IILM

IILM Institute of Higher Education

MTS PROJECT REPORT ON

Submitted in Partial Fulfillment towards the completion of the course:

Master of Business Administration (M.B.A) Academic Year: 2010-2012 SUBMITTED TO: ROHINI VAISHNAVI

SUBMITTED BY:
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SANTOSH KUMAR PGP20101256

INTRODUCTION ABOUT COMPANY

Kansai Nerolac Paints Ltd. (KNPL), a subsidiary of Kansai Paint, Japan was established in the year 1920. It is the second largest coating company in India and the market leader in Industrial Coatings. Having completed 90 years of existence, KNPL has established itself as a well known brand with a strong recall proposition. KNPL has a pan-India presence and serves its customers through its 74 sales locations and 5 factories. The manufacturing operations extend across India and are located in Bawal in Haryana, Lote in Maharashtra, Jainpur in UP, Chennai and Hosur in Tamil Nadu. The proximity of the plants to the customers base has offered logistic advantage and enabled high service levels. Kansai Nerolac has been a cherished name in millions of households across the length and breadth of India. The company manufactures a diversified range of products for every surface. It is the second largest coating company in India and the market leader in automotive and powder coating. Nerolac paints as it is known popularly are an established brand in decorative paints. Origin & Evolution of Nerolac It is the second largest coating company in India and market leader in Industrial Coatings. Its Industrial Coatings it has a wide range of products in the Automotive, Powder, General Industrial and High performance Coatings space. Nerolac paints, as it is popularly known, are an established brand in decorative paints. Kansai Nerolac Paints Ltd is a subsidiary of Japan based Kansai Paint Company Limited, which is one of the top ten coating companies in the

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IILM world. The technological edge of Kansai helps us constantly innovate and come up with products that meet consumer need gaps. Kansai Nerolac has always believed that the key to its business is:

Technology Research & Development Innovations Quality

COMPANY HISTORY
In Year 1920, they began as Gahagan Paints and Varnish Co. Ltd. in Mumbai. The journey is marked by moving from strength to strength in every sphere of business be it product introductions through innovation, value engineering and superior technology. 1920: They started their journey as Gahagan Paints and Varnish Co. Ltd at Lower Parel in Mumbai. 1957: Goodlass Wall Pvt. Ltd grew popular as Goodlass Nerolac Paints (Pvt) Ltd. Also, it went public in the same year and established itself as Goodlass Nerolac Paints Ltd. 1976: Goodlass Nerolac Paints Ltd. became a part of the Tata Forbes Group on acquisition of a part of the foreign shareholdings by Forbes Gokak. 1983: Goodlass Nerolac Paints Ltd. Strengthened itself by entering in technical collaboration agreements with Kansai Paint Co. Ltd, Japan and Nihon Tokushu Toryo Co. Ltd, Japan. 1999: Kansai Paint Co. Ltd, Japan took over the entire stake of Tata Forbes group and thus GNP became wholly owned subsidiary of Kansai Paint Company Ltd.

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IILM 2006: On the 11th of July, Goodlass Paints Ltd. name has been changed to Kansai Nerolac Paints Ltd.

VISION VALUES AND CULTURE

They have been at the forefront of paint manufacturing over eight decades pioneering a wide spectrum of quality products that change the face of economy and lifestyles of people at large.

Innovation Entrepreneurial Responsive Simplicity Team Orientation

KEY DRIVERS OF BUSINESS

COLOR RESEARCH & DEVELOPMENT
Kansai Nerolac has a well equipped Color R&D centre at Lower Parel, Mumbai which is backed by Kansai Paint Co., Japan to service ever expanding need of OEM industry for newer shades & finishes. The Color Development Cell of Kansai Nerolac organizes Color Presentations at customers locations to give wide choice of color introductions and follows it through a rigorous activity from development to standardization. There is a regular activity to liaise with automotive customers Styling & Marketing departments to continuously work for introduction of new shades for new models and refresh existing models as per need of the market. Color Development Cell also collects data on Indian and global Color Trends.

CORPORATE VALUES & PROPAGATED INNOVATION

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IILM For the Industrial Coatings, KNPL has a series of products in the Automotive, Powder and Liquids domain. A series of innovative product launches and service capabilities like Just in Time (JIT) have been some of the key enablers for sustaining the leadership. For the Decorative business, the organization is known for its innovative products and services and has many firsts to its credit like launch of low Volatile Organic Compound (VOC), low odour and lead free (no added lead) paints. The organization, through the course of the last decade had benchmarked itself against the practices of several organizations and devised the Mission for all the business segments. A series of initiatives with long term strategic implications on the organization had been undertaken in all the functions. KNPL has always propagated innovation, use of technology and value engineering. It has continuously demonstrated leadership traits and challenged the way business is done in the Decorative as well as Industrial segments.

QUALITY
It is the philosophy of Kansai Nerolac Paints Ltd., and its associates to achieve complete customer satisfaction by providing products and services that consistently meet or exceed the customer needs and expectations, pursuant to agreed specifications, delivery schedules and competitive prices. It is the philosophy of the company to systematically operate its manufacturing facilities by inculcating commitment to total quality management at all levels and on a continuous basis with a view to achieving First Time Right results in manufacture, services and other operations. Being major Industrial paint manufacturer & supplier to OEM customers KNPL has also implemented QMS as specified by ISO/TS 16949 standard .Their industrial paint manufacturing locations are certified for ISO/TS 16949 -2009. The Japanese 5-S and TPM (total productive maintenance) concepts have been implemented in organization.

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STRATEGIC PARTNERSHIPS:
Kansai Nerolac has tie-up with the global players for product range offered to automotive and industrial customers. Kansai Nerolac has entered into collaboration with the following players for specific product range: Company Kansai Paint Co., Japan Product Category ED Primers, Automotive & Industrial Coatings, Auto Refinishing System Nihon Parkerizing Co., Japan Oshima Kogyo, Japan Pre-Treatment Chemicals ( JV- NIPA CHEMICALS LTD, Chennai) Heat Resisting Paints

THE PRODUCT

1.

Automotive Paints

In Automotive Coatings, Kansai Paints is one of the top five manufacturers in the world and is having a dominant market share in Asia Pacific in Automotive Coatings. In Japan, it is the largest Automotive Paint Company. Automotive paints segment has undergone a metamorphosis in past 3 decades in India. The paint technology for automobiles has undergone a complete transformation. Kansai Nerolac is proud to be associated with this path breaking change when it forged a technical collaboration with Kansai Paint Co. Japan by introducing contemporary paint technology for Maruti. Kansai Nerolac been in forefront to introduce new technologies in automotive sector in India from time to time be it Cathodic Electrocoats, TSA/Polyester based top coats, Mar Resistant Clear Coats, 3 Wet Coatings technology, Acrylic CED etc. Through its various strategic collaborations, Kansai Nerolac offers a total painting system to auto makers in India with a range of products, starting from Pretreatment Chemicals, Electro Deposition Primers,

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IILM Intermediate Coats/primer Surfacers, Solid & Metallic Top Coats, Clear Coats & Touch-up Paints. The products are approved by most Global Auto Majors. Kansai Nerolac has strong reputation for innovation, Superior Technology, Value Engineering, Quality and Service. More than 85 Technical Service Team members are located at customer sites to support application processes, controlling the process parameters and jointly participate in improvement and optimization plans with customers. Kansai Nerolac is the largest supplier of CED Coatings in India- catering over 75% of requirements in India.

RANGE OF PRODUCTS FOR AUTOMOTIVE PAINTS

Kansai Nerolac offers a very comprehensive product range, technical support & service to cater to the specific needs of Auto OEMs & Components Suppliers keeping in mind the latest global trends.
PRETREATMENT (PT) CHEMICALS: All automotive metallic surfaces

need to be cleaned before the painting process. Kansai Nerolac along with its collaborator Nihon Parkerizing Co., Japan offers Pretreatment Chemicals for cleaning various substrates and prepares these surfaces for improved Paint bonding & corrosion resistance. Pre treatment chemicals play a significant role in corrosion management along with E-coat and subsequent Primers. Zinc Phosphate Conversion Coating is widely used process in Automotive Industry.

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Electro deposition (ED) Technology: In E-Coat the metal substrate is

immersed in an aqueous bath solution & coated with a charged organic primer under the influence of electric field. In CED, their product range consists of lead free Polybutadine Based Anodic Electro-deposition Primer (AED); Epoxy Resin Based Cathodic Electro-deposition Primer (CED) & Acrylic Resin Based Cathodic Electro-deposition Primer (ACED). The product ACED won an Innovation award for being first in the world for usage of a single coat application system for coating of Motorcycle frames.

INTERMEDIATE COATS / PRIMER SURFACERS: The Primer Surfacer is

the second functional layer and it acts as an intermediate coat between E-coat and the topcoats. It also provides excellent stone chip protection and protection against UV rays to the E-coat film. The Intermediate Coats are available in White, Light Grey, Dark Grey, Red, Blue and other specific colors as required by OE manufacturers. Water borne Dipping Primers are also developed with an eye on safer environment.

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TOP COATS: Top Coats provide Color, aesthetics and weather protection
to the coating system in Automotives. Kansai Nerolac manufactures a large variety of Top Coats based on various resin backbones designed as per specific technical specifications of customers. Containing an extensive range of colored pigments and effect pigments, it plays a significant role in establishing the visual image. A general distinction can be drawn between a solid-color and a metallic paint finish in this segment. Various types of Metallic & Mica finishes are available.

CLEAR COATS: The Clear coat is the top layer in a Paint System which
provides resistance to sunlight and weather and also to Chemicals and biological materials such as bird droppings. It helps provide a scratch resistant final coat to the coating system. Kansai Nerolac offers Clear Coats of various functionalities such as scratch resistance, acid & alkali resistance, UV resistance, mar resistance etc.

TOUCH UP PAINTS & AUTO REFINISHING PRODUCTS: Kansai Nerolac manufactures various types of Touch Paints which are used to undertake small touch ups if the paint film is damaged. Kansai Nerolac offers a complete range of Auto Refinish product range to service requirements of Body Shops for repair coatings.

HEAT RESISTANT PAINTS: Kansai Nerolac manufactures specialty paints such as heat resistant paints, both for interior & exterior surfaces of motorcycle mufflers. These are made to withstand high temperature conditions up to 600 degree C.

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UNDERBODY PAINTS & PVC SEALANTS: Kansai Nerolac manufactures Bitumen & PVC type Underbody Compounds for application on underbody surfaces of automotive bodies to impart anti chipping & sound deadening properties.

RAPGARD TRANSIT PROTECTION FILMS: Kansai Nerolac supplies Rapgard Transit Protection Films which are used for protection of automotive vehicles during transit from dust, chemicals, bird droppings and damages to the paint film. Films are available for protection of metal & plastics surfaces.

2.GENERAL INDRUSTRIAL COATING

Kansai Nerolac Paints develops and supplies cost effective paint systems used on the finishing lines of major electrical components, cycle, and material handling equipments, bus bodies, containers and furniture industries. Besides this they also provide systems conforming to I.S. & Defense specifications. They pride themselves in the quality and consistency of their coatings and have helped companies, who serve diverse markets. They believe in the power of innovation, and are committed to the exploration of new techniques that help us exceed the needs and expectations of their customers. Their product spectrum offers a comprehensive coating system starting from P.T. Chemicals, Primers, Top Coats & Lacquers, Coil Coats, Heat Resistant Paints, Metal decoration coating, etc. and they can create custom coating if application requires so. With a comprehensive range of products meant for industrial application they have specialized in providing:

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IILM Barrel Coating, Gas Cylinder Coatings, Fan Coatings, Helmet Coatings, Glass Coatings, Audio video cabinet Coatings, Mirror backing Coatings, Security equipment Coatings, Agricultural equipment Coatings etc.

KEY CUSTOMERS IN AUTOMOBILE SECTOR

Kansai Nerolac is market Leader in Automotive Industry in India. Some of their main customers are: Maruti Suzuki, Toyota Kirloskar, Honda Siel, General Motors, Tata Motors, Mahindra & Mahindra, Renault, Fiat, Hindustan Motors (Mitsubishi), Renault Nissan, Hero Honda, Yamaha, TVS Motors, Bajaj Auto, Honda Motorcycle & Scooters, Suzuki Motorcycle , Volvo India, Ashok Leyland, TAFE, Eicher Motors, TACO, Motherson Auto, Visteon, Wheels India etc. The list is long & growing.

3.POWER COATING
Powder coating is different from painting. These are a blend of resins, curing agent and pigments which are melt-mixed and pulverized into finely divided particles. There are no liquids or solvents. Therefore, it is the ultimate coating for environmental friendliness. It is applied to metal products by electrostatic spray, the coated item is then heated and the powder melts into smooth, continuous film. Powder Coatings are gaining in popularity because of their high quality, the apparent ease of application and the environmental friendliness of the technology. It has been a commercial reality now for close to thirty years. PRODUCT RANGE

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IILM Epoxy Powder (6000 Series)

Epoxy powder coatings are used for thick film functional end uses and for thin film decorative uses. Especially suited for surfaces subjected to high stress and chemical effects. It can be formulated to produce attractive coatings of varying gloss and surface texture which still retain the inherent toughness, flexibility, good adhesion and environment resistance of the epoxy resin family. Epoxy powders are very practical coatings for pipes, water and gas valves, steel furniture and white goods. Epoxy Polyester Powder (6100 Series)

This is a system for economical operation with a high degree of chemical resistance. It has been developed for applications where the good appearance qualities of polyesters are required and good UV resistance is non-essential. The manufacturers of household appliances, automobile parts, shelving systems, electrical cabinets and steel furniture, use it. Pure Polyester Powder (6200 Series)

These coatings have good edge coverage and good mechanical properties. This is best suited for industrial finishing and typical applications such as aluminum extrusion, which are exposed to exterior environment. This powder has excellent U.V. resistance

THE TARGET AUDIENCE

Kansai Nerolac is market Leader in Automotive Industry in India. The main target audience for the Nerolac automotive paint is the leading automobile company and their partner who manufacture the body parts for automobile. Small scale industry which has been in process of manufacturing metal parts for industry like Fan, bolts, major electrical components, cycle, and material

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IILM handling equipments, bus bodies, containers and furniture industries etc. have the target audience for the Kansai Nerolac industrial paints. The company has wide a wide prospective customer base and has been continuously exploring it further.
IN U T IA S G E T D S R L E MN

Sa a 8 h lim r, % J n na d e so n N o n8 ich lso , % I I8 C, % B rg r p in e e a ts, 1% 4

O e 5 th rs, %

Asia P in n a ts, 1% 4

G o la o d ss N ro c, 4 % e la 3

THE MARKETING CHALLENGES

The world is not yet completely out of the economic recession. There have been alarming signals, and fears of double recession materializing cannot be ruled out. KNPL has been vigilant and agile and is prepared to meet the challenges. The strategy has been defined to understand the needs of the customers and align the offering vis-a-vis products, product mix, services levels, quality, delivery along with the innovative use of latest technology in IT and other areas. This has enabled the organization to cater to the needs of the consumers in the Decorative and Industrial segments.GDP growth, infrastructure and consumer spend, favorable demographics, introduction of GST amongst others are indicators that the future is bright for the paint industry. The company has outlined a set of initiatives to take advantage of the future. The year also saw high inflation which put cost pressures on the Industry and the company. The company has through a series of internal measures of operational efficiencies tried to minimize the impact. The Industrial business, passing on the cost impact continues to be a challenge.

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IILM This has had an impact on the bottom line growth for the company. As far as the market for paints segment for India is concerned, the long term fundamentals are sound and the industry is expected to grow at about 1213% annually over the next five years. Despite the long term positive growth prospects in the Indian Economy, there have been signs of tightening interest rates, increasing inflation, political uncertainties and rising commodity and oil prices. These along with the instability in the policy making process, cost pressures and market uncertainties have made the business environment very challenging for the year and years ahead. While KNPL has taken various measures to meet the challenges, it maintains a cautious view about the near future both in terms of top-line and bottom-line growth. The industry size for paints is estimated at Rs. 24,000 crores wherein the organized sector accounts for 65% while the remaining is with the unorganized sector comprising of around two thousand small scale paint units. The decorative paints segment accounts for Rs. 18000 crores while industrial accounts for Rs. 6000 crores of the totals paint market. Environmental regulation is rapidly gaining momentum. KNPL is prepared to face with Eco friendly products as well as working on its manufacturing and procurement processes. The year ahead appears challenging with the volatility in the market, increased and new competition, fluctuating foreign exchange, rising interest rates, inflation, rising crude oil prices, and natural disasters. KNPL is geared to meet the challenges. IT is being used to ensure that organization risks are well evaluated without losing out on flexibility. Business managers are empowered with better decision making tools. Inflationary pressures are being met through new products being offered to customers to create a compelling value proposition and thus hedge on cost, price increases and cost reduction. This has gone hand in hand with the internal cost control measures.

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COMPANY FINANCIAL POSITION

Gross sales for the year aggregated to Rs. 2493 crores reflecting a growth of 26.4% over the previous year. Sales net of excise duty grew by 25.3%. Profit

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IILM for the year was driven by robust growth in decorative and industrial sales. Overall raw material inflation was very high. Increase in raw material prices was driven by increase in crude oil prices. Depreciation is higher due to full impact of the water based plant at Hosur commissioned in the last quarter of 09-10. Current year's depreciation is at Rs. 49.35 crores as compared to Rs. 44.26 crores of the previous years. Interest was lower at Rs. 0.84 crores as compared to Rs. 1.20 crores of the previous year due to effective cash management. Other income was higher at Rs. 48.83 crores (09-10 Rs. 20.38 crores) due to profit on sale of investments. During the year companys investment in nipa chemicals ltd. was sold to Nihon Parkerizing co. Ltd., Japan at a profit of Rs. 25.37 crores. Profit before tax (pbt) is higher at Rs. 289.13 crores as compared to Rs. 238.61 crores of the previous year reflecting a growth of 21.1%. The company has been financially sound and would be continue to do so.

FUTURE OUTLOOK

Boom in Indian automobile sector has been continuously growing and it is suppose to grow at a steady pace in recent future which will provide an opportunity for the company to increase its market share.

Strong industrial growth: There is an average growth of 10% in the automobile sector which provides 50% of the revenue in the industrial paints segment

Heavy infrastructure spending: New projects in roads, ports and industrial segments increases revenues from protective coatings for civil applications and road-marking paints to all parts of the building paints sector, whether interior, exterior.

Increase in manufacturing activities: Over 40% of the industrial sector takes the form of OEM finishes, which is expected to grow steadily as a

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IILM result of increasing demand for consumer goods in India as well as Indias position now as a leading manufacturing hub for the supply of goods to the South East Asian and other world markets.

As Indian market has been attracting a lots of foreign players so the competition is expected to intensify in the recent future. The Multinationals Company in the paint industry has started to shift their focus to Indian market especially in industrial sector because they have huge R&D work under their belt and have sophisticated and new technology to back their business in India. So the companies who have been doing business right now should try to be alarm from now.

LEARNING AND SUGGESTIONS

The Indian paint industry has been continuously growing and expects to grow in future. Companies in the paint industry have been competing on the quality parameter rather on price which has been plus point for the industry. All the foreign payers are eying on the Indian market so the competition is expected to intensify in future and Indian player have been doing their efforts to with stand this. Nerolac paints have been performing very well in the B2B segment of the paint industry and with the current policy it will sustain its position. The company invest huge amount of resources and money towards research and development and thats why they have been able to offer new and improved products to their customers and also cost effective. They continually try to improve their efficiency by reengineering the process, use of new modern machine so as to stand to competition and change according to their customer requirement and provide them better services at low cost. The company also gives emphasis on the relationship between the company and suppliers, company and customers, company and distributor. It has the

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IILM policy of nurturing the relationship with mutual benefit and having ideology of working towards aligned goals. Nerolac paint have been doing their level best in their B2B segment but most of their clients are big companies like Tata, Maruti, etc. but there are not fully focusing on the small sector industrial sector which has a wide scope of growth in the future. Although company has allotted their distributor for taking their order but the order processing time is high, so this is a drawback for the company image. So company should try to capitalize the small scale industry in most efficient manner so that it can out-stand the competition.

REFERENCES

www.nerolac.com

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Annual report of Nerolac.

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