Sales Training modules, while at the managerial level, our ‘Lead with Impact programme continued to strengthen leadership capabilities. We also leveraged the Percipio digital learning platform to promote self-directed learning and upskilling. In addition, we expanded our capability-building initiatives by training employees on Enterprise Risk Management (ERM) and the nine principles of BRSR, reinforcing our commitment to sound corporate governance practices. Through these diverse programmes spanning all employee levels, we reaffirm our commitment to individual growth and organisational excellence.

Employee Connect

At KNPL, we emphasise on cultivating strong relationships with employees through a variety of engagement initiatives.

To recognise and celebrate employee contributions, the Company has implemented the Titan+ recognition system.

This initiative allows employees to acknowledge their peers, for achievements. Our engagement initiative, Life@Nerolac, embodies the spirit of community and collaboration by platform, enabling employees to share updates, ideas, and accolades, fostering a cohesive and engaged workforce.

We have also established robust employee communication platforms such as the MDs Townhall, MD Samvaad, Coffee with HR, Works Manager Address sessions, and the Annual Learning Conference.

Throughout the year, the Company actively celebrates cultural and festive occasions across its plants, head office, R&D centres, and depots. On International Womens Day, we established the Women Impact Network (WIN), an employee-led resource group aimed at empowering women within the Company.

Through these thoughtfully designed programmes, we reaffirm our commitment to creating an engaging workplace where employees feel valued and connected.

Nurturing Talent

KNPL emphasises on nurturing talent to align individual aspirations with organisational objectives. A cornerstone of this talent development strategy is the Campus Collaboration Programme, designed to attract exceptional talent from premier management and technical institutes across the country. The Gurukul programme offers summer training opportunities, while the Aarambh Campus Programme facilitates the seamless transition of trainees into full-fledged Nerolites into roles such as management trainee, graduate engineer trainee, technical trainee, and sales trainee based on their qualifications.

Community Development

At KNPL, CSR is not merely an obligation but a fundamental aspect of our business philosophy. We believe that responsible conduct and social contribution are fundamental to our way of doing business, empowering us to serve as a catalyst for positive change in the communities we engage with. Our sustained efforts to enhance lives through targeted social interventions underscore our role as a conscientious corporate citizen and align closely with the United Nations Sustainable Development Goals (UN SDGs). In FY 2024-25, we continued our journey of impactful CSR initiatives at KNPL, positively transforming over 80,000 lives through programmes focussed on livelihood and skill enhancement, preventive healthcare and sanitation, promoting education, environmental sustainability, and rural and community development. Among these, Project Annapurna stands out as a remarkable initiative aimed at empowering women by equipping them with essential farming skills to foster self-reliance and sustainable livelihoods.

Our commitment to CSR excellence was honoured with the prestigious Golden Peacock Award for Corporate Social Responsibility2024,anaffirmationthat our efforts are making a meaningful impact and progressing in the right direction. This accolade reflects not only the scope of our initiatives but also the tangible impact they have had on underprivileged communities.

In FY 2024-25, 28% of KNPL employees actively engaged in CSR activities, exemplifying their commitment to enabling social change. This collective effort strengthens our ability to drive meaningful projects while cultivating a culture of responsibility within the Company.

Environment, Social and Governance

At KNPL, the concept of material issues involves identifying and prioritising key concerns that significantly influence our capacity to generate value for stakeholders. These material issues are considered critical, given their potential to significantly influence our commercial sustainability, social relevance, and the strength of our stakeholder relationships. By recognising and addressing these material issues, we aim to proactively manage our impact, enhance our resilience, and uphold our commitment to creating sustainable value for all stakeholders.

Opportunities and Threats

Information for this section can be found in the ‘Opportunities and Threatssection under + the Corporate Overview section.

Risks and Concerns

Information for this section can be found in the ‘Risks and Concerns section under the + Corporate Overview section.

Outlook

The Indian paints industry is anticipated to experience modest growth in FY 2025-26, driven by favourable macroeconomic conditions, rising urbanisation, and increased construction and infrastructure development activities. This growth can also be attributed to decent demand in both the decorative and industrial segments. In the decorative segment, growth will be supported by higher disposable incomes, premiumisation trends, a rising consumer preference for eco-friendly products, and government initiatives such as the Housing for All programme and the Smart Cities Mission. The industrial segment is also projected to maintain healthy momentum, bolstered by automotive productionandsignificantinfrastructure expansion.

Competition within the industry is intensifying, with the entry of new players challenging the market share of established companies. This is paving the way for increased investment, innovation, and enhanced distribution networks. While the sector may continue to face challenges related to raw material price fluctuations and margin pressures, companies are expected to mitigate these risks through product innovation, digitalisation, and a strong focus on sustainability. Overall, the Indian paints industry is well-positioned for sustained growth in FY 2025-26, supported by resilient demand drivers, a growing consumer base, and an evolving competitive landscape.

Internal Control Systems and their Adequacy

Our internal control systems are designed to monitor and manage our day-to-day operations efficiently. These systems ensure compliance with numerous concepts, regulations, and norms, adhering to methodology requirements. To enhance our internal control mechanisms, we have implemented an Internal Financial Control system in compliance with the provisions of Section 134(5)(e) of The Companies Act, 2013. This system provides the Board of Directors with additional oversight capabilities. The implementation of these systems follows the framework outlined in the Guidance Note on Audit of Internal Financial Controls in Financial Reporting issued by The Institute of Chartered Accountants of India, aimed at addressing KNPLs operational and financial risks. Moreover, our systems undergo testing by statutory auditors using automated techniques.

Efficienc Control

Index and Robust Control Index

The CEI and RCI remain integral to the Companys strategy for assessing internal audit effectiveness. We measure our control mechanisms against industry benchmarks to maintain efficient operations. Our internal audit programme focusses on determining gaps in control design, policy design, control or process deviations, IT systems, and regulatory compliance. Additionally, our internal audit programme evaluates the potential for automation in control processes and we leverage audit results to enhance the Companys internal controls.

Compliances

KNPL has developed a dashboard to monitor key legislative changes notified by various government authorities, which are then tracked by the Management for requirements and implementation. The Company tracks and ensures regulatory compliance online through the Legatrix system. The system is updated regularly with all the changes in compliance as they occur. The online tracking and tracing of completion help ensure strict adherence to regulations. In addition, the Company tracks any legal cases through the Roznama System.

Cautionary Statement

Statements in the Management Discussion and Analysis section of this report describing the Companys objectives, estimates, and expectations may be ‘forward-looking statements within the meaning of the applicable laws and regulations. The actual results might differ materially from those either expressed or implied.