The Directors of your Company are pleased to present the 103rd Annual Report and the
Audited Financial Statements (Standalone and Consolidated) for the year ended 31st March,
2023 ("year under review / FY 2022-23"). The section on Management Discussion
and Analysis includes a review of the financial performance of the Company - Financial
Highlights of the Companys standalone financial results, key financial ratios and
the dividend recommended by the Directors. It also includes the particulars of the
subsidiaries of the Company including overseas subsidiaries and their performance during
the year under review.
1. MANAGEMENT DISCUSSION AND ANALYSIS
Established in 1920, Kansai Nerolac Paints Limited (KNPL) is a subsidiary
of Kansai Paint Co., Ltd., Japan (KPJ).
Apart from its primary operations in India, KNPL operates in Nepal, Sri Lanka and
Bangladesh through acquisitions and joint ventures. It is one of Indias largest
Coatings companies with leadership in industrial coatings. We have a sizeable market share
in Performance coatings and a strong leadership position in Automotive and Powder coating
businesses. In Decorative, we are the 3rd largest paint player in the country. In recent
years, we have gained good traction in Auto Refinish, Wood finishes, Construction
Chemicals and Adhesives.
KNPLs strong position is due to its continuous intellectual and human capital
investment. The Companys access to global technology has helped provide Indian
customers with products and solutions that are unique, environmentally friendly and
cutting-edge.
KNPL, one of the industrys most trusted brands, designs solutions that protect,
inspire, and touch lives every day. Through our painting solutions, we provide
Beauty and Protection to everything that a household uses on a daily basis be
it paints for homes (interior & exterior, wood finishes), automobiles (4-wheeler,
2-wheeler), consumer durables (fans, microwaves, refrigerators, washing machine), personal
use articles (hair clips, artificial jewellery), transportation infrastructure (bridges,
metro rail). This is why we say There is a little bit of Nerolac in
everybodys life.
People are at the core of KNPLs strategy. KNPL prioritises its employees,
creating a culture of openness, collaboration, and empowerment while emphasising employee
well-being, growth, training, and engagement. It believes that happy employees create
differentiated outcomes in the workplace and marketplace.
In the Industrial business, the strategy is profitable growth, premiumisation, network
expansion and entry into new segments. We leverage our global collaborations and
technology leadership to provide our customers with sustainable solutions with an enhanced
value proposition. In the Decorative business, the strategy is to engage with all
stakeholders to provide innovative solutions. The Company offers consumers technologically
superior and differentiated products under the brand Paint+. This year the
Company has embarked on creating a new services offering and has increased its connection
with Influencers.
KNPL has been aggressively augmenting its capacity over the past few years to match the
demands of its expanding product portfolio. The Company has committed investments for a
new plant in Vizag and in augmenting capacities in existing plants.
We further plan to advance towards the future with the purpose, vision and the brand
promise of KNPL. Aiming to capture our customers admiration by diversifying our
product range and showcasing our commitment as a responsible member of society through a
strong focus on sustainability, we continuously strive to evolve into a superior company,
shaping the future of Nerolac.
Over the years, the Indian paint industry has achieved remarkable advancements marked
by substantial growth and progress. It has witnessed notable expansion in terms of market
size and emerged as one of the leading paint markets worldwide. The industry has
experienced a doubledigit Compound Annual Growth Rate (CAGR) in recent years, driven by
various factors, including urbanisation, growing disposable income, and increased
construction and infrastructure projects. This continuous expansion can be attributed to
the dynamic landscape of the Indian economy.
Indias per capita paint consumption has been steadily increasing, driven by a
growing middle class, changing lifestyles, and a shift towards better quality and
decorative paints. The rise in urbanisation has also led to an increased demand for paints
and coatings in both residential and commercial sectors. The Indian paint industry has
embraced technological advancements, leading to improved product quality, durability, and
eco-friendliness. Manufacturers have invested substantially in research and development,
creating innovative products such as low-VOC (Volatile Organic Compound) paints,
eco-friendly coatings, high- performance solutions, and specialised applications. The
Indian Governments focus on infrastructure development has significantly boosted the
paint industry. Initiatives like Smart Cities, affordable housing schemes, and
infrastructure projects such as roads, bridges, airports, and railways have generated a
surge in the demand for paints and coatings. Moreover, there has been a gradual transition
from the unorganised sector to organised players in the Indian paint industry. Prominent
paint companies have expanded their distribution networks, established manufacturing
facilities across the nation, and implemented robust marketing strategies. This transition
has increased organised players market share and raised the industrys overall
quality standards.
With a growing emphasis on environmental sustainability, the paint industry in India
has been actively adopting eco-friendly practices. Manufacturers increasingly offer
low-VOC, lead-free, and water-based paints, considered more environmentally friendly.
Several companies have also obtained certifications for adhering to international
environmental sustainability standards.
A summary of the Companys standalone financial results for the year ended 31st
March, 2023 (FY 2022-23) vis-a-vis standalone financial results for the previous year (FY
2021-22) is as under:
Subsidiaries and Consolidated Financial Statements
In terms of the provisions of Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing
Regulations"), the Board approved a Policy for determining material subsidiaries. The
same is also available on the website of the Company at www.nerolac.com. Further, in terms
of the said policy, the Company does not have a material subsidiary.
Indian Subsidiaries
Nerofix Private Limited
On 31st March, 2023, KNPL has entered into a Share Purchase Agreement with Polygel
Industries Private Limited (Polygel), its Promoters and Nerofix Private Limited (Nerofix)
for acquisition of the remaining 40% of the total shareholding of Nerofix from Polygel for
cash consideration of Rs.37 Crores. The said shares have been transferred to the Company
on the same date. Consequent to the said acquisition of shares, Nerofix has become a
wholly owned (100%) subsidiary of the Company.
Nerofix has become a wholly owned (100%) subsidiary of the Company.
The turnover of Nerofix was at Rs.146.80 Crores compared to Rs.110.42 Crores in the
previous year. EBDITA for the year grew to 3.7% as compared to 1.7% of the previous year.
Nerofix achieved a profit of Rs.0.10 Crores as compared to a loss of Rs.3.69 Crores during
the previous year.
Overseas Subsidiaries
Operations in Nepal
During the year, the turnover of KNP Japan Private Limited, the subsidiary of our
Company in Nepal, was at Rs.81.16 Crores as compared to Rs.84.00 Crores of the previous
year. EBDITA for the year decreased to 11.0% from 13.4% on Y-O-Y basis. Profit After Tax
stood at Rs.7.04 Crores compared to Rs.9.08 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 was Rs.26.73 Crores compared to Rs.23.71 Crores during the previous year. The
Companys loss narrowed to Rs.3.48 Crores during the year compared to a loss of
Rs.17.64 Crores in the previous year.
Operations in Bangladesh
The turnover of our subsidiary in Bangladesh, Kansai Nerolac Paints (Bangladesh)
Limited for the year stood at Rs.239.48 Crores compared to Rs.230.54 Crores in the
previous year. EBDITA for the year improved to 2.2% from -1.4% on Y-O-Y basis. The said
subsidiary incurred a loss of Rs.13.27 Crores during the year compared to a loss of
Rs.22.41 Crores during the previous year.
The consolidated financial statements of the Company as on 31st March, 2023, were
prepared in accordance with applicable Accounting Standards and form a part of this Annual
Report. All the subsidiaries of the Company as on 31st March, 2023, have been considered
in the preparation of consolidated financial statements. Further a separate statement in
Form AOC-1, containing the salient features of the respective financial statements of
subsidiaries of the Company, forms part of this Annual Report. Also, Annual Audited
Financial Statements of all subsidiaries of the Company are available on the
Companys website at www.nerolac.com.
SEGMENT-WISE PERFORMANCE
KNPL has 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.
MARKETING
Decorative Business
Overview
During FY 2022-23, Nerolac adopted a comprehensive approach and invested in several
initiatives to enhance its relevance to more customers as well as improve its value
proposition. Premiumisation, Digitisation, Sustainability and Convenience are some of the
key elements of the Companys approach.
The Companys growth strategy revolved around providing a unique customer
experience by introducing NXTGEN painting and consultation services, enhanced engagement
with painters, collaborating with Architects and Interior Designers, upgrading its digital
infrastructure, expanding into smaller cities, network expansion and offering a new range
of healthy home paints to enhance customer delight.
Product Proposition (Paint+) and New Product Launches
Through its Paint+ offering, the Company positions its offerings uniquely and
identifies new product niches. Under Paint+ brand offering, the Company aims to offer
customers the best-in-class experience and continuously develops innovative products to
enhance its premium and luxury range. The unique offering can be in form of paint
properties like sheen, stretch, durability, warranty or the price point at which it is
offered.
New Launches in Premium Category:
The introduction of new products like Impressions Kashmir and Nerolac
Excel Everlast 12 in its healthy-homes portfolio has increased the growth in the
Premium category. Impressions Kashmir is a high-end interior emulsion paint with a unique
no-smell feature, ultra-luxury sheen finish, and HD colors. It uses Japanese
technology and has high durability, making it an ideal choice.
Nerolac Excel Everlast 12 is a highly durable UV-resistant water-based exterior
emulsion with a self-cleaning property that removes dust with rainwater. It resists
diverse harsh weather conditions with excellent anti-algae performance and durability,
fortified with ENCAP additives.
The emulsion top coat offer superior and long lasting whiteness, excellent coverage,
protection and durability, while the base coat primer provides better hiding and adhesion
to the surface. It is suitable for use on a variety of surfaces, including wood, metal,
and plaster, and is available in both oil-based and water-based variants.
Marketing and Brand Building
We further built on our new brand expression Paint + during the year by expanding the
product portfolio with new launches. The products provided unique properties using
Japanese technology. We brought to life our Nerolac jingle in our advertisements and
communication to ensure consumers relate to our brand legacy.
The Company used various channels to reach its target audience, including TV
commercials, print advertisements, radio advertisements, outdoor hoardings, OTT platforms
and other online advertising. It also had a presence on marquee events like IPL and Asia
Cup on Star Sports, Indian Idol on Sony TV and other regional properties to showcase its
products, building relationships with customers and ensuring high brand visibility across
key markets. The Company launched a new TV commercial with Brand Ambassador Ranveer Singh
to promote Impressions range of products.
Social media platforms like YouTube, Facebook, Instagram and Linkedin were leveraged to
reach out to a larger and relevant set of audience. Digital marketing was rightly used to
reach out to a large set of consumers at the country level as well as to a very specific
set of consumers in a particular locality.
The Companys website underwent a changeover to guide the visitors better with
improved SEO (Search Engine Optimisation) capability. Detailed product portfolio and
offerings are available on the Companys website and continuous social media presence
to engage with customers and build brand awareness.
Consumer Services
NXTGEN programme is the Companys move ahead to touch base with the customer to
offer superior painting experience. The Company aims to provide a hassle-free and seamless
painting service, ensuring customer satisfaction. NXTGEN Painting Services offers a
range of services, including expert visits, site preparation, colour consultation, and
application, all delivered by a team of experienced professionals. The services are now
present in large number of cities in the country and consumers can avail this just by
placing a request on our website or any of our ad campaigns on social media platforms.
During the year, the number of houses painted were more than 20,000.
Nerolacs NXTGEN Paint Consultancy services are one of its kind in the industry. It
provides professional advice and guidance on painting to customers. KNPL NXTGEN Paint
consultants have extensive knowledge and experience and work closely with customers to
provide tailored solutions that meet their specific needs. Additionally, they offer
guidance on application techniques and post-painting maintenance as well. The service was
launched in one of the metro cities and received quite a good response and positive
feedback from consumers who availed this service.
Nerolacs NxtGen shoppe provides a unique and immersive experience for consumers,
catering to all their home painting needs. This experiential centre offers a
comprehensive range of painting solutions, including an extensive selection of paints,
wood coating finishes, wall design inspirations, and waterproofing solutions. The aim is
to assist consumers in making informed and efficient decisions when it comes to choosing
the right paint and colour for their walls. The store features a personalised colour
preview service, allowing customers to visualise and select colours for both their
interior and exterior walls. We have more than 40 stores nationwide and plan to expand
this network further in the upcoming year.
Influencer Engagements Influencer Management Team:
During the year, the Company significantly grew its headcount of Demand Generation
Assistants (DGAs) covering a large number of cities. The DGAs are the first point of
contact for painters and play a pivotal role in creating awareness of product schemes and
benefits. They played a critical role in expanding the Companys reach to individual
painters with customised value proposition. The sales structure to manage the influencer
programme at city, State and country level was put in place.
Launch of Nerolac NXT Range:
This range of products was designed and launched exclusively for NXTGEN dealers. During
the year, 4 products were launched in Nxt series in top coat and base coats:
Pragati Program for Painters
This is Nerolacs flagship programme to engage with painters and contractors. The
Company offers several benefits and schemes to painters through this programme. It has
been made more attractive with the DBT initiative, a Direct transfer of rewards to
painters bank accounts in real time. This has attracted more painters to this
programme. During the year, the Pragati app was enhanced with more features and ease of
use.
Also, more than 61,000 painters were imparted advanced training in paint application
through classroom sessions or by using a Mobile Training Academy.
Illuminati Program for Architect & Interior Designer
Nerolac launched its first edition of Illuminati programme
to capture the interest of leading professionals i.e., Architects and Interior
Designers (AIDs) vital to the industry. It promises to offer professionals future-ready
technology in paints as well as outstanding customer services. Best-in-class AIDs were
invited to be a part of this club. Members receive on-site consulting regarding paints and
best practices for its application online with their project requirements. The Company has
also developed an app (LEAD) for this. Through the app, the user can get details about
products and schemes, and register themselves and their site.
The programme has received a very good response from the Architect community.
Wood Finishes
The Wood Finish business did extremely well during the year and more so in the premium
segment. The wood finish portfolio was expanded through the launch of a specialised paint
product called Nerolac Termiprotect, which provides long-lasting protection to
wooden surfaces against termite infestation. This easy-to-apply product is suitable for
both interior and exterior surfaces. In addition, specialised products such as Bio
Coatings, which have Green Guard certification, were also launched.
The ICRO range, a premium wood coating range comprising Polyester, Acrylics and
Water-Based PU range, has now been launched in South and East markets. The introduction
of ICRO colour dispensing and mixing machines has enabled the promotion of pigmented
products to end-consumers as well as Architects & Interior Designers.
Construction Chemicals
The construction chemicals category witnessed excellent growth during the year. The key
growth drivers were distribution network expansion, deeper engagement with influencers and
demand generation team for retail marketing. A dedicated technical support team was put in
place for the project business. On the product side, the Company launched Damp Lock and
NoDamp+ under the Perma range. Nerolac Perma Damp Lock is one component
ready-to-use pre-putty application product that provides solution to waterproofing
problems like efflorescence and dampness. NoDamp+ is a PU Hybrid high-strength
fibre reinforced elastomeric waterproof membrane coating which provides up to 12 years of
waterproofing and up to 14o of surface temperature reduction.
KNPL also forayed into the tile adhesive and customised admixture category this year
which has started to reap good results.
Adhesive
KNPL was present in the Adhesive business through its subsidiary Nerofix. During the
year, KNPL acquired the balance 40% of equity shares of its subsidiary company Nerofix.
With this, Nerofix became a wholly owned (100%) subsidiary of the Company. The subsidiary
has an adhesive portfolio catering to the markets retail and project segment.
During the year, the Adhesives business grew briskly, with network strategies and
person-power deployed starting to reap results. Nerolac AquaSmart was launched in
select markets to establish KNPLs presence in the premium adhesive category. Strong
carpenter-level activations have helped improve preference for the brand. Our carpenter
application, which was launched in the previous year, has helped us identify the right set
of carpenters and have a more focused approach towards each market. During the year, 50%
more carpenters were registered on our application compared to the previous year, with a
more than 80% retention rate.
Projects
KNPLs Projects business witnessed significant growth during the year. We expanded
our reach to more cities. The Government, builders, and CHS segments have emerged as the
main contributors to B2B opportunities. KNPL has increased its on-ground team presence to
identify and create a demand pipeline. They connect with contractors & customers
across markets and establish strong relationships with them. The team is equipped with
various tools to drive conversions. On the product side, the Super series range of
products was suitably modified to meet the customers specific requirements. Also,
there was synergy created with the industrial products like floor coating and epoxy
products, wherever required. The integration of the construction chemical and projects
teams has positioned Nerolac as a complete solution provider with customers.
Distribution Network
Numerous initiatives were undertaken to strengthen the distribution network,
effectively enhancing market penetration and serviceability. The Company has opened new
dealerships and expedited the installation of CCD machines to expand its presence in the
market, particularly in rural areas. In the financial year, the Company successfully
established a network of 31,000+ dealers. Additionally, the distributor model employed
by the Company enables further market penetration by allowing distributors to appoint
subdealers directly and install CCD machines. These measures collectively contribute to
the Companys increased market presence in Tier II, Tier III, and rural markets,
consequently improving long-term serviceability and ensuring long-term success.
Digital Ecosystem
KNPL has implemented a digital ecosystem, a web of applications specially designed for
all internal and external stakeholders. The set of applications provides visibility across
the value chain. This visibility in real-time help us improve our processes and drive
efficiency to reach out to our consumers. For example, an expression of interest generated
online by a consumer is tracked across all stages of the lead life cycle on the app.
We are leveraging our digital ecosystem to expand our service offerings and better
exchange of information with our stakeholders viz. End Consumer, Dealers, Painters &
contractors, Architect & Interior Designer.
We are also developing several tools to help our customers make the right choice - be
it product selection, and scheme enrollment, among others.
Industrial Business
Overview
This year has been outstanding for our industrial coatings business segment, witnessing
tremendous growth and success. Our unwavering focus on quality, cost, and delivery has
made us the preferred supplier among major OEMs and ancillaries. We are proud to say
that our industrial business segment has excelled in all segments, including automotive,
performance coatings, and auto refinish. This remarkable growth was achieved on the
back of high industry demand, aggressive targeting of new businesses, premiumisation of
the product mix and expansion of the body shops network.
However, the cornerstone for any business and organisation is the leadership
teams vision, which has to formulate a business strategy by integrating
macroeconomic and market inputs with Company strengths and delivering products and
performance that translate into profitability.
We at KNPL have strengthened our leadership position in the Industrial segment by
investing in state-of-the-art R&D facilities, identifying multiple technical
collaborations to augment skills and capabilities, and expanding our body shop network. We
believe that these strategic initiatives have enabled us to meet the industrys
growing demand and maintain our market leadership position.
In the recent years, due to unprecedented material price inflation, the profitability
of this business has taken a severe hit. Collaborative approach with customers to ensure
price increases and a profitable product mix helped us improve our profitability. We
worked with customers to provide solutions based on different technology platforms like
High Solids, Monocoat and Low Bake. Such technology platforms help customers reduce their
carbon footprint and move them closer to their decarbonisation target.
As part of our commitment to sustainable solutions inline with global trends in green
manufacturing, we have developed innovative products that reduce our carbon footprint and
improve our customers environmental performance. Many of our products are first
in their class and serve as benchmarks in their segment, thereby consolidating our
leadership position in the Industrial segment. We are proud of our accomplishments and
believe our sustainability commitment sets us apart from our competitors.
As we move forward, we are excited about the opportunities that lie ahead. Our branding
and marketing efforts have also emerged as a key area of focus. We participated in the
15th CII India Surface Coating show as the principal sponsor, which allowed us to
highlight our products and services alongside other paint, chemical, and equipment
manufacturers. We plan to continue to leverage our Japanese association for access to
superior technology, and also continue our investments in R&D, technical
collaborations, and marketing efforts to maintain our market leadership position and meet
the evolving needs of our customers.
Automotive Segment
Business Overview:
KNPL paints and coatings have the unique position of featuring extensively across
multiple vehicle segments, including passenger vehicles, two-wheelers, and commercial and
electric vehicles, thereby reinforcing leadership position. Our competence to promptly
align with and respond to strong market demand in the automotive industry has been a
driving force behind KNPLs impressive performance this year, contributing to its
exceptional performance.
We have been awarded the best supplier title from various OEMs customers for our high
service orientation and constantly meeting customer expectations on quality.
Also, KNPLs focus on sustainable solutions and the development of environmentally
friendly products has earned its recognition as a responsible industry leader committed to
developing safer and sustainable products. With continued investments in R&D and
technical collaborations, KNPL remains committed to maintaining its market leadership
position and further expanding its presence in the automotive sector.
Passenger Vehicles:
As a market leader in the automotive industry, KNPL achieved impressive growth in the
passenger vehicle (PV) segment this year. With a healthy double-digit growth in value and
volume, KNPL gained market share in this highly competitive segment, supported by a record
number of production by OEMs.
KNPLs advanced R&D capabilities and numerous technical partnerships have
enabled the Company to offer innovative solutions for meeting the evolving needs of the
automotive industry.
KNPLs leadership strategy in the passenger vehicle segment is centred on
innovation, sustainability, and strategic partnerships. KNPLs recent foray into new
segments such as seam sealer, underbody blacks, and alloy wheels, as well as its alignment
with Kansai Helios for entry into the fasteners coatings segment, has further bolstered
its position as a market trailblazer-leader.
The Company has also successfully introduced a tin-free CED coating (heavy metal free)
in the PV segment, furthering its commitment to providing green and sustainable solutions
to its customers.
Two Wheelers:
In the two-wheeler segment, KNPL has achieved unprecedented growth in FY 2022-23, which
has enhanced its market share and established the Company as a trusted supplier for its
OEM customers.
To meet the evolving needs of its customers, KNPL introduced innovative coating
solutions that comply with E20 and E30, ensuring the coatings resistance to 20-30%
ethanol blending in petrol, which is a formidable achievement laying the foundation for
many future innovations in this segment.
KNPLs commitment to sustainability is evident in its enhanced focus on the
development of technologies to support green products and services, and significant
investments in R&D capabilities back this commitment to provide innovative solutions
in line with global trends for the changing needs of the automotive industry. The Company
launched energy- efficient products that reduce the carbon footprint during the
use/application phase at the customer end. The Companys two-wheeler segment
leadership strategy focuses on maintaining its position as a market leader by providing
high- quality products and excellent customer service.
Commercial Vehicles and Tractors:
In addition to the remarkable growth achieved in the two-wheeler segment, KNPLs
automotive business also witnessed significant contributions from the commercial vehicle
and tractor segments. We have strengthened our position with major key accounts in these
segments due to our advanced R&D capabilities and numerous technical partnerships.
Under this category, the Company launched energy-efficient products that reduce the carbon
footprint of its products during the use/application phase at the customer end.
Electric Vehicles:
As a significant player in the high-growth EV segment, KNPL has established a
substantial presence across major OEMs and gained significant traction in market share.
The Company has also focused aggressively on market penetration and expanding its
portfolio by introducing vibrant colours to stay ahead of colour trends and meet its
customers changing preferences in the electric passenger vehicle and twowheeler
segments.
Performance Coatings Segment
Business Overview:
KNPL had a remarkable year, achieving substantial business growth during FY 2022-23.
The Performance Coatings division of the Company expanded its basket of products and now
provides a comprehensive range of coatings suitable for varied applications such as Powder
Coatings, General Industrial, and High-Performance coatings. KNPL caters to customers
across all market segments, from premium to popular and economy.
The Companys diverse client base includes industries such as Drums & Barrels,
PEB, Electrical appliances, construction equipment, and helmets.
With a wide range of coatings in its portfolio, KNPL ensures that it can offer its
customers an extensive selection of options that meet their unique needs and preferences
through its focus on research and innovation.
Powder:
KNPL achieved impressive business growth by focusing relentlessly on the premiumisation
of its products and services and incremental sales despite facing an aggressive market
landscape. The Companys commitment to quality and customer satisfaction has enabled
it to enter new and competitive businesses, drive healthy sales numbers, and enhance
profitability.
With a formidable presence in OEMs, KNPL is now focussing on securing more approvals.
The Company has a resolute commitment to delivering sustainable and environmentally
friendly products, and it is pursuing a focused strategy on premium products to achieve a
profitable product mix.
KNPL has the unique privilege of its products being used in some marquee projects,
including the Mumbai Coastal road, Bullet train, and Mumbai Trans Harbour Link, where it
uses a cutting-edge fluoro polymer-based system.
Liquid:
KNPL achieved impressive traction and success in the liquid performance coating segment
by delivering high- quality products catering to a wide range of industries, including
construction, architecture, packaging coating, bridges and pipe coating, and transformer
coatings. This year, KNPL introduced tinting machines and focused on premiumisation. In
parallel, the Company also constantly focussed on je-jigging its product portfolio by
exiting nonprofitable segments with a singular focus on improved profitability.
KNPLs B2B distribution channel played a key role in driving sales in this segment,
allowing the Company to reach a wider range of customers and deliver its products with
greater efficiency.
KNPLs innovative product, Neropoxy Solvent Free Coating for Water Pipeline
Internal coatings, launched recently has already shown remarkable success, driving
increased sales in the business segment. With its strong foothold in this segment and
technological synergy with KPJ & Group companies, KNPL is well-positioned to maintain
its growth trajectory and continue to meet customers evolving needs.
Auto Refinish
Business Overview
Despite being a late entrant in the Auto Refinish business, KNPL has witnessed rapid
growth over the past few years, and the Companys key focus now is to gain market
share and continue its strong growth trajectory. To achieve this, the business strongly
emphasised its body shop and retail channels. The Company expanded its body shop
network through new wins and retention strategies. It also established a strong presence
for its PU and alkyd range of products in the retail channel through dealer engagement
programs and secondary channel activities.
Focus areas and achievements:
KNPL introduced eight new products to address unmet or untapped market segments and
expand its range of offerings. The division now has a complete range of products to
address the varying needs of the market, with a focus on launching new products and
staying in sync with the latest technological and usage trends to improve and expand
distribution.
KNPL has developed two fully operational training setups at Hosur and Bawal. The
training facility enhances the skill set of body shop technical personnel, and the
internal team. This initiative will help to develop and maintain a high standard of
technical knowledge with organised training programs. KNPL has also improved its reach to
customers through undertaking Digital initiatives. The Company is committed to providing a
digital experience to its customers to enhance the overall customer experience. KNPL
revamped the packaging across its range of products to improve visibility and create a
more cohesive brand identity. KNPL has sustained and augmented its leadership position in
the Industrial coatings segment backed by the Companys market penetration focus
fuelled by innovation and training.
RESEARCH & DEVELOPMENT (R&D)
Overview
KNPLs R&D team is focused on developing innovative solutions that cater to
its customers dynamic needs while aligning with the organisations
sustainability objectives. During the year, we have been granted 2 patents and submitted 4
research papers. KNPL has consistently provided its customers with a range of new and
unique shades and environmentally friendly products that offer the best value.
Along with its technical expertise, KNPL also possesses a keen understanding of the
constantly evolving preferences of consumers.
To facilitate the development of new colour options, the Company has established a
dedicated colour design studio that features over 7,400 innovative shades.
This space is utilised for design research, enabling more effective trend analysis and
reporting. Additionally, the studio serves as an ideal setting for customer presentations
and shade selection, ensuring a seamless experience for all involved. Silicon- PU Acrylic
hybrid technology, Tin Free CED, Low-density PVC sealant were some of the key
technological advancements during the year.
Collaboration with Kansai Paint, Japan, Kansai Paint Group Companies and other Partner
KNPL has sustained its technological dominance in industrial coatings by staying ahead
of the competition with assistance and technical guidance from Kansai Paint Co., Ltd.,
Japan (KPJ), a leading global player in the field with years of experience in designing
and developing technology. KNPL works hand in hand with KPJ to create customised paint and
resin formulations for Indian customers. They also provide customers with knowledge of
emerging colour trends worldwide and offer first-class technical assistance to Indian
clients based on their experiences across the world. KNPL also collaborates with Kansai
Group companies across the globe to offer Indian customers differentiated technologies
across a spectrum of end-user industries in the areas of industrial coatings, coil
coatings, ARF and decorative paints.
Development in Automotive Coatings:
KNPLs Automotive paints division benefits from its strong inhouse R&D
expertise and support from Kansai Paint Japan, giving it a competitive edge. The R&D
team collaborates closely with clients to create long-term product roadmaps and shade
designs, and also works closely with customers to develop customised value-added and
value-engineering projects that deliver significant value in areas such as finish,
consumption reduction, productivity, and energy savings.
The R&D team collaborates closely with clients to create long-term product roadmaps
and shade designs, and also works closely with customers to develop customised value-added
and value-engineering projects that deliver significant value in areas such as finish,
consumption reduction, productivity, and energy savings.
Passenger Vehicle Segment
In the PV segment, KNPL launched new low-density seam sealer and underbody sealant
products to complement its coating expertise in a new segment. Additionally, 8 new colours
have been developed for a major OEM customer under the 3C-1B medium solid technology.
As a breakthrough and first time to market, KNPL introduced a new Tin free CED
(LB-250T) that is free from heavy metals, Hazardous Air Pollutants (HAPs), and has low VOC
emissions, resulting in reduced dry film thickness, resource and energy consumption during
baking.
? Two-wheeler Segment
KNPL achieved significant milestones in product innovation and sustainability efforts
during the year. To cater to the evolving needs of its customers, KNPL provided a major
breakthrough product by converting all shades of fuel tanks for two major OEM
manufacturers to be compliant with E20 and E30, ensuring coating resistance to 20-30%
ethanol blending in petrol.
Additionally, KNPL introduced low-bake products that reduce baking temperature
requirements and energy consumption. This has been achieved by converting the
thermosetting acrylic (TSA) coatings into Polyurethane (PU) coatings.
It also launched a thermal hard coat for twowheeler headlamps with superior
functionality. Furthermore, KNPL launched a ROHS compliant uni-bake primer under its
sustainable coatings portfolio.
? Commercial Vehicle Segment
KNPL commercialised 3 shades with superior functionality by using 3C-1B technology and
low bake PU system. These coatings helped reduce the baking temperature requirement from
the previous 140oC to 80oC. Additionally, low solids TSA product was converted to high
solid PU product, aiding in 15% reduction in VOC emissions and 60oC reduction in baking
temperature requirement for CV segment.
Key Developments in Decorative Paints:
KNPL launched several new and improved offerings, all certified for low VOC and heavy
metal free as per IS standards. For interior applications, a superior functionality
product was launched to address dampness problems, while for exteriors, we offered
extended service life with a 12-year warranty. In the construction chemicals category,
KNPL launched a product with a unique feature of 700% elongation, which reduces the
concrete surface temperature up to 14o C during peak summer. The R&D Team
also introduced customised admixtures for concrete. In wood coatings, termite-resistant
product was launched, as well as 2K PU interior (sealer, matte & glossy) and high
solid NC sanding sealer. Also, KNPL developed and commercialised an anti-carbonation
coating specifically for the Samruddhi Express Highway.
Key developments in Performance Coatings:
The Company developed and commercialised 2K High Weather resistance PU System for
Agricultural & Construction equipment manufacturer developed jointly with KPJ.
A 5-coat system for Bridges of High-Speed rail Project with Fluro Undercoat &
Flouro Topcoat is also commercialised.
Key developments in Powder Coatings
It is impressive to see KNPLs technological leadership in the powder coatings
segment, which has helped the Company become a market leader serving a wide range of
industries such as white goods, furniture, auto ancillaries, and electricals.
The Companys collaboration with customers in the auto industry has enabled it to
convert a range of liquid coatings to powder coatings.
Super functionality Powder which offers High Abrasion resistance, was introduced for
accessories to enhance the durability of coating by 2x times. Also, Powders with
heat-resistant properties were developed in two shades. KNPLs R&D efforts are
also focused on developing various resin backbones for powder coatings to ensure superior
performance.
Key developments in Coil Coatings
During the year, KNPL focused on developing a new portfolio of premium products by
introducing specialty coatings. Under this, a 3-coat metallic system with a clear topcoat
was introduced in the coil coatings segment for appliance coating.
Key developments in Auto Refinish
During the year, KNPL introduced a range of High Gloss Clear PU products in the Economy
range and will further expand and strengthen this portfolio in the near future. The
R&D team has also developed a range of cost effective direct shades that eliminates
the outlets tinting process.
Instrument analysis and analytical capabilities
Thermal Imaging Camera: A thermal camera is a noncontact device that detects infrared
energy (heat) and converts it into a visual image. This instrument will help us with a
site inspection and recommend correct product for waterproofing and suitable product for
roofs that can reduce surface temperature. Further this will help provide reports to
customers (e.g., Co-Operative Housing Societys) better with evidence.
SUPPLY CHAIN
Macro environment
FY 2022-23 was an extremely challenging year. Global issues like cost inflation, war in
Europe, shutdowns in China, and local issues like extended monsoon critically impacted the
supply across the value chain. These challenges, however, sharpened the focus on creating
more value for customers and delivering results for our stakeholders. The years
theme was finding the right balance between adapting to external challenges and the
agility required to run our businesses.
Cost efficiency measures
One of the key successes in the year was the Companys ability to offset the
impact of raw material partially and freight cost inflation with a strong cost reduction
programme along with our parent Company Kansai Paints, Japan, our local R&D, and our
vendor partners. We also introduced cost and working capital reduction measures in late
2022, which will remain a priority throughout 2023.
Service level
Customer-focussed and data-driven planning processes drive KNPLs Supply chain
towards excellence to help fuel our and our customers growth. On the service front,
KNPL ensured continuity of operations for all its Industrial customers despite the
challenges. On the decorative front, we increased our service points, and reduced
service lead time to further improve the response time and ensure velocity in our service
to market.
INFORMATION TECHNOLOGY
Information Technology is a key enabler for Nerolac, helping the Company to achieve its
business objectives by enhancing its productivity, efficiency, and customer engagement.
The Company adopted a both outside-in and inside-out approach.
Under outside in, we focussed on Go To Market initiatives to create a
digital ecosystem for connecting with external stakeholders. For the Architects &
Interior Designers, we developed a new application. It provided information about
organisations, their strengths, product portfolio and loyalty programme. We upgraded the
Pragati app for the painter and contractors for deeper connection with the Company. We
extensively used digital initiatives to provide Painting as a service to the consumers. We
created a digital platform to help consumers make better choices.
Under inside out, we focussed on digital initiatives that would drive internal
efficiencies. KNPL migrated its sales team from the existing tabs to a mobile platform for
enhanced user experience and anywhere access. A mobile app was launched to track market
visits based on Geo-Location. The DGA app was upgraded and enhanced to provide end- to-end
visibility from lead generation to lead conversion and completion. This created a
user-friendly interface that provides necessary insights and dashboards on mobile screens,
enabling faster access to real-time data. On the logistics side, we have leveraged digital
to provide real-time visibility into shipment status, delivery times, and vehicle
locations, allowing for quick and informed decision-making.
The digital initiatives have allowed us to become more agile, efficient, and responsive
to our customers needs. We will continue to invest in and embrace digitisation as an
integral part of our growth strategy.
Business Continuity
In FY 2022-23, KNPL made significant strides to upgrade the IT infrastructure and
enhance our business continuity measures. KNPL has strengthened disaster recovery
capabilities for its IT systems by establishing a Far Data Recovery (FDR) centre to
minimise any impact that unexpected events or disasters might have on its business
operations. These data centres are designed to ensure business continuity by providing
seamless access to critical data and applications in the event of any unforeseen
disruptions.
Cyber Security
As digitisation continues to increase, KNPL recognises the heightened risk of cyber
threats. To mitigate these risks, the Company regularly conducts vulnerability
assessments, penetration testing, and security audits to identify and address potential
security risks.
KNPL also has a well-defined information security policy that outlines the standards
and procedures for protecting the Companys information assets. This policy is
regularly reviewed and updated to ensure its effectiveness in the face of evolving
security threats and technologies. Additionally, regular training and awareness sessions
are conducted for employees on cyber security to promote a culture of security within the
Company and ensure that everyone plays a role in safeguarding the Companys
information and assets.
PEOPLE
Our philosophy at KNPL centres around building a culture that nurtures collaboration,
innovation, and empowerment. We strive to offer our employees a unique and fulfilling
experience by creating a sense of belonging and purpose. Over the course of the year, we
have placed great emphasis on our employees well-being, recognising that a healthy
body and mind are critical components for achieving outstanding results.
Our people are our most prized asset, and we are dedicated to investing in their
growth, learning, and overall well-being to create an exceptional workplace. We are
committed to offering diverse role opportunities that provide structured and immersive
learning journeys, enabling our employees to take on new responsibilities through
on-the-job mentoring and development interventions. During the year, KNPL was also
recognised as Dream Employer of the year - 2022 under the Category Dream
Companies to Work For by Times Ascent World HRD Congress.
As of the end of FY 2022-23, we had a total of3,379 permanent employees who embody our
core values and proudly identify themselves as part of the I AM Nerolac
family.
People Centric Approach
Under the leadership of the Managing Director, the organisation took an approach to
create a work environment that considers and fulfils the needs of one of the
organisations most important assets, its employees. The underlying belief is that
success of the organisation is strongly connected with its employees well-being and
growth. The approach revolved around creating a culture of openness, collaboration and
empowerment. Special efforts were made for employee well-being, training and development
and ensuring high engagement levels. Employee surveys conducted at the start and end of
the year reflected a clear positive shift in organisation culture regarding openness and
empowerment.
Innovation, Collaboration, Empowerment
Innovation, Collaboration and Empowerment were key thrust areas for the Company. During
the year, we had multiple innovation drives, wherein, employees participated across the
organisation to generate ideas that will bring value to the organisation. We had atleast 3
such innovation drives with more than 500 idea submissions by employees across functions
and levels. The ideas ranged across diverse areas such as topline growth, improving bottom
line, operational efficiency, and sustainability. These ideas were reviewed by a
cross-functional team, wherein, ideas were evaluated basis of a set of criteria, including
benefits envisaged, uniqueness, feasibility and resources required for implementation. This
multi-disciplinary approach and teamwork ensured a collaborative approach and alignment
across functions. There was positive interdependence created during collaboration and it
also opened up hidden opportunities or challenges.
During the year, several important projects of strategic nature were given to
employees. The approach was to empower employees with delegation, autonomy, key decision
making and provided required resources. During the process, both the individual employee
as well as the team of employees had an experience which capitalised on their expertise
and judgement, increasing their sense of commitment to the organisation and aiding them to
feel empowered and motivated.
Talent Management
Learning & Development
KNPL has launched its digital academy called Percipio, which provides access to
upskilling opportunities. Our L&D teams have ensured that our employees receive the
necessary opportunities by leveraging virtual mediums. Our employees have remained
connected throughout the year through planned events such as seminars, learning programs,
and self-learning modules.
Our Product Master Class is another initiative that focuses on our
employees continuous learning and upskilling. Our subject matter experts come online
once a month to share their views on technical subjects, making the learning experience
interactive and engaging for our employees.
Competency & Capability Building
At KNPL, we are committed to providing our employees with the necessary training and
development opportunities to help them grow and succeed within our organisation.
Structured training is also provided to various employee groups to enhance leadership
capabilities.
One of our key initiatives is our campus collaboration programme, through which we hire
fresh talent from reputed management and technical institutes. We believe in hiring the
best talent and providing them with the right opportunities to grow and succeed within our
organisation.
Employee Engagement
KNPL aims to create an open, transparent work culture and improve employee engagement
platforms. It has established effective employee connection and communication platforms to
foster a strong relationship between employees and the organisation. These include the
MDs Townhall, Coffee with HR/Works Manager, Annual Learning Conference, and much
more. These initiatives encourage employees to stay informed, participate actively, and
feel valued and involved.
Diversity & Inclusion
KNPL understands that diversity and inclusion are both moral imperatives and critical
components of our business strategy. We believe that a diverse workforce brings a variety
of perspectives, ideas, and experiences that enhance our ability to innovate and solve
challenges. Our permanent female employees are 3.9% of our total employees (excluding
workers).
As an employer that provides equal opportunities, we are focused on attracting,
retaining, and nurturing talented individuals without discrimination based on gender,
race, religion, caste, creed, disability, or any other characteristic. To ensure that our
work environment is inclusive and welcoming, we have conducted assessments at our Mumbai
head office to identify and address any potential infrastructure issues that may hinder
inclusivity. We will be performing such assessments in the upcoming year at our other
locations.
Employee Wellbeing
At KNPL, employee wellness is highly valued, and several initiatives have been
introduced to support it. These initiatives include wellness sessions that focus on topics
related to health and safety, aimed at raising awareness among employees and their
families about key areas related to their well-being.
One of the initiatives introduced this year was the Wellness Corner, which is a
customised wellness app that provides employees with access to a doctor on call with over
30,000 specialists available for consultation through video or in person. Additionally, a
Step Challenge was launched to encourage physical activity and camaraderie among
employees. The Company also extended the benefit of discounted gym memberships to its
employees, showing its commitment to providing them with the resources they need to
maintain a healthy lifestyle and achieve their personal fitness goals.
We will continue to invest in initiatives that support our employees physical,
mental, and emotional health, creating a safe, engaging, and productive workplace where
our valued employees can thrive.
For the first time, KNPL provided its employees with a sense of ownership and a stake
in the Companys success, incentivising them to work harder and more effectively by
announcing restricted stock units (RSUs). It also helps retain top talent and aligns
employee interests with the companys long-term goals.
Performance Management
Our performance management process encompasses setting goals, mid-year check-ins and
annual performance evaluations. Our performance dashboard provides timely feedback on key
performance indicators, empowering employees to remain on track and make any necessary
adjustments.
Rewards & Recognition
We recognise and reward our employees based on their contributions to our business
objectives, adherence to our values, and demonstration of leadership and teamwork.
COMMUNITY DEVELOPMENT
KNPLs commitment to social responsibility extends beyond the confines of its
operations, radiating outwards to benefit society as a whole. Guided by a philosophy of
being a conscientious and compassionate neighbour, KNPL strives to contribute meaningfully
to the betterment of humanity. In line with this, KNPL has linked its CSR programmes to
the United Nations Sustainability Development Goals (UNSDGs), emphasising the
organisations dedication to sustainable development and social responsibility.
The current fiscal year saw KNPL enhance its efforts, with a focus on 17 of the
identified 121 aspirational districts by the Government of India. These initiatives
have been designed to benefit the underprivileged sections of society and enhance
KNPLs reputation as a responsible corporate citizen. Through these actions, KNPL
also aims to encourage individual employees to embrace their societal duty, developing a
sense of compassion and awareness towards those in need.
KNPLs CSR initiatives are varied and multifaceted, encompassing everything from
rural and community development to promoting education, ensuring environmental
sustainability, and providing preventive healthcare and sanitation. With more than 22% of
KNPLs employees volunteering for such activities in the previous year, it is clear
that the organisation is succeeding in fostering a culture of social responsibility
amongst its workforce.
Through its Women Empowerment in farming through livelihood intervention
project, KNPL has significantly impacted the lives of 20 women farmer families,
encompassing approximately 120 members. This project has inspired these families and
mobilised 54 additional families to participate actively in agriculture as an
entrepreneurial pursuit. As a result, the project is now selfsustainable, with women
cultivating 5 acres of land. The cultivation area has increased by more than five-fold,
and agricultural production has increased by nearly six-fold.
During the year, steps were taken to address human health issues through the
Companys CSR initiatives. The Company has initiated and planned specific activities
in the areas of HIV/AIDS, tuberculosis, and malaria. Awareness-building workshops and
skits were also organised with NGOs in villages near the plants. Informative posters
displayed at various locations, such as hospitals and Gram Panchayat, as well as other
public places near all KNPL plants. Booklets in local languages were created in
consultation with medical authorities and distributed in villages near the plants to
increase awareness about these diseases. KNPL provided necessary equipment and support to
nearby hospitals to aid in the treatment of related diseases.
In the pursuit of environmental sustainability, KNPL has taken a proactive approach by
implementing various initiatives such as planting trees, harvesting rainwater, conducting
cleanliness drives, and promoting the use of solar energy. These efforts have contributed
to improving the quality of life on land and paved the way towards a greener future.
ENVIRONMENT, HEALTH & SAFETY
KNPL is dedicated to maintaining a safe and healthy workplace, complying with
regulations, minimising environmental impact, and promoting sustainable practices.
Climate Change
In response to the pressing environmental challenge of climate change, KNPL has adopted
the Task Force on Climate-related Financial Disclosures (TCFD) framework in FY 2022-23 to
assess and quantify its risks and opportunities. We have integrated the identified risks
with our Enterprise Risk Management strategy. KNPL is committed to setting and submitting
science-based emission reduction targets to the Science-Based Targets initiative (SBTi)
for validation. We have estimated our current carbon footprint for Scope 1, Scope 2
& Scope 3 and actively working towards lowering our carbon footprint. We are
implementing energy-saving measures, using affordable, eco-friendly solutions such as
solar and wind power, and exploring bio-based and recycled materials. We also undertake
tree-planting activities both inside and outside our factory premises, planting 6496 trees
within the factory boundaries and 600 trees outside in FY 2022-23. We strive to be
environmentally responsible by mitigating our impact and taking steps towards a
sustainable future.
Water Management
We recognise our responsibility towards promoting a sustainable ecosystem and ensuring
responsible resource usage. We have implemented various water management practices and
initiatives to ensure water stewardship and reduce water usage throughout our operations,
including recycling wastewater, using low-flow fixtures, and collecting rainwater. We
engage with local communities to understand their water needs and concerns and have taken
measures to restore ponds and replenish water. Our efforts have resulted in becoming water
neutral by replenishing 100% of water withdrawal across our operations. Despite
commissioning inhouse resin manufacturing, we have reduced specific water consumption by
1.7%. We prioritise rainwater harvesting and obtain 23% of our water supply from recycled
sources while maintaining our ZERO Liquid Discharge status at all major plants.
Waste Management
Our waste management practices are guided by the principles of reduce, reuse, and
recycle, as we strive to minimise our environmental impact. We have optimised our
production methods to reduce waste production, including eliminating paint losses during
production and recycling solvent waste. The leftover paint from manufacturing is recycled
and used as a raw material to make low-grade paints, demonstrating our commitment to
circular economy principles.
We are constantly working towards enhancing our waste management procedures. We aim to
reduce the amount of hazardous waste generated at our manufacturing locations, which saw a
7% increase in the specific hazardous waste generation during the reporting period due to
the increase in effluent generation from recently commissioned in-house resin
manufacturing units. We remain committed to using responsible waste management techniques
and promoting sustainable resource usage.
Our waste management practices are guided by the principles of reduce, reuse, and
recycle, as we strive to minimise our environmental impact. We have optimised our
production methods to reduce waste production, including eliminating paint losses during
production and recycling solvent waste.
Plastic Waste Management - KNPL has taken steps to meet its EPR obligations for
plastic waste through collection and recycling. The Company has set up pre-consumer
plastic sheet take-back programmes to ensure they are recycled at the end of their useful
lives. KNPL engages with its suppliers to ensure that they follow the PWM guidelines set
forth by the CPCB, as part of its commitment to promoting a circular economy for plastics.
For the reporting year, KNPL collected and recycled 7,421 MT of pre- and post-consumer
plastic, fulfilling its EPR obligation as a brand owner. The Company has also eliminated
the use of single-use plastic and is increasing the use of recycled content in its packing
materials.
Further details on our efforts to reduce climate impact, water consumption, waste
generation and disposal are outlined in the Natural Capital Section of our annual report.
For the reporting year, KNPL collected and recycled 7,421 MT of pre- and post-consumer
plastic, fulfilling its EPR obligation as a brand owner.
Safety
Every individual has the right to a safe and healthy workplace, and KNPL is dedicated
to ensuring this is a reality for everyone. All major factories are ISO 45001 accredited,
ensuring a reliable environmental and safe working conditions. Several activities,
thematic safety training, competitions, and evaluations are regularly conducted to enhance
emergency readiness and build a safety culture amongst our workforce. Details of the
initiatives undertaken are covered in the Occupational Health and Safety section of Human
Capital.
RECOGNITION IN ESG
KNPLs continuous efforts and proactive measures towards Environmental, Social,
and Governance (ESG) have significantly improved its position in the global Chemical ESG
sector.
KNPL was rated in the top 10% in the S&P Corporate Sustainability Assessment (CSA)
2022 in Chemicals Category out of 400+ companies that were assessed by S&P Global and
ranked in the Top Quartile of FTSE4Good Index Series June 2022 Review by Financial Times
Stock Exchange (FTSE).
OPPORTUNITIES AND THREATS
Information for this section can be found in the Opportunities and Threats
section of the Corporate Overview.
RISKS AND CONCERNS
Information for this section can be found in the Risks and Concerns section
of the Corporate Overview.
OUTLOOK
The Indian paint sector presents significant opportunities for growth. The
Governments emphasis on infrastructure development, affordable housing schemes, and
smart cities is expected to drive demand for paints. We aim to create value for all
stakeholders in the medium to long term by outpacing market growth and maintaining modest
margin expansion.
The entry of newer players in the industry is expected to increase competition and
drive innovation, which is positive for the industry as a whole. Secondly, as consumers
are also increasingly aware of their choices impact on the environment, there is a
growing demand for sustainable and eco-friendly products in both decorative and industrial
coatings landscape.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
KNPLs Internal Control Systems are designed to track and report on its day-to-day
operations to monitor and control them. These systems also effectively monitor compliance
with numerous concepts, regulations, and norms and adhere to methodology requirements.
The Company has implemented an Internal Financial Control system in compliance with the
provisions of Section 134(5) (e) of The Companies Act, 2013, to improve internal control
systems and give the Board of Directors additional capacity to review internal controls.
Implementing these systems has been guided by the framework suggested in the Guidance Note
on Audit of Internal Financial Controls in Financial Reporting issued by The Institute of
Chartered Accountants of India, to address the Companys operational and financial
risks. In addition, the statutory auditors test the Companys systems using automated
techniques.
Control Efficiency Index and Robust Control Index
The Control Efficiency Index (CEI) and the Robust Control Index (RCI) are still used by
the Company to track its internal audit success. KNPLs control measures are
benchmarked against industry standards for effective control mechanisms. The
Companys internal audit programme focuses on determining whether gaps exist due to
control design, policy design, control or process deviation, IT or regulatory compliances.
It also considers which controls are capable of automation. The Company then uses the
results of the audit to improve its internal controls.
Compliances
KNPL has developed a dashboard of key legislation changes that are notified by various
Government authorities and tracked by the management regarding requirements and
implementation. The Company tracks all regulatory compliances online through the Legatrix
system. The system is updated regularly with all the changes in compliance as they occur.
Online tracking and tracing of completion help ensure strict adherence to regulations. In
addition, the Company also tracks any legal cases through the Roznama system.
AWARDS AND RECOGNITION
* Ms. Sonia Singh was appointed as the Chairperson of the CSR Committee with effect
from 1st April, 2022.
#
Mr. Bhaskar Bhat was appointed as a member of the CSR Committee with effect
from 10th August, 2022. Mr. N. N. Tata ceased to be the member of the CSR Committee
consequent to his resignation as a Director of the Company with effect from 10th August,
2022.
The functions of the CSR Committee are to:
(a) formulate and recommend to the Board, a Policy which shall indicate the activities
to be undertaken by the Company in areas or subject, specified in Schedule VII of the Act;
(b) recommend the amount of expenditure to be incurred on the activities referred to in
clause (a); and
(c) monitor the CSR Policy of the Company from time to time.
There was 1 (one) meeting of the CSR Committee during the financial year on 27th March,
2023 which was attended by all members of the Committee.
The Board on recommendation of the CSR Committee has framed a CSR Policy and the same
is available on the website of the Company at https://www.nerolac.com/
financial/policies.html.
The Annual Report on CSR activities as required under Companies (Corporate Social
Responsibility Policy) Rules, 2014, as amended, including a brief outline of the Company's
CSR Policy, is annexed to this Report as Annexure 1.
18. Particulars on the Committees of the Board
The details with regard to the composition of the Committees of the Board and the
number of meetings held during the year of such committees, as required under the SEBI
Listing Regulations, is separately provided in the Annual Report, as part of the Report on
Corporate Governance.
19. Dividend Distribution Policy
The Dividend Distribution Policy of the Company has been formulated to ensure
compliance with the provisions of Regulation 43A of the SEBI Listing Regulations. The
Dividend Distribution Policy is also available on the website of the Company at https://www.nerolac.com/financial/policies.html.
The declaration of dividend by the Company is in compliance with its Dividend
Distribution Policy.
20. Prevention of Sexual Harassment at workplace
In line with the provisions of the Sexual Harassment of Women at Workplace (Prevention,
Prohibition and Redressal) Act, 2013 ("POSH Act"), the Company has adopted a
"Policy on Appropriate Social Conduct at Workplace". The Policy is applicable
for all employees of the organization, which includes corporate office, manufacturing
locations, branches, depots etc. The Policy is applicable to non-employees as well i.e.
business associates, vendors, trainees etc.
The Company has complied with the provisions relating to the constitution of Internal
Complaints Committee under the POSH Act to redress complaints received on sexual
harassment as well as other forms of verbal, physical, written or visual harassment.
During the year under review, the Company did not receive any complaints of sexual
harassment and no case was filed under the POSH Act.
21. General Shareholder Information
General Shareholder Information is given as Item no. 11 of the Report on Corporate
Governance forming part of the Annual Report.
22. Particular regarding Employees Remuneration
Disclosure comprising particulars with respect to the remuneration of directors and
employees, as required to be disclosed in terms of the provisions of Section 197(12) of
the Act and Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel)
Rules, 2014, is annexed to this Report as Annexure 2.
23. Conservation of Energy, Technology Absorption and Foreign Exchange earnings and
outgo
The statement giving the particulars relating to conservation of energy, technology
absorption and foreign exchange earnings and outgo, as required in terms of Section
134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, is
annexed to this Report as Annexure 3.
24. Share Capital
The paid up Equity Share Capital as at 31st March, 2023 stood at Rs.53.89 Crores.
During the year under review, the Company did not issue any Equity Shares. Further, the
Company has not issued any convertible securities or shares with differential voting
rights or sweat equity shares or warrants.
The Board of Directors, at its meeting held on 8th May, 2023, approved the increase in
Authorised Share Capital of the Company from Rs.66.50 Crores to Rs.85 Crores and issue of
bonus shares in the proportion of 1 (One) New Equity Share of Rs.1 each for every 2 (Two)
existing Equity Shares of Re. 1 each, subject to approval of the Shareholders. Approval of
the Shareholders is being sought vide Postal Ballot Notice dated 8th May, 2023.
25. Restricted Stock Unit Plan
The Shareholders have approved the Kansai Nerolac Paints Limited - Restricted Stock
Unit Plan 2022 ("RSU Plan 2022") on 25th October, 2022 vide Postal Ballot and
authorised the Board to offer, issue and provide Restricted Stock Units ("RSUs")
to such employees as may be determined by the Nomination and Remuneration Committee
("NRC") in terms of the RSU Plan 2022. The RSU Plan 2022 has been introduced to
attract, retain, motivate its employees and improve performance of the Company for
ensuring sustained growth.
The NRC acts as the Compensation Committee under the SEBI (Share Based Employee
Benefits and Sweat Equity) Regulations, 2021 ("SEBI SBEB Regulations") for the
administration of the RSU Plan 2022.
The NRC, during the year under review, has granted 11,92,792 RSUs to selected employees
of the Company as determined by the NRC, in terms of the RSU Plan 2022. NRC, at its
meeting held on 8th May, 2023, further granted 24,786 RSUs to selected employees.
During the financial year 2022-23, there has been no change in the RSU Plan 2022. There
was no RSU that vested or any share issued on vesting during the year. The RSU Plan 2022
is in compliance with the SEBI SBEB Regulations.
Information as required under the SEBI SBEB Regulations have been uploaded on the
Company's website at https://www.nerolac.com/investors/financial-results.html and
is annexed to this Report as Annexure 4.
26. Annual Return
Pursuant to Section 92(3) read with Section 134(3)(a) of the Act, the Annual Return as
on 31st March, 2023 is available on the website of the Company at https://www.nerolac.com/our-financial-results.html.
27. Details of Unclaimed Suspense Account
Details pertaining to Unclaimed Suspense Account of the Company are separately provided
in the Annual Report, as part of the Report on Corporate Governance.
28. Investor Education and Protection Fund ("IEPF")
Transfer of Unclaimed Dividend to IEPF
During the year under review, dividend amounting to ' 12.48 Lakhs that had not been
claimed by the shareholders for the year ended 31st March, 2015, was transferred to the
credit of IEPF as required under Sections 124 and 125 of the Act.
Unclaimed dividend as on 31st March, 2023
As on 31st March, 2023, dividend amounting to ' 2.34 Crores has not been claimed by
Shareholders of the Company. Shareholders are required to lodge their claims with the
Registrar and Share Transfer Agents of the Company
i.e. TSR Consultants Private Limited, for unclaimed dividend.
Pursuant to the provisions of Investor Education and Protection Fund Authority
(Accounting, Audit, Transfer and Refund) Rules, 2016 (as amended), the Company has
uploaded the details of unpaid and unclaimed amounts lying with the Company as on 31st
March, 2022, on the website of the Company at www.nerolac.com. The same are also
available with the Ministry of Corporate Affairs.
Transfer of Equity Shares
As required under Section 124 of the Act, 86,731 Equity Shares, in respect of which
dividend has not been claimed by the members for 7 (seven) consecutive years or more, have
been transferred by the Company to the IEPF Authority during the financial year 2022-23.
Details of such shares transferred have been uploaded on the website of the Company at www.nerolac.com.
The same are also available with the Ministry of Corporate Affairs.
Nodal Officer
The Company has appointed Mr. G. T Govindarajan, Company Secretary as the Nodal Officer
for the purpose of verification of claims filed with the Company in terms of IEPF Rules
and for co-ordination with the IEPF Authority. The said details are also available on the
website of the Company at www.nerolac.com.
29. Secretarial Audit
Pursuant to the provisions of Section 204 of the Act, the Company had appointed JHR
& Associates, Company Secretaries, as the Secretarial Auditor for the year under
review, to conduct the Secretarial Audit of the Company.
The Secretarial Audit Report for the year under review issued by the Secretarial
Auditor is annexed to this Report as Annexure 5. There is no qualification or adverse
remark in their Report.
Further, in terms of the provisions of Regulation 24A of the SEBI Listing Regulations,
the Company has obtained the Secretarial Compliance Report for the year ended 31st March,
2023, confirming compliance of the applicable SEBI Regulations and circulars/guidelines
issued thereunder.
The Company has complied with the applicable Secretarial Standards issued by the
Institute of Company Secretaries of India.
30. Cost Audit
The Company has maintained cost records as specified by the Central Government under
Section 148(1) of the Act. Further, the Company had appointed D. C. Dave & Co., Cost
Accountants (Registration No. 000611), as the Cost Auditor to conduct an audit of its cost
accounting records for the financial year 2021-22, pertaining to products of the Company
as required by the law. The Cost Audit Report submitted by the Cost Auditor for the
financial year 2021-22 was clean and there was no qualification in their Report. The same
was duly filed with Ministry of Corporate Affairs on 21st October, 2022.
The Company had re-appointed D.C. Dave & Co., Cost Accountants, as the Cost Auditor
for the financial year ended 31st March, 2023 and the Cost Audit Report when submitted by
them, will be duly filed with the Ministry of Corporate Affairs.
Further, the Company has re-appointed D.C. Dave & Co., Cost Accountants, as the
Cost Auditor for the financial year 2023-24, to conduct an audit of its cost accounting
records pertaining to the products of the Company as required by the law, at a
remuneration of ? 3,00,000 plus GST and reimbursement of out of pocket expenses. The
Company is seeking the approval of the Shareholders by means of ratification, for the
remuneration to be paid to D. C. Dave & Co., Cost Accountants, vide Item no. 4 of the
Notice of the 103rd AGM.
Certificate from D. C. Dave & Co., Cost Accountants, has been received to the
effect that their appointment as Cost Auditor, if made, would be in accordance with the
provisions of the Act and Rules framed thereunder.
31. Business Responsibility and Sustainability Report
The Business Responsibility and Sustainability Report as required in terms of the
provisions of Regulation 34(2)(f) of the SEBI Listing Regulations, separately forms part
of the Annual Report.
32. Acknowledgements
Your Directors wish to express their grateful appreciation for the co-operation and
continued support received from customers, parent company, collaborators, vendors,
investors, shareholders, financial institutions, banks, regulatory authorities and the
society at large during the year.
We also place on record our appreciation for the contribution made by our employees at
all levels and for their commitment, hard work and support.