The Rs 4,943 crore paint major, Kansai Nerolac, recently completed 100 years of existence and its 100th year has definitely been one of the most challenging, with the COVID-19 lockdown washing out business especially in the month of April. April traditionally is a month when the paint industry sees the maximum uptake in business as most people want to get their homes painted prior to the monsoon months. The negative effect on business in April 2020, will impact company's overall growth in FY21, says Anuj Jain, Executive Director, Kansai Nerolac Paints.
Like most businesses, the paint major has also found tier 2-3 markets to be more resilient than tier-1 and the metros. "When the lockdown was lifted, rural India and tier 2-3 markets responded very well. These markets were able to come to 90 per cent of pre-COVID levels by June, while metros were at 40-50 per cent. Today, smaller markets are at pre-COVID levels (in terms of sales) and the metros are at 80 per cent of pre-Covid levels," says Jain.
He believes that the fear factor in the smaller markets was lower, hence the return of demand was fast. Despite the number of COVID cases being on the rise in the tier 2-3 towns, Jain doesn't expect a significant dip in demand. "People are restless to go back to work and don't consider stopping work as an option. Also, with the government stepping up medical facilities, I can see that people have aligned themselves to the new normal," he further explains.
However, safety and hygiene are priority in the new normal. The average consumer also wants more affordable options. Nerolac has recently launched Excel Virus Guard, which is supposed to be an anti-viral paint that promises to repel over 95 per cent germs. "Virus Guard also reduces humidity on the walls. If there are undulations on the surface it takes care of that too. It also absorbs smell," says Jain.
In addition to the anti-viral paint, Nerolac has also launched a disinfectant, which helps to keep the surface of walls protected for 24 hours. Jain claims that most of the virus disinfectants available in the market don't protect the walls. The company has also launched economy versions of its exterior and interior paints, Nerolac Suraksha and Nerolac Beauty, which are priced 30 per cent lower.
"We were negative in Q1 FY21 as April was washed out. In May-June we saw double digit volume growth on the back of these products," explains Jain.
He says that the paint industry, which had been growing in double digits, saw growth dipping to single digits in the last couple of years because of the economy slowing down. He, however, expects consumers to look at paints through a different lens in the new normal.
"If you spend more time at home you obviously make more observations about your walls and ceilings. Also, when the mood is down, a fresh coat of paint is uplifting. On the other hand, consumers will also want to paint their walls more often to keep fungus, algae, bacteria and virus at bay. Paints will no longer be considered discretionary."
Kansai Nerolac made a profit of Rs 535.4 core in FY20.