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Last Updated : Nov 05, 2015 01:07 PM IST | Source: CNBC-TV18

See Q3 better than Q2 on delayed Diwali: Kansai Nerolac

The company‘s 53 percent of revenue comes from decorative segment says HM Bharuka, MD of Kansai Nerolac.

Industrial paint company Kansai Nerolac’s second quarter net-profit rose 33 percent to Rs 96.8 crore this year. Speaking to CNBC-TV18, HM Bharuka, MD of Kansai Nerolac says the company has registered an 11 percent volume growth during the quarter.

He is of the view that a delay in Diwali, compared to the last year, will lead to better performance in the third quarter versus that of the second.

Bharuka adds that 53 percent of the company’s revenues come from its decorative segment.

Below is the verbatim transcript of HM Bharuka's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Sonia: It has been a very lacklustre for a lot of the companies in your sector. Is there any pickup in demand towards the end of the year?

A: The demand has not been bad. If you look volume wise, we had double digit growth while value wise it looks lower growth, certainly it is lower than the last year but in the given circumstances it is not a bad demand.

However, Diwali being late by one month compared to the last year, we expect Q3 to be better than the second quarter. Therefore, I would say it is positive; there is no need to be pessimistic.

Latha: What exactly was your volume growth?

A: It was more than 11 percent in the second quarter and in first quarter it was more than 12 percent.

Latha: Are you noticing October to have been a little better than the previous October. Can we expect an improvement in demand?

A: Certainly October was better and Diwali is still not over, so we hope Q3 would be far better than the Q2.

Latha: Is there any consumer down trading or is it that more luxurious products are being demanded?

A: It depends from state to state. There are states where premium products demand is down but there are states where both premium and lower category products are up. Therefore, I would not brush the entire country in the same colour, so there are states where growth is good for higher segment and somewhere the growth is good for lower segment. It all depends on which state as of now is positive.

Sonia: You have the biggest market share, the largest market share in the industrial paint segment and within that you supply a lot to auto companies. We have seen many new launches come through and good sales there as well. Will your share from the industrial paint segment go up in the near future?

A: 75 percent of the paint industry demand comes from decorative, so decorative continues to be the largest market segment. So even if the growth is better in industrial, it is not going to change mix dramatically. However, industrial passenger car is the only segment which is doing well other than passenger it is flat or negative.

Latha: What is your own split between industrial and decorative?

A: About 53 percent is from decorative, balance is from industrials and within industrials we have about 15-20 percent coming from performance quoting division. The rest is from auto.

Latha: Your margins have improved about 300 bps, EBITDA margins. Is there scope for more?

A: It is difficult to answer that question looking at the volatility in the crude oil as well as the exchange rate. However, in 2009 we had a peak margin, so our endeavour would be to reach that margin. So whether we are able to do that - all depends upon how the exchange volatility will remain. At the same time we are also conscious, when there is a benefit, we pass on the benefit to the customer we have done it and if required, we would do it as well.

Sonia: Has there been any pickup in rural demand and in tier two and tier three cities in the decorative segment. What is the sense?

A: As I mentioned there are states where the rural demand is good, so it is a mixed bag, somewhere tier two-tier three is very good, somewhere it is down and somewhere urban demand is very good. So overall it is a mixed bag. It is not same across the entire country.

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First Published on Nov 5, 2015 11:20 am
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