AKZOINDIA - Akzo Nobel India Limited Share Price

Management's outlook for Akzo Nobel India Limited, as discussed in the earnings call on May 15, 2025, presents a positive yet cautious perspective on market performance and strategy execution. The company reported a 5% industry-leading growth in the last quarter, with the decorative paints sector showing a slight revenue decline, primarily due to challenges in the mass economy putty categories. However, notable growth was observed in premium products and urban markets.

Mr. Rajiv Rajgopal, Chairman, emphasized that the organization remains committed to gaining market share without significantly diluting EBIT margins. In terms of financials, the company has managed to strike a balance between growth and profitability, despite ongoing investments in digital transformation and reshaping business strategies.

Key forward-looking points include:

• The coatings business achieved double-digit growth, attributed to robust performance across marine, protective, and industrial segments, although automotive and specialty segments experienced some demand weakness.
• Management expects decorative paint volumes to return to single-digit growth for the fiscal year, driven by recent price corrections.
• An ongoing focus on enhancing customer experience through digital investments is central to their strategy.
• The company plans to expand its distribution network, with 3,200 new outlets added, increasing total outlets to 22,000.
• The outlook for rural markets is cautiously optimistic, with anticipated improvements post-monsoon, correlated with potential increases in household incomes due to recent tax changes.

Overall, management remains optimistic about future growth while navigating competitive pressures and market dynamics.

Major Questions and Answers from Akzo Nobel India Limited Q&A Session

1. Question: GM was impacted due to mix. Which segment has this impact come into? Because you have also mentioned that you have stayed out of the mass segments?

Answer: Yes. The impact on GM comes mainly from two mixes. First, our coatings segment performed better than paints, causing a margin shift since decorative offers higher margins. Second, last year's price drops, driven by competitive intensity, led to higher market discounts. Overall, B2B and B2C product mix contributes to this situation, impacting margins.

2. Question: What insights do you have on industry growth, especially in context of heightened competitiveness?

Answer: The narrative about competition has evolved. Despite increased competitive pressure from new entrants, our strategy remains focused on market share gains while protecting profitability. We've seen short-term volume erosion, but our brand strength is intact, with performance indicators showing a significant long-term outlook.

3. Question: What has been the like-for-like growth after divestments in FY '24 and FY '25?

Answer: The growth reported (5%) is on a like-for-like basis. IndAS 105 accounting solely affects the balance sheet and doesn't impact the P&L directly. Thus, last year's performance and current year's figures can be compared without the divested segments affecting the core business's growth trajectory.

4. Question: Did you witness any attrition among sales and marketing employees in the last six months?

Answer: Attrition levels haven't increased. Our primary challenge has been recruiting, leading to some dropouts. We're working to fill these positions effectively and address recruitment challenges in a timely manner to maintain our operational effectiveness.

5. Question: What is the status of your distribution reach increase over the past year?

Answer: We added over 3,200 outlets, raising our active transaction points above 22,000. We aim for high productivity in these stores, ensuring profitability while protecting our existing distribution before expanding further. The environment demands a balanced approach to maintain both growth and sustainability.

6. Question: What are the reasons behind flat growth in decorative business during Q4?

Answer: The decorative business faced marginal drops leading to flat revenue primarily due to supply-side constraints and price corrections. However, I anticipate a return to single-digit growth moving forward, given that we have seen positive trends in April.

7. Question: How are your experiential stores expected to contribute to revenue?

Answer: While it's premature to quantify revenue from the newly opened experiential stores directly, they are designed to enhance customer experience. Our ultimate goal is to expand significantly in the future beyond the 11 stores, establishing closer ties with architects and interior designers.

8. Question: What is the projected capex for the coming years?

Answer: We don't provide explicit future capex projections. However, we anticipate maintaining a normal trajectory while investing in capacity expansions to align with our growth plans. Specific projects will be communicated as we progress.

9. Question: What is your outlook on supply and demand for the paints industry?

Answer: The current market shows early single-digit growth. I believe that, unless and until influenced by external factors, the second half of the year should outperform the first half. Long term, the demand should regain momentum as we improve our competitive positioning.

10. Question: How do you plan to handle raw material price fluctuations and cost savings?

Answer: Our strategy is to focus on retaining profitability while reinvesting in growth. The reduction in crude oil prices will be beneficial, and we intend to use potential savings wisely to strengthen our market position without compromising on quality and margins.