Kansai Nerolac Paints Ltd. के निदेशक की रिपोर्ट

Mar 31, 2026

The Directors of your Company are pleased to present the 106^th Annual Report and the Audited Financial Statements (Standalone and
Consolidated) for the year ended 31^st March, 2026 (‘reporting year''/year under review''/FY 2025-26''). The section on Management
Discussion and Analysis includes a review of the financial performance of the Company: financial highlights of the Company''s
standalone financial results, key financial ratios, and the dividend recommended by the Directors. It also includes the particulars of
the Company''s subsidiaries, including overseas subsidiaries and their performance during the year under review

Kansai Nerolac Paints Limited (referred to as ‘KNPL'', ‘the
Company'' or ‘We''), established in 1920, is a subsidiary of Kansai
Paint Co., Ltd., Japan. In addition to our primary operations in
India, we have established a presence in Nepal and Bangladesh
through strategic acquisitions and joint ventures. As one of the
largest manufacturers of paints and coatings in India, we have
established a strong position in the decorative and industrial
coatings sector. The Company continues to lead the Automotive
and Powder Coating segments and commands a significant
market share in performance coatings backed by deep
technical expertise and longstanding industry partnerships. In
the Decorative segment, we are recognised as the third-largest

paint manufacturer in India. Our strong market position is driven
by sustained investments in intellectual and human capital,
complemented by access to advanced global technologies. This
enables us to deliver differentiated, environmentally responsible,
and innovation-led solutions, tailored to the evolving needs of
Indian consumers.

As a trusted name in the industry KNPL is committed to designing
solutions that protect, inspire, and touch lives every day Our
painting solutions provide ‘Beauty and Protection'' to a wide
array of applications, including decorative paints (interior and
exterior, wood coating, construction chemicals, tile adhesives),
automotive coatings (for 2-, 3-, and 4-wheelers, electric vehicles,
commercial vehicles, and tractors), emerging segments
(underbody coatings, alloy wheels, and seam sealers),
consumer durables (fans, microwaves, refrigerators, washing
machines), personal items (hair clips, artificial jewellery),
and transportation infrastructure (bridges, metro rail). This
commitment is encapsulated in our belief that ‘There is a
little bit of Nerolac in everybody''s life''.

At KNPL, passion is more than emotion; it is the driving force
behind everything we do. It fuels high performance, sparks
innovation, and pushes us to raise the bar every single day
Here, ambition is encouraged, effort is recognised, and growth
is purposefully designed. With clear pathways for progression,
learning, and leadership, passion here takes colour, shape,
and impact.

As we look ahead to FY 2026-27, we remain committed to
building on the strong foundation established in recent years.
Guided by our core values of innovation, integrity and customer
centricity, we aim to deepen our relations with our stakeholders
while maintaining a disciplined approach to growth. We will
continue to enhance our product offerings, improve service
quality and drive operational efficiencies, with the objective of
creating sustainable value for all our stakeholders.

Industry Progress

FY 2025-26 was characterised by a mixed operating
environment for the Indian paints and coatings industry
The year was shaped by multiple external factors, such as
geopolitical conflicts, the onset and exit of the monsoon, GST
cuts, infrastructure growth, and consumer demographics.

During the year under review, the demand for decorative
paints, especially in the North region, was affected by the Indo-
Pak conflict As the year progressed, the painting cycle was
affected by the early onset and prolonged monsoon. However,
rural demand remained relatively stable throughout the year,
while urban demand showed an uptick. Also, demand during
the festive period was subdued due to a shorter Diwali season;
however, a recovery was observed in the latter part of the year.
Overall, the Decorative segment continued to face near-term
pressures, even as underlying demand drivers remained intact.

For the automotive industry the second half of the year saw
a decisive upshift as GST 2.0 improved affordability lifted
sentiment and triggered momentum, which was further
bolstered by the festve season. Demand momentum
remained robust across all major sub-segments. The
Passenger Vehicle segment delivered good growth, reflecting
sustained consumer demand and new model launches. The
two-wheeler and Three-wheeler segments also recorded
strong growth, whereas the Commercial Vehicle segment
witnessed strong double-digit growth.

The Performance Coatngs segment demonstrated
resilience and healthy growth during the year. Infrastructure
development across railways, roads, airports, and power
projects contnued to augur well for the industry driving
demand for high-end and premium coatings. General
industrial coatings witnessed healthy demand while the
Powder Coatings segment maintained stable demand.

In summary FY 2025-26 was a year of measured progress
for the paints industry While the year was marked by
short-term challenges, it was supported by strong
fundamentals, infrastructure investments, healthy demand in
the automotve sector, and a sustained shift towards premium
and performance-driven solutions.

Financials

Highlights

A summary of KNPL''s standalone financial results for the year ended 31^st March, 2026 (FY 2025-26), compared to the standalone
financial results for the previous year, FY 2024-25, is as follows:

Particulars	FY 2025-26	FY 2024-25
Revenue from Operations	7,739.23	7,496.71
Profit Before Depreciation, Interest, Exceptional Item, and Tax (PBDIT)	986.22	974.13
Less: Depreciation and Amortisation	221.36	193.68
Profit Before Interest, Exceptional Item, and Tax (Operating Profit)	764.86	780.45
Less: Interest	18.41	15.09
Add: Other Income	152.46	142.06
Profit Before Exceptional Item and Tax	898.91	907.42
Add: Exceptional Item	(60.70)	479.19
Profit Before Tax (PBT)	838.21	1,386.61
Less: Tax Expenses	218.36	365.37
Profit after Tax	619.85	1,021.24
Other Comprehensive Income	6.74	(3.46)
Total Comprehensive Income for the Year	626.59	1,017.78

Revenue from operations for the year aggregated to
''7,739.23 Crores, compared to '' 7,496.71 Crores in the previous
year, reflecting 3.2% growth. Athough average crude oil prices
declined during the year, currency depreciation partially offset
the impact. Consequently overall raw material prices remained
largely stable throughout the year.

Meanwhile, we continued our efforts to control overheads, wth
all departments contributing positively towards this objective.
PBDIT for the year stood at '' 986.22 Crores, compared to
'' 974.13 Crores in the previous year, refecting 1.2% growth. In
addition, other income increased to '' 152.46 Crores from
'' 142.06 Crores recorded in the previous year.

THE FOLLOWING EXCEPTIONAL ITEMS WERE
RECORDED DURING THE YEAR:

♦ Provision for impairment of long-term investment, loan, trade
receivables, and financial guarantees, after considering
past performance and prevailing economic and market
conditions, amounted to '' 5.76 Crores

♦ Additional employee benefit cost of '' 44.72 Crores was
recognised based on actuarial valuation following
implementation of the Wage Code

Â¥ Loss arising from the fire incident at the warehouse located in
Ghaziabad, Uttar Pradesh, amounted to '' 10.22 Crores

PBT for the year stood at '' 898.91 Crores, marginally lower than
'' 907.42 Crores reported in the previous year before exceptional
items, reflecting a degrowth of 0.9%. PAT declined to
'' 619.85 Crores from '' 1,021.24 Crores in the previous year,
marking a degrowth of 39.3%. Return on net worth, excluding
exceptional items, stood at 10.3% compared to 11.3% in the
previous year.

During the year, KNPL did not accept any deposits covered
under Chapter V of the Companies Act, 2013. Furthermore, no
material orders were passed by regulators, courts, or tribunals
that could affect our going concern status or future operations.
There was also no change in the nature of our business during
the year. Additionally, no material changes or commitments
affecting our financial position occurred between the end of the
financial year and the date of this report.

Dividend

The Board has recommended dividend of 250% ('' 2.50 per share) for the financial year ended 31^st March, 2026. Last year, the
Company declared a final dividend of 375% ('' 3.75 per share), including a special dividend of 125% ('' 1.25 per share).

Key Ratios	FY 2025-26	FY 2024-25	Difference	% Change
Debtors Turnover (No. of Days)	50	47	3	6.4
Inventory Turnover (No. of Days)	113	121	8	6.6
Interest Coverage Ratio	54	65	11	16.9
Current Ratio	3.75	4.02	0.3	6.7
Debt Equity Ratio	-	-	-	-
Operating Profit Margin (%)	12.7	13.0	0.3	2.3
Net Profit Margin (%)	8.0	13.7	5.7	41.6
Return on Equity (%)	9.5	17	7.5	44.1

Subsidiaries and Consolidated Financial Statements

In accordance with the provisions of tine Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements)
Regulations, 2015 (SEBI Listing Regulations), the Board has approved a policy for determining material subsidiaries. The policy is
available on the website of KNPL at wwwnerolac.com. Further, based on this policy we do not have any material subsidiaries.

The consolidated financial statements of KNPL as of 31^st March, 2026, have been prepared in accordance with applicable accounting
standards and form part of this Report All subsidiaries of the Company as of 31^st March, 2026 have been considered while preparing
the consolidated financial statements. Further, a separate statement in Form AOC-1, highlighting the key features of the financial
statements of the Company''s subsidiaries, forms part of this Report

The Annual Audited Financial Statements of all KNPL subsidiaries are available on the Company''s website at
wwwnerolac.com

Indian Subsidiary

The turnover of Nerofx Private Limited stood at
'' 163.89 Crores, compared to '' 125.23 Crores in the
previous year. Nerofix Private Limited recorded a loss of
'' 7.64 Crores against '' 15.26 Crores in the previous year. At
the same time, strategic initiatives were undertaken to
revamp the business.

The Board of Directors of Nerofix Private Limited and Kansai
Nerolac Paints Limited approved the Scheme of
Amalgamation (‘‘Scheme”) of Nerofx Private Limited
(Transferor Company), Company''s wholly owned subsidiary
with the Company (Transferee Company), subject to
requisite approvals including approval from National
Company Law Tribunal, Mumbai Bench (“NCLT”). The
appointed date for the Scheme is 1^st April, 2025.

NCLT vide its order dated 6^th January 2026, directed
convening of a meeting of the Equity Shareholders of the
Company Accordingly a NCLT convened Shareholders
Meeting was held on 27^th February 2026 through Video
Conferencing / Other Audio Visual Means, wherein the
shareholders approved the Scheme wth requisite majority

Overseas Subsidiaries

During the year, the turnover of KNP Japan Private Limited, our
subsidiary in Nepal, rose to '' 76.12 Crores, up from
'' 69.43 Crores in the previous year. PAT stood at '' 6.01 Crores,
as compared to '' 5.97 Crores in the previous year.

Kansai Nerolac Paints (Bangladesh) Limited, our subsidiary in
Bangladesh, registered a turnover of '' 91.25 Crores for the
year, as compared to '' 143.18 Crores in the previous year. The
Company incurred a loss of '' 27.55 Crores during the year,
compared to a loss of '' 30.95 Crores in the previous year.

The Board of Directors of the Company approved sale of the
Company''s entire stake of 60% of the total equity share
capital of Kansai Paints Lanka (Private) Limited, the
Company''s subsidiary in Sri Lanka, to Atire (Private) Limited,
a Sri Lankan entity. The total consideration received by the
Company is LKR 18,00,000 (approxmately '' 5,25,000).

The accounts of Kansai Paints Lanka (Private) Limited,

Sri Lankan subsidiary, have been consolidated till
16^th December, 2025, when it ceased to be a subsidiary of the
Company

Segment-Wise Performance

We have only one segment of activity namely ‘paints,'' in accor¬
dance 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

Decorative Business

Overview

In FY 2025-26, we carried forward our century-long legacy of
excellence, offering painting solutions that seamlessly combine
aesthetics with durability We continued to strengthen our bond
of trust with customers.

During the year, we enriched our portfolio wth 15 new decorative
products. These launches were thoughtfully developed to deliver
distinctive value by combining aesthetics with performance,
further strengthening our position as a trusted solutions provider.

With the objective of delivering professional painting services
through timely execution, tailored colour guidance, and
dedicated supervision, we expanded our Nerolac NxtGen
Painting services to 250 towns.

In the new business segment, the Construction Chemical and
Waterproofing segment demonstrated a very strong growth.
The Project business continued its growth momentum from
the previous year and maintained a strong growth as well. We
continued to provide superior retail experience through our
Nerolac NxtGen Shopee, Shop-in-Shop outlets and Paint
zones. Our Illuminati Programme also witnessed an increased
participation from architects and interior designers. This was
driven by focused engagement efforts and participation in
various exhibitions and seminars.

New Product Launches

Value Creation at
Every Step

During the year under review we remained focused on building
a competitive advantage by expanding our product portfolio and
responding effectively to evolving market requirements. Under
the Paint category we continued to emphasise unique product
offerings that enhance our market presence. Our newly developed
product, Nerolac Excel Everlast 20, offers a 20-year performance
warranty superior crack-bridging ability and anti-carbonation
properties.

In the Interior range, we launched Nerolac Beauty Gold Washable ,
featuring anti-bacterial and stain-resistant properties and 1.25x
better washability. We also introduced Nerolac Beauty Little Master
Super, an economical product that offers a smooth and pleasing
matt finish.

In an effort to provide superior products in our Exterior range, we
launched Nerolac Mica Marble Stretch and Sheen WOW, which
provide 15% more coverage, crack-bridging ability and excellent
dirt pickup resistance, while Nerolac Excel Sheen comes with
superior algae resistance and up to 5°C surface temperature
reduction.

These product i ntroductions not only strengthen our portfolio but also
reaffirm our commitment to delivering high-quality differentiated
solutions that align with evolving customer expectations.

Consumer

Services

The NxtGen Painting Service continued to deliver a seamless,
digitally enabled experience backed by efficient end-to-end
processes. The programme focused on simplifying the home
painting journey through structured execution, professional
service delivery and transparent customer engagement

Service standards were further enhanced through the
deployment of dedicated site supervisors, leading to improved
on-ground executon and faster resolution of customer concerns.
This emphasis on quality and responsiveness resulted in high
levels of customer satisfaction, as reflected in a strong Net
Promoter Score and positive feedback on professionalism, timely
completion, and after-sales support

In addition to strengthening customer trust, the initiative enhanced
confidence among painting contractors and the dealer network,
reinforcing its scalability and long-term relevance.

Superior Retail
Experience

We remain committed to elevating the retail experience for our
consumers through our NxtGen Premium Shoppe ‘Sapphire'' and
‘Ruby''. These experiential platforms provide a one-stop solution
for all surfaces in consumers'' homes, offering an immersive
environment where consumers can view, compare, and feel
actual paint finishes, wood coatings & waterproofing solutions,
enabling more informed and confident decision-making. In
addition, trained experts at these outlets offer personalised
colour consultations and need-based product recommendations
to further enrich the consumer journey

As of FY 2025-26, our retail footprint stood at 150 Nerolac
NxtGen Shoppe outlets and 250 Shop in Shop outlets across
the country strengthening our presence and accessibility

During the year, we further enhanced our market reach by
introducing ‘Paint Zones'', a new initiative aimed at increasing
visibility and driving growth for small-sized retailers. As of the
end of FY 2025-26, we have reached 250 touchpoints through
Paint Zones.

Influencer Engagement
Programme

PRAGATI PROGRAMME FOR PAINTERS

Our Painter Loyalty Programme, Pragati, remains a key element
of the Company''s strategy to enhance engagement within the
Painting Contractor segment. The programme emphasises
capability building and skill development among this important
group of influencers who play a critical role in the final quality of
product application.

During the year, the Company continued to implement multi¬
modal training initiatives, combining classroom-based sessions
with training delivered through mobile mini vans. Through these
efforts, over 1,00,000 painters were trained in paint application
techniques, thereby strengthening their technical skills and
professional expertise. The training programmes focused
on decorative, wood, and designer finishes. In addition, the
Company leveraged its existing Shop Meet programmes to
upskill its loyal painters while simultaneously creating awareness
of the KNPL range of products and services across key markets.
These initiatives contributed to deeper engagement and stronger
brand advocacy within the painter community

Painter engagement is supported by the digital Pragati
application. During FY 2025-26, the application was upgraded

to deliver a faster, smoother and more seamless user
experience. The Company also utilised artificial intelligence to
generate insights into painter purchasing behaviour, enabling
personalised product recommendations aligned with specific
requirements. This approach enhanced the overall painter
experience and supported improved sales outcomes.

ILLUMINATI PROGRAMME FOR ARCHITECTS AND
INTERIOR DESIGNERS

At KNPL, we acknowledge the important role architects and
interior designers play in shaping functional and aesthetically
compelling environments. Over the years, we have successfully
engaged with more than 12,000 professionals across India,
fostering strong relationships and long-term trust through our
Lunch & Learn presentations. To support their creative and
technical requirements, we offered colour consultancy services
and ensured seamless integration of our shade palettes into their
3D design and rendering software, with AD services available
across 45 cities.

In addition, we actively participated in prominent industry
exhibitions, such as FOAD in Delhi and Mumbai, providing a
platform to showcase our diverse product portfolio, strengthen
engagement with the design community and stay aligned
with emerging trends and preferences. Complementing these
initiatives, a nationwide engagement programme featuring a
value-added incentive further enhanced participation and brand
recall among professionals. Collectively these strategic efforts
have significantly strengthened brand awareness and brand
equity among architects and interior designers, who continue to
serve as key future influencers for the organisation.

Growth Businesses

Wood

Coating

During the year, we sustained our positive performance in the
Wood Coating segment driven by growth in the premium category
Our strategic collaboration with ICRO Coatings continued to
be a catalyst for success, enabling the introduction of globally
acclaimed products. This has significantly accelerated our market
expansion in North India and strengthened our competitive edge.

Our neWy launched product, Nerolac Wonderwood RTU - ‘O''
series, covers a complete range of finishes, including glossy
satin, matt, and dead matt The range offers fast drying, good
scratch resistance, and ready-to-use formulatons.

Our Premium Wood Coatings Contractor Loyalty programmes
have played a pivotal role in deepening engagement wth
our contractor community By recognising and celebrating
their contribution, we are nurturing relationships built on trust,
partnership, and shared growth.

With a robust product pipeline, a strengthened partner ecosystem,
and rising acceptance of premium wood solutions, the business is
well poised for sustained growth in the coming year.

Construction Chemicals
and Waterproofing

During the year under review, both Construction Chemicals and
Waterproofing businesses demonstrated very strong growth.
Significant efforts were undertaken to benchmark and enhance
products, enabling the Company to offer a comprehensive
portfolio of construction chemical products aligned with leading
industry standards.

Key product categories, such as Tile Settng and Admixtures,
contributed positively to performance, with both segments
experiencing rapid scale-up. In addition, flooring remains a
category with visible activity The Construction Chemicals
business delivered sturdy performance, and focused initiatives
are underway to further strengthen the operating structure,
enabling profitable and sustainable scalability

Our newy launched product, Nerolac Perma No Damp Super,
provides an exterior waterproof coatng for roofs, terraces, and
walls with up to 10°C surface temperature resistance. Nerolac
Perma R POXY 2K provides high compressive strength, excellent
stain resistance, and waterproofing properties.

Marketing and
Branding

Projects

This year, KNPL''s Projects Business continued to build on
its strong growth trajectory Our strategic priorities remained
centred on strengthening our presence across key customer
segments, expanding our geographic reach, and enhancing
both operational and on-ground engagement capabilities, as
we continued to consolidate our position in the Builder (Fresh
Painting) segment while driving growth in the CHS (Repainting)
segment and the Government sector

Employee engagement and capability development remained
key priorities during the year A focused project sales conference
was conducted to align teams with strategic objectives, promote
cross-functional collaboration and recognise performance
excellence. The initiative reinforced shared purpose, motvaton
and organisational alignment. We also conducted Contractor
Engagement Meets across the country bringing together
over 1,000 of our loyal and influential contractors. These
meets deepened our ecosystem relationships, strengthened
partnerships, encouraged knowledge sharing, and reinforced
KNPL''s commitment to supporting contractor growth and
capability building.

We also strengthened our portfolio by expanding the Super
Series with new products that meet evolving project needs,
enhancing our value to builders, contractors, CHS customers,
and Government stakeholders.

Together, these initiatives have strengthened our market
presence and reinforced our commitment to driving sustained
growth in the Projects Business. During the year under review
we also undertook several marquee projects, including the
Jharkhand High Court, Vidhan Sabha, and Raipur

The Company continued to emphasise effective, consistent
communication with customers through targeted marketing
campaigns and media outreach. Social media platforms such
as Instagram, Facebook and LinkedIn were actively leveraged
to share product information, key initiatives and achievements,
thereby enhancing brand visibility and customer engagement

During the year, the iconic Nerolac jingle was reintroduced
througha high-impact multi-channel media campaign, refreshed
to reflect evolving consumer preferences while retaining its
nostalgic appeal. In addition, the Company launched its first
digital video commercial for NxtGen Painting Services across
multiple regional languages.

Additionally, the Company''s marketing and media initiatives
received significant recognition across leading industry forums
during FY 2025-26. The ‘Dukaan it Yourself campaign, executed
during the Mahakumbh, garnered 26 prestigious awards in FY
2025-26, underscoring the creativity effectiveness and impact
of the Company''s brand-building efforts.

Industrial Business
Overview

India is witnessing sustained investments in infrastructure
development, which continue to drive demand for industrial
paints. As one of the world''s largest automotive markets, the
country is experiencing strong growth, supported by rising
domestic passenger vehicle consumption andincreasing
vehicle exports to international markets.

The industrial paints business caters to a diverse customer
base, including automotive OEMs, auto refinish body
shops, general industrial manufacturers, and users of high
performance coatings across sectors such as oil & gas,
chemical processing, power generation, and infrastructure.

During the year, the Powder Coatings segment recorded
decent growth, primarily led by demand from the Auto
Ancillary and Furniture segments. The Liquid Coatings
market registered strong growth, driven by the growing
adoption of high performance coatings designed for
specialised industrial applications.

Technological advancements continued to play a pivotal
role in shaping the industrial paints market, with innovations
in product formulations and application technologies.
Our state-of-the-art R&D centre has been instrumental
in strengthening our capabilities and reinforcing our
leadership position in the industry.

As we operate in this dynamic and evolving environment,
we remain firmly committed to innovation, quality and
operational excellence, ensuring we can meet the changing
requirements of the industrial coatings market

Automotive Business

Overview

Building on an already strong foundation in the Automotve
segment the Company further strengthened its market
leadership during the year by gaining market share and
reinforcing its positon as a market leader. This performance
was driven by a focused strategy centred on developing
technologically advanced products and accelerating the
adoption of sustainable technologies, closely aligned with the
rapidly evolving requirements of customers and OEMs.

During the year, our performance in the Passenger Vehicle
segment witnessed healthy growth, while the 2-Wheeler and
3-Wheeler segments also witnessed strong growth. In contrast
to the previous year, the Commercial Vehicle segment also
demonstrated a very strong double-digit growth. Furthermore,
the Auto Refinish segment also demonstrated good growth,
primarily driven by premium products, outlining customers'' shift
towards premium offerings.

Overall, the Automotive segment delivered a robust performance
during the year, supported by broad-based growth across
key sub-segments. The Company''s focus on innovation,
premiumisaton, and sustainable technologies, combined with its
ability to respond proactively to evolving customer requirements,
has further strengthened its leadership position. With a strong
product pipeline, deep customer relationships, and sustained
emphasis on technology-led solutions, the Company remains
well-positioned to leverage emerging opportunities and drive
long-term, profitable growth in the Automotive segment

New Segment

During the year, the Company emphasised targeted initiatives in
segments such as alloy wheels, underbody coatings, and seam
sealers in the automotive industry.

The Aloy Wheels segment recorded very strong growth during
the year, reflecting an increasing market share. We aim to
sustain this momentum by introducing advanced technologies
aligned with evolving market requirements and by contnuing to
focus on enhancing market share. Additionally, the Underbody
Coatings segment also delivered good growth, while the Seam
Sealers segment registered decent progress during the year. To
further support our growth in these segments, we are focusing
on rapidly increasing our capacity and enhancing our presence
by reaching more customers.

With continued emphasis on advanced technologies and market
expansion, these segments are well-positioned to support
sustainable growth and enhance long-term value creation.

Passenger

Vehicles

The Passenger Vehicle segment recorded healthy growth
during the year, driven by increased demand following the
implementation of GST 2.0. This demand was further supported
by the launch of new models and a sustained shift in consumer
preference towards SUVs. In line with evolving customer
requirements, the Company focused on delivering superior
finishes while advancing its sustainability agenda through
resource-efficient solutions. The Company remains committed
to sustainability by offering solutions that promote energy
conservation and optimise paint usage, thereby reinforcing
its emphasis on technological innovation and operational
efficiency

Commercial Vehicles
and Tractors

The Commercial Vehicles and Tractor segment recorded
very strong growth during the financial year. Demand in
the Commercial Vehicles segment was driven primarily by
increased infrastructure-led activity, while tractor demand
benefited from factors such as good harvest seasons and GST
reforms. In response to these market dynamics, the Company
focused on developing solutions that offer enhanced durability,
superior weathering performance, and improved anti-corrosive
properties to meet the rigorous requirements of this segment

Two-wheeler and
Three-wheeler

During the year, the Two-wheeler and Three-wheeler segments
recorded solid growth, supported by GST-led affordability, low
interest rates, improved access to financing, and a broadening
product portfolio. The rising demand in this segment has
increased the need for paints and coatings, and the Company
remains committed to meeting this demand to further strengthen
its market position. In response to evolving customer needs,
the segment witnessed the development of new products
tailored to diverse application requirements, with a focus
on enhanced functionality and superior finishes, including
high-gloss, improved hardness, and anti-corrosive properties.
The Company also introduced environmentally friendly solutions
during the year, emphasising efficient resource utilisation and
reduced energy consumption, in line with its sustainability
objectives.

Electric Vehicles
(EVs)

Amid the increasing emphasis on environmental sustainability
the Electric Vehicle (EV) segment continued to witness significant
growth across all mobility categories. As a market leader in
automotive coatings, the Company strategically strengthened
its presence in this segment, to maintain a strong market share
and reinforce its leadership position. During the reportng
year, the Company recorded strong growth in the Electric
Two-wheeler segment, supported by a similar upward trend in
Electric Three-wheelers, while the Electric Passenger Vehicle
segment also demonstrated remarkable growth. Leveraging
advanced technologies such as Super Durable Topcoats and
a suite of energy-efficient solutions, the Company remained
focused on effectively addressing the evolving requirements of
this rapidly expanding market

Auto Refinish

During FY 2025-26, the Auto Refinish segment delivered decent
growth, primarily driven by premium products, reflecting a clear
shift in customer preference towards higher-value offerings. We
continued to strengthen our presence in A class body shops,
reinforcing our positioning in the premium end of the market
The industry-wide transition from solvent-based to water-based
systems gained further momentum during the year, and we
remained well aligned to this trend through our portfolio. Our
continued partnerships in the Bus Body segment supported
steady volumes, while focused training and awareness sessions
enhanced engagement, improving product awareness and
adoption.

Product development efforts during the year were centred
on high-solids coats that deliver superior gloss, faster drying
characteristcs, and improved standability, enabling better
productvity and finish quality for customers. These initatives
collectively supported growth, premiumisation and long-term
sustainability of the Auto Refinish business

Performance Coating

Business Overview

During FY 2025-26, the Performance Coating division delivered
strong performance, with positive contributions from all segments.
This momentum was supported by an uptick in government-led
infrastructure development projects, which drove increased
demand for high-quality, premium-grade coating solutions. The
general industries segment recorded strong growth during the
year, reflecting sustained demand across applications. The
High-performance Coatng business experienced good growth,
driven by the Premium segment The Powder Coating business
also achieved decent growth, while the Coil Coating business
demonstrated a very strong double-digit growth. Overall, the
broad-based growth across sub-segments underscores the
resilience and strength of the Performance Coating portfolio.

Powder

Coating

The Powder Coating segment witnessed decent growth during
the FY 2025-26, backed by stable demand from Auto Ancillary,
Electrical Appliances and Furniture segments. The Powder
Coating segment continued to cater to various segments such as
white goods, rebars, pipe coatings and construction equipment.

During FY 2025-26, we expanded our product portfolio with
several impactful new launches focused on premium performance
and emerging application needs. Key introductions included low
bake and fast cure powder coatings to enhance productvity and
energy efficiency, super-durable and high scratch resistance
products for demanding applications, and heat resistant coatings
suitable for specialised industrial use. We also advanced liquid
to powder conversion solutions, particularly for the Two-wheeler
segment supportng sustainability and cost efficiency. In additon,
new architectural finishes, specialised coatings for alloy wheels,
pipelines, and flame resistant applications further strengthened
our position across high-growth and value-added segments.

Liquid

Coating

The Liquid Coating segment in FY 2025-26 demonstrated strong
performance, with all subsegments contributing positively.
The High-performance Coatings segment was backed by
performance in Industrial applications and Oil & Gas segment

The General Industries Coating segment was supported by very
strong performance in Construction equipment and Helmets,
while segments such as Drums and Barrels and Agricultural
equipment also contributed positively.

During FY 2025-26, the Liquid Coatings segment introduced new
products offering advanced functional performance, including
high-temperature resistance, thermal insulation and enhanced
corrosion protection, with applications spanning locomotive
spare parts and consumer durables.

Going forward, we will continue focus on expanding our presence
in high performance and infrastructure-led applications,
supported by continued innovation in sustainable, value-added
solutions to drive long-term profitable growth.

Research and Development (R&D)

Overview

Research & Development remains a critical pillar of the
Company''s long-term strategy, supporting innovation,
competitiveness and sustainable growth across Decorative,
Automotive and Industrial coatings. The Company''s R&D
efforts are focused on developing differentiated products and
technologies that respond to evolving customer requirements,
regulatory standards and environmental considerations.

In the Decorative Coatings segment, R&D initiatives continue to
emphasise enhanced performance, durability and application
efficiency while incorporating features that address changing
consumer preferences. The Automotive Coatings portfolio is
focused on continuous technological advancement to improve
coating performance, process efficiency, and resource
optimisation, in line with the stringent quality and environmental
norms of the automotive industry.

Within Industrial coatings, the Company is focused on
developing application-specific solutions to meet the diverse
and demanding requirements of infrastructure, engineering, and
other industrial end-use segments.

Overall, the Company''s R&D organisation plays a vital role in
strengthening its technology base, driving innovation across
businesses and reinforcing its position as a solutions-oriented
coatings provider.

COLLABORATION WITH KANSAI PAINT CO., LTD
AND KANSAI PAINT GROUP COMPANIES

Over the years, the Company has sustained its technological
leadership in the Industrial Coatings segment by consistently
outpacing competitive benchmarks. A key enabler of this
strength has been the strategic partnership with Kansai Paint
Co., Ltd. (KPJ), a globally recognised leader with extensive
expertise in technology design and development. Through
close and continuous collaboration with KPJ, the Company has
developed customised paint and resin formulations tailored to
the specific requirements of the Indian market

Key innovations include the development of tin-free Cathodic
Electro Deposition (CED) coatings and stoving primers for
four-wheeler body applications, as well as several solutons that
deliver superior aesthetic appeal and functional performance.
KPJ also contributes valuable insights into emerging global
colour trends and provides robust technical support to
customers in India, drawing on its international experience and
capabilites.

In addition, the Company collaborates with Kansai Group entties
worldwide to introduce differentiated technologies across a wide
range of end-user segments. This includes industrial coatings,
coil coatings, automotve refinish and decorative paints, thereby
enhancing value delivery to customers.

Key Developments in
Decorative Paints

Aligned with the Paint strategy, which emphasises
differentiated and value-added offerings, the Company''s R&D
initiatives continued to focus on innovation-driven by evolving
customer needs. During the year under review the Decorative
Paints portfolio was further strengthened with the introduction of
15 new products.

In the Interior segment product development efforts focused
on solutions offering extended warranties, smoother, more
aesthetically pleasing finishes, antibacterial properties,
enhanced washability, and improved stain resistance. In the
Exterior segment, innovations focused on algae-resistant
coatings with lower surface temperatures and superior dirt
resistance, enhancing performance and durability Some of the
key offerings introduced during the year were Excel Everlast 20,
Nerolac Excel Sheen, and Beauty Gold Washable Plus.

These initiatives further strengthen the Company''s decorative
paints portfolio and reinforce its commitment to delivering
high-performance, differentiated solutions that align with
changing consumer preferences.

Key Developments in the
Automotive Segment

Passenger Vehicles
Segment

During the year under review, we advanced our passenger
vehicle coatings portfolio by introducing high-impact solutions to
enhance aesthetics, performance, and application efficiency Our
new offerings focused on enhancing finishes and functionality
while prioritising environmental sustainability

During the year, we also expanded our product portfolio by
introducing several advanced coating solutions, reinforcing our
focus on innovation and sustainability We developed an Energy-
efficient Wet-on-wet System that enables significant energy
savings and enhances process efficiency. A Primer has been
engineered to deliver high durability and superior corrosion
resistance, meeting the evolving performance requirements of
automotive applications.

These product introductions underscore our commitment to
delivering high-performance, value-driven solutions aligned with
industry needs.

Two-wheeler and
Three-wheeler Segment

The Two-wheeler and Three-wheeler segments saw the
development of new products designed to meet diverse
application requirements. These offerings focused on improved
functionality and enhanced finishes, delivering attributes such as
high gloss, increased hardness and superior weatherability.

During the year under review we further strengthened our
product portfolio. The Low-Bake Technology enables significant
energy savings while improving overall process efficiency The
Anticorrosive Underbody Protection solution has been developed
to provide enhanced corrosion resistance, thereby extending
the service life. Additionally the High Gloss Clear Coats offer
improved surface hardness and a durable finish, ensuring
superior aesthetics and long-term performance.

These developments reflect our continued commitment to
delivering technologically advanced and value-driven solutions
aligned with evolving industry requirements.

Commercial Vehicles
Segment

During the year under review, we remained focused on
advancing innovation, sustainability and product performance
by developing coating solutions aligned with evolving customer
requirements, operational efficiency and environmental
considerations.

For the Commercial Vehicle segment, we launched several new
products designed to improve performance and operational
efficiency The Super Low-Bake Colour Coating offers improved
weathering performance and energy-efficient curing, supporting
both durability and sustainability objectives. The Anti-corrosive
Sealer for castings has also been developed to deliver superior
anticorrosive protection, thereby extending the service life. In
addition, the Clear Adhesion Promoter ensures strong inter-coat
adhesion without impacting the visual appearance, enhancing
overall coating integrity

These product innovations reinforce our commitment to delivering
high-quality technologically advanced solutions aligned with
customer expectations and industry standards.

Key Developments in
Auto Refinish

In the Auto Refinish segment, we are observing a notable
shift towards sustainable products, with demand rising for
water-based solutions over traditional solvent-based ones.
During the year, we advanced our Auto Refinish Coatings
portfolio by developing high-impact products.

Key developments included cost-effective, high-solid,
clear coats delivering superior gloss and clarity as well as
fast-drying PU systems offering good gloss. The portfolio
was further strengthened with solutions that offer improved
sandability and easier application, effectively catering to retail
refinish customers.

These innovations reinforce our focus on delivering efficient, high
quality solutions in the Auto Refinish segment

Key Developments in
the Performance Coating
Segment

KEY DEVELOPMENTS IN POWDER COATINGS

During the year, we continued to focus on innovation, operational
efficiency and our presence across diverse application
segments by introducing advanced coatng solutions tailored to
evolving market needs.

In line with these focus areas, we introduced several new
products to enhance performance and process efficiency The
Low-Bake One-Shot Matt Powders enable energy-efficient,
low-temperature curing while supporting faster throughput The
Fusion Bonded Epoxy Topcoat has been developed as a coating
system for pipe applicatons. Additionally coatngs designed for
furniture and consumer durables deliver high scratch resistance,
ensuring improved durability and long-lasting aesthetics.

These product innovatons underscore our commitment to
delivering high-performance, application-specific solutons
that align with evolving customer requirements and industry
standards.

KEY DEVELOPMENTS IN LIQUID COATINGS

In FY 2025-26, we contnued to drive innovation and sustainability
through our Liquid Coatings portfolio by developing advanced
coating solutions focused on regulatory compliance, enhanced
performance, and improved safety across diverse applications.

As part of these efforts, the Company introduced a range of new
products designed to address evolving market and environmental
requirements. The Highly Flexble RoHS-compliant Coil Coating
has been engineered to withstand severe forming operations
while offering strong anti-peeling properties, ensuring durability
and compliance with global standards. The High-Performance
Outdoor Coatng System delivers long-term UV resistance along
with improved gloss retention, maintaining aesthetic appeal
under harsh environmental conditions. Additionally the Thermal
Insulation Coatng is designed to reduce surface temperature
and enhance touch safety thereby improving user comfort and
operational safety.

These innovatons reaffirm the Company''s commitment to
delivering high-performance, sustainable, and customer-centric
coating solutions.

Supply Chain

The global supply chain environment continues to evolve amid
persistent geopolitical uncertainties, volatility in crude oil prices,
foreign exchange fluctuations, and challenges related to imports
and logistics. These factors have underscored the importance of
agility and resilience in supply chain management. At KNPL, we
perceive such disruptions not merely as risks but as opportunities
to strengthen our operating model through proactive planning,
continuous innovation, and strategic adaptation.

Our supply chain has consistently remained a core component
of our competitive advantage, enabling us to maintain high
standards of quality operational efficiency and dependable
customer service. The Company operates through an extensive
network of nine owned manufacturing facilities, supported
by a supplier base of over 500 key suppliers that provide raw
materials, components, and services. Finished products are
distributed efficiently across the country through a robust
network comprising 112 depots and 8 Regional Distribution
Centres (RDCs), ensuring optimal market reach and service
continuity

Furthermore, we have implemented an SAP-enabled digital
platform to advance supplier identification, onboarding and
digitisation of the procurement process. We have also deployed
a logistics management system across our operating locations
to digitise and optimise logistics operations.

To strengthen collaboration and engagement with its supply
chain partners, the Company conducts an Annual Supplier
Conference as a key engagement platform. The conference
enables meaningful interaction wth suppliers, facilitates
networking, and provides an opportunity to communicate the
Company’s strategic priorities and future roadmap.

During the financial year, we strengthened supplier engagement
by conducting structured training and awareness programmes to
align supply chain partners with our sustainability expectations.
This training was focused on the Supplier Code of Conduct and
BRSR principles, covering social responsibility, environmental
stewardship and ethical conduct. During the year, 100
suppliers were assessed using the ESG Self-Assessment to
evaluate practices in environmental management, energy and
emissions, water and waste management occupational health
and safety, human rights, and governance standards. These
initiatives undertaken during the year reinforce responsible
sourcing and support the integration of sustainable practices
across the supply chain.

We also recognise the importance of inclusive growth among all
our stakeholders. During F Y 2025-26, approximately 22% of our
input materials were sourced from MSMEs, supporting inclusive

growth initiatives. Additionally to promote local sourcing, 77% of
our input materials were sourced in India.

Overall, our supply chain strategy remains firmly focused on
building resilience, enhancing digital capabilities, fostering
responsible sourcing, and strengthening long-term partnerships
across the value chain. By combining operational excellence,
sustainability integration, inclusive growth, and continuous
engagement with our suppliers, we are well positioned to
navigate external uncertainties, enhance stakeholder value, and
support the Company''s long-term growth and competitiveness.

Information Technology

KNPL continues to enhance its digital capabilities as a key
enabler of operational efficiency scalability and stakeholder
engagement. During the year, we successfully completed
our transition to SAP S/4HANA establishing a robust and
future ready digital foundation. Our digitally enabled platforms
facilitate seamless engagement with key stakeholders, including
painters, dealers, architects, interior designers, and sales
teams, enhancing service delivery and generating actionable
insights. In addition, we have an employee portal that supports
organisation-wide learning, communication, engagement, and
recognition.

Alongside digital transformation, the Company emphasises
cybersecurity and information security governance.
Comprehensive security measures, controls, and monitoring
mechanisms have been implemented to protect digital assets,
safeguard stakeholder data, ensure system integrity, and
support business continuity amid increasing cyber risks.
Additionally, we have made cybersecurity training mandatory

for all employees within the organisation. We also regularly
communicate cybersecurity awareness tips to all our employees.

In parallel, the Company has initiated efforts to build basic A
capabilities to improve employee productivity and promote
smarter ways of working. Structured training programmes
are being conducted to build foundational A awareness and
skills. Going forward, KNPL will continue to evaluate selective
A-led opportunities with a focus on operational efficiency and
measurable benefits.

Through sustained investments in digital platforms, cybersecurity
and emerging technologies, the Company remains committed to
building a resilient, trusted, and future-ready organisation.

People

At KNPL, our people remain at the heart of our growth and
transformation. Life at KNPL is defined by pride, belonging, and
purpose: qualities that inspire every NEROLITE to bring their
best selves to work. This year, we rolled out our Employee Value
Proposition, ‘Where your passion takes colour'', reflecting
our belief that our people''s passion is at the heart of everything
we do.

As of FY 2025-26, KNPL is powered by 3,804 dedicated
NEROLITEs, who proudly embody this ethos in all they do. We
remain committed to their holistic development consistently
translating this promise into meaningful actions. By prioritising
health, safety and overall well-being, and fostering a diverse,
equitable, and inclusive environment, we ensure that individuals
from all backgrounds feel respected, valued, and empowered
to thrive.

Employee

Well-being

Employee well-being continues to be a cornerstone of our people
strategy Recognising that our employees are fundamental
to organisational success, we have strengthened wellness
initiatives to support both physical and mental health.

The Advantage Club App serves as a comprehensive
platform offering resources, activities, and support for holistic
well-being. Wellness Wednesday Sessions build awareness on
critical themes such as mental health, emotional intelligence,
productivity, and work-life balance. Our monthly newsletter
showcases stories from NEROLITEs about their personal
journeys towards healthier lifestyles in our ‘Wellness Club''
column.

These efforts underscore our commitment to creating a
supportive workplace where employees feel encouraged,
empowered, and inspired to perform at their best.

Capability

Building

Capability building continued to be a key focus area, with
emphasis on strengthening skills, leadership capability and
learning agility across the organisation. During the year, the
Company implemented a range of targeted learning initiatives
covering professional readiness, sales excellence, product
and application knowledge, digital enablement, ESG and
risk awareness, business communication and leadership
development. These structured programmes supported
continuous learning, enhanced workforce effectiveness and
enabled the organisation to respond effectively to evolving
business and market needs. We also launched Shiksha Product
training for employees covering product features, advantages
and benchmarking. Additionally, the newly launched ‘20-20
with Nerolac’ learning series is designed to create awareness
of initiatives in the decorative function and product categories,
helping employees to connect and close knowledge gaps.

Nurturing

Employee

Connect

Talent

Building strong and meaningful connections with employees
remains a priority, fostered through a wide range of engagement
and communication initiatives that nurture a participative and
collaborative culture.

The Titan Recognition Programme allows employees to
celebrate each other''s achievements and contributions,
reinforcing a culture of appreciation. During the year, we
also introduced the Annual Excellence Awards to recognise
outstanding individual and team contributions, celebrating
sustained performance, innovation, collaboration, and alignment
wth organisational values, thereby reinforcing a merit-based,
high-performance culture.

The Life@Nerolac platform further strengthens community
spirit by enabling employees to share ideas, updates, and
accomplishments. Transparent, two-way communication is
encouraged through forums such as the HR Connects, Reach
Programme, Works Manager Address sessions, and the
Annual Learning Conference. In addition, cultural and festive
celebrations across Plants, the Head Office, R&D centres, and
depots bring the KNPL family together, creating a vibrant and
inclusive workplace atmosphere.

We also have the Women''s Impact Network (WIN), an employee
resource group that fosters an inclusive environment for women
to thrive professionally and personally In addition, the WTW
Engagement Survey provides valuable insights into employee
sentiment, enabling KNPL to continuously enhance workplace
practices and strengthen trust.

Through these thoughtfully curated programmes, we reinforce
our dedication to building an engaging, inclusive, and
people-centric workplace where every employee feels valued
and connected.

KNPL emphasises building and nurturing young professionals
as key enablers of long-term growth. Its talent acquisition
approach is aligned with organisational objectives and
supported by digitised, transparent hiring processes that
enhance efficiency and candidate experience. Fresh talent
is sourced through structured campus collaborations and
internship programmes, while Graduate Engineer Trainee
and Management Trainee initiatives provide early-career
professionals with cross-functional exposure and development
opportunities. The Gurukul Programme offers summer training
opportunities, while the Aarambh Campus Programme facilitates
the seamless transition of trainees into full-fledged Nerolites.
These efforts reinforce a strong talent pipeline, promote internal
capability building and foster a diverse, inclusive and future
ready workforce.

Innovation

(AVINYA)

The Company continues to actively harness ideas generated
through its innovation initiatives, with a strong focus during
the year on disciplined implementation and benefit tracking.
Identified ideas were systematically monitored for progress
and outcomes, ensuring that innovation efforts translated
into measurable business impact while fostering a culture
of accountability, continuous improvement and value-driven
innovation.

In addition, inventory control emerged as a key theme during the
year. Employee-led ideas under this focus area were carefully
evaluated, and selected ideas were implemented. Thus,
contributing to improved efficiency and a strengthened cash
conversion cycle.

Community Development

At KNPL, Corporate Social Responsibility (CSR) is not merely
a statutory obligation, but an integral part of our business
philosophy We firmly believe that responsible conduct and
meaningful social contribution are central to sustainable value
creation, enabling us to act as a catalyst for positive change in
the communities we serve. Our focused and sustained social
interventions reflect our commitment to inclusive growth and
responsible citizenship and align closely with the United Nations
Sustainable Development Goals (UN SDGs). During FY 2025-26,
KNPL continued to advance its CSR journey through impactful
programmes spanning livelihood and skill development,
preventive healthcare and sanitation, education promotion,
environmental sustainability, and rural and community
development. Through these initiatives, the Company positively
touched the lives of over 1,00,000 beneficiaries, reinforcing
its commitment to long-term social development and shared
prosperity

Under its CSR initiatives, one of the innovative projects undertaken
by KNPL is Project Swayam, a seven-month capacity-building
programme aimed at empowering rural women entrepreneurs in
Chiplun. The initiative supported 25 women through a structured
15-session curriculum focused on business skills, digital literacy
financial awareness, and branding, enabling them to transition
into entrepreneurship. The programme delivered tangible
outcomes, including rapid adoption of digital payment platforms
such as UPI and WhatsApp Business, and facilitated access
to institutional finance, wth one participant securing a CMEGP
loan of '' 8 Lakhs. To ensure long-term impact, the project has
institutionalised a women-led consortium and peer-mentorship
framework, fostering a self-sustaining ecosystem for rural
livelihoods and economic empowerment

Overall, KNPL''s CSR initiatives reflect a long-term commitment
to inclusive development and community empowerment.
By creating scalable and sustainable models, the Company
continues to contribute meaningfully to social progress while
strengthening the foundations for resilient and self-reliant
communites.

Environment, Social and
Governance

At KNPL, the identification and prioritisation of material issues
form a critical part of our sustainability and value creation
framework. Material issues are matters that significantly
influence the Company''s ability to create long-term value for its
stakeholders and are considered critical due to their potential
impact on business sustainability, social responsibility, and
stakeholder relationships.

By systematically recognising and addressing these material
issues, the Company seeks to proactively manage risks and
opportunities, enhance organisational resilience, and reinforce
its commitment to sustainable and responsible value creation.
Based on this assessment KNPL has identified five key material
issues, namely:: Decarbonisation, Resource Use, Quality of Life,
Diversity and Governance.

Outlook

For FY 2026-27, the outlook for the Indian paints and coatings
industry remains positive, supported by structural growth
drivers. Continuedinvestmentsininfrastructure across railways,
roads, airports, power, and urban development are expected to
sustain demand for industrial and performance coatings. Also,
the automotive sector is likely to maintain healthy momentum.

In the Decorative Paints segment, demand is expected to
improve wth a more normalised monsoon cycle, steady rural
consumption, and a gradual recovery in urban demand. Rising
disposable incomes, ongoing premiumisaton, and increasing
consumer preference for eco-friendly and value-added products
are anticipated to further support growth. Government initiatives,
such as housing and urban development programmes, are also
expected to provide an impetus to demand.

While the industry may continue to face near-term challenges
from raw material price volatility, currency movements, and
an increasingly competitive landscape, we aim to mitigate
these risks through product innovation, premium offerings,
digitalisation, and a sustained focus on sustainability Overall,
the paint industry is well positioned to deliver steady sustainable
growth in the coming year, supported by resilient demand drivers,
infrastructure expansion, and evolving customer preferences.

Internal Control Systems
and their Adequacy

Our internal control systems are designed to monitor and
manage our day-to-day operations efficiently. These systems
ensure compliance wth numerous concepts, regulations, and
norms, adhering to methodology requirements. To enhance
our internal control mechanisms, we have implemented
an Internal Financial Control system in compliance with the
provisions of Section 134(5)(e) of The Companies Act, 2013.
This system provides the Board of Directors with additional
oversight capabilities. The implementation of these systems
follows the framework outlined in the Guidance Note on
Audit of Internal Financial Controls in Financial Reporting,
issued by The Institute of Chartered Accountants of India, to
address KNPL’s operational and financial risks. Moreover,
our systems undergo testing by statutory auditors using
automated technigues.

Control Efficiency Index
and Robust Control Index

The CEI and RCI remain integral to the Company''s strategy for
assessing internal audit effectiveness. We measure our control
mechanisms against industry benchmarks to maintain efficient
operations. Our internal audit programme focuses on identifying
gaps in control and policy design, control and process deviations,
IT systems, and regulatory compliance. Additionally our internal
audit programme evaluates opportunities to automate control
processes, and we leverage audit findings to enhance the
Company''s internal controls.

Compliances

KNPL has developed a dashboard to monitor key legislative
changes notified by various government authorities, which
are then tracked by the Management for requirements and
implementation. The Company tracks and ensures regulatory
compliance online through the Legatrix system. The system
is updated regularly to reflect all compliance changes as they
occur. The online tracking and tracing of completion help ensure
strict adherence to regulations. In addition, the Company tracks
any legal cases through the Roznama System.

Cautionary Statement

Statements in the Management Discussion and Analysis section
of this report describing the Company''s objectives, estimates,
and expectations may be ‘forward-looking statements'' within
the meaning of the applicable laws and regulations. The actual
results might differ materially from those either expressed or
implied.

Awards and
Recognition

Sustainability -

Carbon Disclosure Project (CDP)

Rated ‘B'' in both Climate Change and Water Security in the CDP 2025 Cycle

Dow Jones Sustainability Index (DJSI)

Ranked within the top 12 percentile in the Chemical Industry Group in the
S&P Global Large-Midcap ESG Index 2025

EcoVadis

Awarded the Bronze Medal in the EcoVadis Assessment 2026, ranking among the top
18% of companies assessed

Confederation of Indian Industry (CII)

The Sayakha Plant team received the Gold Award at the CII National Excellence
Practice Competition for presenting the Fresh Water Reduction Green Initiative

Tamil Nadu Climate Change Mission

The Hosur Plant received the Corporate Biodiversity Award for contribution towards
biodiversity conservation under the ‘Biodiversity Inside the Campus'' category

Customers -

Toyota Kirloskar Motors Private Limited

Awarded the Best Raw Material Supplier Award by Toyota Kirloskar Motors Private Limited for
FY 2025-26

Honda Motorcycle and Scooter India

Received the Excellence Award in the Paint Category from Honda Motorcycle and Scooter India

TAFE

Awarded the Best Supplier Award by TAFE in recognition of outstanding delivery performance

Wheels India Limited

The Hosur Plant team received the Gold Award at the 11^th Supplier Kaizen Competition
hosted by Wheels India Limited

CIE

Recognised by CIE Automotive India Ltd. at the 4^th CIE India Suppliers Conference for excellence in ESG initiatives

Manufacturing -

India Manufacturing Excellence Award (IMEA)

The Jainpur Plant received the Platinum Award for Future Ready Factory of the
Year at the Frost & Sullivan India Manufacturing Excellence Awards (IMEA) 2025

Confederation of Indian Industry (CII)

The Hosur Plant received the Gold Award for ‘Best Organisation in Overall EHS Practices'' at the 7^th CII National
EHS Competition 2026

The Bawal Plant received the Gold Award at the 21^st CII National 3M Competition for its case study on Muda
Elimination

The Sayakha Plant received the Platinum Award at the 3^rd National 5S Competition organised by CII

The Sayakha Plant received the Gold Award in the Renewable Energy and Energy Saving category at the CII
National Excellence Competition

The Sayakha Plant received the Gold Award at the 8^th CII IQ National Safety Practice Competition
The Lote Plant received the Gold Award at the National Maintenance Circle Competition organised by CII

Quality Circle Forum of India (QCFI)

The Bawal Plant received two Gold Awards in the Kaizen category for Quality Improvement and Productivity
Improvement projects from the Quality Circle Forum of India, Delhi Chapter

The Hosur Plant received the Gold Award in the Alied Concepts category at the 10^th Chapter Convention on
Quality Concepts (CCQC)

The Sayakha Plant received the Gold Award at the 13^th Annual Convention for Quality Concepts for its case study
on Productivity and Skill Enhancement

Earned 26 Awards across multiple prestigious platforms for the ‘Dukaan it Yourself
campaign executed during the Mahakumbh

Goafest

Received 12 awards at Goafest, comprising 1 Grand Prix, 3 Gold, 2 Silver and 6 Bronze awards

Kyoorius Creative Awards 2025

Received 7 Baby Blue Elephant awards

Dragons of Asia

Received 6 awards at the Dragons of Asia Marketing Awards, including the Gold Dragon for Business-to-business
Marketing, the Silver Dragon for Market Discipline and 4 Black Dragon awards

2. Directors’ Responsibility Statement

As stipulated under the provisions contained in
Section 134(3)(c) read with Section 134(5) of the
Companies Act, 2013 (“the Act”), the Board of Directors to
the best of its knowledge and belief and according to the
information and explanations obtained by it, hereby state that:

i. in the preparation of the annual accounts, the
applicable accounting standards have been followed
and there are no material departures;

ii. t he directors have selected such accounting policies
and applied them consistently and made judgments
and estimates that are reasonable and prudent so as
to give a true and fair view of the state of affairs of the
Company at the end of the financial year and of the
profit of the Company for that period;

iii. the directors have taken proper and sufficient care
for the maintenance of adequate accounting records
in accordance with the provisions of the Act, for
safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;

iv. t he directors have prepared the annual accounts of
the Company on a going concern basis;

v. the directors have laid down internal financial controls
to be followed by the Company and that such internal
financial controls are adequate and are operating
effectively; and

vi. the directors have devised proper systems to ensure
compliance with the provisions of all applicable laws
and that such systems are adequate and operating
effectively.

3. New Projects

During the financial year ended 31st March, 2026:

1. the Company has completed the Brownfield
manufacturing project at Jainpur Plant and the
production of Water Based Paint has commenced;

2. the captive offsite Solar power plant project for Lote
Plant has been completed;

3. a second Captive Wind Turbine in Gujarat, for
Sayakha Plant has been completed;

4. the capacity enhancement of industrial Alkyd and
Polyester Resin at Sayakha Plant and of Acrylic Resin
at Bawal Plant, to meet the increased automotive
paint demand, are progressing well;

5. the automotive paint capacity addition project at Sayakha
Plant, to meet the future demand of Original Equipment
Manufacturers (OEMs), is progressing well; and

6. the offsite Solar power plant project for Bawal Plant, to
optimise the power cost, is progressing well.

4. Directors

In terms of the provisions of the Act and the Articles of
Association of the Company, Mr. Takashi Tomioka (holding
Director Identification Number 08736654), Non-Executive
Director, is liable to retire by rotation at the ensuing AGM
of the Company and being eligible, offers himself for
re-appointment.

Mr. Pravin D. Chaudhari (holding Director Identification
Number 02171823) has been appointed as the
Managing Director of the Company for a term of 3 (three)
years commencing from 1st April, 2025 up to and ending on
31st March, 2028 (both days inclusive). The approval of the
Shareholders of the Company and the Central Government
for the appointment of Mr. Chaudhari as the Managing
Director of the Company have been received.

Mr. Gen Yokota (holding Director Identification Number
11084786) had been appointed as a Non-Executive
Director of the Company with effect from 6th May, 2025. The
Shareholders approved his appointment at the 105th AGM
of the Company held on 30th June, 2025.

Mr. Hitoshi Nishibayashi (holding Director Identification
Number 03169150), Non-Executive Director, liable to retire
by rotation at the 105th Annual General Meeting (“AGM”)
of the Company did not seek re-appointment due to health
reasons. He retired as a Non-Executive Director of the
Company on 30th June, 2025. The Board placed on record its
sincere appreciation and gratitude for the services rendered
by Mr. Nishibayashi during his association with the Company.
Mr. Hirokazu Kotera (holding Director Identification Number
10707431) has resigned as the Executive Director of the
Company, on the directions of the Promoter Company,
Kansai Paint Co., Ltd., Japan (“KPJ”), which had nominated
Mr. Kotera as a Director on the Board of the Company.
The Board placed on record its sincere appreciation and
gratitude for the services rendered by Mr. Kotera during his
association with the Company.

For the period from 1st April, 2025 to 31st March, 2026,
Mr. Chaudhari and Mr. Kotera received a remuneration of
? 96.50 Lakhs and ? 92.18 Lakhs respectively, from KPJ for
their association with KPJ.

None of the Directors of the Company are disqualified as on
31st March, 2026 from being appointed as a Director under
Section 164 of the Act.

All the Independent Directors on the Board have given
a declaration of their independence to the Company
as required under Section 149(6) of the Act and
Regulation 16(1)(b) of the Securities and Exchange Board
of India (Listing Obligations and Disclosure Requirements)
Regulations, 2015 (“SEBI Listing Regulations”). In the
opinion of the Board, all the Independent Directors possess
integrity, relevant expertise and experience including
proficiency required to be an Independent Director of the
Company. They fulfill the conditions of independence as
specified in the Act and SEBI Listing Regulations, comply with
the Code for Independent Directors as prescribed in Schedule
IV of the Act and are independent of the Management.

The Company has a Code of Conduct for Directors and
Senior Management. All the Directors and members of Senior
Management have confirmed compliance with the Code.
Details with respect to the composition of the Board,
the meetings of the Board held during the year and the
attendance of the Directors thereat have been provided
separately in the Annual Report, as a part of the Report on
Corporate Governance.

5. Key Managerial Personnel

Mr. P. D. Pai, Chief Financial Officer, retired from the
services of the Company with effect from the close of
business on 31st July, 2025. The Board placed on record
its sincere appreciation and gratitude for the valuable
contribution made by Mr. Pai, during his association with
the Company.

The Board of Directors of the Company, on recommendation
of the Audit Committee and Nomination and Remuneration
Committee, has appointed Mr. Yash Ahuja as the
Chief Financial Officer of the Company with effect from
1st August, 2025.

In terms of Section 203 of the Act, the Company has the
following Key Managerial Personnel: Mr. Pravin D. Chaudhari,
Managing Director, Mr. Yash Ahuja, Chief Financial Officer
and Mr. G. T Govindarajan, Company Secretary.

6. Meetings of the Board

The Board met 10 (ten) times during the financial year
ended 31st March, 2026. The meeting details are provided
separately in the Annual Report, as a part of the Report on
Corporate Governance. The maximum time gap between
any two meetings did not exceed 120 days, as prescribed in
the Act and SEBI Listing Regulations.

7. Board Evaluation

In terms of the applicable provisions of the Act and
SEBI Listing Regulations, the Nomination and Remuneration
Committee and Board of Directors have approved a
framework which lays down a structured approach,
guidelines and processes to be adopted for carrying out
evaluation of the performance of the Directors, the Board as
a whole and its Committees. The criteria are broadly based
on the Guidance Note on Board Evaluation, issued by the
Securities and Exchange Board of India.

Detailed questionnaires covering various parameters
relevant for the evaluation are circulated to the Directors.
The feedback received from the Directors is discussed at
the meetings of Independent Directors, Nomination and
Remuneration Committee and Board.

For the year under review, the Board carried out the
evaluation of its own performance, its Committees and
individual Directors. Evaluation results as collated and
presented, were noted by the Independent Directors,
Nomination and Remuneration Committee and Board.

8. 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 the Committees, as required under the
SEBI Listing Regulations, is separately provided in the Annual
Report, as part of the Report on Corporate Governance.

9. Audit Committee

In terms of the provisions of Regulation 18 of the
SEBI Listing Regulations read with Section 177 of the Act,
the constitution of Audit Committee as on 31st March, 2026
is as follows:

Name of the Member	Designation
Mr. Uday S. Bhansali (Chairman of the Audit Committee)	Independent Director
Ms. Sonia Singh	Independent Director
Mr. Bhaskar Bhat	Chairman and Independent Director

The recommendations made by the Audit Committee to the
Board, from time to time during the year under review, have
been accepted by the Board. Other details with respect to
the Audit Committee such as its terms of reference, meetings
and attendance thereat are separately provided in the Annual
Report, as a part of the Report on Corporate Governance.

10. Corporate Social Responsibility

In terms of Section 135 of the Act, the constitution of the
Corporate Social Responsibility (“CSR”) Committee as on
31st March, 2026 is as follows:

Name of the Member	Designation
Ms. Sonia Singh (Chairperson of the CSR Committee)	Independent Director
Mr. Bhaskar Bhat	Chairman and Independent Director
Mr. Pravin D. Chaudhari*	Managing Director

* Mr. Pravin D. Chaudhari has been appointed as a member of the
CSR Committee with effect from 1st April, 2025.

The functions of the CSR Committee are to:

(a) formulate and recommend to the Board, a CSR 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.

During the financial year ended 31st March 2026, 2 (two)
meetings of CSR Committee were held on
25th November, 2025 and 26th March, 2026 which were
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 athttps://www.nerolac.com/
investors/policies.html.

The Company had appointed Soulace Consulting Pvt.
Ltd. to undertake impact assessment for its CSR program
- Advanced Open Training for Painters. The CSR Impact
Assessment Report is available on the Company''s website
at https://www.nerolac.com/investors/financial-results.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 and executive summary of CSR Impact
Assessment Report, is annexed to this Report as Annexure 1.

11. Risk Management Policy

The Company has identified the risk areas in its operations
along with its probability and severity, department wise.
An effective Risk Management Framework is put in place
in the Company in order to analyse, control and mitigate
risk. Risk profiling is also put in place for all the areas of
operations in the Company and are well integrated in the
business cycle. The various risks to which the Company is
exposed are disclosed as a part of Management Discussion
and Analysis, hereinabove.

The Risk Management Framework of the Company comprises
of Risk Management Committee and the Risk Officer.

In terms of the provisions of Regulation 21 of the SEBI
Listing Regulations, the constitution of Risk Management
Committee as on 31st March, 2026 is as follows:

Name of the Member	Designation
Ms. Sonia Singh (Chairperson of the Risk Management Committee)	Independent Director
Mr. Hirokazu Kotera*	Executive Director
Mr. Uday S. Bhansali	Independent Director
Mr. Pravin D. Chaudhari®	Managing Director
Mr. Jason Gonsalves	Non-board member on the Committee
Mr. Yash Ahuja#	Chief Risk Officer and Non-board member on the Committee

* Mr. Hirokazu Kotera ceased to be a member of the Risk
Management Committee consequent to his resignation from the
services of the Company with effect from the close of business on
31st March, 2026.

@ Mr. Pravin D. Chaudhari has been appointed as a Member of
the Risk Management Committee with effect from 1st April, 2025.

# Mr. Yash Ahuja has been appointed as a member and Chief
Risk Officer of the Risk Management Committee with effect from
1st August, 2025.

Mr. P D. Pai ceased to be a member and Chief Risk Officer
of the Risk Management Committee consequent to his
retirement at the close of business on 31st July, 2025.

12. Remuneration Policy

The Board of Directors has adopted a policy which deals with

(i) criteria for determining qualifications, positive attributes

and independence of Director and (ii) remuneration for

Directors, Key Managerial Personnel and other employees

(“Remuneration Policy”).

The features of the Remuneration Policy are as follows:

• The Company, while constituting the Board shall
draw members with appropriate skills, experience
and knowledge from diverse fields such as finance,
law, management, sales, marketing, architecture,
administration, research, corporate governance,
operations or other disciplines related to the Company''s
business. There shall be no discrimination on the
basis of gender, race, ethnicity and nationality while
determining the board composition.

• A Director shall be a person of integrity, who possesses
relevant expertise and experience. He shall uphold ethical
standards of integrity and probity and act objectively
and constructively. He shall exercise his responsibilities
in a bona-fide manner in the interest of the Company;
devote sufficient time and attention to his professional
obligations for informed and balanced decision making;
and assist the Company in implementing the best
corporate governance practices.

• An Independent Director should meet the requirements
of the Act and SEBI Listing Regulations, concerning
independence of directors. The Company shall
also obtain certification of independence from the
Independent Director in accordance with the Act and
SEBI Listing Regulations.

• The remuneration paid to Whole-time Directors is
subject to the limits laid down under Section 197 and
Schedule V to the Act and in accordance with the
terms of appointment approved by the Shareholders
of the Company. The remuneration of the Whole-time
Directors is determined by the Nomination and
Remuneration Committee based on factors such as the
Company''s performance and performance/track record
of the Whole-time Directors. The remuneration consists
of Salary, Commission, Company''s contribution to
Provident Fund and Superannuation Fund, House Rent
Allowance (HRA), Leave Travel Allowance (LTA) and
other perquisites and allowances in accordance with
the rules of the Company, applicable from time to time.

• The Non-Executive Independent Directors are paid
commission within the ceiling of 1% of net profits of the
Company as specified in Section 197 of the Act. The
commission payable to Non-Executive Independent
Directors is decided by the Board, on recommendation
of the Nomination and Remuneration Committee, based
on a number of factors including number of Board and
Committee meetings attended, individual contribution
thereat etc. The Non-Executive Independent Directors

are also paid sitting fees for attending the meetings of the
Board or Committee thereof within the limits prescribed
under the Act.

• The objective of the policy is to have a compensation
framework that will reward and retain talent.

• The remuneration will be such as to ensure that the
correlation of remuneration to performance is clear and
meets appropriate performance benchmarks.

• Remuneration to Key Managerial Personnel, Senior
Management and other employees will involve a balance
between fixed and variable pay reflecting short and long
term performance objectives of the employees in line
with the working of the Company and its goals.

• The short and long term performance objectives
cover amongst various aspects industry performance,
customer performance, overall economic environment,
financial performance and performance on Environment,
Social and Governance objectives.

• For Directors, the Performance Pay will be linked
to achievement of Business Plan (achievement of
short-term and long-term business objective).

• For Heads of Department, the Performance Pay will be
linked to achievement of functional plan which is derived
from the business plan. The functional plan includes
both, short-term and long-term objectives.

• For other management personnel, the Performance Pay
will be linked to achievement of individual set objectives
and part of this will also be linked to overall Company
performance.

The Remuneration Policy is also available on the website of the
Company athttps://www.nerolac.com/investors/policies.html.

13. Vigil Mechanism - Whistle Blower Policy

The Company, pursuant to Section 177(9) of the Act and
Regulation 22 of the SEBI Listing Regulations, has a
Whistle Blower Policy to report genuine concerns and
grievances. The Policy provides adequate safeguards
against victimisation of persons who use the whistle blower
mechanism. The Policy also provides for direct access to
the Chairman of the Audit Committee.

Details with respect to implementation of vigil mechanism
are separately disclosed in the Annual Report, as a part of
the Report on Corporate Governance. The Whistle Blower
Policy is also available on the website of the Company at
https://www.nerolac.com/investors/policies.html.

14. 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 athttps://www.nerolac.com/investors/policies.html.
The declaration of dividend by the Company is in compliance
with its Dividend Distribution Policy.

15. 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 to all employees and
non-employees including 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, two complaints of sexual
harassment were received and resolved as per the provisions
of the POSH Act. There was no case which was pending for
more than 90 (ninety) days.

16. Related Party Transactions

The Company has in place a Policy on dealing with
Related Party Transactions and on Materiality of Related
Party Transactions which is available on the website
of the Company athttps://www.nerolac.com/investors/
policies.html. The Audit Committee reviews this Policy
periodically as required under Regulation 23 of the SEBI
Listing Regulations. In terms of the Policy, a statement in
summary form of transactions with related parties in the
ordinary course of business and on arm''s length basis is
also periodically placed before the Audit Committee for its
review. Omnibus approval was obtained for the proposed
related party transactions which were repetitive in nature.
Transactions entered into pursuant to omnibus approval
were placed before the Audit Committee for its review
during the year.

Related party transactions entered during financial year
2025-26 have been disclosed in Note no. 39 to the Standalone
Financial Statements.

In terms of the provisions of Section 188(1) of the
Act read with the Companies (Meetings of Board and
its Powers) Rules, 2014 and Regulation 23 of the
SEBI Listing Regulations, all related party transactions that
were entered into, during the year under review, were in
the ordinary course of business of the Company and on
arm''s length basis.

There were no material related party transactions during
the financial year 2025-26. Accordingly, Form AOC-2,
prescribed under the provisions of Section 134(3)(h) of the
Act and Rule 8 of the Companies (Accounts) Rules, 2014,
for disclosure of details of related party transactions, which
are “not at arm''s length basis” and also which are “material
and at arm''s length basis”, is not provided as an annexure
to this Report as it is not applicable.

17. Particulars of Loans, Guarantees or
Investments under Section 186 of the Act

Details of Loans, Guarantees and Investments covered
under the provisions of Section 186 of the Act, are separately
disclosed in the Annual Report, as a part of the Notes to the
Financial Statements.

18. Particulars 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.

19. 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.

20. Corporate Governance

The Company is in full compliance with the requirements
and disclosures that have to be made in terms of the
requirements of Corporate Governance specified in the
SEBI Listing Regulations.

In terms of the provisions of Schedule V(C) of the
SEBI Listing Regulations, a detailed Report on Corporate
Governance forms part of the Annual Report. Further, a
Certificate from the Statutory Auditors of the Company
confirming compliance with the requirements of
Corporate Governance as specified in the SEBI Listing
Regulations is provided together with the Report on
Corporate Governance, the same shall be considered to be
an annexure to this Report.

21. 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.

22. Share Capital

The paid-up Equity Share Capital as at 31st March, 2026
stood at ? 80.87 Crores.

During the year under review, the Company allotted
2,13,393 Equity Shares of ? 1 each pursuant to exercise
of Restricted Stock Units granted under the Kansai Nerolac
Paints Limited - Restricted Stock Unit Plan, 2022.

During the year under review, the Company has not issued
any convertible securities or shares with differential voting
rights or sweat equity shares or warrants.

23. Restricted Stock Unit Plan

The Company introduced the Kansai Nerolac Paints Limited
- Restricted Stock Unit Plan 2022 (“RSU Plan 2022”) in terms
of the approval of the Shareholders vide Postal Ballot on
25th October, 2022, to attract, retain, motivate its employees
and improve performance of the Company for ensuring
sustained growth.

During the financial year 2025-26, there has been no
change in the RSU Plan 2022. The RSU Plan 2022 is
available on the Company''s website athttps://www.nerolac.
com/investors/restricted-stock-units.html.

Information as required under the Securities and Exchange
Board of India (Share Based Employee Benefits and Sweat
Equity) Regulations, 2021 (“SEBI SBEB & SE Regulations”)
2021 has 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.

The certificate from the Secretarial Auditor, certifying that
the RSU Plan 2022 has been implemented in accordance
with SEBI SBEB & SE Regulations and in accordance
with the Special Resolution passed by the Members of
the Company through Postal Ballot on 25th October, 2022
and 15th June, 2023 will be available for inspection of the
Shareholders through electronic mode. Shareholders may
write to the Company at[email protected] in that regard,
by mentioning “Request for Inspection” in the subject of
the e-mail.

24. 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.

25. Investor Education and Protection Fund
(“IEPF”)

Transfer of Unclaimed Dividend to IEPF

During the year under review, dividend amounting to
? 31.93 Lakhs that had not been claimed by the Shareholders
for the year ended 31st March, 2018, was transferred to the
credit of IEPF as required under Sections 124 and 125 of the Act.

Unclaimed dividend as on 31st March, 2026

The IEPF Authority had requested companies to carry
out a special outreach campaign “Saksham Niveshak”
from 28th July, 2025 to 6th November, 2025 and from
1st April, 2026 to 9th July, 2026, to reach out to shareholders
whose dividend remain unpaid/unclaimed. The Company
encourages its Shareholders to claim their unclaimed
dividends by updating their KYC details (viz., PAN, Bank
account details, contact details, choice of nomination,
specimen signature).

As on 31st March, 2026, dividend amounting to f 2.41 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.
MUFG Intime India 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, 2025, on the website of the
Company athttps://www.nerolac.com/financial/shareholders.html.

Transfer of Equity Shares

As required under Section 124 of the Act, 65,365 Equity
Shares, in respect of which dividend has not been claimed
by the Shareholders for 7 (seven) consecutive years or
more, have been transferred by the Company to the IEPF
Authority during the financial year 2025-26.

Details of such Equity Shares due for transfer to IEPF Authority, in
financial year 2026-27 have been uploaded on the website
of the Company athttps://www.nerolac.com/financial/
shareholders.html.

Nodal Officer

Mr. G. T Govindarajan, Company Secretary, is 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.

26. Statutory Auditors

At the 104th AGM of the Company, the Shareholders
had approved the re-appointment of S R B C & CO LLP,
Chartered Accountants (Firm Registration No. 324982E /
E300003) as the Statutory Auditors of the Company, to hold
office for a second term of 5 (five) consecutive years from
the conclusion of the 104th AGM until the conclusion of
the 109th AGM of the Company, in terms of the applicable
provisions of Section 139(1) of the Act read with the
Companies (Audit and Auditors) Rules, 2014. Details of
the remuneration paid to S R B C & CO LLP, Chartered
Accountants, Statutory Auditors, during the financial year
2025-26 are disclosed in the Financial Statements of
Company, which forms part of the Annual Report.

The Auditors'' Report on the Financial Statements
(Standalone and Consolidated) of the Company
for the year under review, is clean and there are no
qualifications in the said Report. Also, no frauds in terms
of the provisions of Section 143(12) of the Act have
been reported by the Auditors in their Report for the year
under review.

The Notes to the Financial Statements (Standalone and
Consolidated) are self-explanatory and do not call for any
further comments.

27. Secretarial Auditors

In terms of Regulation 24A of the SEBI Listing Regulations,
the Shareholders at the 105th AGM of the Company, had
appointed JHR & Associates, Company Secretaries,
(Firm registration no. P2015MH059200) as the Secretarial
Auditor of the Company for a term of 5 (five) consecutive
years commencing from 1st April, 2025 to 31st March, 2030,
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.

The Secretarial Auditors have confirmed that they have
subjected themselves to the peer review process of Institute
of Company Secretaries of India (ICSI) and hold valid
certificate issued by the Peer Review Board of the ICSI.
Further, JHR & Associates have confirmed that they are not
disqualified from being Secretarial Auditor of the Company.

28. 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 2024-25, pertaining to products of the
Company as required by the law. The Cost Audit Report
submitted by the Cost Auditor for the financial year 2024-25
was clean and there was no qualification in their Report. The
same was duly filed with Ministry of Corporate Affairs.

The Company had re-appointed D.C. Dave & Co.,
Cost Accountants, as the Cost Auditor for the financial
year 2025-26 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 2026-27,
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 f 4,00,000 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 106th AGM.

The eligibility and consent letter 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.

29. General Disclosure

During the year under review:

1. the Company has complied with the applicable
Secretarial Standards issued by the Institute of
Company Secretaries of India;

2. t here was no application made or proceeding pending
under the Insolvency and Bankruptcy Code, 2016;

3. there were no instances of onetime settlement with any
Banks or Financial Institutions; and

4. the Company has complied with the provisions relating to
the Maternity Benefits Act, 1961.

30. General Shareholder Information

General Shareholder Information is given as Item no. 12 of
the Report on Corporate Governance forming part of the
Annual Report.

31. Annual Return

Pursuant to Section 92(3) read with Section 134(3)(a) of the
Act, the Annual Return as on 31st March, 2026 is available
on the website of the Company athttps://www.nerolac.com/
investors/annual-return.html.

32. Acknowledgements

Your Directors wish to express their grateful appreciation
for the co-operation and continued support received from
customers, promoter 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.

For and on behalf of the Board
Bhaskar Bhat

Mumbai, 6th May, 2026 Chairman

---

Mar 31, 2025

The Directors of your Company are pleased to present the 105^th Annual Report and the Audited Financial Statements (Standalone and Consolidated) for the year ended 31^st March, 2025 (‘year under review/FY 2024-25''). The section on Management Discussion and Analysis includes a review of the financial performance of the Company: Financial Highlights of the Company''s 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

INTRODUCTION

Kansai Nerolac Paints Limited (referred to as ''KNPL,'' ''the Company,'' or ''We''), established in 1920, is a subsidiary of Kansai Paint Co., Ltd., Japan. In addition to our primary operations in India, we have established a presence in Nepal, Sri Lanka, and Bangladesh through a combination of strategic acquisitions and joint ventures. As one of the largest manufacturers of paints and coatings in India, we have established a strong leadership position in the decorative and industrial coatings sector. The Company continues to lead the automotive and powder coating segments and commands a significant market share in performance coatings backed by deep technical expertise and longstanding industry partnerships. In the decorative segment, we are recognised as the third-largest paint manufacturer in India. Our strong market position is driven by sustained investments in intellectual and human capital, complemented by access to advanced global technologies. This enables us to deliver differentiated, environmentally responsible, and innovation-led solutions, tailored to the evolving needs of Indian consumers.

As a trusted name in the industry, KNPL is committed to designing solutions that protect, inspire, and touch lives every day Our painting solutions provide ''Beauty and Protection'' to a wide array of applications, including decorative paints (interior and exterior, wood coating, construction chemicals, tile adhesives), automotive coatings (for 2,3, and 4-wheelers, electric vehicles, commercial vehicles, and tractors), emerging segments (underbody coatings, alloy wheels, and seam sealers), consumer durables (fans, microwaves, refrigerators,

washing machines), personal items (hair clips, artificial jewellery), and transportation infrastructure (bridges, metro rail). This commitment is encapsulated in our belief that ''There is a little bit of Nerolac in everybody''s life.''

At KNPL, we remain firmly committed to our purpose of transforming spaces and enriching lives by offering high-quality paints that enhance everyday environments and make a positive contribution to the world around us. Guided by innovation and a relentless pursuit of excellence, we strive to deliver solutions that not only inspire and protect but also leave a meaningful, lasting impact on our stakeholders and the communities we serve.

As we look ahead to FY 2025-26, we remain firmly focussed on building upon the momentum of recent years to further reinforce our market position. This continued drive is rooted in our long-standing commitment to innovation and customer-centricity: principles that have consistently defined our journey and underpinned our success over the decades. This year, the competitive landscape has undergone a marked shift, presenting us with both new challenges and emerging opportunities. Throughout this period of change, we have remained focussed on meeting evolving customer expectations. This continued emphasis has enabled us to launch products that directly address consumer needs, enhance engagement through better service delivery and reinforce our position in the market

Industry Progress

InFY 2024-25, the Indian paints industry demonstrated resilience in the face of subdued demand and intensifying competitive pressures. Rural demand remained muted for much of the year, with signs of recovery emerging towards Q3. The entry of new players into the market further intensified competition, prompting more aggressive pricing strategies. Additionally, an extended monsoon season impacted demand during the second quarter, affecting both retail and project sales.

The automotive coatings segment recorded healthy growth, driven largely by the launch of new passenger vehicle models. Meanwhile, industrial coatings experienced stable demand, supported by ongoing infrastructure development and government-led stimulus measures. Demand in the performance coatings segment was primarily driven by strong growth in

high-performance protective coatings, particularly within the oil and gas sector. Powder coatings saw subdued demand while general industrial paints registered healthy traction, especially in applications related to pre-engineered buildings and other industrial products.

The industry''s focus on premiumisation has continued to strengthen, supported by increased investments in innovation and responsiveness to evolving consumer preferences. This strategic shift highlights the sector''s adaptability and sustained commitment to long-term growth.

FINANCIALS

FINANCIAL HIGHLIGHTS

? ''

A summary of KNPL''s standalone financial results for the year ended 31^st March, 2025

(FY 2024-25) compared to the standalone financial results for the previous year, FY 2023-24, is as follows:

? in Crores
Partculars	FY 2024-25	FY 2023-24
Revenue from Operations	7,496.71	7,393.30
Profit before Depreciation, Interest Exceptional Item, and Tax (PBDIT)	974.13	1,022.88
Less: Depreciation and Amortisation	193.68	179.96
Profit Before Interest, Exceptional Item, and Tax (Operating Profit)	780.45	842.92
Less: Interest	15.09	12.46
Add: Other Income	142.06	93.11
Profit Before Exceptonal Item and Tax	907.42	923.57
Add: Exceptional Item	479.19	642.25
Profit Before Tax (PBT)	1,386.61	1,565.82
Less: Tax Expenses	365.37	382.95
Profit after Tax	1,021.24	1,182.87
Other Comprehensive Income	(3.46)	(3.77)
Total Comprehensive Income for the Year	1,017.78	1,179.10

Revenue from operations for the year aggregated to '' 7,496.71 Crores as compared to '' 7,393.30 Crores for the previous year, reflecting a growth of 1.4%.

While average crude oil prices declined compared to the previous year, the impact was partially offset by currency depreciation during the same period. As a result overall raw material prices remained largely stable throughout the year. We continued our efforts to control overheads, wth all departments working on their tasks and achieving positive results.

PBDIT for the year stood at '' 974.13 Crores, registering a decline from '' 1,022.88 Crores in the previous year, reflecting a degrowth of 4.8%. On the other hand, other income rose to '' 142.06 Crores, a notable increase from '' 93.11 Crores recorded in the previous year. During the year, the Company sold its factory land and building at Lower Parel, Mumbai and a gain of '' 665.4 Crores was accounted. Due to the continued losses incurred by our subsidiaries in Sri Lanka and Bangladesh, the Company has recognised an impairment loss of '' 186.25 Crores in the year. The net amount of '' 479.19 Crores is shown as an exceptional item.

PBT for the year stood at '' 907.42 Crores, marginally lower than '' 923.57 Crores (before exceptional items) in the previous year, reflecting a degrowth of 1.7%. PAT declined to '' 1,021.24 Crores from '' 1,182.87 Crores in the previous year, marking a degrowth of 13.7%.

Return on net worth (excluding exceptional items) for the year is 11.3% as compared to 13.4%.

During the year, KNPL did not accept any deposits covered under Chapter V of the Companies Act, 2013. There are no significant or material orders passed by any regulators, courts, or tribunals against us that could impact our going concern status or our operations in the future.

There has been no change in the nature of our business during the year. Additionally, there have been no material changes or commitments affecting our financial position that occurred between the end of the financial year to which the financial statements relate and the date of this report

DIVIDEND

? *

The Board has recommended dividend of 375% ('' 3.75 per share) including special dividend of 125% ('' 1.25 per share) for the financial year ended 31^st March, 2025. This compared with a final dividend of 375% ('' 3.75 per share) including special dividend of 125% ('' 1.25 per share) declared last year.

Key Ratios	FY 2024-25	FY 2023-24	Difference	% Change
Debtors Turnover (No. of Days)	47	46	1.4	3.1%
Inventory Turnover (No. of Days)	121	125	3.7	2.9%
I nterest Coverage Ratio	65	82	17.5	21.3%
Current Ratio	4.02	3.48	0.5	15.5%
Debt Equity Ratio	-	-	-	-
Operating Profit Margin (%)	13.0	13.8	0.8	5.9%
Net Profit Margin (%)	13.7	16.1	2.4	15.0%
Return on Equity (%)	1 7.0	23.1	6.1	26.3%

SUBSIDIARIES AND CONSOLIDATED FINANCIAL STATEMENTS

? •

In accordance with the provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI Listing Regulations), the Board has approved a policy for determining material subsidiaries. The policy is available on the website of KNPL at www.nerolac.com. Further, based on this policy we do not have any material subsidiaries.

Overseas Subsidiaries

(Operations in Nepal

During the year, the turnover of KNP Japan Private Limited, our subsidiary in Nepal, rose to '' 69.43 Crores, up from '' 65.92 Crores in the previous year. Profit after tax stood at '' 5.97 Crores, as compared to '' 5.49 Crores in the previous year.

(Operations in Bangladesh^)

Kansai Nerolac Paints (Bangladesh) Limited, our subsidiary in Bangladesh, registered a turnover of '' 143.18 Crores for the year, as compared to '' 202.27 Crores in the previous year. The Company incurred a loss of '' 30.95 Crores during the year, compared to a loss of '' 17.52 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 stood at ''2.03 Crores, compared to '' 34.25 Crores the previous year. The Company incurred a loss of '' 19.89 Crores during the year, as compared to '' 7.21 Crores in the previous year.

SEGMENT-WISE PERFORMANCE ? •

We have 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.

Indian Subsidiary

Nerofix Private Limited^)

The Company''s turnover was recorded at '' 125.33 Crores, compared to '' 132.8 Crores the previous year. The Company recorded a loss of '' 15.26 Crores, compared to '' 2.74 Crores in the previous year. Strategic initiatives have also been taken to revamp the business.

The consolidated financial statements of KNPL, as of 31^st March, 2025, are prepared in accordance with applicable accounting standards and form a part of this report. All subsidiaries of the Company as of 31 ^st March, 2025, have been considered in the preparation of consolidated financial statements. Additionally a separate statement in Form AOC-1, highlighting the key features of the financial statements of the Company''s subsidiaries, is included in this report Furthermore, the Annual Audited Financial Statements of all KNPL subsidiaries are available on the Company''s website at www.nerolac.com.

PAINT AND NEW PRODUCT LAUNCHES

? •

Value Creation at Every Step

In the reporting year, we remained firmly committed to our strategic growth agenda and strengthening our position as a market leader. Under the Paint category, we continued to emphasise unique product offerings that enhance our market presence. We also introduced the Wow Whites range (Whitest of White), across both interior and exterior emulsions that provides best-in-class whiteness along with 15% more coverage.

As part of our efforts to strengthen the exterior product portfolio, we launched Excel No Dust an acrylic emulsion paint designed to deliver superior performance. We further expanded this range wth the introduction of Nerolac Excel Mica Marble Stretch and Sheen NXT, a highly durable, water-based, high-performance exterior paint. Additional launches in this category included Neu Latex Exterior White and Nerolac Suraksha Primer, broadening our offerings to meet varied customer needs.

In the Interior Range, we launched the Nerolac Beauty Gold Washable NXT and Impressions Sheen Emulsion, which provides a radiant sheen and smooth finish. The other new products in the interior range are Kansai Select Shikisai and Neu Latex Interior White.

These product introductions not only strengthen our portfolio but also reaffirm our commitment to delivering high-quality differentiated solutions that align with evolving customer expectations.

Consumer

Services-1

The NxtGen Painting Service Programme continued to offer a seamless, digitally enabled experience through its streamlined, end-to-end processes designed for ease and efficiency This year, we continued to uphold our commitment to delivering exceptional value by connecting homeowners with trained professionals and offering affordable solutions that significantly enhance customer satisfaction.

Our strong growth and adaptability are reflected in the continued expansion of our painting services, now spanning over 250 cities across the country and serving over 25,000 customers.

Through the expansion of our Contractor Service across diverse geographies, we have built strong partnerships with trained contractors who serve as trusted contributors within their local communities. This approach not only enables us to provide our customers with cost-effective painting solutions but also fosters a sense of trust and reliability

Superior Retail

Experience-1

We have enhanced customer experience through our NxtGen Premium Shoppe concepts customised to meet retailer requirements. These platforms provide a solution based comprehensive approach to home renovation including repair, waterproofing and painting. A based colour recommendations, an industry first, basis existing furnishings and furniture is the unique feature across all our format.

As of FY 2024-25, we have increased our Nerolac NxtGen Shoppe outlets to 100 and Shop in Shop outlets to 200 across the country

®Influencer Engagement Programme

Pragati Programme for Painters

Our Painter Loyalty Programme, Pragati, is a key element of our strategy to drive engagement and derive higher share of wallet from the painting contractor segment. Our focus is on capability building and skill development in this set of key influencers that impact the final delivery of the finished product We trained over 80,000 painters in paint application through classroom and hands-on sessions, further enhancing their skills and expertise. This year, through our existing programmes of Shop Meets and Expos we upskilled our existing loyalists as well as built awareness of the KNPL range of products and services across key markets. The entire engagement for this category is driven by our digital app called ‘Pragati'', which established the foundation for our Painter Training Academies. Additionally, we utlised artificial intelligence to gain insights into painters'' purchasing behaviours, leading to product recommendations from our side that meet their specific needs. This personalised approach not only improved the painter experience but also boosted sales.

Illuminati Programme for Architects and Interior Designers

At KNPL, we recognise the indispensable role of architects and interior designers in shaping our environment, crafting spaces that were both functional and visually captivating.

Over the past two years, we successfully engaged with 8,000 professionals across the country cultivating trust and loyalty through our Lunch & Learn presentations. To further support their creative process, we provided colour consultancy services and ensured that our shade palettes were seamlessly integrated into their 3D design rendering software.

We also actively participated in leading exhibitions, such as FOAD Delhi and Mumbai, providing a platform to showcase our diverse offerings, engage meaningfully with the design community, and stay attuned to emerging market trends. All these strategic initiatives have enabled us to grow our brand awareness and brand equity among this set of future influencers.

Industrial Business Overview

India is experiencing significant investment in infrastructure development which in turn is driving demand for industrial paints. Simultaneously, as one of the largest automotive markets globally, the country is witnessing rapid growth in the sector, fuelled by rising domestic demand for passenger vehicles and a surge in vehicle exports to international markets.

The powder coating segment experienced steady growth, primarily driven by demand from the white goods and electrical appliances sectors. The liquid coatings market saw significant expansion, fuelled by the increasing adoption of high-performance coatings that cater to specialised industrial applications.

The industrial paints business caters to a large variety of industrial customers like automotive OEMs, auto refinish body shops, general industrial customers and high-performance coatings users such as oil and gas, chemical plants, power plants, and infrastructure companies.

Technological advancements played a crucial role in shaping the industrial paints market, with innovations in application techniques and product formulations. Our state-of-the-art R&D centre has been instrumental in solidifying our leadership position within the industry

As we navigate this vibrant landscape, we remain committed to innovation and excellence, ensuring that we continue to meet the demands of a rapidly evolving industry.

6 Passenger

Vehicles-,

The passenger vehicle segment recorded good growth during the year, driven by rising demand across both urban and rural markets. In line with this growth and evolving consumer needs, we have consistently been introducing new, high-functionality products within this segment.

Furthermore, we remain committed to sustainability by offering solutions that support energy conservation and optimise paint usage, reinforcing our focus on technological innovation and operational efficiency

TwoWheeler -1

The 2-wheeler segment experienced good growth in FY 2024-25. This can be attributed to increased demand for newly launched variants from manufacturers and a heightened consumer focus on EVs, across both urban and rural markets.

The rise in demand for two-wheelers has led to an increased need for paints and coatings. In response, KNPL has introduced a range of innovative solutions in FY 2024-25 to strengthen its competitive position in this dynamic market.

For 2-wheelers, we have prioritised solutions that deliver a superior gloss finish. Our Special PU clear product is engineered to provide an exceptional finish and anti-stain properties.

Overall, we remain dedicated to meeting the evolving needs of the 2-wheeler market through continuous innovation and a focus on quality, reinforcing our position as one of the leaders in the industry.

Commercial Vehicles

and Tractors-1

The commercial vehicles segment experienced subdued demand during the year. In response to specific industry needs, KNPL introduced a high-performance casting sealer for tractors, offering superior corrosion resistance. Engineered to withstand harsh conditions, particularly during puddling operations involving fertilisers, this solution helps prevent paint peeling and enhances long-term durability.

@ Electric

Vehicles (EVs)-,

Amid growing emphasis on environmental sustainability, the EV segment has witnessed significant growth across all categories of mobility. As a market leader in automotive coatings, we have strategically enhanced our presence in this segment, successfully maintaining a strong market share and leadership position in the EV sector.

In the reporting year, we achieved remarkable growth in the electric 2-wheeler segment, accompanied by a similar upward trajectory in the electric 3-wheeler space. By leveraging advanced technologies such as our Super Durable Topcoat and a range of energy-efficient solutions, we remained focussed on effectively addressing the evolving needs of this fast-growing market

Powder

Coating -1

In FY 2024-25, the Company achieved modest growth in the powder coating segment, due to the demand from white goods and electrical appliances. The segment continues to cater to diverse industries, including rebar, pipe coating, alloy wheels, and construction equipment, with a focus on delivering premium solutions. Customers are also transitioning from liquid paints to environmentally friendly (zero VOC) powder coatings.

At KNPL, we also focussed on innovation and premium offerings to meet evolving customer needs, including the introduction of pigmented primer-cum-basecoats to enhance both performance and aesthetics. Additionally, we launched breakthrough product to deliver one-shot matt black finishes wthout the need for a matting agent. Another key innovation was Monocoat metallic coatings for 4W ancillary applications.

Liquid

Coating -1

The liquid coatings segment at KNPL sustained its growth momentum in FY 2024-25, supported by strong performance in high-performance coatings, driven by increased infrastructure activity and rising demand for durable, high-quality solutions.

During this period, we witnessed strong growth in the premium segment driven by demand from oil & gas and heavy engineering segments. We also focussed on enhancing our product range with an emphasis on the premium segment.

Technologically, we remain well-eguipped to navigate the evolving market landscape, ensuring our continued success in delivering cutting-edge solutions to our customers.

Auto

Refinish

In the auto refinish segment, KNPL achieved good growth during FY 2024-25 with the overall momentum being driven by strong growth in premium category.

Responding to evolving customer preferences, the Company observed a notable shift towards sustainable products. We also focussed on providing water-based solutions over traditional solvent-based options, reinforcing our commitment to sustainability.

Additionally, the Company implemented a digital platform for Body Shop Management during the reporting year. This innovative platform is designed to enhance customer experience and engagement, ensuring streamlined operations and superior service delivery in the auto refinish domain. These initiatives underscore our dedication to meeting market demands while fostering sustainable practices and technological advancement.

Research & Development (R&D)

OVERVIEW

? *

In recent years, we have maintained our position as one of the leaders in the coatings industry The Company''s R&D team is dedicated to creating innovative solutions that address the evolving needs of our customers while aligning with our sustainability objectives. During the year, we successfully filed 24 patents related to paint composition and the processes involved in paint preparation.

A notable achievement was the introduction of groundbreaking technologies that meet the stringent requirements of the industry KNPL has excelled in automotive coatings, achieving significant success by implementing technologies that reduce resource consumption and energy usage. We have engineered high-performance products that are entirely free of heavy metals, ensuring both superior functionality and adherence to stringent environmental regulations.

In our performance coatings business, we introduced advanced, application-specific solutions, including a high-performance coating system developed for semi high-speed railway coaches. These innovations reflect our ongoing commitment to addressing critical industry challenges through targeted technological advancement. Our R&D team continues to work closely wth value chain partners, wth a strong focus on value engineering, localisation, and mitigating supply-side risks.

Collaboration with Kansai Paint, Japan, Kansai Paint Group Companies

Over the years, we have maintained our technological leadership in the industrial coatings sector by consistently staying ahead of competition. Our partnership with Kansai Paint Co., Ltd. (KPJ), a prominent global leader wth extensive experience in technology design and development, has been instrumental in this endeavour. Through close collaboration with KPJ, we have successfully developed customised paint and resin formulations specifically tailored to meet the needs of Indian customers.

Among our notable innovations are tin-free cathodic electrodeposition (CED) coatings and stoving primers for 4-wheeler body applications, along wth several other products that excel in both aesthetics and functional performance. KPJ also brings deep insights into emerging global colour trends and extends robust technical support to our clients in India, leveraging its rich international expertise to add significant value across engagements. Furthermore, KNPL also collaborates wth KPJ Group companies worldwide to deliver differentiated technologies to Indian customers across a diverse range of end-user industries, including industrial coatings, coil coatings, auto refinish, and decorative paints.

Key Developments in Decorative Paints

Aligned with our Paint strategy, which focusses on delivering products with distinct, value-added features, our R&D team has made meaningful progress in developing innovative solutions tailored to evolving customer needs. During the year, we further strengthened our portfolio with several strategic product introductions.

We launched Kansai Select Shikisai, inspired by the natural beauty of stones, which offers a sophisticated matte finish embodying elegance and luxury.

Additionally, our Wow White Range features superior whiteness and provides 15% greater coverage. In the wood coating category, we launched Nerolac Wonderwood Gloria NXT, an offering that stands out for its high-gloss finish and superior resistance to scratches and stains. These advancements underscore our commitment to innovation and our responsiveness to the evolving preferences of our customers.

&

Key Developments in Automotive Segment

J

Passenger Vehicles Segment

m

The Company has made significant strides in the passenger vehicles segment, wth the launch of innovative low flash off compact 3C-1B system for roof painting. This solution offers a range of sustainability benefits, including the elimination of one baking cycle, resulting in energy conservation, and a low film build that enables reduced paint consumption.

Additionally, we introduced Everlast Matt clear coat for one of the country''s leading passenger vehicle manufacturers. The product offers superior workability and enhances functional performance.

J

Two-Wheeler Segment

In the 2-wheeler segment, we have introduced several noteworthy products that cater to the evolving needs of the market These innovative products stand out as a vibrant two-coat shade developed in Monocoat for excellent workability. Our versatile low-bake product suitable for both metal and plastic substrates, further expands application possibilities. Furthermore, our economical soluton for the general OEM market, provides high-quality performance at a compettive price. These innovations reflect KNPL''s commitment to meeting the specific requirements of the 2-wheeler industry

J

Commercial Vehicles Segment

m

In the commercial vehicles segment, the Company introduced several key products that enhance performance and durability Our castng sealer provides excellent corrosion resistance, making it ideal for harsh environments encountered in commercial applicatons. Our high-solid paint recognised for its exceptional durability, is suitable for demanding commercial uses.In addition to it, the combination of Texture Primer and Topcoat offers a unique textured finish enhancing aesthetic appeal and ensuring robust protecton. These developments highlight KNPL''s commitment to innovation and quality in the commercial vehicles sector.

A

Key Developments in Performance Coating Segment

In the performance coatings segment, we have introduced several impressive products that enhance durability and functionality. In coil coating application, we have introduced a highly resilient product capable of withstanding QUV test conditions. Additionally the newy introduced products offer exceptional flexbility on high-thickness substrates. Additionally the Antidust Lacquer is perfect for electrical appliances, maintaining a sleek matte finish.

These advancements solidifies KNPL''s commitment to sustainability and customer satisfaction within the performance coatings sector for FY 2024-25. We have launched special high build epoxy paint for the highly humid areas and jetties in the tidal zone application.

V

Key Developments in Powder Coatings

In the powder coatings segment, we have made significant advancements by introducing innovative products that cater to diverse market needs. Notably we developed a new pigmented primer-cum-basecoat specifically designed for alloy wheels, enhancing both performance and aesthetics. We also introduced a specialised anti-static coating technology tailored for ESD applications. These new products exemplify our commitment to innovation and quality reinforcing KNPL''s position as a trusted provider of powder coating solutions in the market

A

Key Developments in Coil Coatings

With regard to coil coatngs, we have developed a high-build system engineered for enhanced durability and longevity specifically suited for applications such as puff panels used in high-rise buildings, airports, and similar infrastructure. This innovative product is suitable for both domestc and international markets, addressing the increasing demand for coated metals in infrastructure development and construction projects.

A

Key Developments in Auto Refinish

In FY 2024-25, we launched an Economy Range Product crafted as an affordable alternative in the automotive refinish segment, delivering consistent results where cost-efficiency matters.

Supply

Chain

The supply chain landscape continues to undergo rapid shifts, shaped by geopolitical uncertainties, crude oil price volatility, foreign exchange fluctuations, and import-related logistical constraints. AtKNPL, we view these disruptions not as setbacks, but as catalysts, driving us to strengthen our supply chain resilience through proactive innovation and strategic adaptation. Over the years, our supply chain has remained a critical pillar of our competitive edge, enabling us to uphold the highest standards of quality and deliver reliable customer service. Our extensive network comprises nine owned manufacturing facilities that produce our products using materials and services from over 500 key suppliers. We efficiently reached dealers and distributors nationwide, through a robust distribution system of 114 depots and 7 RDCs.

At KNPL, our long-term performance and brand value are deeply anchored in the strength and agility of our supply chain. To meet these objectives, we place strong emphasis on close collaboration and foster trusted, mutually rewarding partnerships across our supply chain ecosystem. Our Annual Suppliers Conference enables us to engage with all our suppliers, recognise their excellence, and foster open communication.

We also recognise the importance of inclusive growth among all our stakeholders. During FY 2024-25, approxmately 20% of our input materials were sourced from MSMEs, supporting inclusive growth initiatives. Additionally, to promote local sourcing, 75% of our input material was sourced within India. Furthermore, to engage our suppliers in our commitment to sustainability, we initiated a ‘Value Chain Sustainability'' programme. This includes training many of our suppliers on climate change awareness and greenhouse gas (GHG) inventorisation. As a proactive step, KNPL has begun engaging with suppliers on emissions management.

The end-to-end digital transformation of our supply chain, coupled with purpose-led partnerships, will enable us to create a future-fit supply chain that is resilient, efficient, and sustainable.

Information

Technology

In recent years, we have made substantial enhancements to our information technology capabilities across all operational functions by deploying a suite of new applications. Our IT ecosystem extends seamlessly to both internal and external stakeholders, with customised solutions developed specifically for dealers, painters, architects, interior designers, and our frontline sales teams. While managing a diverse array of applications, KNPL is committed to upholding the highest standards | of security, as an essential and non-negotiable component of our operations. We utilise state-of-the-art tools and processes to safeguard our intellectual property and IT infrastructure. Through advanced threat monitoring and prevention measures overseen by the Corporate Information Security Steering Committee, we are committed to ensuring the early detection and mitigation of cyber threats across the Company.

Furthermore, we have made cybersecurity training mandatory for all the employees to keep them aware ofpotential threats and security concerns. We routinely disseminate cybersecurity awareness materials to employees, offering practical guidance on digital security best practices, spam and fraud prevention, safe usage of Al tools, and other key aspects of cyber hygiene. These initiatives collectively ensure that we are well-prepared to face future challenges, safeguard our valuable information, and support our continuous growth.

I We are making significant progress on our digital ecosystem, including transforming our IT landscape by digitalising our operations. This is being done through the implementation of the latest technologies in core processes, supply chain, and procurement among others.

Innovation

(AVINYA) -,

Building on the success of previous years, we launched two innovation seasons, each targeting specific strategic agendas aligned with our organisational goals.

In addition to promoting innovation, we have prioritised culture building among employees through cross-functional participation, training, and developmentinitiatives.

By continuing to promote a collaborative environment for idea generation and execution, our AVINYA platform empowers employees to take ownership of their innovations, driving success and positioning the Company for future growth.

Employee

Well-being -,

At KNPL, we remain steadfast in our commitment to enhancing the well-being of our employees, recognising them as the cornerstone of organisational success. One of the key initiatives in this regard is the Wellness Corner App, which serves as a comprehensive platform for both physical and mental well-being.

Through our Wellness Wednesday Sessions, we consistently raise awareness among employees around mental and physical health, productivity, emotional intelligence, and work-life balance. Additionally our monthly newsletter, ‘Impressions,'' features Nerolites'' sharing their experiences in maintaining a healthy lifestyle.

These initiatives reflect our unwavering dedication to creating a supportive and thriving workplace environment where employees feel valued, empowered, and inspired to excel.

Capability

Building

Our initiative, TAJ 2.0 (Tap-Abhyaas-Jap), exemplifies our dedication to nurturing leadership potential. By collaborating with world-class organisations, this programme is aimed at building a strong leadership pipeline. Additionally, through Abhyaas, new joinees are introduced to all our products. For our sales front-liners, we rolled out Advanced Sales Training modules, while at the managerial level, our ‘Lead with Impact'' programme continued to strengthen leadership capabilities. We also leveraged the Percipio digital learning platform to promote self-directed learning and upskilling. In addition, we expanded our capability-building initiatives by training employees on Enterprise Risk Management (ERM) and the nine principles of BRSR, reinforcing our commitment to sound corporate governance practices. Through these diverse programmes spanning all employee levels, we reaffirm our commitment to individual growth and organisational excellence.

Employee

Connect-1

At KNPL, we emphasise on cultivating strong relationships with employees through a variety ofengagementinitiatives.

To recognise and celebrate employee contributions, the Company has implemented the ''Titan '' recognition system. This initiative allows employees to acknowledge their peers, for achievements. Our engagement initiative, Life@Nerolac, embodies the spirit of community and collaboration by platform, enabling employees to share updates, ideas, and accolades, fostering a cohesive and engaged workforce.

We have also established robust employee communication platforms such as the MD''s Townhall, MD Samvaad, Coffee with HR, Works Manager Address sessions, and the Annual Learning Conference.

Throughout the year, the Company actively celebrates cultural and festive occasions across its plants, head office, R&D centres, and depots. On International Women''s Day we established the Women Impact Network (WIN), an employee-led resource group aimed at empowering women within the Company.

Through these thoughtfully designed programmes, we reaffirm our commitment to creating an engaging workplace where employees feel valued and connected.

Nurturing

Talent

KNPL emphasises on nurturing talent to align individual aspirations with organisational objectives. A cornerstone of this talent development strategy is the Campus Collaboration Programme, designed to attract exceptional talent from premier management and technical institutes across the country The Gurukul programme offers summer training opportunities, while the Aarambh Campus Programme facilitates the seamless transition of trainees into full-fledged Nerolites into roles such as management trainee, graduate engineer trainee, technical trainee, and sales trainee based on their qualifications.

Environment, Social and Governance

At KNPL, the concept of material issues involves identifying and prioritising key concerns that significantly influence our capacity to generate value for stakeholders. These material issues are considered critical, given their potential to significantly influence our commercial sustainability social relevance, and the strength of our stakeholder relationships. By recognising and addressing these material issues, we aim to proactively manage our impact enhance our resilience, and uphold our commitment to creating sustainable value for all stakeholders.

Opportunities and Threats

Information for this section can be found in the ‘Opportunities and Threats'' section under the Corporate Overview section.

Risks and Concerns

Information for this section can be found in the ‘Risks and Concerns'' section under the Corporate Overview section.

Outlook

TheIndian paintsindustryis anticipated to experience modest growth in FY 2025-26, driven by favourable macroeconomic conditions, rising urbanisation, and increased construction andinfrastructure development activities. This growth can also be attributed to decent demand in both the decorative and industrial segments. In the decorative segment, growth will be supported by higher disposable incomes, premiumisation trends, a rising consumer preference for eco-friendly products, and government initiatives such as the Housing for All programme and the Smart Cities Mission. The industrial segment is also projected to maintain healthy momentum, bolstered by automotive production and significant infrastructure expansion.

Competition within the industry is intensifying, with the entry of new players challenging the market share of established companies. This is paving the way for increased investment, innovation, and enhanced distribution networks. While the sector may continue to face challenges related to raw material price fluctuations and margin pressures, companies are expected to mitigate these risks through product innovation, digitalisation, and a strong focus on sustainability. Overall, the Indian paints industry is well-positioned for sustained growth in FY 2025-26, supported by resilient demand drivers, a growing consumer base, and an evolving competitive landscape.

Internal Control Systems and their Adequacy

Our internal control systems are designed to monitor and manage our day-to-day operations efficiently. These systems ensure compliance with numerous concepts, regulations, and norms, adhering to methodology requirements. To enhance our internal control mechanisms, we have implemented an Internal Financial Control system in compliance with the provisions of Section 134(5)(e) of The Companies Act, 2013. This system provides the Board of Directors with additional oversight capabilities. The implementation of these systems follows the framework outlined in the Guidance Note on Audit of Internal Financial Controls in Financial Reporting issued by The Institute of Chartered Accountants of India, aimed at addressing KNPL''s operational and financial risks. Moreover, our systems undergo testing by statutory auditors using automated techniques.

( _ ^

Control Efficiency

Index and Robust

Control Index-1

The CEI and RCI remain integral to the Company''s strategy for assessing internal audit effectiveness.

We measure our control mechanisms against industry benchmarks to maintain efficient operations. Our internal audit programme focusses on determining gaps in control design, policy design, control or process deviations, IT systems, and regulatory compliance. Additionally, our internal audit programme evaluates the potential for automation in control processes and we leverage audit results to enhance the Company''s internal controls.

Compliances-1

KNPL has developed a dashboard to monitor key legislative changes notified by various government authorities, which are then tracked by the Management for requirements and implementation. The Company tracks and ensures regulatory compliance online through the Legatrix system. The system is updated regularly with all the changes in compliance as they occur. The online tracking and tracing of completion help ensure strict adherence to regulations. In addition, the Company tracks any legal cases through the Roznama System.

V_)

Cautionary

Statement

Statements in the Management Discussion and Analysis section of this report describing the Company''s objectives, estimates, and expectations may be ‘forward-looking statements'' within the meaning of the applicable laws and regulations. The actual results might differ materially from those either expressed or implied.

2. Directors’ Responsibility Statement

As stipulated under the provisions contained in Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013, (“the Act”), the Board of Directors to the best of its knowledge and belief and according to the information and explanations obtained by it, hereby state that:

i. in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures;

ii. the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

iii. the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. the directors have prepared the annual accounts of the Company on a going concern basis;

v. the directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

vi. the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

3. New Projects

During the financial year, the Company has:

1. completed Greenfield manufacturing project at Atchutapuram, Andhra Pradesh (Vizag Plant) and production has commenced;

2. started capacity enhancement of industrial Alkyd and Polyester Resin at Sayakha Plant and of Acrylic Resin at Bawal Plant, to meet the increased automotive paint demand;

3. commenced automotive paint capacity addition project at Sayakha Plant, to meet the future demand of Original Equipment Manufacturers (OEMs);

4. completed and put in operation, captive wind turbine project for Sayakha Plant; and

5. initiated offsite Solar power plant project for Bawal Plant, to optimise the power cost.

4. Land Monetisation

In the previous financial year, the Board of Directors of the Company had approved a proposal for sale of the Company''s land parcels at Lower Parel, Mumbai, together with building

thereon to Aethon Developers Private Limited (hereinafter referred to as Aethon Developers), for an aggregate consideration of ? 726 Crores. Accordingly, the Company entered into an Agreement for Sale with Aethon Developers. The sale was subject to completion of certain procedures and approvals as were necessary in this regard.

As a part of the procedures, on 30th September, 2024, the Company entered into a Deed of Conveyance with the Bombay Zoroastrian Jashan Committee, the Lessor, for acquiring the ownership and title of one of the land parcels of which the Company was the Lessee, by purchase of the revisionary rights for a consideration of ? 48 Crores.

After completion of the procedures and approvals as required for the sale, on 24th October, 2024, the Company entered into definitive agreements for conveyance/assignment of lease with Aethon Developers for an aggregate consideration of ? 726 Crores.

5. Directors

Mr. Hitoshi Nishibayashi (holding Director Identification Number 03169150), Non-Executive Director, is liable to retire by rotation at the ensuing Annual General Meeting (“AGM”) of the Company. He is not seeking re-appointment due to health reasons and shall retire as a Director of the Company at the AGM on 30th June, 2025. The Board placed on record its sincere appreciation and gratitude for the services rendered by Mr. Nishibayashi during his association with the Company.

In terms of the provisions of the Act and the Articles of Association of the Company, Mr. Takashi Tomioka (holding Director Identification Number 08736654), Non-Executive Director, is liable to retire by rotation at the ensuing AGM of the Company and being eligible, offers himself for re-appointment.

Mr. Hirokazu Kotera (holding Director Identification Number 10707431) has been appointed as a Whole-time Director designated as the Executive Director of the Company for a term of 3 (three) years commencing from 1st August, 2024 and ending on 31st July, 2027 (both days inclusive). The Shareholders approved the terms of appointment, vide Postal Ballot, on 26th September, 2024.

For the period from 1st August, 2024 to 31st March, 2025, Mr. Kotera has received a remuneration of ? 51.95 Lakhs from Kansai Paint Co. Ltd., Japan (“KPJ”) as a General Manager in KPJ.

Mr. Uday S. Bhansali (holding Director Identification Number 00363902) has been appointed as an Independent Director of the Company to hold office for a term of 5 (five) years commencing from 6th November, 2024 and ending on 5th November, 2029 (both days inclusive). The Shareholders approved his appointment, vide Postal Ballot, on 8th January, 2025.

Mr. P P Shah (holding Director Identification Number 00066242) retired upon completion of his second term of office as an Independent Director and consequently, ceased to be a Director and Chairman of the Company, from close

of business on 29th January, 2025. The Board placed on record its sincere appreciation and gratitude for the valuable contribution made by Mr. Shah, during his association with the Company.

Mr. Bhaskar Bhat (holding Director Identification Number 00148778), Independent Director has been appointed as the Chairman of the Company with effect from 30th January, 2025.

Mr. Anuj Jain (holding Director Identification Number 08091524), Managing Director, took an early retirement from the services of the Company at the close of business on 31st March, 2025. The Board placed on record its sincere appreciation and gratitude for the valuable contribution made by Mr. Jain, during his association with the Company.

Mr. Pravin D. Chaudhari (holding Director Identification Number 02171823) has been appointed as the Managing Director of the Company for a term of 3 (three) years commencing from 1st April, 2025 and ending on 31st March, 2028 (both days inclusive). The Shareholders approved the terms of appointment, vide Postal Ballot, on 18th April, 2025. As Mr. Chaudhari is not a resident of India as per the requirements of Schedule V of the Act, approval of the Central Government has been sought for the appointment of Mr. Chaudhari as the Managing Director of the Company.

Pursuant to 161(1) of the Act, read with the Articles of Association of the Company, the Board of Directors of the Company, on recommendation of the Nomination and Remuneration Committee, appointed Mr. Gen Yokota (holding Director Identification Number 11084786) as an Additional Director and Non-Executive Director of the Company with effect from 6th May, 2025, subject to the approval of the Shareholders. The Board, while appointing Mr. Yokota considered his technical knowledge and rich experience in the field of research along with the skills, capabilities and proficiency required for the role.

None of the Directors are disqualified as on 31st March, 2025 from being appointed as a Director under Section 164 of the Act.

All the Independent Directors on the Board have given a declaration of their independence to the Company as required under Section 149(6) of the Act and Regulation 16(1)(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Listing Regulations”). In the opinion of the Board, all the Independent Directors possess integrity, relevant expertise and experience, including proficiency required to be an Independent Director of the Company. They fulfill the conditions of independence as specified in the Act and SEBI Listing Regulations, comply with the Code for Independent Directors as prescribed in Schedule IV of the Act and are independent of the Management.

The Company has a Code of Conduct for Directors and Senior Management. All the Directors and members of Senior Management have confirmed compliance with the Code.

Details with respect to the composition of the Board, the meetings of the Board held during the year and the attendance of the Directors thereat have been provided separately in the Annual Report, as a part of the Report on Corporate Governance.

6. Key Managerial Personnel

Mr. Anuj Jain, Managing Director, took an early retirement from the services of the Company at the close of business on 31st March, 2025.

Mr. Pravin D. Chaudhari has been appointed as the Managing Director of the Company with effect from 1st April, 2025.

In terms of Section 203 of the Act, the Company has the following Key Managerial Personnel: Mr. Pravin D. Chaudhari, Managing Director, Mr. P D. Pai, Chief Financial Officer and Mr. G. T Govindarajan, Company Secretary.

7. Meetings of the Board

The Board met 6 (six) times during the financial year ended 31st March, 2025. The meeting details are provided separately in the Annual Report, as a part of the Report on Corporate Governance. The maximum time gap between any two meetings did not exceed 120 days, as prescribed in the Act and SEBI Listing Regulations.

8. Board Evaluation

In terms of the applicable provisions of the Act and SEBI Listing Regulations, the Nomination and Remuneration Committee and Board of Directors have approved a framework which lays down a structured approach, guidelines and processes to be adopted for carrying out evaluation of the performance of the Directors, the Board as a whole and its Committees. The criteria are broadly based on the Guidance Note on Board Evaluation, issued by the Securities and Exchange Board of India.

Detailed questionnaires covering various parameters relevant for the evaluation are circulated to the Directors. The feedback received from the Directors is discussed at the meetings of Independent Directors, Nomination and Remuneration Committee and Board.

For the year under review, the Board carried out the evaluation of its own performance, its Committees and individual Directors. Evaluation results as collated and presented, were noted by the Independent Directors, Nomination and Remuneration Committee and Board.

9. 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.

Mr. P P Shah ceased to be a member and Chairman of the Audit Committee consequent to his retirement upon completion of second term of office as an Independent Director from close of business on 29th January, 2025.

Mr. Uday S. Bhansali has been appointed as a member and Chairman of the Audit Committee with effect from 30th January, 2025.

The recommendations made by the Audit Committee to the Board, from time to time during the year under review, have been accepted by the Board. Other details with respect to the Audit Committee such as its terms of reference, meetings and attendance thereat are separately provided in the Annual Report, as a part of the Report on Corporate Governance.

11. Corporate Social Responsibility

In terms of Section 135 of the Act, the constitution of the Corporate Social Responsibility (“CSR”) Committee as on 31st March, 2025 is as follows:

Name of the Member	Designation
Ms. Sonia Singh (Chairperson of the CSR Committee)	Independent Director
Mr. Anuj Jain*	Managing Director
Mr. Bhaskar Bhat	Chairman and Independent Director

* Mr. Anuj Jain ceased to be a member of the CSR Committee consequent to his early retirement from the services of the Company at the close of business on 31st March, 2025.

Mr. Pravin D. Chaudhari has been appointed as a member of

the CSR Committee with effect from 1st April, 2025.

The functions of the CSR Committee are to:

(a) formulate and recommend to the Board, a CSR 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

10. Audit Committee

In terms of the provisions of Regulation 18 of the SEBI Listing Regulations read with Section 177 of the Act, the constitution of Audit Committee as on 31st March, 2025 is as follows:

Name of the Member	Designation
Mr. Uday S. Bhansali (Chairman of the Audit Committee)	Independent Director
Ms. Sonia Singh	Independent Director
Mr. Bhaskar Bhat	Chairman and Independent Director

(c) monitor the CSR Policy of the Company from time to time.

During the financial year ended 31st March 2025, 2 (two) meetings of CSR Committee were held on 25th November, 2024 and 20th March, 2025 which were 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.

12. Risk Management Policy

The Company has identified the risk areas in its operations along with its probability and severity, department wise. An effective Risk Management Framework is put in place in the Company in order to analyze, control and mitigate risk. Risk profiling is also put in place for all the areas of operations in the Company and well integrated in the business cycle. The various risks to which the Company is exposed are disclosed as a part of Management Discussion and Analysis, hereinabove.

The Risk Management Framework of the Company comprises of Risk Management Committee and the Risk Officer.

In terms of the provisions of Regulation 21 of the SEBI Listing Regulations, the constitution of Risk Management Committee as on 31st March, 2025 is as follows:

Name of the Member	Designation
Ms. Sonia Singh (Chairperson of the Risk Management Committee)A	Independent Director
Mr. Anuj Jain*	Managing Director
Mr. Hirokazu Kotera#	Executive Director
Mr. Uday S. Bhansali#	Independent Director
Mr. P D. Pai	Chief Risk Officer and Non-board member on the Committee
Mr. Jason Gonsalves	Non-board member on the Committee

a Ms. Sonia Singh has been appointed as the Chairperson of the Risk Management Committee with effect from 30th January, 2025.

# Mr. Uday S. Bhansali and Mr. Hirokazu Kotera have been appointed as the members of the Risk Management Committee with effect from 30th January, 2025.

* Mr. Anuj Jain ceased to be a member of the Risk Management Committee consequent to his early retirement at the close of business on 31st March, 2025.

Mr. P. P Shah ceased to be a member and Chairman of the Risk Management Committee consequent to his retirement upon completion of second term of office as an Independent Director from the close of business on 29th January, 2025.

Mr. Pravin D. Chaudhari has been appointed as a member of the Risk Management Committee with effect from 1st April, 2025.

13. Remuneration Policy

The Board of Directors has adopted a policy which deals with (i) criteria for determining qualifications, positive attributes and independence of Director and (ii) remuneration for Directors, Key Managerial Personnel and other employees (“Remuneration Policy”).

The features of the Remuneration Policy are as follows:

• The Company, while constituting the Board shall draw members with appropriate skills, experience and knowledge from diverse fields such as finance, law, management, sales, marketing, architecture, administration, research, corporate governance, operations or other disciplines related to the Company''s business. There shall be no discrimination on the basis of gender, race, ethnicity and nationality while determining the board composition.

• A Director shall be a person of integrity, who possesses relevant expertise and experience. He shall uphold ethical standards of integrity and probity and act objectively and constructively. He shall exercise his responsibilities in a bona-fide manner in the interest of the Company; devote sufficient time and attention to his professional obligations for informed and balanced decision making; and assist the Company in implementing the best corporate governance practices.

• An Independent Director should meet the requirements of the Act and SEBI Listing Regulations, concerning independence of directors. The Company shall also obtain certification of independence from the Independent Director in accordance with the Act and SEBI Listing Regulations.

• The remuneration paid to Whole-time Directors is subject to the limits laid down under Section 197 and Schedule V to the Act and in accordance with the terms of appointment approved by the Shareholders of the Company. The remuneration of the Whole-time Directors is determined by the Nomination and Remuneration Committee based on factors such as the Company''s performance and performance/track record of the Whole-time Directors. The remuneration consists of Salary, Commission, Company''s contribution to Provident Fund and Superannuation Fund, House Rent Allowance (HRA), Leave Travel Allowance (LTA) and other perquisites and allowances in accordance with the rules of the Company, applicable from time to time.

• The Non-Executive Independent Directors are paid commission within the ceiling of 1% of net profits of the Company as specified in Section 197 of the Act. The commission payable to Non-Executive Independent Directors is decided by the Board, on recommendation of the Nomination and Remuneration Committee, based on a number of factors including number of Board and Committee meetings attended, individual contribution thereat etc. The Non-Executive Independent Directors are also paid sitting fees for attending the meetings of the Board or Committee thereof within the limits prescribed under the Act.

• The objective of the policy is to have a compensation framework that will reward and retain talent.

• The remuneration will be such as to ensure that the correlation of remuneration to performance is clear and meets appropriate performance benchmarks.

• Remuneration to Key Managerial Personnel, Senior Management and other employees will involve a balance between fixed and variable pay reflecting short and long term performance objectives of the employees in line with the working of the Company and its goals.

• The short and long term performance objectives cover amongst various aspects industry performance, customer performance, overall economic environment, financial performance and performance on Environment, Social and Governance objectives.

• For Directors, the Performance Pay will be linked to achievement of Business Plan (achievement of short-term and long-term business objective).

• For Heads of Department, the Performance Pay will be linked to achievement of functional plan which is derived from the business plan. The functional plan includes both, short-term and long-term objectives.

• For other management personnel, the Performance Pay will be linked to achievement of individual set objectives and part of this will also be linked to overall Company performance.

The Remuneration Policy is also available on the website of the Company at https://www.nerolac.com/financial/policies.html.

14. Vigil Mechanism - Whistle Blower Policy

The Company, pursuant to Section 177(9) of the Act and Regulation 22 of the SEBI Listing Regulations, has a Whistle Blower Policy to report genuine concerns and grievances. The Policy provides adequate safeguards against victimisation of persons who use the Whistle Blower mechanism. The Policy also provides for direct access to the Chairman of the Audit Committee.

Details with respect to implementation of the Whistle Blower Policy are separately disclosed in the Annual Report, as a part of the Report on Corporate Governance. The Policy is also available on the website of the Company at https://www.nerolac.com/financial/policies.html.

15. 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.

16. 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 to all employees and non-employees including 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, three complaints of sexual harassment was received and resolved as per the provisions of the POSH Act.

17. Related Party Transactions

The Company has in place a Policy on dealing with Related Party Transactions and on Materiality of Related Party Transactions which is available on the website of the Company at https://www.nerolac.com/financial/policies.html. In terms of the same, a statement in summary form of transactions with related parties in the ordinary course of business and on arm''s length basis is periodically placed before the Audit Committee for its review. Omnibus approval was obtained for transactions which were repetitive in nature. Transactions entered into pursuant to omnibus approval were placed before the Audit Committee for its review during the year. Related party transactions have been disclosed in Note no. 38 to the Standalone Financial Statements.

In terms of the provisions of Section 188(1) of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 23 of the SEBI Listing Regulations, all related party transactions that were entered into, during the year under review, were in the ordinary course of business of the Company and on arm''s length basis. There were no material related party transactions during the year. Accordingly, Form AOC-2, prescribed under the provisions of Section 134(3)(h) of the Act and Rule 8

of the Companies (Accounts) Rules, 2014, for disclosure of details of related party transactions, which are “not at arm''s length basis” and also which are “material and at arm''s length basis”, is not provided as an annexure to this Report as it is not applicable.

18. Particulars of Loans, Guarantees or Investments under Section 186 of the Act

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act, are separately disclosed in the Annual Report, as a part of the Notes to the Financial Statements.

19. Particulars 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.

20. 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.

21. Corporate Governance

The Company is in full compliance with the requirements and disclosures that have to be made in terms of the requirements of Corporate Governance specified in the SEBI Listing Regulations.

In terms of the provisions of Schedule V(C) of the SEBI Listing Regulations, a detailed Report on Corporate Governance forms part of the Annual Report. Further, a Certificate from the Statutory Auditors of the Company confirming compliance with the requirements of Corporate Governance as specified in the SEBI Listing Regulations is provided together with the Report on Corporate Governance, the same shall be considered to be an annexure to this Report.

22. 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.

23. Share Capital

The paid-up Equity Share Capital as at 31st March, 2025 stood at ? 80.84 Crores.

During the year under review, the Company allotted 65,300 Equity Shares of Re. 1 each pursuant to exercise of Restricted Stock Units (“RSUs”) granted under the Kansai Nerolac Paints Limited - Restricted Stock Unit Plan, 2022 (“RSU Plan 2022”).

Further, after 31st March, 2025, the Company allotted 45,799 Equity Shares of Re. 1 each pursuant to exercise of RSUs granted under the RSU Plan 2022.

During the year under review, the Company has not issued any convertible securities or shares with differential voting rights or sweat equity shares or warrants.

24. Restricted Stock Unit Plan

The Company introduced the Kansai Nerolac Paints Limited - Restricted Stock Unit Plan 2022 (“RSU Plan 2022”) in terms of the approval of the Shareholders vide Postal Ballot on 25th October, 2022, to attract, retain, motivate its employees and improve performance of the Company for ensuring sustained growth.

During the financial year 2024-25, there has been no change in the RSU Plan 2022. The RSU Plan 2022 is available on the Company''s website at https://www.nerolac.com/investors/ restricted-stock-units.html.

Information as required under the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (“SEBI SBEB & SE Regulations”) 2021 has 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.

The certificate from the Secretarial Auditor, certifying that the RSU Plan 2022 has been implemented in accordance with SEBI SBEB & SE Regulations and in accordance with the Special Resolution passed by the Members of the Company through Postal Ballot on 25th October, 2022 and 15th June 2023, will be available for inspection of the Shareholders through electronic mode. Shareholders may write to the Company at [email protected] in that regard, by mentioning “Request for Inspection” in the subject of the e-mail.

25. 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.

26. Investor Education and Protection Fund (“IEPF”)

Transfer of Unclaimed Dividend to IEPF

During the year under review, dividend amounting to ? 34.21 Lakhs that had not been claimed by the Shareholders for the year ended 31st March, 2017, was transferred to the credit of IEPF as required under Sections 124 and 125 of the Act.

Unclaimed dividend as on 31st March, 2025

As on 31st March, 2025, dividend amounting to ? 2.46 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. MUFG Intime India Private Limited (formerly Link Intime India 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, 2024, 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, 23,101 Equity Shares, in respect of which dividend has not been claimed by the Shareholders for 7 (seven) consecutive years or more, have been transferred by the Company to the IEPF Authority during the financial year 2024-25.

Details of such Equity 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.

27. Statutory Auditors

At the 104th AGM of the Company, the Shareholders had approved the re-appointment of S R B C & CO LLP, Chartered Accountants (Firm Registration No. 324982E / E300003) as the Statutory Auditors of the Company, to hold office for a second term of 5 (five) consecutive years from the conclusion of the 104th AGM until the conclusion of the 109th AGM of the Company, in terms of the applicable provisions of Section 139(1) of the Act read with the Companies (Audit and Auditors) Rules, 2014. Details of the remuneration paid to S R B C & CO LLP, Chartered Accountants, Statutory Auditors, during the financial year 2024-25 are disclosed in the Financial Statements of Company, which forms part of the Annual Report.

The Auditors'' Report on the Financial Statements (Standalone and Consolidated) of the Company for the year under review, is clean and there are no qualifications in the said Report. Also, no frauds in terms of the provisions of Section 143(12) of the Act have been reported by the Auditors in their Report for the year under review.

The Notes to the Financial Statements (Standalone and Consolidated) are self-explanatory and do not call for any further comments.

28. Secretarial Auditors

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.

The Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

Further, in terms of Regulation 24A of the SEBI Listing Regulations, as amended with effect from 13th December, 2024, the Board has appointed JHR & Associates, Company Secretaries, (Firm registration no. P2015MH059200) as the Secretarial Auditor of the Company for a term of 5 (five) consecutive years commencing from 1st April, 2025 to 31st March, 2030, subject to the approval of the Shareholders at the ensuing 105th AGM. The Company is seeking the approval of the Shareholders for appointment of JHR & Associates, Company Secretaries, as the Secretarial Auditors of the Company, vide Item no. 6 of the Notice of 105th AGM.

JHR & Associates, a peer reviewed firm, was established in 2017 by a team of experienced professionals. Prior to this, the founding partners had been active in the industry since 1996 under the name J.H. Ranade & Associates. The firm specializes in various areas including core-secretarial compliance, FEMA regulations, due diligence, secretarial audits, corporate governance, mergers and acquisitions, charge management and XBRL services.

The Company has obtained a written consent for such appointment along with a certificate from JHR & Associates confirming that they are not disqualified from being appointed as Secretarial Auditor of the Company.

29. 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 2023-24, pertaining to products of the Company as required by the law. The Cost Audit Report submitted by the Cost Auditor for the financial year 2023-24 was clean and there was no qualification in their Report. The same was duly filed with Ministry of Corporate Affairs.

The Company had re-appointed D.C. Dave & Co., Cost Accountants, as the Cost Auditor for the financial year 2024-25 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 2025-26, 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 ? 4,00,000 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. 5 of the Notice of 105th AGM.

The eligibility and consent letter 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.

30. General Disclosure

1. During the year under review, there was no application made or proceeding pending under the Insolvency and Bankruptcy Code, 2016.

2. During the year under review, there were no instances of onetime settlement with any Banks or Financial Institutions.

31. General Shareholder Information

General Shareholder Information is given as Item no. 12 of the Report on Corporate Governance forming part of the Annual Report.

32. Annual Return

Pursuant to Section 92(3) read with Section 134(3)(a) of the Act, the Annual Return as on 31st March, 2025 is available on the website of the Company at https://www.nerolac.com/ investors/annual-return.html.

33. Acknowledgements

Your Directors wish to express their grateful appreciation for the co-operation and continued support received from customers, promoter 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.

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Mar 31, 2023

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 Company’s 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

INTRODUCTION

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 India’s 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.

KNPL’s strong position is due to its continuous intellectual and human capital investment. The Company’s 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 industry’s 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 everybody’s life’.

People are at the core of KNPL’s 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.

INDUSTRY PROGRESS

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.

India’s 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 Government’s 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 industry’s 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.

FINANCIALS

Financial Highlights

A summary of the Company’s 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:

			(f in Crores)
r		FY 2022-23	FY 2021-22
	Revenue from Operations	7,081.02	5,948.90	V
	Profit before Depreciation, Interest, Exceptional item and Tax	793.89	647.34
	Less: Depreciation and Amortisation	164.63	153.82
	Profit Before Interest, Exceptional Item and Tax	629.26	493.52
	Less: Interest	9.73	9.87
	Less: Exceptional Item	-	(11.39)
	Add: Other Income	30.83	32.86
	Profit Before Tax	650.36	505.12
	Less: Tax Expenses	163.93	130.79
	Profit After Tax	486.43	374.33
	Other Comprehensive Income	0.16	2.51
	Total Comprehensive Income for the Year	486.59	376.84

Revenue from Operations for the year aggregated to f 7,081.02 Crores as compared to f 5,948.90 Crores for the previous year, reflecting a growth of 19.0%.

Average Crude oil prices during the year increased from USD 79.8/bbl to USD 92.6/bbl, a jump of 17% over the last year. The currency further depreciated during the year, impacting raw material prices.

Inflation which was very high at the beginning of the year started tapering downwards towards the second half of the year, which helped in some margin improvement.

The Company continued its efforts to control overheads, and all departments worked on their tasks and achieved the result.

During the period, the Company granted 11,92,792 restricted stock units to eligible employees as determined by the Nomination and Remuneration Committee of the Company. Consequently, employee benefits expense includes a provision of f 3.75 Crores made towards Share-Based Payment Expense for the year ended 31st March, 2023.

PBDIT for the year was higher at f 793.89 Crores compared to f 647.34 Crores, reflecting a growth by 22.6%.

Depreciation for the year was f 164.63 Crores, slightly higher compared to the previous year.

Other income was lower at f 30.83 Crores as compared to f 32.86 Crores in the previous year.

PBT for the year was f 650.36 Crores as compared to f 516.51 Crores (before exceptional item) of the previous year, reflecting a growth of 25.9% over the previous year. PAT was higher at f 486.43 Crores compared to f 374.33 Crores, reflecting growth of 29.9%.

The Company did not accepted any deposits covered under Chapter V of the Companies Act, 2013, during the year.

There were no significant or material orders passed by any Regulators, Courts or Tribunals against the Company which could impact its going concern status and the Company’s operations in future.

There was no change in the nature of business during the year. There were no material changes and commitments affecting the financial position of the Company that occurred between the end of the financial year of the Company to which the financial statements relate and the date of this Report.

Dividend

The Board recommended a final dividend of 270% (f 2.70 per share) for the year ended 31st March, 2023, compared to a total dividend of 225% (f 2.25 per share) for the year ended 31st March 2022.

Bonus

The Board has considered and approved the issue of

1 bonus equity share of the face value of f 1 each against

2 equity shares of the face value of f 1 each. This is subject to shareholder’s approval.

Key Financial Ratios
r r	Key Ratios	FY 2022-23	FY 2021-22	Difference	% change	1
	Debtors Turnover ( No. of Days)	45	41	4	9.8%
	Inventory Turnover ( No. of Days)	117	117	0	0.0%
	Interest Coverage Ratio	82	66	16	24.2%
	Current Ratio	2.85	2.91	-0.06	-2.1%
	Debt Equity Ratio	0.02	0.02	0.0	0.0%
	Operating Profit Margin ( % )	11.2	10.9	0.3	2.8%
	Net Profit Margin ( % )	6.9	6.4	0.5	8.2%
	Return on Equity ( % )	11.1	9.1	2.0	22.0%

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 f 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 f 146.80 Crores compared to f 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 f 0.10 Crores as compared to a loss of f 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 f 81.16 Crores as compared to f 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 f 7.04 Crores compared to f 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 f 26.73 Crores compared to f 23.71 Crores during the previous year. The Company’s loss narrowed to f 3.48 Crores during the year compared to a loss of f 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 f 239.48 Crores compared to f 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 f 13.27 Crores during the year compared to a loss of f 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 Company’s 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 Company’s approach.

The Company’s 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 Company’s 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 Company’s website and continuous social media presence to engage with customers and build brand awareness.

Consumer Services

NXTGEN programme is the Company’s 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.

Nerolac’s 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.

Nerolac’s 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 Company’s 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 Nerolac’s 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 14^o 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 market’s 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 KNPL’s 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

KNPL’s 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 Company’s 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 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 team’s 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 industry’s 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 KNPL’s 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, KNPL’s 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.

KNPL’s 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.

KNPL’s leadership strategy in the passenger vehicle segment is centred on innovation, sustainability, and strategic partnerships. KNPL’s 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 coating’s resistance to 20-30% ethanol blending in petrol, which is a formidable achievement laying the foundation for many future innovations in this segment.

KNPL’s 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 Company’s 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, KNPL’s 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 Company’s 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 Company’s 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. KNPL’s 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.

KNPL’s 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 Company’s 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 Company’s market penetration focus fuelled by innovation and training.

RESEARCH & DEVELOPMENT (R&D)

Overview

KNPL’s R&D team is focused on developing innovative solutions that cater to its customers’ dynamic needs while aligning with the organisation’s 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.

KNPL’s 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.

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 14^o 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 KNPL’s 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 Company’s 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. KNPL’s 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.

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 outlet’s 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 Society’s) 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 year’s 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 Company’s 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 KNPL’s 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 Company’s 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 Company’s 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 organisation’s 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.

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 MD’s 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 Company’s 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 company’s long-term goals.

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

KNPL’s 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 organisation’s 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 KNPL’s 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.

KNPL’s 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 KNPL’s 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 Company’s 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.

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.

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.

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

KNPL’s continuous efforts and proactive measures towards Environmental, Social, and Governance (ESG) have significantly improved its position in the global Chemical ESG sector.

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 Government’s 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

KNPL’s 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 Company’s operational and financial risks. In addition, the statutory auditors test the Company’s 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. KNPL’s control measures are benchmarked against industry standards for effective control mechanisms. The Company’s 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.

CAUTIONARY STATEMENT:

Statements in the Management Discussion and Analysis section of this report describing the Company’s objectives, estimates and expectations may be ‘forwardlooking statements’ within the meaning of the applicable laws and regulations. Actual results might differ materially from those either expressed or implied.

2. Directors’ Responsibility Statement

As stipulated under the provisions contained in Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013, (“the Act”), the Board of Directors, to the best of its knowledge and belief and according to the information and explanations obtained by it, hereby states that:

i. in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures;

ii. the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

iii. the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. t he directors have prepared the annual accounts of the Company on a going concern basis;

v. the directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

vi. the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

3. New Projects

During the financial year 2022-23, the Company has commissioned the resin plant at Sayakha. It has initiated expansion of its water-based paint units at Jainpur and Hosur plants. Further, a plant for water-based paint and other products is being set up at Vizag.

4. Land Monetisation

The Board of Directors has approved a proposal for monetization of idle land parcels of the Company not being put for productive use. The Board of Directors of the Company has approved a proposal for sale of the Company''s land at Kavesar, Thane to Shoden Developers Private Limited, a group company of House of Hiranandani group (hereinafter referred as the “Purchaser”) for consideration of '' 655 Crores for an area admeasuring 96,180 sq. mts. The Company has entered into an Agreement to Sell with the Purchaser. The sale is subject to completion of procedures and approvals as may be necessary in this regard.

5. Directors

In terms of the provisions of the Act and the Articles of Association of the Company, Mr. Hitoshi Nishibayashi (holding Director Identification Number 03169150), Non-Executive Director, is liable to retire by rotation at the ensuing Annual General Meeting (“AGM”) of the Company and being eligible offers himself for re-appointment.

Mr. Anuj Jain (holding Director Identification Number 08091524) has been appointed as the Managing Director of the Company for a period of 5 (five) years commencing from 1st April, 2022 and ending on 31st March, 2027 (both days inclusive).

Ms. Sonia Singh (holding Director Identification Number 07108778) has been re-appointed as an Independent Director for a second term of 5 (five) years commencing from 29th July, 2022 and ending on 28th July, 2027 (both days inclusive).

The Shareholders approved the aforesaid appointment of Mr. Anuj Jain and Ms. Sonia Singh at the 102nd AGM of the Company held on 23rd June, 2022.

Mr. N. N. Tata (holding Director Identification

Number 00024713) has resigned as an Independent Director of the Company with effect from 10th August, 2022. He has tendered his resignation as an Independent Director due to increased professional commitments and requirements of various Board positions. The Company has received a confirmation from Mr. N. N. Tata that there are no other material reasons other than those provided above for his resignation from the Board.

Mr. Bhaskar Bhat (holding Director Identification

Number 00148778) has been appointed as an Independent Director to hold office for a term of 5 (five) years commencing from 10th August, 2022 and ending on 9th August, 2027 (both days inclusive). The Shareholders approved the said appointment on 25th October, 2022 vide Postal Ballot.

Mr. Shigeki Takahara, Non-Executive Director (holding Director Identification Number 08736626) is resigning from the Board of the Company with effect from 26th June, 2023.

Pursuant to Section 161(4) of the Act, read with Article 114 of the Articles of Association of the Company, the Board of Directors of the Company, on recommendation of the Nomination and Remuneration Committee, appointed Mr. Pravin Digambar Chaudhari as a Non-Executive Director of the Company with effect from 26th June, 2023, in the casual vacancy that is being caused by the resignation of Mr. Shigeki Takahara. The Board, while appointing Mr. Chaudhari considered his rich experience and vast knowledge in the field of operations management, manufacturing, supply chain management, business development, sales management and strategy, the skills, capabilities and proficiency required for the role.

The Board placed on record its sincere appreciation and gratitude for the valuable contribution made by Mr. Tata and Mr. Takahara, during their association with the Company.

None of the Directors is disqualified as on 31st March, 2023 from being appointed as a Director under Section 164 of the Act.

All the Independent Directors on the Board have given a declaration of their independence to the Company as required under Section 149(6) of the Act and Regulation 16(1)(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Listing Regulations”). In the opinion of the Board, all the Independent Directors possess integrity, expertise and experience including proficiency required to be an Independent Director of the Company. They fulfill the conditions of independence as specified in the Act and the SEBI Listing Regulations, comply with the Code for Independent Directors as prescribed in Schedule IV of the Act and are independent of the Management.

The Company has a Code of Conduct for Directors and Senior Management. All the Directors and Senior Management have confirmed compliance with the Code.

Details with respect to the composition of the Board, the meetings of the Board held during the year and the attendance of the Directors thereat have been provided separately in the Annual Report, as a part of the Report on Corporate Governance.

6. Key Managerial Personnel

In terms of Section 203 of the Act, the Company has the following Key Managerial Personnel: Mr. Anuj Jain, Managing Director, Mr. P. D. Pai, Chief Financial Officer and Mr. G. T Govindarajan, Company Secretary.

7. Meetings of the Board

The Board met 7 (seven) times during the financial year ended 31st March, 2023. The meeting details are provided separately in the Annual Report, as a part of the Report on Corporate Governance. The maximum interval between any two meetings did not exceed 120 days, as prescribed in the Act and the SEBI Listing Regulations.

8. Board Evaluation

In terms of the applicable provisions of the Act and the SEBI Listing Regulations, Nomination and Remuneration Committee and the Board of Directors have approved a framework, which lays down a structured approach, guidelines and processes to be adopted for carrying out an evaluation of the performance of the Directors, the Board as a whole and its Committees. The evaluation process has been separately explained in the Annual Report, as a part of the Report on Corporate Governance.

For the year under review, the Board carried out the evaluation of its own performance, its Committees and individual Directors. Evaluation results as collated and presented, were noted by the Nomination and Remuneration Committee and the Board.

9. Audit Committee

In terms of the provisions of Regulation 18 of the SEBI Listing Regulations read with Section 177 of the Act, the Audit Committee is constituted as follows:

Names of the Members	Designation
Mr. P. P. Shah (Chairman of the Audit Committee)	Chairman and Independent Director
Mr. Bhaskar Bhat*	Independent Director
Ms. Sonia Singh	Independent Director

* Mr. Bhaskar Bhat was appointed as a member of the Audit Committee with effect from 10th August, 2022. Mr. N. N. Tata ceased to be the member of the Audit Committee consequent to his resignation as a Director of the Company with effect from 10th August, 2022.

The recommendations made by the Audit Committee to the Board, from time to time during the year under review, have been accepted by the Board. Other details with respect to the Audit Committee such as its terms of reference, the meetings of the Audit Committee and attendance thereat of the members of the Committee, are separately provided in the Annual Report, as a part of the Report on Corporate Governance.

10. Statutory Auditors

At the 99th AGM of the Company, the Shareholders had approved the appointment of S R B C & CO LLP, Chartered Accountants (Firm Registration No. 324982E / E300003) as the Statutory Auditors of the Company, to hold office for a period of 5 (five) years from the 99th AGM of the Company till the conclusion of the 104th AGM of the Company, in terms of the applicable provisions of Section 139(1) of the Act read with the Companies (Audit and Auditors) Rules, 2014. Details of the remuneration paid to S R B C & CO LLP, Chartered Accountants, Statutory Auditors, during the financial year 2022-23 are disclosed in the Financial Statements of Company, which are part of the Annual Report.

The Auditors'' Report on the Financial Statements (Standalone and Consolidated) of the Company for the year under review, is clean and there are no qualifications in the said Report. Also, no frauds in terms of the provisions of Section 143(12) of the Act have been reported by the Auditors in their Report for the year under review.

The Notes to the Financial Statements (Standalone and Consolidated) are self-explanatory and do not call for any further comments.

11. Particulars of Loans, Guarantees or Investments under Section 186 of the Act

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act, are separately disclosed in the Annual Report, as a part of the Notes to the Financial Statements.

12. Related Party Transactions

The Company has in place a Policy on dealing with Related Party Transactions and on Materiality of Related Party Transactions which is available on the website of the Company at https://www.nerolac.com/financial/policies.html. In terms of the same, a statement in summary form of transactions with related parties in the ordinary course of business and arm''s length basis is periodically placed before the Audit Committee for its review. Omnibus approval was obtained for transactions which were repetitive in nature. Transactions entered into pursuant to omnibus approval were placed before the Audit Committee for its review during the year. Related party transactions have been disclosed in Note no. 38 to the Standalone Financial Statements.

In terms of the provisions of Section 188(1) of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 23 of the SEBI Listing Regulations, all related party transactions that were entered into, during the year under review, were in the ordinary course of business of the Company and on an arm''s length basis. There were no material related party transactions during the year. Accordingly, Form AOC-2, prescribed under the provisions of Section 134(3)(h) of the Act and Rule 8 of the Companies (Accounts) Rules, 2014, for disclosure of details of Related Party Transactions, which are “not at arm''s length basis” and also which are “material and at arm''s length basis”, is not provided as an annexure to this Report as it is not applicable.

13. Corporate Governance

The Company is in full compliance with the requirements and disclosures that have to be made in terms of the requirements of Corporate Governance specified in the SEBI Listing Regulations.

In terms of the provisions of Schedule V(C) of the SEBI Listing Regulations, a detailed Report on Corporate Governance forms part of the Annual Report. Further, a Certificate from the Statutory Auditors of the Company confirming compliance with the requirements of Corporate Governance as specified in the SEBI Listing Regulations is provided together with the Report on Corporate Governance, the same shall be considered to be an annexure to this Report.

14. Remuneration Policy

The Board of Directors has adopted a policy which deals with (i) criteria for determining qualifications, positive attributes and independence of Director and (ii) remuneration for Directors, Key Managerial Personnel and other employees (“Remuneration Policy”).

The features of the Remuneration Policy are as follows:

• The Company, while constituting the Board shall draw members with appropriate skills, experience and knowledge from diverse fields such as finance, law, management, sales, marketing, architecture, administration, research, corporate governance,

operations or other disciplines related to the Company''s business. There shall be no discrimination on the basis of gender, race, ethnicity and nationality while determining the Board composition.

• A Director shall be a person of integrity, who possesses relevant expertise and experience. He shall uphold ethical standards of integrity and probity and act objectively and constructively. He shall exercise his responsibilities in a bona-fide manner in the interest of the Company; devote sufficient time and attention to his professional obligations for informed and balanced decision making; and assist the Company in implementing the best corporate governance practices.

An Independent Director should meet the requirements of the Act and the SEBI Listing Regulations, concerning independence of directors. The Company shall also obtain certification of independence from the Independent Director in accordance with the Act and SEBi Listing Regulations.

• The remuneration paid to Whole-time Directors is subject to the limits laid down under Section 197 and Schedule V to the Act and in accordance with the terms of appointment approved by the Shareholders of the Company. The remuneration of the Whole-time Directors is determined by the Nomination and Remuneration Committee based on factors such as the Company''s performance and performance/ track record of the Whole-time Directors. The remuneration consists of Salary, Commission, Company''s contribution to Provident Fund and Superannuation Fund, House Rent Allowance (HRA), Leave Travel Allowance (LTA) and other perquisites and allowances in accordance with the rules of the Company, applicable from time to time.

• The Non-Executive Independent Directors are paid commission within the ceiling of 1% of net profits of the Company as specified in Section 197 of the Act. The commission payable to Non-Executive Independent Directors is decided by the Board, on recommendation of the Nomination and Remuneration Committee, based on a number of factors including number of Board and Committee meetings attended, individual contribution thereat etc. The Non-Executive Directors are also paid sitting fees for attending the meetings of the Board or Committee thereof within the limits prescribed under the Act.

• The objective of the policy is to have a compensation framework that will reward and retain talent.

• The remuneration will be such as to ensure that the correlation of remuneration to performance is clear and meets appropriate performance benchmarks.

• Remuneration to Key Managerial Personnel, Senior Management and other employees will involve a balance between fixed and variable pay reflecting short and long term performance objectives of the employees in line with the working of the Company and its goals. The short and long term performance objectives cover amongst various aspects industry performance, customer performance, overall economic environment, financial performance and performance on Environment, Social and Governance objectives.

• For Directors, the Performance Pay will be linked to achievement of Business Plan (achievement of short term and long-term business objective).

• For Heads of Department, the Performance Pay will be linked to achievement of functional plan which is derived from the business plan. The functional plan includes both, short-term and long-term objectives.

• For other management personnel, the Performance Pay will be linked to achievement of individual set objectives and part of this will also be linked to overall Company performance.

The Remuneration Policy is also available on the website of the Company at https://www.nerolac.com/ financial/ policies.html.

15. Risk Management Policy

The Company has identified the risk areas in its operations along with its probability and severity, department wise. An effective Risk Management Framework is put in place in the Company in order to analyze, control and mitigate risk. Risk profiling is also put in place for all the areas of operations in the Company and well integrated in the business cycle. The various risks to which the Company is exposed are disclosed as a part of Management Discussion and Analysis, hereinabove.

The Risk Management Framework of the Company comprises of Risk Management Committee and the Risk Officers.

In terms of the provisions of Regulation 21 of the SEBI Listing Regulations, the constitution of Risk Management Committee as on 31st March, 2023 is as follows:

Names of the Members	Designation
Mr. P P Shah* (Chairman of the Risk Management Committee )	Chairman and Independent Director
Ms. Sonia Singh	Independent Director
Mr. Anuj Jain	Managing Director
Mr. Jason Gonsalves	Non-board member on the Committee
Mr. P. D. Pai	Chief Risk Officer and Non-board member on the Committee

* Appointed as the Chairman of the Risk Management Committee with effect from 1st April, 2022.

16. Vigil Mechanism - Whistle Blower Policy

The Company, pursuant to Section 177(9) of the Act and Regulation 22 of the SEBI Listing Regulations, has a Whistle Blower Policy to report genuine concerns and grievances. The Policy provides adequate safeguards against victimisation of persons who use the Whistle Blower mechanism. Details with respect to implementation of the Whistle Blower Policy are separately disclosed in the Annual Report, as a part of the Report on Corporate Governance. The same is also available on the website of the Company at https://www.nerolac.com/financial/policies.html.

17. Corporate Social Responsibility

In terms of Section 135 of the Act, the constitution of the Corporate Social Responsibility (“CSR”) Committee as on 31st March, 2023 is as follows :

Names of the Members	Designation
Ms. Sonia Singh* (Chairperson of the CSR Committee)	Independent Director
Mr. Anuj Jain	Managing Director
Mr. Bhaskar Bhat #	Independent Director

* 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 '' 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 '' 66.50 Crores to '' 85 Crores and issue of

bonus shares in the proportion of 1 (One) New Equity Share of '' 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.

For and on behalf of the Board

P. P. Shah

Chairman

Mumbai, 8th May, 2023

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Mar 31, 2022

The Directors of your Company are pleased to present the 102nd Annual Report and the Audited Financial Statements (Standalone and Consolidated) for the year ended 31st March, 2022 (“year under review / FY 2021-22”). The section on Management Discussion and Analysis includes a review of the financial performance of the Company - Financial Highlights of the Company''s 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 Introduction

Established in 1920, Kansai Nerolac Paints Limited (“KNPL”) is a subsidiary of Kansai Paint Co., Ltd., Japan (“KPJ”). Apart from operations in India, KNPL has subsidiaries in Nepal, Sri Lanka and Bangladesh through acquisitions and joint ventures.

KNPL (“the Company”) is one of India''s largest Coatings companies with leadership in industrial coatings. It is an acknowledged leader in Automotive Coating and Powder Coatings and has a sizeable presence in General Industrial

and High Performance coatings as well. In the Decorative segment, KNPL is a leading player and is amongst the top 3 players in the country. It has steadily grown its presence in new and niche segments that the Company entered, such as High-End Wood finish, Construction chemicals, Auto Refinish, and Coil coatings. These forays have helped KNPL expand its portfolio of products and offerings in the market.

With IT, R&D and Manufacturing Technology as strategic drivers, KNPL has been making rapid progress on driving an organisation-wide agenda to boost customer responsiveness, efficiency, speed and productivity. It has rolled out several IT applications for internal and external stakeholders (channel partners, painters and employees) for deeper connect and engagement. The Company launched a new brand proposition “Paint ” as part of its offering to consumers.

KNPL is one of the most trusted brands in the industry and stands for quality, ingenuity, and excellence. It further plans to advance towards the future with the purpose, vision and brand promise of KNPL. With an intention of winning the hearts of the customers through an expanded product portfolio and through a focus on sustainability, it displays its evolution into a better Company - the Nerolac of tomorrow.

Industry Progress

FY 2021-22 came with a wave of incidents including the effect of COVID-19 pandemic. The year began in a positive manner in April but as we moved ahead through the month, the second wave of COVID-19 hit us. The first quarter was impacted due to the pandemic. In the 4th quarter, the world encountered war between Ukraine and Russia. Due to this, businesses encountered high inflationary pressures on account of crude oil, as well as, high volatility in Forex. The global Chip Shortage in the Auto Industry led to reduced production of cars ultimately impacting the automotive paint industry.

Financials

A summary of the Company''s standalone financial results for the year ended 31st March, 2022 (FY 2021-22) vis-a-vis standalone financial results for the previous year FY 2020-21, is as under:

		'' in Crores
	2021-22	2020-21
Revenue from Operations..........	5948.90	4770.90
Profit before Depreciation, Interest, Exceptional item and Tax............	647.34	843.53
Less: Depreciation and Amortisation...............................	153.82	149.01
Profit Before Interest, Exceptional Item and Tax...............................	493.52	694.52
Less: Interest.............................	9.87	8.48
Add: Other Income ....................	32.86	38.85
Profit before Exceptional item and Tax ..............................	516.51	724.89
Less : Exceptional Item .............	11.39	10.82
Profit Before Tax ........................	505.12	714.07
Less : Tax Expenses	130.79	183.47
Profit After Tax ...........................	374.33	530.60
Other Comprehensive Income ...	2.51	0.27
Total Comprehensive Income for the year ......................................	376.84	530.87

Revenue from Operations for the year aggregated to '' 5948.90 Crores as compared to '' 4770.90 Crores for the previous year, reflecting a growth of 24.7%.

Unprecedented very high inflation was seen in all major categories of raw materials, resulting in substantial increase in material cost. Raw material prices also increased due to global shortages and invoking of force majeure clause by global MNCs. Currency also depreciated during the year which further impacted raw material prices.

Gross margins were severely affected mainly in case of industrial business due to high inflation not compensated by corresponding increase in sales price.

Operating costs were kept under control by various cost reduction initiatives across all functions. Employee Benefits Expense includes provision made towards retirement

benefits to Executive Directors of '' 24.22 Crores for the year. Overheads as a percentage of net revenue were lower at 13.9% compared to 14.2% of previous year.

PBDIT for the year was lower at '' 647.34 Crores compared to '' 843.53 Crores reflecting a de-growth by 23.3%.

Depreciation for the year was at '' 153.82 Crores, which is slightly higher compared to the previous year.

Other income was lower at '' 32.86 Crores as compared to '' 38.85 Crores of the previous year.

Exceptional item represents impairment of investment in subsidiary viz. Kansai Paints Lanka (Private) Limited amounting to '' 11.39 Crores (Previous Year: '' 10.82 Crores) after taking into account its past performance, current change in economic and market conditions consequent to the severe detoriation of political and economic condition, currency devaluation and very high inflation.

PBT for the year before exceptional item was '' 516.51 Crores as compared to '' 724.89 Crores of the previous year reflecting a de-growth of 28.7% over previous year. PAT is lower at '' 374.33 Crores compared to '' 530.60 Crores reflecting de-growth of 29.5%.

There is no amount proposed to be transferred to any reserves.

The Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013, during the year.

There are no significant or material orders passed by any Regulators, Courts or Tribunals against the Company which could impact the going concern status and Company''s operations in future. There is no corporate insolvency resolution process initiated under the Insolvency and Bankruptcy Code, 2016. There has been no failure to implement any Corporate Action.

There has been no change in the nature of business during the year. There have been no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this Report.

Dividend

The Board has recommended a final dividend of 100% ('' 1.00 per share) for the year, in addition the Company had declared interim dividend of 125% ('' 1.25 per share) paid on 22nd November, 2021. Accordingly, the total dividend is 225% ('' 2.25 per share) for the financial year ended 31st March, 2022 as compared to total dividend of 525% ('' 5.25 per share) including Special Dividend of 200% ('' 2.00 per share) declared last year.

Merger

The National Company Law Tribunal, Mumbai Bench and Ahmedabad Bench have approved the Scheme of Amalgamation (“the Scheme”) of Marpol Private Limited and Perma Construction Aids Private Limited (''Transferor Companies''), wholly-owned subsidiaries, with the Company (''Transferee Company''). Pursuant to necessary filings with the concerned Registrar of Companies, the Scheme has become effective from 21st October, 2021. The appointed date of the Scheme is 1st July, 2019. Accordingly, the amalgamation has been accounted under the ''pooling of interests'' method in accordance with Appendix C of Ind AS 103 ''Business Combinations under common control'' and comparatives have been restated to give effect of the amalgamation from the beginning of the previous year. The impact of amalgamation is not material to the standalone financial results of the Company.

Key Financial Ratios
Key Ratios	2021-22	2020-21	Difference	% Change
Debtors Turnover (No. of Days).............	41	43	-2	-4.7%
Inventory Turnover (No. of Days)...............	117	127	-10	-7.9%
Interest Coverage Ratio .........	66	99	-33	-33.3%*
Current Ratio.............	2.91	2.96	-0.05	-1.65%
Debt Equity Ratio.......	0.02	0.02	0.0	8.1%
Operating Profit Margin (%)........	10.9%	17.7%	-6.8%	-38.4%*
Net Profit Margin (%) .	6.4%	11.2%	-4.8%	-43.0%*
Return on Equity.........	9.1%	13.5%	-4.4%	-32.6%*

*Change is mainly due to unprecedented inflation resulting in compression in margins during the financial year.

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 has 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

The Company''s turnover was at '' 110.42 Crores compared to '' 69.98 Crores of the previous year. EBDITA for the year de-grew to 1.7% as compared to 3.1% of the previous year. The Company incurred a net loss of '' 3.69 Crores as compared to '' 3.71 Crores during the previous year. Company has the plans to expand this business and become a noticeable player in this category.

Overseas Subsidiaries:

Operations in Nepal

During the year, the turnover of KNP Japan Private Limited, the subsidiary of our Company in Nepal, was at '' 84.00 Crores as compared to '' 68.46 Crores of the previous year. EBDITA for the year decreased to 13.6% from 16.1% on Y-o-Y basis. PAT is '' 9.08 Crores as compared to '' 10.24 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 '' 23.71 Crores

as compared to '' 15.17 Crores during the previous year. The Company''s net loss has been widened to '' 17.64 Crores during the year as compared to net loss of '' 7.68 Crores during the previous year due to unprecedented inflation and economy crises in Sri Lanka.

Operations in Bangladesh

The turnover of our subsidiary in Bangladesh, Kansai Paints (Bangladesh) Limited (Formerly known as RAK Paints Limited) for the year was '' 230.54 Crores as compared to '' 163.52 Crores in the previous year. EBDITA for the year de-grew to -1.7% from 2.9% on Y-o-Y basis. The Company incurred a net loss of '' 22.41 Crores during the year as compared to net loss of '' 6.09 Crores during the previous year.

Consolidated financial statements of the Company as on 31st March, 2022, are 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, 2022, 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 website of the Company i.e. www.nerolac.com.

Segment-wise performance

KNPL has only one segment of activity, namely “paints”, in accordance with the definition of “Segment” covered under Indian Accounting Standards (Ind AS) 108 on Operating Segments. The performance of the Company is discussed in this Report.

Marketing

Decorative

The Nerolac Brand focusses on continuing to expand its product portfolio as per the evolving preferences of the consumer. Numerous new, high-end products at premium and economy segments have been launched and promoted through a lot of unique marketing initiatives in the FY 2021-22.

The Company focussed on increasing its distribution

network with opening of new dealers and also accelerating the CCD machine (Colorant Dispenser) installations. In the rural markets, the Company introduced distributor model for deeper penetration.

In the influencer category, it rolled out initiatives to be a preferred partner through enhanced loyalty programs, training workshops and painter meets. It also rolled out an app for influencers to digitise the painter journey including real-time redemption of loyalty points.

Based on consumer insights, the Company''s new product strategy centred on evolving consumer needs and preferences and as a result, a new brand expression “Paint ” was introduced during the year.

The Company witnessed high material price inflation

during the year and had to take series of price increases to offset the inflation and maintain profitability.

Unique Brand Positioning

This year, the Company has envisioned its new brand expression as PAINT . This expression stands for its sentiment to offer more to its customers i.e. paint with added benefits. Paint is KNPL''s commitment to provide its consumers with unique products that go beyond offering thousands of colourful options. The features built into the Company''s world-class products offer benefits that resonate with emerging consumer needs and preferences.

The Company has positioned the brand with unique products that live up to the Paint promise enabled by Japanese technology. It has also brought back the popular and memorable Nerolac jingle. The Japanese woman and couple showcase an active role played by the lady - acknowledging the growing role of women in decision-making in all aspects around home.

New Products

Understanding the needs of customers and their unique requirements, the Company launched multiple products with characteristics that are combining the brand promise of “Healthy Home Paints” and the new brand expression “PAINT ”. KNPL''s efforts in R&D and new product development is focussed not just on paint performance, but also the safety and well-being of the consumer and the environment.

As part of KNPL''s new product strategy, it launched “Excel Mica Marble Stretch & Sheen”, a product that offers a 6-year waterproofing warranty at a compelling price point and solves a very pertinent problem of cracks on exterior walls.

In the Interior space, KNPL launched Beauty Gold Washable, which offers unique anti-bacterial and stain resistance properties.

In enamels, KNPL has launched a revolutionary product “Nerolac PU Enamel 10 in 1”. The product offers excellent gloss and finish and offers a host of relevant benefits never offered in this category. KNPL is focussing on efforts to adapt to the changing market and ensuring it develops sustainable products. As a result, it has recently launched Zinc Yellow Metal Primer (Chrome Free). The product gives long-lasting rust-free performance.

KNPL has introduced a paint for ceilings i.e. Beauty Ceilings Emulsion, which imparts a smooth finish and has low spatter thus resulting in reduced wastage during application.

Strengthening New Business

KNPL has been steadily making investments in the new businesses of Adhesives, Construction Chemicals and High-end Wood Finishes. It has adopted a multi-pronged approach to strengthen them and increase market share. The Company focussed on increasing product range, introduce new applications, expand distribution network, enhance influencer programmes and deepen engagement with consumers.

For Wood Coatings, KNPL has a complete range of products and are present in PU, Polyester, Melamine and NC Coatings. The PU range has been expanded by introducing 2K PU Interior. Tinting machines were installed at dealer counters for tintable range of products. The Company plans to launch more products in PU range leveraging its collaboration with the Italian company ICRO Coatings. For its NC range, KNPL developed sustainable and environment-friendly products, which were awarded REACH certification. The distribution network was expanded and influencer participation was significantly increased.

For Construction Chemicals, KNPL with its acquisition of Perma, is focussed on providing a holistic product range to the customers through synergy between its paint and construction chemical portfolio. During the year, KNPL

has launched 3 new products under general waterproofing category. With this, it has an entire range of construction chemicals consisting of General waterproofing, General repairs, Tiling, Admixture, High end waterproofing, sealants, structural repairs, flooring, industrial grouts and Waterproof putty. During the year, drives were undertaken for increasing channel participation as well as increasing reach through expanded dealer network. Also, initiatives were launched for influencers to increase their participation. Going forward, the brand - Nerolac Perma, will focus on both retail & projects with an enhanced product range, channel expansion and adding newer waterproofing technologies to provide superior solutions to the customers.

For Adhesives, KNPL has a complete range of products covering both white-based and rubber-based adhesives. Under white-based, it is present in premium, mid-tier and economy segments with distinctive product features such as heat resistant, water resistant and waterproof. The brand includes Nerofix, Gold, Nerofix Super, Smart & Aqua Smart. Masking tape was also launched during the year. Aggressive penetration in infrastructure projects with focus on new applications for retail and industrial segments helped drive growth. Initiatives were undertaken to increase channel expansion and extraction. Launch of the carpenter app (Nerofix Super Carpenter App) attracted several carpenters to be on board and

resulted in faster disbursements. The launch of company website (www.nerofixindia.com) enhanced visibility and established better customer connect. Digital marketing and engagement on social media drove lead generation. Process optimisation initiatives were undertaken in manufacturing to increase the capacity. Also, packaging artworks were revamped for enhanced visibility and acceptance by customer.

Marketing Campaigns

KNPL took a focussed market approach for this year''s marketing plans, ensuring high brand visibility in the key markets which would also act as an enabler for the sales team. Also, the focus this year was to build product offerings and product propositions in the minds of consumers and drive awareness for key products.

Multiple brand-building campaigns were initiated throughout the year for “Beauty Gold Washable” and “Excel Mica Marble Stretch and Sheen” products.

A high decibel 360 media campaign for Beauty Gold washable was initiated to build sustained salience for the brand to build on the key proposition of “Ab Walls Rahe Saaf aur Safe” and highlight the importance of stain reduction.

Nerolac also launched a new Television commercial for Excel Mica Marble Stretch & Sheen. The key proposition of the brand - ‘Chamak pe na aaye Crack, only Nerolac'' highlights the importance of No cracks on walls through the 2X stretch ability feature backed by Japanese Technology.

Apart from this, an amplification plan was implemented for highlighting the protection features of exterior products -Excel Mica Marble & Suraksha by the means of strategic associations of weather branding with top news channels in Hindi, Telugu & Tamil, thus reinforcing KNPL''s product proposition and driving clutter-free on-air presence. KNPL partnered with big ticket properties on television like IPL, Big Boss etc., during the brand campaigns to deliver high impact with partners such as Star Sports,

Asianet and other leading channels. In its focus markets, outdoor advertising, FM radio, Newspaper and other ambient media were used to drive salience of the products being advertised.

Digital marketing also delivered higher reach and frequency for the campaigns by targeting unique audiences via YouTube, Facebook, Google and other content providers. Social media marketing was topical and focussed on building product feature and benefits in sync with the Paint approach. SEO (Search Engine Optimisation) and SEM (Search Engine Marketing) played a crucial role in providing a quantum jump in driving consumer traffic to Nerolac assets and building its product propositions.

Industrial

KNPL is an acknowledged leader in industrial coatings and specialises in providing unique and sustainable solutions to its customers. It has a state-of-the-art R&D set up and has multiple technical collaborations, which are leveraged to provide innovative products and solutions to customers.

KNPL has invested in setting up integrated plants across the country to service its customers. Strong intellectual capital coupled with multi-locational manufacturing set up has helped KNPL maintain its leadership position in the industrial paint segment.

During the year, there was unprecedented inflation in material prices and the Company had to seek a price increase from its customers. However, the price increase realised has been insufficient to offset the inflation for the industrial segment.

Industrial Marketing

This year, KNPL participated in the Global Chemical Expo Conference and B2B sessions organised by the Indian Chemical Council (ICC). The exhibition was attended by business heads, technocrats, policy makers, industry associations and trade delegations from India and abroad.

KNPL sponsored the International Automotive Design Conclave 2021, an event organised by CII and participated as a Silver Partner. The discussion was focussed on “AUTOMOTIVE DESIGN - Creating Self Reliant India”.

KNPL participated in Powdertech - Organised by Paint India in March 2022. This was a conference for powder coating manufacturers where KNPL presented and discussed on changing trends in powder coating.

Colour Trends & Promotions

KNPL participated in Colour Promotions at most of the key accounts and new colours were launched for new vehicles introduced in FY 2021-22. While achromatic tints are the most popular, customers are increasingly gravitating toward chromatic colours such as red and blue. Metallic colours are becoming more popular in the PV and 2W segments. In Greens and Blues, the EV category has developed new notions of medium saturation shades.

Automotive

During the year, as the market revived post COVID, KNPL continued to strengthen its position in major key accounts in the Automotive, Ancillary and Alloy Wheels segment.

The organisation continues to work on offering innovative technology and entry into diversified product range in Auto segment to expand horizon. Introduction of coating technologies for new substrates like Plastic, Aluminium Die Castings are leading concepts in Auto Segment and KNPL product innovations continue to lead the market.

KNPL continued to set higher benchmarks in various parameters of Quality, Cost and Delivery and this resulted in it being considered as the priority supplier across many Automotive OEMs and Ancillaries. KNPL also received Best Supplier Awards from major OEMs like Honda Motorcycles and Scooters and Isuzu Motors during the year.

In the Electric vehicle category, KNPL is present across all segments i.e. two-wheeler, three-wheeler, passenger vehicle and commercial vehicle. In tractor segment, the penetration of electric vehicle has been low.

In two-wheeler segment, which has witnessed highest growth of EV, KNPL has a formidable presence and has tapped into both existing and new entrants and partnered for paint supplies. Also, in the PV segment, the Company has partnered with major players for paint supplies. KNPL is a strong player in the EV (Electric Vehicle) segment in the country and will continue to focus on this high growth segment with value-added products and solutions.

Performance Coatings

Under Performance Coatings, the Company offers powder coatings for powder segment and liquid coatings for General Industrial segment & High Performance segments. In FY 2021-22, the Company witnessed significant growth in all three segments and gained market share.

In Powder coatings, KNPL is present in premium, popular and economy segments. In General Industrial, it caters to customers across all segments viz. Drums & Barrels, PEB, Electrical appliances, construction equipment and helmets. Under High performance coatings, it has a range of products like the C5 Fluoro Polymer Coatings, IPNet, Polysiloxane and anti-carbonation systems to meet customer needs and requirements.

Niche Business

KNPL has also witnessed significant growth in niche segments that it entered i.e. rebar coatings, super durable powder in the powder coatings. It added new customers in rebar coatings and have achieved a significant market share. It achieved good growth in powder coating for alloy wheel segment as well. In pipe coatings, amongst the new products developed this year was “Neropoxy Solvent Free Coating” for Water Pipeline Internal coatings, which has been certified by Water Regulations Approval Scheme Ltd, UK. This development places KNPL on a strong footing to enter this segment.

Coil Coatings

In coil coatings, KNPL has introduced a collection of products that provide clients with unique value. Despite the fact that the Company entered this market a few years ago, its products have gained widespread acceptance. In line with its strategy to enter premium segment in coil coatings, KNPL introduced coil coating products for appliance industries. This has gained good momentum in the market assisted by increased service availability and targeted client base expansion. Also, KNPL now has a dedicated manufacturing facility for coil coating at Sayaka.

Research and Development

Innovation and Sustainable products have been the fundamental endeavours of KNPL''s existence. With a devoted facility at Mumbai along with a satellite facility at its plants, R&D is at the core of KNPL''s strategy. This facility is directed towards creating innovative solutions catering to the ever-changing needs of its customers along with fulfilling the organisation''s sustainability agenda.

KNPL is making progress in this area by continuing to develop sustainable products that have a lower carbon footprint during their manufacturing and use phase. It is building a portfolio time and again, that offers new unique-to-category products which offer long-term value to its esteemed customers. KNPL has offered a variety of new shades, and health-conscious products offering the best value proposition to its customers. The Company has also pioneered many new concepts and innovations in decorative paints. Its technology-based products are customised for various operating environments which offer protection to many key industries like metals, chemicals and petrochemicals, among others. KNPL has also delivered on the promise to develop healthy home paints - 100% heavy metal free by design and low VOC products.

Auto Refinish

Auto Refinish business was designated as a major thrust area for the Company. It has developed a complete range of products catering to the Premium, Economy and Retail market. The key elements include new products launches, OEM approvals and greater reach through the development of the retail distribution network and body shops. The Company has created state-of-the-art Training Centres at its plants of Bawal and Hosur and conducted several Skill Improvement and Training Activities for OEMs and Body Shop painters. Also, Digital colour matching instrument was installed at R&D.

KNPL has decades of experience in designing and commissioning various customer lines to successfully run various paint products in the automotive and OEM spaces for both liquid and powder coatings. Together with deep expertise in resin technology and keen working with suppliers over many decades, KNPL has introduced many technological innovations over the years, which have helped customers improve finish, film thickness, productivity and reduce resource use based on its deep expertise and R&D strength.

Along with its technical prowess, KNPL also has a flair for ever-changing consumer preferences. KNPL''s research and development facility has a dedicated colour design studio has been designed and built especially for the colour development process. The studio gives easy access to more than 7000 new shades. The studio space is used for design research and helps in mind mapping for a better trend analysis and report. Customer presentation and shade selection takes place smoothly in the studio.

Collaboration with Kansai Paint, Japan, Kansai Paint Group Companies and other Partner

KNPL has maintained its technological leadership in industrial coatings by staying ahead of the curve with support and technical guidance from Kansai Paint Co., Ltd., Japan (KPJ), one of the global leaders in the category with decades of experience in designing and developing technology.

KNPL works closely with KPJ in developing paint and resin formulations customised to Indian customers. They also offer insights to customers on emerging shade trends across the globe, with world-class technical support to Indian customers based on experiences across the globe.

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.

The Company has a technical collaboration with Oshima Kogyo Co. Ltd., Japan. This year the product Pyrosin Stack F150, Pyrosin PX 3103 & Stack Act 250 were developed from M/s Oshima. These products offer protection from high heat and enhance the life of the substrate.

The Company has a technical collaboration with Cashew Co. Ltd., Japan, to manufacture coating for interior car application and with M/s Protech Chemicals Limited, Canada, to manufacture powder-coating products.

Development in Automotive Coatings:

In the Automotive paints sector, KNPL''s in-house R&D expertise, paired with support from Kansai Paint Japan, gives it a substantial competitive advantage.

The R&D team focusses on subject expertise and collaborates closely with clients to create long-term product roadmaps and shade designs. When combined with product and line knowledge, it also leads the effort to work closely with customers to develop unique and customised value-added and value-engineering projects that have added significant value to customers in areas such as finish, consumption reduction, productivity, and energy savings.

The Company has focussed its research efforts on sealants for passenger automobiles, which is one of the business segments it has decided to foray into. To that extent, the Company has developed and received approval for sealants for automotive clients.

Passenger Vehicle Segment

KNPL has developed high solid anti-chip primer and introduced to one of our Key customer end. This product has given VOC reduction as well as it has excellent anti-chip performance.

KNPL is a lead supplier for Metallic colours in PV Segment and various new shades have been introduced in this year. The product range is introduced in 3C-1B Technology which offers lean process, energy conservation and high productivity.

Two-wheeler Segment

In this segment where high-end bikes are on the rise, coatings performance demands are far higher than traditional coatings in terms of durability and scratch resistance. KNPL has introduced Matt Lacquer for petrol tanks of motorcycles with superior mar & scrub resistance as advancement in the segment. Its characteristics are petrol stain marks resistance, silky finish, suitability for dual tone painting, adhesion in multiple recoat system and Alkali resistance.

KNPL has launched a Coating for Rotamould Nylon Petrol tank. It is an adhesion promoter primer with High Crosslink polymeric resin system with better adhesion, Low VOC system, lower baking temperature, and excellent surface filling property as it is a porous substrate.

Commercial Vehicle Segment

High Weatherable Topcoat for three-wheelers was launched with Superior Gloss & Finish, Enhanced light fastness with improved weather ability and Superior Gloss retention and Colour retention.

KNPL has a High performance Solid Monocoat technology with high durability and chemical resistance in the CV Segment. This has resulted in better aesthetic performance of the vehicles in the field for a longer time. Further innovation in Solid monocoat technology, has reduced curing temperature by 20^oC. This has reduced carbon footprint by lower energy consumption, productivity improvement and savings to customers without any impact on performance properties. This product technology is appreciated by customers and evolved as a trendsetter in the CV Segment.

Conventional medium solids PU technology is upgraded to High Solids PU technology. This has offered low consumption, VOC reduction and productivity improvement. This has helped customers receive superior performance without losing productivity.

Key Developments in Decorative Paints:

The market forces are heavily influenced by the surrounding environment, which is hyper-dynamic in today''s world. Customer expectations in the decorative paint category are constantly evolving along with the surroundings. The demand curve has evolved from better to customised, and now from customised to customised & sustainable.

Innovating its way to adopt product standards that match the regulations of the European Union, KNPL has launched REACH certified products in the Wood Coatings

Division. This certification is intended to improve the protection of human health and the environment through the better and earlier identification of the intrinsic properties of chemical substances.

KNPL has introduced products using heavy metal free and low VOC design technology. KNPL is working on a new array of products to address the rising trend of functional products and has now developed Chrome free Yellow Metal primer for retail market. This year, the Company also introduced many products in both construction chemicals, wood finishes and adhesives, which have gained good acceptance in the market.

Key developments in Performance Coatings:

Performance Coatings are used by a range of OEMs and end-user industries to protect and enhance surfaces. KNPL has exhibited great skills and proficiency in a wide range of end-user sectors.

M/s Water Regulations Approval Scheme Ltd, UK (WRAS) has approved KNPL''s product “Neropoxy Solvent Free Coating” for Water Pipeline Internal Coating. Its suitability for use on coming in contact with water on the basis of impact on water quality, such that the water could be utilised for household purposes fulfilled the standards of “BS6920-1:2000 and/or 2014.” The product also gives thickness of 400 microns in one coat & meets Zero VOC regulations.

To offer to the society its “bit” and “best”, KNPL has also had the privilege to coat the Mumbai trans harbour bridge for

which a five coat anticorrosive system was developed and commercialised. Its top cost is Fluoro polymer based which has exterior durability. Celatect F Series Product demonstrates a strong interatomic bonding power, resulting in superior weatherability that is a step above other resins. In particular, Celatect F Series of Product features as its principal chain to provide strong binding energy to prevent degradation caused by ultraviolet light & coatings that offer long-term protection.

The Company is also working on areas such as new coatings solutions for demanding infrastructure categories like bridges, metro-rail and pipelines.

Key developments in Powder Coatings

Technological leadership in this segment has helped KNPL be the market leader in powder coatings, serving a vast array of industries such as white goods, furniture, auto ancillaries and electricals, besides others. The Company continues to be at the forefront of working closely with customers in Auto as it continues to convert a range of liquid coatings to powder coatings. KNPL has achieved chrome finish on the ceiling fans with powder coatings, successfully removing plating and thereby, reducing the toxicity caused due to the plating process. The Company has also developed a product with better UV transmission confirming with REACH requirements for one of its customers. R&D efforts are also focussed on developing various resin backbones for powder coatings for superior performance.

Key developments in Coil Coatings

New technological products such as Low Bake Coil Coatings, Uni-coats, and Super Durable Coil Coatings have been developed to create distinctiveness in this segment.

The R&D efforts of the Company are committed to ensuring market-share gain in this space even further.

Key developments in Auto Refinish

The R&D function developed products with superior performance in terms of finish, drying time, coverage and environment-friendly. The R&D team has developed a unique product Anti-Viral Clear Coat, High Gloss PU Clear with Anti-Viral Property, a novel product which is first of its kind providing Health Safety to our Customers.

Collaboration with Vendors

KNPL views its vendors as partners with whom it works to reach a win-win outcome. It works closely with its key global supplier base, numerous research institutes, and universities to generate new ideas, products, and innovations for the future through a systematic coordinated programme.

A number of futuristic, collaborative projects are undertaken with the suppliers to create mutual value. Going forward, KNPL''s focus will be to increase range of sustainable products using raw material based on renewable sources.

Instrument analysis and analytical capabilities

KNPL has a robust and high-end instrumentation laboratory for analysing complicated substances and providing systematic solutions. It also has a strong R&D team to analyse such data and add to the intellectual capital of the Company. Such analytical capabilities enables high end product development and aids in providing customer specific solutions.

Supply Chain

The pandemic continues to affect the world. In the midst of the world returning to normalcy, the Russia-Ukraine war has also caused significant disruptions.. In these dynamic, uncertain circumstances, keeping operations running has been a challenge.

The above-mentioned circumstances have led to extremely volatile crude oil prices and exchange rates and major disruption in the global supply chain. KNPL has initiated a series of measures to cope up with the situation.

In line with its strategy of being an integrated player with in-house resin, intermediate & paint manufacturing facility, KNPL has commissioned the resin facility for Industrial coating segment at Sayakha plant. An emulsion manufacturing facility for Decorative segment was also commissioned at Goindwal plant.

This year, the Company focussed on ensuring high OTIF (On Time in Full) for its Industrial customers. In Decorative business, new RDCs (Regional Distribution Centre) and efficient logistics resulted in better service standards for the customers. This was achieved while maintaining an overall balanced inventory.

On import and logistics side, KNPL received AEO certification and also introduced container tracking for

increased controls.

Even with volatile and uncertain circumstances, KNPL ensured continuity of operations for all its customers. KNPL aims “deliver on time every time” and therefore strongly focusses on offering customers world-class supply-chain capabilities, with a customer-centric approach backed by data-driven planning systems.

Information Technology

Investments in technology have been the hallmark of Nerolac''s journey throughout. With the influx of digital technology, KNPL embarked on its digital journey a couple of years back during the pre-COVID times. The organisation was prepared to reap the benefits from use of these technologies when the pandemic accelerated the process of adoption of digital technologies in the organisation.

KNPL has been making rapid progress on pushing “an organisation-wide” digitisation agenda to improve consumer responsiveness, reliability, speed and productivity. Digital initiatives have been introduced during the year across internal and external stakeholders like Dealers, Influences, Customers, Suppliers and Employees. More details about these initiatives can be referred under the Intellectual Capital section.

KNPL upgraded its IT infrastructure, moved to a new data centre and set up disaster recovery capabilities. The Company focussed on governance through enhanced cyber security and mobile security. Bulletins on IT & cyber security were shared with employees on best security practices. Also, External Verification and Vulnerability Analysis was conducted during the year under review.

People

KNPL continued to cultivate a culture of trust, confidence and transparency in which its people can thrive and prepare themselves for the future. Employee well-being has evolved into a key priority. Through the year, the Company adopted a systematic approach and a range of tools and engagement initiatives to ensure the well-being and health of its employees.

As a testimony to the initiatives taken towards making KNPL a congenial workplace, it was recognised as a “Great Place to Work” by the Great Place to Work Institute for the 2nd time. The first certification was given in the year 2019, and the second was given in 2021.

Total number of permanent employees as on 31st March, 2022 is 3105.

Pandemic and Employee Well-Being:

From the COVID-induced remote model, KNPL has seamlessly transitioned to on-site model. It has published an advisory guide on travel & work, preparing its employees for the “New normal”.

The organisation actively held vaccination drives pan-India (at all depots, offices, plants) and allotted reimbursements if vaccinated through private hospitals to accelerate the national vaccination coverage. Employees were prepared for the “New normal” by publishing an advisory guide on the coronavirus and travel to work. As per government regulations, offices were only opened to limited individuals, regular sanitisation of the premises was done and wearing a mask was made mandatory.

Competency and Capability Building:

KNPL commits to training and development of its employees right from inception as it believes in “building careers”. It has developed extensive offline and online learning programmes and training modules to help its employees not just upskill and reskill for their roles at KNPL, but also to prepare them for the changing workplace.

To make its people future-ready and purpose-driven, KNPL continues to expand organisational skills with a clear focus on functional learning priorities. Several new training modules were introduced in terms of competency enhancement. Interactive Digital Workshop was held for Decorative Sales & Marketing for improving adoption of ML App (Saathi). Learning programmes on Innovation and Design Thinking, as well as Business Acumen, were undertaken for identified employees.

Trainings related to fire-fighting & life after accident

was imparted to manufacturing personnel. Also, Project Management training was imparted to employees for cost control and timely delivery.

A rigorous training system has been developed and executed for R&D personnel to improve their skills and competencies. Various employee groups are also given leadership training. KNPL has external interventions in several functional areas where needed, either through external training or through initiatives with best-in-class organisations, to update its personnel knowledge and capability. These initiatives enlighten employees about new ideas and concepts, allowing them to better cope with environmental problems.

Various assessment tools were employed as part of the programme to provide a formal opportunity for managers and staff to grow themselves, as well as courses to pursue to improve competency in specified areas.

For all managers, a three-day Annual Learning Conference (ALC) was held online. “Good to Great” was the theme of the Annual Learning Conference. The learning conference was important because it provided a forum for representatives from all functions to communicate about the Company''s success as well as future plans and direction.

KNPL has strengthened the talent management programme by evaluation of critical positions and creating consideration set for succession planning.

Communication Platforms:

Transparency in communication has always been a priority for the Company. The management concentrated on building a friendly and inclusive environment in the organisation by ensuring frequent connect programmes with employees to discuss various subjects with the aid of digital initiatives and strategies. These were interactive sessions that took place both in person and virtual mode.

Performance Management:

KNPL seeks to attain the highest levels of transparency in goal-setting and objective-setting, as well as constant feedback to our employees. It supports this goal by providing employees with KRAs and performance dashboards that show how their KPIs and performance affect the overall organisation.

Community Development

KNPL as an organisation holds itself to considerable standards when it comes to the responsibility it owes to the community. It believes that taking collaborative action and generating answers to common problems is how it can fulfil its social obligation.

KNPL''s CSR efforts are not limited to the locations in which it works, but also extends to society at large. The Company is guided by the philosophy of contributing meaningfully to humanity''s progress by acting as a good neighbour, being thoughtful of others, and operating as a responsible corporate citizen with fervour and compassion.

KNPL aspires to be a responsible corporate citizen by proactively contributing to society''s social and economic advancement through the use of practices that go beyond traditional industry''s bounds.

The Company participates in Corporate Social Responsibility (CSR) activities that promote social advancement, with a focus on events that benefit the underprivileged and disadvantaged. Encouraging employee participation in CSR initiatives across the country also fosters a sense of societal duty on an individual level while also improving the Company''s image.

KNPL has linked its CSR programmes to the Sustainability Development Goals defined by United Nation (UNSDG''s).

The following are broad definitions for all programmes:

Rural Development / Community Development

The objective is to reach out to people by providing basic services and amenities. To do so, the organisation contributes to the local community by construction and refurbishment of school and other basic infrastructure. During the year, KNPL carried out multiple such activities. The highlight for the same during the year are Community Hall Painting Work, Community Room and construction of Boundary Wall, Pick-up Sheds, Women Empowerment. KNPL carried out a key project of “Women Empowerment in farming through livelihood intervention”, which was initiated three years ago. This project dealt with the development of farming activity amongst small, marginal land holder & landless women farmers which helped them to be financially self-dependent and also to get social recognition.

Promoting Education

KNPL runs a range of programmes in schools around its factories and depots to raise educational levels and support education in rural regions. Construction of classrooms and science laboratories, providing computers, solar inverters, clean water etc. are few initiatives carried out under the said programme.

Preventive Health Care and Sanitation

The purpose of this initiative is to create amenities that improve general health and sanitation. Multiple Good Health & Well-Being camps were held; toilets provided in schools, initiatives to provide clean drinking water were organised. KNPL extended support considering the pandemic scenario, Oxygen Concentrators were distributed. Personal Protective Equipment (PPE kits) were provided to Frontline Health workers (Equipment to Hospitals) at multiple community health centres.

Ensuring Environmental Sustainability

The Company is dedicated to helping the community conserve natural resources and maintain the environment. It has worked on a number of projects aimed at preserving the environment''s balance. Tree Plantations, Solar Energy Use, Cleanliness drive, and Painting activities were created to contribute to the quality of life on the land. In view of KNPL''s aim to become “Water Positive Organisation” by 2024-25, Pond Rejuvenation projects were carried out near the Plants. The project included pond cleaning, desilting / deepening of the pond, disposal of silt, making protection wall and tree plantation in the surrounding area.

Environment, Health and Safety

Environment, Health and Safety have always been a corner stone of KNPL''s business strategy and value system. As a socially and environmentally responsible organisation, it imbibes practices and encourage programmes that ensure social well-being and promote environmental conservation & protection.

KNPL has been placed in the top Quartile in Manufacturing Space and Rated No.1 in Paint Sector in the CRISIL ESG

compendium. It has also been recognised by S&P Global and ranked in Top Quartile of Global Chemical Industry S&P ESG Index in CSA 2021.

Safety

KNPL believes in building safety-first mindset among employees and consistent efforts are made to sensitise and raise awareness among employees in regards to varied aspects of safety. Robust Environmental and Safety Management System is in place at all KNPL industrial units. All plants have ISO 45001 certification and are equipped with adequate requisites for emergency situations. To improve emergency preparedness and foster safety culture; various drills, thematic safety trainings, contests and assessments are undertaken on a regular basis. In order to encourage open-feedback culture, KNPL conducted a Safety Culture Survey for management-level and operator-level employees during the reporting period. Further details are provided in the Occupational Health and Safety section of Human Capital.

Water Management

KNPL has set an inspiring target of becoming water positive by FY 2024-25. To do so, it has set exacting standards and management goals to achieve water stewardship and minimise overall water consumption across the firm. The Company''s aim is to reduce freshwater consumption, increase rainwater usage within factory premises, and restore water in operating areas through water replenishment initiatives. In FY 2021-22, several measures have been launched to reduce freshwater consumption and improve water efficiency within operational boundaries which has helped KNPL to reduce specific water consumption by 7% over the last FY. Special emphasis was laid on water replenishment in community areas where KNPL operates. Efforts towards water conservation are detailed out in the Water Management section of Natural Capital.

Waste Management

Judicious waste management has become a major feature and of paramount importance as the regulatory landscape is constantly evolving and new requirements are emerging. All major plants are Zero Liquid Discharge facilities. KNPL has set up Recovery units at its plants for solvent recovery and also collect powder dust emitted during charging through dust collector and powder recovery system.

KNPL follows the 3R principle for management of all types of wastes: REDUCE, REUSE & RECYCLE. Special precautions are taken to handle, store and dispose of hazardous wastes. Continuous efforts are made to minimise industrial waste through adopting and implementing varied initiatives focussing on reduction of hazardous as well as non-hazardous waste. During the year, specific hazardous waste generation decreased by 7% from the previous year.

Plastic Waste Management

In regards to plastic waste management, KNPL is abreast of the changing regulatory requirements. In terms of post-consumer plastic waste, it has initiated efforts under the provision of Extended Producer Responsibility. The Company also taken significant efforts to limit incoming plastic waste from suppliers by replacing alternative materials for plastic or utilising a supplier-set take-back system. KNPL has also initiated use of recycled plastic content in certain packing materials.

Further details on efforts to reduce waste generation and disposal are outlined in the Waste Management Section under Natural Capital.

Energy and Emission Management

During the reporting period, KNPL continued its energy-saving goal to reduce its carbon footprint by implementing a variety of energy-saving initiatives and moving to environment-friendly and cost-effective options. KNPL''s aim is to, gradually adopt new concepts and technologies which further lead to diversification of energy mix, to reduce carbon emissions and improve air quality. In conclusion, KNPL aims to become more and more energy efficient.

In FY 2021-22, 52% of total energy (power fuel heat and steam) consumed is from renewable sources. KNPL was also able to sustain its Scope 1 and Scope 2 GHG emission intensity as a result of energy saving initiatives and increasing the share of green energy. The Company has also on-boarded experts to conduct a detailed Scope 3 inventorisation in order to achieve completeness in GHG reporting and, as a result, construct a carbon reduction action plan.

Climate Change

During the reporting period, KNPL has taken concerted steps to tackle climate change. It has instituted a framework to identify risks and opportunities related to climate change. The Company is working to align and improve its disclosures with growing frameworks such as the TCFD and set a science-based target. Going forward, KNPL intends to have a robust strategy and deploy an action plan to mitigate climate change risks.

Other Air Emissions

Ambient air quality, stack emissions, and VOC levels on the shop floor and at other plant sites are evaluated on a regular basis to limit other air emissions.

Additional details on energy and emission reduction are stated in Natural Capital under the section of Energy and Emission Management.

Greenbelt Development

As a responsible organisation, KNPL conducts tree-plantation drives within and outside factory premises on various occasions round the year. The Company has a total of 53,811 trees planted within factory premises, of which 6,564 trees were planted during the reporting period. In addition, 6,760 trees were planted outside factory premises through CSR initiatives in FY 2021-22.

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 “Risk and Concerns” section of the Corporate Overview.

Outlook

KNPL expects demand to remain positive for the year. Many favourable factors like demographics, urbanisation, infrastructure thrust and lower per capita paint consumption by global standards make the outlook positive over the long term.

The industry is seeing renewed action with the entry of newer players. This augurs well for the industry as it will lead to more innovation. KNPL has taken many strategic initiatives in the areas of Branding, Technology, Products, Manufacturing, Distribution, Service, People, Digital and Governance and is confident of meeting the challenges of the emerging tomorrow.

There are challenges expected in the immediate term due to the Russia-Ukraine war scenario. However, the Company''s view is that the supply chain challenges and inflation pressures will ease off once the war subsides.

Internal Control Systems and their Adequacy

KNPL''s Internal Control Systems are designed to track and report on its day-to-day operations in order to monitor and control them. These systems also effectively monitor compliance to numerous concepts, regulations, and norms, as well as adherence 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 with additional capacity to review internal controls. Implementation of 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 Company''s operational and financial risks. In addition, the statutory auditors test the Company''s 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. KNPL''s control measures are benchmarked against the industry standards for effective control mechanisms. The internal audit programme of the Company focusses on determining whether gaps exist as a result of control design, policy design, control or process deviation, IT or regulatory compliances. It also considers which controls are capable of automation. The results of the audit are then used by the Company to improve its internal controls.

Compliances:

KNPL has developed a dashboard of key legislation changes that are notified by various government authorities and is tracked by the management with respect to requirements and implementation. The Company tracks all regulatory compliances online, through the Legatrix system. The system is updated regularly with all the changes in compliances as they occur. Online tracking and tracing of completion helps ensure strict adherence to regulations. In addition, the Company also tracks any legal cases through the Roznama system.

Cautionary Statement

Statements in this Management Discussion and Analysis section of this report describing the Company''s objectives, estimates and expectations may be “forward-looking statements”, actual results might differ materially from those either expressed or implied.

2. Directors’ Responsibility Statement

As stipulated under the provisions contained in Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013, (“the Act”), the Board of Directors, to the best of its knowledge and belief and according to the information and explanations obtained by it, hereby states that:

i. in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures;

ii. the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

iii. the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. the directors have prepared the annual accounts of the Company on a going concern basis;

v. the directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

vi. the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

3. New Projects

During financial year 2021-22, the Company has commissioned emulsion resin manufacturing facility at Goindwal Sahib, Punjab.

4. Directors

In terms of the provisions of the Act and the Articles of Association of the Company, Mr. Shigeki Takahara (holding Director Identification Number 08736626), Non-Executive Director and Mr. Takashi Tomioka (holding Director Identification Number 08736654), Non-Executive Director are liable to retire by rotation at the ensuing Annual General Meeting (“AGM”) of the Company and being eligible offer themselves for re-appointment.

Mr. H. M. Bharuka (holding Director Identification Number 00306084) retired as the Vice Chairman and Managing Director of the Company on completion of his term from the close of business on 31st March, 2022 and also resigned as a member of the Board of Directors of the Company from the same date. The Board placed on record its sincere appreciation and gratitude for the very valuable and outstanding contribution made by Mr. Bharuka during his long and fruitful association with the Company including his tenure as Deputy Managing Director,

then as the Managing Director and subsequently as the Vice Chairman and Managing Director of the Company.

The Board of Directors of the Company, at its meeting held on 18th February, 2022 pursuant to the recommendation of Nomination and Remuneration Committee of the Board, approved the appointment of Mr. Anuj Jain (holding Director Identification Number 08091524), as the Managing Director of the Company for a period of 5 (five) years commencing from 1st April, 2022 and ending on 31st March, 2027 (both days inclusive) on the remuneration and perquisites as set out in the draft Agreement between the Company and Mr. Jain, referred to in the Resolution at Item no. 6 of the Notice of AGM. In accordance with the Articles of Association of the Company, Mr. Jain as the Managing Director will not be liable to retire by rotation.

The Board of Directors of the Company, at its meeting held on 10th May, 2022 pursuant to the recommendation of the Nomination and Remuneration Committee of the Board, approved the re-appointment of Ms. Sonia Singh (holding Director Identification Number 07108778), as an Independent Director of the Company, not being liable to retire by rotation, for a second term of 5 (five) years commencing from 29th July, 2022 and ending on 28th July, 2027 (both days inclusive), subject to the approval of Shareholders of the Company vide a Special Resolution. The Board considered her rich experience and vast knowledge in the field of brand strategy, sales and marketing, the skills, capabilities and proficiency required for the role, performance evaluation and her contribution to the Board during her first term for her re-appointment.

None of the Director is disqualified as on 31st March, 2022 from being appointed as a Director under Section 164 of the Act.

All the Independent Directors on the Board have given a declaration oftheir independence to the Company as required under Section 149(6) of the Act and Regulation 16(1)(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Listing Regulations”). In the opinion of the Board, all the Independent Directors possess integrity, expertise and experience including proficiency required to be Independent Directors of the Company. They fulfill the conditions of independence as specified in the Act and SEBI Listing Regulations, comply with the Code for Independent Directors as prescribed in Schedule IV of the Act and are independent of the Management.

The Company has a Code of Conduct for Directors and Senior Management. All the Directors and Senior Management have confirmed compliance with the Code.

Details with respect to the composition of the Board, the meetings of the Board held during the year and the attendance of the Directors thereat have been provided separately in the Annual Report, as a part of the Report on Corporate Governance.

5. Key Managerial Personnel

Mr. H. M. Bharuka retired as the Vice Chairman and Managing Director of the Company on completion of his term from the close of business on 31st March, 2022.

The Board of Directors of the Company, pursuant to the recommendation of Nomination and Remuneration Committee of the Board, appointed Mr. Anuj Jain as the Managing Director of the Company for a period of 5 (five) years commencing from 1st April, 2022 and ending on 31st March, 2027 (both days inclusive).

In terms of Section 203 of the Act, the Company has the following Key Managerial Personnel: Mr. Anuj Jain, Managing Director, Mr. P. D. Pai, Chief Financial Officer and Mr. G. T. Govindarajan, Company Secretary.

6. Meetings of the Board

The Board met 5 (five) times during the financial year ended 31st March, 2022. The meeting details are provided separately in the Annual Report, as a part of the Report on Corporate Governance. The maximum interval between any two meetings did not exceed 120 days, as prescribed in the Act and the SEBI Listing Regulations.

7. Board Evaluation

In terms of the applicable provisions of the Act and the SEBI Listing Regulations, Nomination and Remuneration Committee and the Board of Directors have approved a framework, which lays down a structured approach, guidelines and processes to be adopted for carrying out an evaluation of the performance of the Directors, the Board as a whole and its Committees. The evaluation process has been separately explained in the Annual Report, as a part of the Report on Corporate Governance.

For the year under review, the Board carried out the evaluation of its own performance, its Committees and individual Directors. Evaluation results as collated and presented, were noted by the Nomination and Remuneration Committee and Board.

8. Audit Committee

In terms of the provisions of Regulation 18 of SEBI Listing Regulations read with Section 177 of the Act, the Audit Committee is constituted as follows:

Names of the Members	Designation
Mr. P. P. Shah (Chairman of	Chairman and
the Audit Committee)	Independent Director
Mr. N. N. Tata	Independent Director
Ms. Sonia Singh	Independent Director

The recommendations made by the Audit Committee to the Board, from time to time during the year under review, have been accepted by the Board. Other details with respect to the Audit Committee such as its terms of reference, the meetings of the Audit Committee and attendance

thereat of the members of the Committee, are separately provided in the Annual Report, as a part of the Report on Corporate Governance.

9. Statutory Auditors

At the 99th Annual General Meeting of the Company, the Shareholders had approved the appointment of S R B C & CO LLP, Chartered Accountants (Firm Registration No. 324982E/ E300003) as the Statutory Auditors of the Company, to hold office for a period of 5 (five) years from the 99th Annual General Meeting of the Company till the conclusion of the 104th Annual General Meeting of the Company, in terms of the applicable provisions of Section 139(1) of the Act read with the Companies (Audit and Auditors) Rules, 2014. Details of the remuneration paid to S R B C & CO LLP, Chartered Accountants, Statutory Auditors, during financial year 2021-22 are disclosed in the Financial Statements of Company, which are part of the Annual Report.

The Auditors'' Report on the Financial Statements (Standalone and Consolidated) of the Company for the year under review, is clean and there are no qualifications in their Report. Also, no frauds in terms of the provisions of Section 143(12) of the Act have been reported by the Auditors in their Report for the year under review.

The Notes to the Financial Statements (Standalone and Consolidated) are self-explanatory and do not call for any further comments.

10. Particulars of Loans, Guarantees or Investments under Section 186 of the Companies Act, 2013

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act, are separately disclosed in the Annual Report, as a part of the Notes to the Financial Statements.

11. Related Party Transactions

The Company has in place a Policy on dealing with Related Party Transactions and on Materiality of Related Party Transactions which is available on the website of the Company at https://www.nerolac.com/financial/policies.html. In terms of the same, a statement in summary form of transactions with related parties in the ordinary course of business and arm''s length basis is periodically placed before the Audit Committee for its review. Omnibus approval was obtained for transactions which were repetitive in nature. Transactions entered into pursuant to omnibus approval were placed before the Audit Committee for its review during the year. Related party transactions have been disclosed in Note no. 37 to the Standalone Financial Statements.

In terms of the provisions of Section 188(1) of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 23 of the SEBI Listing Regulations, all contracts/ arrangements/ transactions entered into by the Company with its related

parties, during the year under review, were in the ordinary course of business of the Company and on an arm''s length basis. There were no material related party transactions during the year. Accordingly, Form No. AOC-2, prescribed under the provisions of Section 134(3)(h) of the Act and Rule 8 of the Companies (Accounts) Rules, 2014, for disclosure of details of Related Party Transactions, which are “not at arm''s length basis” and also which are “material and at arm''s length basis”, is not provided as an annexure to this Report as it is not applicable.

12. Corporate Governance

The Company is in full compliance with the requirements and disclosures that have to be made in terms of the requirements of Corporate Governance specified in SEBI Listing Regulations.

In terms of the provisions of Schedule V(C) of the SEBI Listing Regulations, a detailed Report on Corporate Governance forms part of the Annual Report. Further, a Certificate from the Statutory Auditors of the Company confirming compliance with the requirements of Corporate Governance as specified in SEBI Listing Regulations is provided together with the Report on Corporate Governance, the same shall be considered to be an annexure to this Report.

13. Remuneration Policy

The Board of Directors has adopted a (“Remuneration Policy”) which deals with (i) criteria for determining qualifications, positive attributes and independence of Director and (ii) remuneration for Directors, Key Managerial Personnel and other employees.

The features of the Remuneration Policy are as follows:

• The Company, while constituting the Board shall draw members from diverse fields such as finance, law, management, sales, marketing, architecture, administration, research, corporate governance, operations or other disciplines related to the Company''s business. There shall be no discrimination on the basis of gender, race, ethnicity and nationality while determining the Board composition.

• A Director shall be a person of integrity, who possesses relevant expertise and experience. He shall uphold ethical standards of integrity and probity and act objectively and constructively. He shall exercise his responsibilities in a bona-fide manner in the interest of the Company; devote sufficient time and attention to his professional obligations for informed and balanced decision making; and assist the Company in implementing the best corporate governance practices. ¹

independence from the Independent Director in accordance with the Act and SEBI Listing Regulations.

• The remuneration paid to Whole-time Directors is subject to the limits laid down under Section 197 and Schedule V to the Act and in accordance with the terms of appointment approved by the Shareholders of the Company. The remuneration of the Whole-time Directors is determined by the Nomination and Remuneration Committee based on factors such as the Company''s performance and performance/ track record of the Whole-time Directors. The remuneration consists of Salary, Commission, Company''s contribution to Provident Fund and Superannuation Fund, House Rent Allowance (HRA), Leave Travel Allowance (LTA) and other perquisites and allowances in accordance with the rules of the Company, applicable from time to time.

• The Non-Executive Independent Directors are paid commission within the ceiling of 1% of net profits of the Company as specified in Section 197 of the Act. The commission payable to Non-Executive Independent Directors is decided by the Board, on recommendation of the Nomination and Remuneration Committee, based on a number of factors including number of Board and Committee meetings attended, individual contribution thereat, etc.

• The objective of the policy is to have a compensation framework that will reward and retain talent.

• The remuneration will be such as to ensure that the correlation of remuneration to performance is clear and meets appropriate performance benchmarks.

• Remuneration to Key Managerial Personnel, Senior Management and other employees will involve a balance between fixed and variable pay reflecting short and long term performance objectives of the employees in line with the working of the Company and its goals. The short and long term performance objectives cover amongst various aspects industry performance, customer performance, overall economic environment, financial performance and performance on Environment, Social and Governance objectives.

• For Directors, the Performance Pay will be linked to achievement of Business Plan (achievement of short term and long-term business objective).

• For Heads of Department, the Performance Pay will be linked to achievement of functional plan which is derived from the business plan. The functional plan includes both, short-term and long-term objectives.

• The above will take into consideration industry performance, customer performance and overall economic environment.

• For other management personnel, the Performance Pay will be linked to achievement of individual set objectives and part of this will also be linked to overall Company performance.

• The Remuneration Policy is also available on the website of the Company at https://www.nerolac.com/ financial/policies.html.

14. Risk Management Policy

The Company has identified the risk areas in its operations along with its probability and severity, department wise. An effective Risk Management Framework is put in place in the Company in order to analyze, control and mitigate risk. Risk profiling is also put in place for all the areas of operations in the Company and well integrated in the business cycle. The various risks to which the Company is exposed are disclosed as a part of Management Discussion and Analysis, hereinabove.

The Risk Management Framework of the Company comprises of Risk Management Committee and the Risk Officers.

In terms of the provisions of Regulation 21 of SEBI Listing Regulations, the constitution of Risk Management Committee as on 31st March, 2022 as follows:

Names of the Members	Designation
Mr. H. M. Bharuka1	Vice Chairman and
(Chairman of the Risk Management Committee)	Managing Director
Ms. Sonia Singh	Independent Director
Mr. Anuj Jain	Executive Director
Mr. Jason Gonsalves	Non-board member on the Committee
Mr. P. D. Pai	Chief Risk Officer and Non-board member on the Committee

* Mr. H. M. Bharuka retired as the Vice Chairman and Managing Director of the Company on completion of his term from close of business on 31st March, 2022 and resigned as a member of the Board of Directors of the Company from the same date.

Ms. Sonia Singh, Independent Director, has been appointed as a member of the Risk Management Committee in accordance with SEBI Listing Regulations along with Mr. P D. Pai appointed as the Chief Risk Officer and member, with effect from 5th May, 2021.

Mr. P P Shah, Independent Director, has been appointed as the Chairman of the Risk Management Committee with effect from 1st April, 2022.

15. Vigil Mechanism - Whistle Blower Policy

The Company has a Whistle Blower Policy to report genuine concerns and grievances. The Policy provides adequate safeguards against victimisation of persons who use the Whistle Blower mechanism. Details with respect to implementation of the Whistle Blower Policy are separately disclosed in the Annual Report, as a part of the Report on Corporate Governance. The same is also available on the website of the Company at https://www.nerolac.com/financial/policies.html.

16. Corporate Social Responsibility

In terms of Section 135 of the Act, the constitution of the Corporate Social Responsibility (“CSR”) Committee as on 31st March, 2022 is as follows :

Names of the Members	Designation
Mr. H. M. Bharuka1 (Chairman of the CSR Committee)	Vice Chairman and Managing Director
Mr. N. N. Tata	Independent Director
Mr. Anuj Jain	Executive Director

* Mr. H. M. Bharuka retired as the Vice Chairman and Managing Director of the Company on completion of his term from close of business on 31st March, 2022 and resigned as a member of the Board of Directors of the Company from the same date.

Ms. Sonia Singh, Independent Director, has been appointed as the Chairperson of the CSR Committee with effect from 1st April, 2022.

The functions of the CSR Committee are to:

(a) formulate and recommend to the Board, a Corporate Social Responsibility 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 17th March, 2022 which was attended by all members of the Committee.

The Board on recommendation of 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.

17. 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 SEBI Listing Regulations, is separately provided in the Annual Report, as part of the Report on Corporate Governance.

18. Dividend Distribution Policy

The Dividend Distribution Policy of the Company

has been formulated to ensure compliance with the provisions of Regulation 43A of SEBI Listing Regulations. The Dividend Distribution Policy of the Company

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 the Dividend Distribution Policy.

19. 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 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 cases were filed under the POSH Act.

20. General Shareholder Information

General Shareholder Information is given as Item no. 11 of the Report on Corporate Governance forming part of the Annual Report.

21. 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.

22. 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.

23. Share Capital

The paid up Equity Share Capital as at 31st March, 2022 stood at ? 53.89 Crores. In terms of the Scheme of Merger by absorption of Marpol Private Limited and Perma Construction Aids Private Limited, both wholly-owned subsidiaries of the Company, with the Company and as directed by the National Company Law Tribunal, Mumbai Bench, the Authorised Share Capital of the Company increased from ? 60,00,00,000 (Rupees Sixty Crores) to ? 66,50,00,000 (Rupees Sixty Six Crores Fifty Lakhs).

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 nor has granted any stock options or sweat equity or warrants.

24. Annual Return

Pursuant to Section 92(3) read with Section 134(3)(a) of the Act, the Annual Return as on 31st March, 2022 is available on the website of the Company in the following link https://www.nerolac.com/our-financial-results.html

25. 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.

26. Investor Education and Protection Fund (“IEPF”)

Transfer of Unclaimed Dividend to IEPF

During the year under review, dividend amounting to ?9.64 Lakhs that had not been claimed by the shareholders for the year ended 31st March, 2014, was transferred to the credit of IEPF as required under Sections 124 and 125 of the Act.

Unclaimed dividend as on 31st March, 2022

As on 31st March, 2022, dividend amounting to ? 2.46 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 (formerly known as TSR Darashaw 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, 2021, on the website of the Company i.e. 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, 61,790 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 2021-22. Details of such shares transferred have been uploaded on the website of the Company, i.e. 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 i.e. www.nerolac.com.

27. 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 Secretarial Auditor is annexed to this Report as Annexure 4. There is no qualification or adverse remark in their Report.

Further, in terms of the provisions of the Circular No. CIR/ CFD/CMD1/27/2019 dated 8th February, 2019 issued by Securities and Exchange Board of India, the Company has obtained the Annual Secretarial Compliance Report for the financial year ended 31st March, 2022, confirming compliance of the applicable SEBI Regulations and circulars/ guidelines issued thereunder, by the Company.

The Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

28. 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 2020-21, pertaining to products of the Company as required by the law. The Cost Audit Report submitted by the Cost Auditor

for the previous year, was clean and there was no qualification in their Report. The same was duly filed with Ministry of Corporate Affairs on 19th October, 2021.

The Company had re-appointed D.C. Dave & Co., Cost Accountants, as the Cost Auditor for the year ended 31st March, 2022, and the Cost Audit Report when submitted by them, will be duly filed with Ministry of Corporate Affairs.

Further, the Company has re-appointed D.C. Dave & Co., Cost Accountants, as the Cost Auditor for the Financial Year 2022-23, to conduct an audit of its cost accounting records pertaining to said products, at a remuneration of ? 3,00,000 plus Goods and Service tax and 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. 5 of the Notice of the 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 limits specified under Section 141 of the Act and Rules framed thereunder.

29. Business Responsibility Report

A Business Responsibility Report describing the initiatives taken by the Company from an environmental, social and governance perspective, as required in terms of the provisions of Regulation 34(2)(f) of SEBI Listing Regulations, separately forms part of the Annual Report.

30. 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 in a challenging environment.

For and on behalf of the Board

P. P. Shah

Chairman

Mumbai, 10th May, 2022

1

An Independent Director should meet the requirements of the Act and the SEBI Listing Regulations, concerning independence of directors. The Company shall also obtain certification of

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Mar 31, 2021

The Directors of your Company are pleased to present the 101st Annual Report and the Audited Financial Statements (Standalone and Consolidated) for the year ended 31st March, 2021 ("year under review / FY 2020-21").

The section on Management Discussion and Analysis includes a review of the financial performance of the Company - Financial Highlights of the Company''s standalone financial results, key financial ratios and the dividend declared / 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 Introduction

Established in 1920, Kansai Nerolac Paints Limited ("KNPL"), is one of India''s largest Coatings companies with leadership in industrial coatings. In line with its stated strategy and objective, KNPL has built organisation capabilities to expand its horizons into new product segments and new regions, while strengthening its core of technology and service orientation to provide revolutionary and best-in-class products to its customers. The Company has ventured into new segments, such as High-end Wood Coatings, Adhesives, Construction Chemicals and Hygiene Products. KNPLis one of the most trusted brands in the industry and stands for quality, ingenuity, and excellence. Apart from its primary operations in India, KNPL operates in Nepal, Sri Lanka and Bangladesh.

Marking The Centenary - 100-Year Celebrations

Founded in 1920 as Gahagan Paints and Varnish Co Ltd with a paint manufacturing unit in Lower Parel, Mumbai, KNPL crossed the glorious 100-year milestone on

2nd September 2020. The Company is now a subsidiary of Kansai Paint Co. Ltd., Japan ("KPJ"). It has been a journey of not only resilience but also pure resolve from one pandemic (Spanish Flu 1920) to another (COVID-19). The Company maintained its technological leadership over the decades through continued focus on pioneering, innovative, revolutionary and globally best-in-class products in diverse market segments. It brought world-class technology to India in the areas of automotives, powder coatings and high-performance coatings. It pioneered environment consciousness through the introduction of heavy-metal-free paints by design and low-VOC paints.

As we turn a century, we have renewed ourselves through our Purpose, Vision, Mission, Brand promise and Brand expression. We have also changed our corporate identity/logo to capture the spirit of positive change and re-evaluation that we encourage as a brand. Our new logo, highlighted by the Swirl, underlines the connect with Change (transformation highlighted by the swirling circle) and Care, underscoring our new tag line of ''Colours that Care''. The endless possibilities triggered by this marriage of Change and Care showcase the constant evolution of the Company towards something better.

Industry Progress

COVID-19 has been the most disruptive event in recent memory for the Indian paint and coatings industry. Due to the nationwide lockdown restrictions imposed to combat the spread of the COVID-19, demand was suppressed in the first half of the year.

Following the easing of COVID-19-related restrictions, demand conditions improved in the second half of the year. New construction and renovation, as well as strong holiday demand, bolstered the recovery. The manufacturing and construction sectors have also shown signs of improvement.

While raw material prices were soft during the initial months of the year, the second half of year saw inflationary pressures, mainly due to global supply-demand gaps, force majeure and shipping-line disruptions and delays.

The implementation of the COVID-19 vaccination campaign augurs well for a broad-based and well-established domestic demand recovery.

Revenue from Operations for the year aggregated to '' 4,690.00 Crores as compared to '' 4,943.17 Crores for the previous year, reflecting a de-growth of 5.1%.

Till YTD December 20 there was a deflation, however there was a steep inflation in Q4 2020-21, resulting in overall inflation for the year. Raw material prices also increased due to global shortages.

During the year, Company took major steps to reduce operating costs. Cost reduction was achieved through innovative ideas, renegotiations, and strong budgetary control. These initiatives resulted in improvement in the bottom line.

PBDIT (before exceptional item) for the year was higher at '' 833.08 Crores compared to '' 781.62 Crores reflecting a growth of 6.6%.

Depreciation for the year was at '' 138.97 Crores, which was higher compared to the previous year '' 119.88 Crores, mainly due to project capitalisation and addition in Right of Use assets.

Other income was higher at '' 38.71 Crores as compared to '' 26.86 Crores of the previous year. Increase was due to higher deployment of surplus funds in mutual funds & fixed deposits.

In the current year, we had provided for impairment loss towards our investment in subsidiary viz. Kansai Paints Lanka (Private) Limited amounting to '' 10.82 Crores.

Financial Highlights

A summary of the Company''s standalone financial results for the year ended 31st March, 2021 (FY 2020-21) vis-a-vis standalone financial results for the previous year FY 2019-20, is as under:

'' in Crores
	FY 2020-21	FY 2019-20
Revenue from Operations..........	4690.00	4943.17
Profit before Depreciation, Interest, Exceptional Item and Tax (PBDIT).........................	833.08	781.62
Less: Depreciation and Amortisation........................	138.97	119.88
Profit Before Interest, Exceptional Item and Tax ..........	694.11	661.74
Less: Finance Cost....................	7.49	5.00
Less: Exceptional Item ..............	10.82	-
Add: Other Income.....................	38.71	26.86
Profit Before Tax (PBT)...............	714.51	683.60
Less: Tax Expense ....................	183.52	148.20
Profit After Tax (PAT)..................	530.99	535.40
Other Comprehensive Income (Net of Tax) ...................	0.19	(1.02)
Total Comprehensive Income for the year....................	531.18	534.38

PBT (before exceptional item) for the year was '' 725.33 Crores as compared to '' 683.60 Crores of the previous year reflecting a growth of 6.1% over previous year. PAT is lower at '' 530.99 Crores compared to '' 535.40 Crores, resulting in de-growth of 0.8%.

There is no amount proposed to be transferred to any reserves.

The Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013, during the year.

There are no significant or material orders passed by any Regulators, Courts or Tribunals against the Company which could impact the going concern status and Company''s operations in future. There is no corporate insolvency resolution process initiated under the Insolvency and Bankruptcy Code, 2016. There has been no failure to implement any Corporate Action.

There has been no change in the nature of business during the year. There have been no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this report.

Dividend

The Board has recommended a final dividend of 400% ('' 4.00 per share) which includes special dividend of 200% ('' 2.00 per share) for the year, in addition the Company had declared interim dividend of 125% ('' 1.25 per share) paid on 27th November, 2020. Accordingly, the total dividend is 525% ('' 5.25 per share) for the financial year ended 31st March, 2021 as compared to total dividend of 315% ('' 3.15 per share) declared last year.

Key Financial Ratios

Key Ratios	2020-21	2019-20	Difference	% Change	Explanation
Debtors Turnover (No. of Days)...	45	42	3	7.1%
Inventory Turnover (No. of Days)....	114	118	-4	-3.4%
Interest Coverage Ratio................	93	132	-39	-29.5%	Interest cost on account of lease accounting as per Ind AS 116.
Current Ratio...	3.0	3.4	-0.4	-11.3%
Debt Equity Ratio................	-
Operating Profit Margin (%).......	14.6%	15.7%	-1.1%	-6.8%
Net Profit Margin (%).......	11.3%	10.8%	0.5%	4.5%
Return on Net Worth (%)..	13.0%	14.1%	-1.1%	-8.0%

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 has 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

a. Marpol Private Limited

The Revenue from Operations was lower at '' 58.01 Crores as compared to '' 59.03 Crores of the previous year. PBDIT for the year stood at 9.5%. Profit After Tax (PAT) is '' 2.63 Crores (FY 2019-20: '' 2.90 Crores).

b. Perma Construction Aids Private Limited

The Revenue from Operations was at '' 35.94 Crores compared to '' 35.23 Crores of the previous year. PBDIT for the year increased to 13.3% from 9.7%. Profit After Tax (PAT) is '' 3.52 Crores (FY 2019-20: '' 2.28 Crores).

c. Nerofix Private Limited

Nerofix Private Limited (Nerofix) started operations in December 2019 and achieved Revenue from Operations of '' 69.98 Crores in FY 2020-21. PBDIT for the year was at 3.1%. Nerofix incurred a loss of '' 3.71 Crores during the year. Nerofix has plans to expand this business and become a noticeable player in this category.

d. Merger of wholly-owned subsidiaries with the Company The Company had conducted National Company Law Tribunal (NCLT) convened meeting of the members of the Company on 20th October, 2020, wherein the consent of the members had been obtained for the merger of Marpol Private Limited and Perma Construction Aids Private Limited, both wholly- owned subsidiaries of the Company, with the Company. The merger process is on and petition for merger has been filed by the Company and the subsidiaries with NCLT.

Overseas Subsidiaries:

a. Operations in Nepal

During the year, the Revenue from Operations of KNP Japan Private Limited, the subsidiary of the Company in Nepal, was lower at '' 68.46 Crores as compared to '' 85.09 Crores of the previous year. PBDIT for the year improved from 16.1% to 18.0% on Y-o-Y basis. Profit After Tax is '' 10.24 Crores as compared to '' 10.34 Crores in the previous year.

b. Operations in Sri Lanka

The Revenue from Operations of our subsidiary in Sri Lanka, Kansai Paints Lanka (Private) Limited (KPLPL) for the year was '' 15.17 Crores as compared to '' 12.19 Crores during

the previous year. KPLPL incurred a loss of '' 7.68 Crores during the year as compared to loss of '' 10.00 Crores during the previous year. During the year, the Company has made additional equity infusion of '' 12.00 Crores.

c. Operations in Bangladesh

The Revenue from Operations of our subsidiary in Bangladesh, Kansai Nerolac Paints (Bangladesh) Limited (Formerly known as RAK Paints Limited) (KNPBL) for the year was '' 163.52 Crores as compared to '' 135.30 Crores in the previous year. PBDIT for the year improved from 2.9% to 6.0% on Y-o-Y basis. KNPBL incurred a loss of '' 6.09 Crores during the year as compared to loss of '' 9.27 Crores during the previous year. During the year, the Company has made additional equity infusion of '' 14.34 Crores.

Consolidated financial statements of the Company as on 31st March 2021, are 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 2021, 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 website of the Company i.e. www.nerolac.com.

Segment-wise performance

KNPL has only one segment of activity, namely "paints", in accordance with the definition of “Segment” covered under Indian Accounting Standards (Ind AS) 108 on Operating Segments. The performance of the Company is discussed in this Report.

Marketing

Decorative Paints

New Long-term Roadmap for the Decorative Paints Business

The year saw KNPL re-visit its approach to the Decorative Paints market. A long-term roadmap has been evolved. As part of this initiative, the business is being restructured under verticals such as Retail for the Nerolac range

and Retail for the Soldier range, Institutional and new business segments. Various initiatives around unique to category products, markets and distribution would now be undertaken as part of the roadmap. Amongst the initiatives to be undertaken are a new thrust on rural areas as well as experimentation with new distribution models. The Company would also look at entering painting services.

Foray into new product lines and segments In line with its stated strategy, KNPL has been making strategic investments in the new businesses of Adhesives, Construction Chemicals and High-end Wood Finishes.

For Adhesives, it entered into a strategic JV with Polygel last year to set up a new company “Nerofix” to tap the B2B and B2C adhesives markets. During the year, the Company undertook many initiatives around strengthening and augmenting its product range, securing various OEM approvals, developing connect with carpenters and strengthening distribution.

For Construction Chemicals, KNPL had acquired Perma Construction Aids Private Limited. It also launched a range of products under the Nerolac Perma Brand.

During the year, many products were introduced, and distribution strengthened as KNPL sharpened its strategic focus in this segment. With these investments, KNPL can confidently move ahead on the path of becoming a significant player in this space.

For High-end Wood Coatings, KNPL had inked an agreement with the Italian company ICRO Coatings. The product range has gained significant traction during the year. To ensure a strong presence in wood coatings, the Company is augmenting its wood-coatings manufacturing capability through a new facility at Jainpur.

A separate organisation structure has been put in place to drive these businesses.

Product Launches in Health & Hygiene

Keeping to its brand promise of "Colours that Care”, KNPL is dedicated to developing products in the segment of health & hygiene. It launched India''s first anti-viral paint, Nerolac Excel Virus Guard, with Japanese Shiqui technology. The product has excellent antiviral properties and efficacy against different viruses.

KNPL introduced another ground-breaking innovation with the launch of Nerolac Excel Multi-Surface Protection Sheets providing anti-viral and anti-bacterial protection for highly-used surfaces. The product has been made with Japanese technology and launched on e-commerce and rolled out in select paint-dealer channels.

Marketing Campaign

During the year, KNPL strengthened its Economy Emulsion Portfolio for Interiors and Exteriors, through a variety of launches. In addition, it introduced Suraksha Dust Resist and Beauty Gold - washable and anti-bacteria.

In the Soldier range of products, catering to the lower end of the market, KNPL strengthened its portfolio through the launch of emulsions. It also introduced CCD machines for its dealers carrying the Soldier range of products. The Floor Coatings and Metallic ranges introduced last year have

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In Construction Chemicals, KNPL has strengthened its product range through the introduction of products such as Damp Protect, Magic Boost, Perma Super 2K and Waterproof Latex.

KNPL has been in forefront in providing healthy and sustainable solutions to customers. It realised the harmful effects of lead and introduced lead-free decorative paints back in 2008. In 2010, it was the first company to introduce eco-friendly and low-VOC paints. The new brand positioning of "Colours that Care" resonates with our philosophy of care and accountability.

Keeping to its brand promise, KNPL launched a series of digital films, titled ''Aaj Careful toh Kal Colourful'' to spread the message that we need to be careful in the context of the pandemic situation which has gripped the whole world. The campaign was also amplified across television and radio. An industry-first podcast series on Aaj Careful toh Kal Colourful was also launched on Spotify as a part of the campaign.

Influencer Activities

KNPL believes in equitable growth and development of the whole value chain; the painter community is a crucial partner in this value chain. The Company went an extra mile to support this community during the pandemic crisis. It initiated Aatmanirbhar training for painters in which they were trained for home-sanitisation services, creating alternative sources of income in the absence of fewer painting jobs, and adding one more skill to their profession. 500 painters were trained in Delhi and Ghaziabad and were given a sanitisation kit along with a Nerolac disinfectant. Several online training programmes were also conducted during lockdown, benefiting 4,000 painters. Safety kits were provided to one lakh painters.

KNPL launched a unique crowd-sourcing initiative for painters, called "Paint their Future". This was unique and a one-of-its-kind programme for painters where stakeholders across the value chain were tapped to support this community during the pandemic crisis. A '' 25 Lakh COVID fund was generated through this painters'' welfare programme.

Industrial

KNPL specialises in distinctive services for industrial customers based on decades of know-how and experience working with most automotive lines in India.

Due to the pandemic and lockdowns, factories were completely shut down. KNPL engaged with all customers to ensure smooth and safe shutdown of their production lines. Later, the factories were gradually given permissions by the Authorities to operate at reduced rates. KNPL worked with customers to ensure a smooth start-up of their production lines. It ensured continuity even while the external environment became ever more challenging.

Automotive Coatings

During the year, KNPL gained market share among automotive customers within its existing customer base as well as through wins of new accounts. Many innovative technologies were introduced during the year.

In auto ancillaries, for automobile wheels, the products introduced by KNPL using technology from group company, Kansai Altan, Turkey, have been well accepted.

Performance Coatings

Under Performance Coatings, the Company offers liquid and powder coatings. KNPL continues to grow from strength to strength in powder coatings, and is the market leader.

Besides conventional coatings, the Company''s foray in areas like bridges and pipe coatings gained traction during the year. KNPL''s range of products like the C5 Fluoro Polymer Coatings, IPNet, Polysiloxane and anti-carbonation systems have yielded good results

In Powder Coatings, the Company renewed its focus on high-end functional powders like Rebar Coatings, heat resistant powders, super durable powders and powders for pipe coatings. KNPL has made good progress in these areas and has gained market share. Bonded metallic powders developed in the previous year and offering customers the advantages of a uniform finish and lower process costs have gained acceptance in the market.

Auto Refinish

Auto Refinish remains one of the key focus divisions under the Industrial Coatings Division. The Company continues on the growth path with strategic actions to improve market share, year-on-year.

The Premium PU brand "Retan" from Kansai Paints, Japan, is an environment-friendly paint, high-solids system offering great benefits to paint shops with increased productivity and profitability. This brand is predominantly well accepted in across the premium segment.

The Mid-Tier PU brand "Cardea", based on technology from Kansai Paints Altan, introduced last year was launched in different markets during the year. The product provides a superior finish and performance benefits for retail customers. The brand is now soaring to new heights and has now presence across the country in the retail segment.

Perfect Match is one of the flagship brands in the retail segment. The brand provides channel connect PU products and delivers quick paint-finishing solutions to end-customers. The brand is well established across the retail channel in the country.

Coil Coatings

Over the past few years, KNPL had forayed into Coil Coatings in a big way. With dedicated capacity in place, an innovative product range and agile services, KNPL has garnered market share in this segment. It introduced many innovative products which are technology-based such as low-bake coatings, uni-coats, and super durable coil coatings. During the year, KNPL innovated with products such as topcoats with anti-bacterial properties as well as Clear coats with high gloss at very low thickness. KNPL continues to work on expanding its customer base and positioning itself as a technology player in this market.

Paint Co. Ltd., Japan, one of the global leaders in the category with several decades of experience in designing and developing technologies. KNPL works closely with KPJ in developing paint and resin formulations customised to Indian customers. It also offers insights to customers on emerging shade trends across the globe, with world-class technical support to Indian customers based on experience across the globe.

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.

The Company has a technical assistance agreement with Oshima Kogyo Co. Ltd., Japan, to manufacture heat-resistant coatings; Cashew Co. Ltd., Japan, to manufacture coating products MICRON TXL SK-1 and thinner for MICRON; and Protech Chemicals Limited, Canada, to manufacture powder-coating products. The Directors record their appreciation for the co-operation from these collaborators.

Emulsions, coil coatings, rebar coatings, pipe coatings, high-end wood finishes, adhesives and construction chemicals, hygiene products, and automotive sealants are some of the product segments where the Company is now concentrating its efforts.

Leadership in Industrials Paints:

KNPL''s in-house R&D capability, coupled with partnerships, gives it a huge advantage in maintaining its technical leadership in the paints sector. The R&D team focusses on its domain expertise and collaborates closely with customers to develop long-term product roadmaps and shade concepts.

KNPL has maintained its leading position in the paint industry by staying ahead of consumer needs and providing solutions proactively. With a dedicated facility at Mumbai along with a satellite facility at its plants, R&D is at the core of KNPL''s strategy of creating customised and innovative solutions catering to the ever-changing needs of its various customers. The R&D facility focusses on not just creating solutions for today''s need but works on creating new unique-to-category products which offer long-term value to its valued customers. It has developed deep expertise to develop new products and shades with quick turnaround and offering the best value proposition to customers.

KNPL has decades of experience in designing and commissioning various customer lines to successfully run various paint products in the automotive and OEM spaces for both liquid and powder coatings. Together with deep expertise in resin technology and keen working with suppliers over many decades, KNPL has introduced many technological innovations over the years, which have helped customers improve finish, film thickness, productivity, save painting time, and reduce energy cost based on its deep expertise and R&D strength. The Company has also pioneered many new concepts and innovations in decorative paints. Its technology-based products, customised for various operating environments, offer protection to many key industries like metals, chemicals and petrochemicals, among others.

Collaboration with Kansai Paints, Japan, and Kansai Paint Group Companies and Other Collaborators

The Company has stayed ahead of the technology curve and maintains its leadership in industrial coatings. This is because of the strong collaboration and support from Kansai

R&D also leads the effort to collaborate closely with customers to develop unique and customised value-added and value-engineering projects that, when combined with product and line knowledge, have added significant value to customers in areas like finish improvement, consumption reduction, productivity and energy saving.

In the PV segment, as the European Union has banned the use of formaldehyde, which was declared a toxic substance, to fulfil this requirement, we have initiated the development of low formaldehyde products. In the 1st phase, we have implemented low formaldehyde base coats at one of our precious PV manufacturers'' unit.

In the two-wheeler sector, on the trend of introducing high-end bikes, expectations regarding coatings performance are much superior to conventional coatings with respect to durability and scratch resistance. We have introduced PU KP 200 HP Clear Coat to meet these requirements.

For commercial vehicles, we have introduced PU High Solid Top Coat, which has many benefits like increased productivity and energy saving. With this technology, a product''s superior performance can be achieved at lower baking conditions. We have also introduced zero flash off 3C-1B System, this technology product can be introduced at the existing painting set-up without any extra investment. This has helped customers for enhancement of a superior performance without losing productivity. In addition, we have implemented a common primer for ABS and PP Plastic Substrate as an inventory-reduction project

Sealants for passenger vehicles is an emerging segment where the Company has directed its research efforts. Towards that end, the Company has developed sealants

for automotive customers which has been approved. A dedicated facility is being put in place to cater to this new area.

Key Developments in Decorative Paints:

The decorative space is exciting with constantly evolving customer needs. KNPL has been bringing exciting innovations to this market segment based on technology. With products built on the platform of Healthy Home Paints, its products are heavy-metal-free by design and Low VOC. Building on the brand promise of Colours that Care, KNPL is now working to create a new basket of products that address the emerging trend of functional products. With a range of "smart" coatings, it has now developed another unique category product, Excel Virus Guard, which has various performance qualities like anti-viral, anti-bacteria and pollution abetment properties, like Ammonia, Formaldehyde, SOx and NOx.

Given the thrust of the Company in adhesives, construction chemicals and high-end wood coatings, it is rapidly developing new products which can offer differentiated value to end-customers. This year, the Company already introduced many products in both construction chemicals and adhesives, which have gained good acceptance in the market.

Key developments in Performance Coatings:

Performance Coatings help protect and beautify surfaces in a variety of OEMs and end-user Industries. KNPL has strong demonstrated skills and competency to cater to this wide variety of end-user industries.

In case of construction equipment, most of the colours are very vibrant, and achieving good colour and gloss retention is a challenge. We have developed a high-durable product

system and implemented it at one of our key customers, overcoming all challenges.

The Company is working on areas such as new coatings solutions for demanding infrastructure categories like bridges, metro-rail and pipelines.

Key developments in Powder Coatings:

Technological leadership in this segment has helped KNPL be the market leader in powder coatings, serving a vast array of industries such as white goods, furniture, auto ancillaries and electricals, besides others.

The Company continues to be at the forefront of working closely with customers in Auto as it converts liquid coatings to powder coatings. With electrical vehicles going to be the future, KNPL is working in this emerging space. It has developed a dielectric powder for use in coating the battery enclosure of 2-wheeler batteries, having the property of electrical insulation.

R&D is focussed on developing products for niche areas like rebar coatings, powders for pipe coatings, heat-resistant powders and other high-end powder coatings. R&D efforts are also focussed on developing various resin backbones for powder coatings.

Key developments in Coil Coatings:

In coil coatings, KNPL has been bringing to the market a differentiated set of products which can create differentiated value for customers. Despite entering this space only a few years ago, the Company''s products are now well accepted. In line with bringing technology leadership in this space, the Company has developed the Nero Coil anti-bacteria top-coat. These coil-coating sheets will be used for Hospitals, which will help in hygiene improvement. The R&D efforts of the Company are committed to ensuring that market-share gain in this space.

In ARF, the Company''s R&D efforts are towards creating better products for end-customers using the vast Kansai experience across the globe. Work is being done to continue to bring various factory-made shades to end-customers through the Perfect Match Range. The Company is also working to strengthen its Retan and Cardea ranges of offerings to the high end and popular PU segment.

This year, KNPL introduced an innovative Rapid Cure non-isocyanate PU primer surface, which is an isocyanate-free product for human health & safety. This product has the property of drying fast, which helps start the next process within 30 minutes and reduces the process time by around 60%.

Collaboration with vendors

KNPL considers its vendors as partners with whom it strives to achieve a win-win situation. Via a structured coordinated programme, it collaborates closely with its main global supplier base, various research institutes and academia to develop new ideas, products, and innovations for the future.

Instrument analysis and analytical capabilities

KNPL has a strong R&D talent pool and high-end instrumentation to analyse complex chemicals and provide systematic solutions, offering invaluable support to customers. The capabilities of the instrument lab have been strengthened by the addition of Atlas Ci4400 Xenon Arc Weatherometer at the R&D centre.

Supply Chain

In a year of extremely high uncertainty in the macro environment due to the pandemic, daily new challenges were faced to keep operations running. The year also saw extreme volatility in crude oil prices and exchange rates. There were a series of proactive measures taken to ensure raw-material and packing-material supplies and minimise the damage caused due to disruption in the global supply chain.

With the single agenda and passion of fulfilling customer needs, KNPL ensured continuity of operations for all its customers. At KNPL, supply chain excellence is all about putting in place a more customer-focussed and data-driven planning process to help fuel our and our customer''s growth. KNPL continues to invest in systems to offer world-class supply-chain capabilities, with a customer-centric approach backed by data-driven planning systems

Information Technology

KNPL has always been investing regularly in cutting-edge technologies to help the business gain an additional edge in the market. With the advent of the new age digital technologies, it is ready to leverage these technologies to bring in digital transformation across the organisation and reap the necessary business benefits from the use of these technologies.

The lockdown at the beginning of the year saw KNPL embrace Digital in a massive way, with the entire workforce migrating to Digital platforms to facilitate WFH.

This year, KNPL began to implement the digital roadmap it had drawn for itself. It has been making rapid progress on pushing an organisation-wide digitisation agenda to improve consumer responsiveness, reliability, speed and productivity. Some of the key digital initiatives that have been introduced for various stakeholders are:

¦ Dealers: Introducing a Dealer app, ''SAATHI'', aimed at creating a digital bridge between a dealer and KNPL.

¦ Influencers: Introducing an Influencer App, ''PRAGATI'', to create a digital connect with influencers such as painters.

¦ Sales Teams: Use of machine learning and chatbots to generate and guide regarding actionable insights for enhanced effectiveness in the marketplace.

¦ Employees: A range of apps concerning employee-training, competency-enhancement, engagement, employee well-being, and performance management through gamification.

¦ Decision-making: Dashboards were developed incorporating visual and predictive capabilities.

¦ Automation: Introducing Vendor Invoice Management for automatic bill passing.

¦ Manufacturing and R&D: KNPL had set up its first Digital factory using the latest technology at Amritsar. In manufacturing and R&D, KNPL is using advanced analytics to drive improvements in formulation development, formulation cost optimisation for new developments, asset utilisation, tinting optimisation, formulation optimisation and waste reduction.

¦ Mobility and Cloud: This year, KNPL has embraced Mobility and Cloud in a big way with applications being developed and rolled out using these platforms. This would be further enhanced in the years to come.

People

At KNPL, people are the most important asset. It is the employees of the organisation that create value. Many efforts are made to engage the energies and enthusiasm of KNPL employees in the most effective way. KNPL strongly believes that it is the employees that make the organisation successful.

KNPL strives to create an atmosphere of "trust, confidence and transparency” for employees. It believes in offering careers.

Employee well-being is an important facet of KNPL''s HR focus and, this year with the onset of the pandemic, the Company undertook many initiatives to ensure the well-being and health of its employees.

Pandemic and Employee well-being:

The COVID-19 outbreak engulfed the world in an unprecedented crisis. KNPL adapted itself quickly to the situation to ensure an “employee safety first” environment.

KNPL holds employee well-being in high regard; therefore, the corporate communications function released care bulletins. An advisory guide on corona virus, guidelines for travel to work and updated office etiquette were issued, biometric machines were discontinued and crowd-controlling measures were taken even before the implementation of the lockdown and work from home by the government.

Beginning with setting up a dedicated task-force internally to attend to employees, creating a COVID Site for employees, launching a Health and Wellness App, KNPL has tried to do its utmost for employee care. Regular interventions right through the lock-down and during the various phases of opening up, HR and the COVID taskforce ensured that

employee concerns at all levels related to self or family were heard and addressed. Employees were encouraged to work from home wherever possible and all necessary support for this was extended to make an effortless transition to the new WFH environment.

At KNPL plants, right from the beginning of the lock-down, the plants were safely shut down and subsequently safely started up, following all the safety protocols to create a sanitised and safe environment. Clear operating protocols for travel to and fro from the plants, and manuals for day-today operations were created, and employees trained.

Similar care for taken for all employees operating out of the depots, R&D and the head office. Regular health check-ups were also organised to ensure the health of its people.

Employees who were affected by COVID were provided with necessary help and aid to ensure their recovery. Help was also extended to the immediate families of the employees in need.

KNPL is a professional organisation. We believe in transparency in goals and objective-setting as well as providing continuous feedback to our employees. This is achieved through KRAs and performance dashboards for our employees, in which they can relate how their KPIs and performance impacts the overall organisation. KNPL also

believes in a shared goal towards the larger corporate goal of top line and bottom line with employees.

Taking performance management a step forward this year, the performance management system has been gamified by introducing the NPL (Nerolac Premier League) built around the popular Cricket concept of IPL.

Community Development

KNPL''s emphasis on social responsibility extends to the communities in which it works as well as society at large. The Company operates under the principle of making a meaningful contribution to the progress of humanity by behaving as a good neighbour, being considerate of others, and acting as a responsible corporate citizen with zeal and compassion. It also aspires to be a responsible corporate citizen by proactively partnering in the cultural, social, and economic growth of societies through use of creative technology, goods, and practices outside the scope of the regular industry.

The Company actively works and engages with communities around its manufacturing facilities as well as with painters and their families through a variety of interventions.

The organisation participates in Corporate Social Responsibility (CSR) programmes, focussing on societal improvement, with special emphasis on events that support the disadvantaged and vulnerable sectors of society. The Company strives for overall national growth as well as

Preventive Health Care and Sanitation

This programme''s goal is to provide facilities that enhance general health care and sanitation. Among them are health camps, the provision of toilets in villages, public buildings and schools, provision of clean drinking water and COVID-19 related activities, such as periodic sanitisation of common public areas, distribution of sanitisers and masks to the villagers.

community development. Involvement of the Company''s staff, deployed in all regions, in CSR programmes tends to inculcate in them a sense of belonging while also building a strong image of the Company.

As a responsible corporation, the Company approaches people''s social needs consciously, giving attention to the local communities where it works under different programme heads. All programmes can be broadly defined as follows:

Rural Development / Community Development

The goal is to reach out to people by offering basic facilities and amenities in the villages surrounding the plant locations/ depots. Construction and renovation of basic infrastructure of schools and child care centres.

To increase the educational level and encourage education in rural areas, the organisation implements a variety of programmes in schools near its plants and depots. Construction of classrooms and science laboratories, provision of computers, solar inverters, clean water facilities, and provision of instructional materials such as projectors, benches and tables, and inverters, among other things, are essential practices.

Ensuring Environmental Sustainability

The Company is committed to supporting the community in the preservation of natural resources and in ensuring a clean environment. It has undertaken many projects aimed at maintaining the ecological balance. These include the development of public parks, painting in village schools, plantation, tree guards and rainwater harvesting projects, to name a few.

The Company has adopted a Code of Conduct for affirmative action to provide employment opportunities for the socially disadvantaged.

Environment Health & Safety

At KNPL, environment, health, and safety (EHS), is a top priority and an integral part of the Company''s value system. We make concerted efforts to be an environmental

steward and ensure the well-being of every employee. As a responsible organisation, we continued to introduce and embrace high-quality practices and programmes to protect the environment and encourage the highest level of physical, emotional and social well-being among our employees.

Safety

During these unprecedented times, we continued to raise employee awareness and instil a safety culture across the organisation. All locations implemented appropriate safety measures, not only limited to industrial safety but also to COVID-19, and ensured 100% adherence.

The Company''s manufacturing sites, except for Amritsar, are ISO 45001-certified. The Company lays specific emphasis on periodic mock drills and fire drills. Periodic safety audits are conducted. The Company conducts operations and process reviews through Process Hazard Analysis (PHA) and Hazard and Operability (HAZOP) studies. It also has Hazard Identification and Risk Assessment (HIRA) registers at every location to track expected hazards and analyse risks.

The Company has clocked 25.7 million man-hours without lost-time injury (LTI).

Zero Accidents

In pursuance of a ''Zero Accident'' goal, thematic safety online tests, trainings and competitions like Kiken Yochi Training (KYT), Danger Experience Programme (DEP), trainings on static electricity and human-error prevention are conducted across all levels at regular intervals. Self-learning Safety Training Kiosks with customised training modules are deployed to increase competency and imbibe a safety culture among employees.

We understand behaviour plays an important role as a majority of incidents are caused due to negligence, non-adherence to standards and procedural violations. Aiming to reduce behavioural incidents, this year we have developed and introduced an in-house Behavioural-Based Safety (BBS) training module and initiated BBS observations across all plants.

We have instituted an online system to prevent unsafe conditions, report incidents and for timely closure. We have also set up safety laboratories to demonstrate and experience hazards related to specific activities. During the year, we conducted various safety-related studies interlock assessments, fire-load surveys and published a revised chemical-compatibility chart.

At KNPL, we consistently study industry-best practices and horizontally deploy them across all manufacturing locations.

In regards to water and waste management, we have adopted a two-way approach: Reduction at source and recycle & reuse.

Water Management

We have water management goals in place and set exacting standards to limit our water consumption across the organisation. The aim is to increase the utilisation of recycled and rainwater and reduce freshwater consumption. During the year, we consumed 7,800 kl of rainwater in the process. Specific water consumption in FY 2020-21 was 1.25 KL/KL of FG, compared to 1.4 KL/KL of FG in FY 2019-20, a reduction of 11% from the previous year. Of the total non-product water consumed 36% is recycled.

During the year, we have implemented various water-conservation initiatives like installation of fan-less cooling towers to reduce drift losses, faucet-type taps and flow-controllers, transition from VAM chillers to SCREW chillers, among others. This year, in addition to Lote, we have initiated the reuse of rainwater in process at Sayakha. These efforts have helped us to successfully achieve our target of reduction in specific water consumption, compared to last year.

With a long-term strategic goal of becoming a water-positive organisation, we intend to focus not only on reduction of freshwater consumption, but also on implementing watershed management projects in neighbouring villages through Corporate Social Responsibility (CSR) to increase water replenishment.

During the year, we initiated a water-footprint assessment in line with the Water Footprint Network to assess our blue, green and grey water footprint and identify opportunities for water reduction.

All plants have achieved ZERO LIQUID DISCHARGE through the installation of Ultrafiltration (UF), Reverse Osmosis (RO) and Multi-effect-Evaporator (MEE) treatment systems.

Waste Management

With the changing regulatory landscape and emerging rules, it is necessary to manage waste judiciously. Waste management is another key aspect and of paramount importance. We follow the 3R principle for management of all types of wastes, and special precautions are taken to handle, store and dispose of hazardous wastes. Continuous efforts are made to minimise industrial waste through adopting and implementing distillation-residue reduction, solvent refining, sticking-losses reduction, and sample resin reuse.

During the year, our specific hazardous waste generation decreased by 8.5% from the previous year.

We have installed bio-composting machines across all plants to convert food waste into good quality manure. We have also initiated disposal of hazardous waste through co-processing across all plants to minimise the quantum of waste sent to landfills.

Plastic Waste and Extended Producer Responsibility:

During the year, special emphasis was laid on plastic waste. In terms of post-consumer plastic waste, we have initiated efforts under the provision of Extended Producer Responsibility. Also, we have taken concerted steps to reduce incoming plastic waste from suppliers by substituting plastic with alternative materials or through a take-back mechanism set by the supplier.

Energy and Emission Management

We have continued our energy-saving agenda in FY 2020-21, making a collective effort to minimise our carbon footprint through a number of energy-saving measures and transitioning towards environmentally-friendly and cost-effective alternatives.

The aim is to gradually reduce our carbon emissions and offset unavoidable carbon emissions to achieve carbon neutrality. During the year, we continued to invest in renewable energy to ensure energy efficiency. In FY 2020-21,46% of our energy (power fuel) consumed is from renewable sources. 29% of our power consumption is from renewable sources.

Additionally, we implemented energy-saving measures, which include replacement of conventional lights with LED lighting, installation of a mist cooling tower, provision of interlocks between dust collector blowers and purging timers, timer ad sensor installation, among others.

As a responsible organisation, we conduct tree-plantation drives within and outside factory premises on various occasions at all plants round the year. With the current carbon sequestration rate, we have been able to offset 2% of our total GHG emissions.

Our Scope 1, Scope 2 and Scope 3 emissions have been brought down from 47,698 tonnes of CO2e to 41,324 tonnes of CO2e, a 13.3% reduction.

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 “Risk and Concerns" section of the Corporate Overview.

Outlook

We expect demand to remain positive for the year. Many favourable factors like demographics, nuclear families, infrastructure thrust and lower penetration of paint by global standards make the outlook positive over the long term.

The industry is seeing renewed action with the entry of newer players. This augurs well for the industry as it will lead to more innovation. KNPL has taken many strategic initiatives in the areas of Brand, Technology, Products, Manufacturing, Distribution, Service, People, Digital and Governance and is confident of meeting the challenges of the emerging tomorrow.

There are small challenges expected in the immediate term due to the second wave of COVID-19. However, with the vaccine rollout, we expect that this would be a short-term hic-cup, and the economy will bounce back immediately.

Internal Control Systems and their Adequacy

The Internal Control Systems at KNPL are intended to monitor and control its day-to-day operations through regular tracking and reporting. These systems also satisfactorily screen consistency to various principles, policies and rules, and adherence to methodology necessities.

To strengthen the systems of internal control and provide the Board of Directors with an added ability to oversee internal controls, the Company has in place an Internal Financial Control system, in accordance with the requirements of Section 134(5) (e) of The Companies Act, 2013. Implementation of 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 Company''s operational and financial risks. In addition, the Company''s systems are tested through automated tools by the statutory auditors.

Control Efficiency Index and Robust Control Index:

The Company continues to monitor its internal audit progress by measuring the Control Efficiency Index (CEI) and the Robust Control Index (RCI). The control measures at KNPL are benchmarked against standards of efficient control-mechanisms. The Company''s internal audit programme focusses on identifying whether gaps arise on account of control design, policy design, control or process deviation, IT or regulatory compliances. It also focusses on which controls can be automated. The Company in turn uses the audit findings to strengthen its internal controls.

Compliances:

KNPL has developed a dashboard of key legislation changes that are notified by various government authorities and is tracked by the management with respect to requirements and implementation.

The Company tracks all regulatory compliances online, through the Legatrix system. The system is updated regularly with all the changes in compliances as they occur. Online tracking and tracing of completion helps ensure strict adherence to regulations. In addition, the Company also tracks any legal cases through the Roznama system.

2. Directors'' Responsibility Statement

As stipulated under the provisions contained in Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013, (''the Act''), the Board of Directors, to the best of its knowledge and belief and according to the information and explanations obtained by it, hereby states that:

i in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures;

ii the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company for that period;

iii the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv t he directors have prepared the annual accounts of the Company on a going concern basis;

v the directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

vi the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

3. New Projects

The Shareholders were informed last year that the Company''s paint manufacturing unit at Goindwal Sahib, Punjab has commenced commercial production.

During the financial year 2020-21, the Company has commissioned its powder coating facility at Goindwal Sahib, Punjab, wood coating facility at Jainpur, Uttar Pradesh and Cathodic Electro Deposition facility at Sayakha, Gujarat.

4. Directors

In terms of the provisions of the Act and the Articles of Association of the Company, Mr. Anuj Jain, Whole-time Director and Mr. Hitoshi Nishibayashi, Non-Executive Director would be liable to retire by rotation at the ensuing Annual General Meeting of the Company and being eligible offer themselves for re-appointment.

None of the Directors is disqualified as on 31st March, 2021 from being appointed as a Director under Section 164 of the Act. As required by law, this position is also reflected in the Auditors'' Report.

All the Independent Directors on the Board have given a declaration of their independence to the Company as required under Section 149(6) of the Act and Regulation 16(1)(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Listing Regulations”). In the opinion of the Board, all the Independent Directors possess the integrity, expertise and experience including the proficiency required to be Independent Directors of the Company, fulfil the conditions of independence as specified in the Act and the SEBI Listing Regulations and are independent of the management and have also complied with the Code for Independent Directors as prescribed in Schedule IV of the Act.

The Company has a Code of Conduct for Directors and senior management personnel. All the Directors and senior management personnel have confirmed compliance with the said code.

Details with respect to the composition of the Board, the meetings of the Board held during the year and the attendance of the Directors thereat have been provided separately in the Annual Report, as a part of the Report on Corporate Governance.

Mr. H. M. Bharuka, Vice Chairman and Managing Director, resigned with effect from 26th June, 2020, from the Board of Directors of Kansai Paint Co., Ltd., Japan (“KPJ”), the holding company. He received a remuneration of ? 20.87 Lakhs during the year as a Non-Executive Director of KPJ.

5. Key Managerial Personnel

In terms of Section 203 of the Companies Act, 2013, the Company has the following Key Managerial Personnel : Mr. H. M. Bharuka, Vice Chairman and Managing Director, Mr. Anuj Jain, Executive Director, Mr. P D. Pai, Chief Financial Officer and Mr. G. T Govindarajan, Company Secretary.

6. Meetings of the Board

The Board met 4 (four) times during the financial year. The meeting details are provided in the Corporate Governance report that forms part of this Annual Report. The maximum interval between any two meetings did not exceed 120 days, as prescribed in the Act and the SEBI Listing Regulations.

7. Board Evaluation

In terms of the applicable provisions of the Act and the SEBI Listing Regulations, Nomination and Remuneration Committee and the Board of Directors have approved a framework, which lays down a structured approach, guidelines and processes to be adopted for carrying out an evaluation of the performance of all the Directors, the Board as a whole and its Committees. The evaluation process has been separately explained in this Annual Report, as a part of the Report on Corporate Governance.

For the year under review, the Board carried out the evaluation of its own performance and that of its Committees and the individual Directors and the evaluation results, as collated and presented, were noted by the Board.

8. Audit Committee

In terms of the provisions of Regulation 18 of SEBI Listing Regulations read with Section 177 of the Act, the Audit Committee is constituted as follows:

Names of the Members	Designation
Mr. P. P. Shah (Chairman of	Chairman and
the Audit Committee)	Independent Director
Mr. N. N. Tata	Independent Director
Ms. Sonia Singh	Independent Director

The recommendations made by the Audit Committee to the Board, from time to time during the year under review, have been accepted by the Board.

Other details with respect to the Audit Committee such as its terms of reference, the meetings of the Audit Committee and attendance thereat of the members of the Committee, are separately provided in this Annual Report, as a part of the Report on Corporate Governance.

Further, detailed information with respect to the other Committees of the Board is also provided in this Annual Report, as a part of the Report on Corporate Governance.

9. Statutory Auditors

At the 99th Annual General Meeting of the Company, the Shareholders had approved the appointment of S R B C & CO LLP, Chartered Accountants (Firm Registration No. 324982E/ E300003) as the Statutory Auditors of the Company, to hold office for a period of 5 (five) years from the 99th Annual General Meeting of the Company till the conclusion of the 104th Annual General Meeting of the Company, in terms of the applicable provisions of Section 139(1) of the Act read with the Companies (Audit and Auditors) Rules, 2014.

The Auditors'' Report on the Financial Statements (Standalone and Consolidated) of the Company for the year under review, is clean and there are no qualifications in their Report. Also, no frauds in terms of the provisions of Section 143(12) of the Act have been reported by the Statutory Auditors in their report for the year under review.

The Notes to the Financial Statements (Standalone and Consolidated) are self-explanatory and do not call for any further comments.

10. Particulars of Loans, Guarantees or Investments under Section 186 of the Companies Act, 2013

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act, are separately disclosed in this Annual Report, as a part of the notes to the Financial Statements.

11. Related Party Transactions

Related Party Transactions entered into during the year under review were approved by the Audit Committee and the Board of Directors, from time to time and the same are disclosed in the Financial Statements of the Company for the year under review. Further, pursuant to the provisions of the Act and the SEBI Listing Regulations, the Board of Directors has, on recommendation of its Audit Committee, adopted a Policy on Related Party Transactions and the said policy is available on the website of the Company i.e. https://nerolac.com/financial/policies.html.

In terms of the provisions of Section 188(1) of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 23 of the SEBI Listing Regulations, all contracts/ arrangements/ transactions entered into by the Company with its related parties, during the year under review, were in the ordinary course of business of the Company and on an arm''s length basis. There were no material Related Party transactions during the year. Accordingly, Form No. AOC-2, prescribed under the provisions of Section 134(3)(h) of the Act and Rule 8 of the Companies (Accounts) Rules, 2014, for disclosure of details of Related Party Transactions, which are "not at arm''s length basis" and also which are "material and at arm''s length basis", is not provided as an annexure to this Report as it is not applicable.

12. Corporate Governance

The Company is in full compliance with the requirements and disclosures that have to be made in terms of the requirements of Corporate Governance specified in SEBI Listing Regulations.

In terms of the provisions of Schedule V(C) of the SEBI Listing Regulations, a detailed Report on Corporate Governance forms part of this Annual Report. Further, though for better readability and easy reference of the Shareholders, a Certificate from the Statutory Auditors of the Company confirming compliance with the requirements of Corporate Governance as specified in SEBI Listing Regulations is provided together with the Report on Corporate Governance, the same shall be considered to be an annexure to this Report.

13. Remuneration Policy

The Board of Directors has adopted a Policy which deals with (i) criteria for determining qualifications, positive attributes and independence of a Director, and (ii) Remuneration Policy for Directors, Key Managerial Personnel and other employees (“Remuneration Policy”).

The features of the Remuneration Policy are as follows:

• The Company, while constituting the Board shall draw members from diverse fields such as finance, law, management, sales, marketing, architecture, administration, research, corporate governance, operations or other disciplines related to the Company''s business. There shall be no discrimination on the basis of gender, race, ethnicity and nationality while determining the Board composition.

• A Director shall be a person of integrity, who possesses relevant expertise and experience. He shall uphold ethical standards of integrity and probity and act objectively and constructively. He shall exercise his responsibilities in a bona-fide manner in the interest of the Company; devote sufficient time and attention to his professional obligations for informed and balanced decision making; and assist the Company in implementing the best corporate governance practices.

• An Independent Director should meet the requirements of the Act and the SEBI Listing Regulations, concerning independence of directors. The Company shall also obtain certification of independence from the Independent Director in accordance with the Act.

• The objective of the policy is to have a compensation framework that will reward and retain talent.

• The remuneration will be such as to ensure that the correlation of remuneration to performance is clear and meets appropriate performance benchmarks.

• Remuneration to Key Managerial Personnel, Senior Management and other employees will involve a balance between fixed and variable pay reflecting short and long term performance objectives of the employees in line with the working of the Company and its goals. The short and long term performance objectives cover amongst various aspects industry performance, customer performance, overall economic environment, financial performance and performance on Environment, Social and Governance objectives.

• For Directors, the Performance Pay will be linked to achievement of Business Plan (achievement of short term and long-term business objective).

• For Heads of Department, the Performance Pay will be linked to achievement of functional plan which is derived from the business plan. The functional plan includes both, short-term and long-term objectives.

• The above will take into consideration industry performance, customer performance and overall economic environment.

• For other management personnel, the Performance Pay will be linked to achievement of individual set objectives and part of this will also be linked to overall Company performance.

The Remuneration Policy is also available on the website

of the Company at https://nerolac.com/financial/policies.

html#scroll.

14. Risk Management Policy

The Company has identified the risk areas in its operations along with its probability and severity, department wise. An effective Risk Management Framework is put in place in the Company in order to analyze, control and mitigate risk. Risk profiling is also put in place for all the areas of operations in the Company and well integrated in the business cycle. The various risks to which the Company is exposed are disclosed as a part of Management Discussion and Analysis, hereinabove.

The Risk Management Framework of the Company comprises of Risk Management Committee and the Risk Officers.

In terms of the provisions of Regulation 21 of SEBI Listing Regulations, the Risk Management Committee is constituted as follows:

Names of the Members	Designation
Mr. H. M. Bharuka (Chairman of the Risk Management Committee)	Vice Chairman and Managing Director
Mr. Anuj Jain	Executive Director
Mr. Jason Gonsalves	Chief Risk Officer

The Risk Management Committee will be reconstituted in accordance with the amendments to the SEBI Listing Regulations.

The functional Heads are the Risk Officers of their respective functions. The Board and the Audit Committee review the effectiveness of the Risk Management framework and provide advice to the Risk Management Committee at regular intervals.

The functions of the Risk Management Committee include preparation of company-wide framework for risk management, fixing roles and responsibilities, communicating the risk management objective, giving direction for managing cyber security, drawing action plan and allocating resources, determining criteria for defining major and minor risks, deciding strategies for escalated major risk areas, updating company-wide Risk register and preparing MIS report for review of Audit Committee.

The Risk Management Framework aims to:

(a) address our Company''s strategies, operations and compliances and provide a unified and comprehensive perspective.

(b) establish the risk appetite.

(c) be simplistic and intuitive to facilitate a speedy and appropriate identification of potential and actual risks and its communication.

(d) seek escalation of the identified risk events to the appropriate persons to enable a timely and satisfactory risk response.

(e) r educe surprises and losses, foresee opportunities and improve deployment of resources.

(f) develop a mechanism to manage risks.

Systems and processes are set through the Risk Management framework, to identify, gauge and mitigate any potential risk promptly and efficiently in order to manage and control them effectively. Clearly defined work profiles and assigned responsibilities are well at place, throughout the organization, at all levels and all functions, ensuring smooth flow of information across various levels within the organization.

15. Vigil Mechanism - Whistle Blower Policy

The Company has a Whistle Blower Policy to report genuine concerns and grievances. The policy provides adequate safeguards against victimisation of persons who use the Whistle Blower mechanism. Details with respect to implementation of the Whistle Blower Policy are separately disclosed in this Annual Report, as a part of the Report on Corporate Governance. The same is also available on the website of the Company at https://nerolac.com/financial/ policies.html.

16. Corporate Social Responsibility

The Board of Directors has constituted a Corporate Social Responsibility ("CSR") Committee in terms of the provisions of Section 135 of the Act, as follows :

Names of the Members	Designation
Mr. H. M. Bharuka (Chairman	Vice Chairman and
of the CSR Committee)	Managing Director
Mr. N. N. Tata	Independent Director
Mr Anuj Jain	Executive Director

The functions of the CSR Committee are to:

(a) formulate and recommend to the Board, a Corporate Social Responsibility 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 one meeting of the CSR Committee during the

financial year, which was attended by all members of the

Committee.

The Board has also framed a CSR Policy for the Company, on the recommendations of the CSR Committee and the same is available on the website of the Company at https://nerolac.com/financial/policies.html#scroll.

Pursuant to appeal dated 30th March, 2020 by the Secretary of Ministry of Corporate Affairs for contribution to the Prime Minister''s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund), the Company had contributed a sum of ? 4 crores on 31st March, 2020 towards the PM CARES Fund. Based on the appeal as aforesaid and legal opinion, in respect of recent amendments by Ministry of Corporate Affairs in the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company has set-off excess amount expensed towards CSR in FY 2019-2020 of ? 2.43 Crores against FY 2020-2021 CSR obligations.

The Annual Report on CSR activities as required under Companies (Corporate Social Responsibility Policy) Rules, 2014, including a brief outline of the Company''s CSR Policy, is annexed to this Report as Annexure 1.

17. 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 SEBI Listing Regulations, is separately provided in the Report on Corporate Governance forming part of this Annual Report.

18. Dividend Distribution Policy

The Dividend Distribution Policy of the Company has been formulated to ensure compliance with the provisions of Regulation 43A of SEBI Listing Regulations.

The Board of Directors will assess the Company''s financial requirements, including present and future organic and inorganic growth opportunities and other relevant factors as mentioned in this policy before declaring dividend in any financial year.

The Board may consider not declaring dividend or may recommend a lower payout for a given financial year, after analyzing the prospective opportunities and threats or in the event of challenging circumstances such as regulatory and financial environment.

The Dividend (including interim and/or final) for any financial year shall be declared or paid by the Company for any financial year out of the profits of the Company for that year, arrived at after providing for depreciation in accordance with the provisions of the Act or out of the profits of the Company for any previous financial year(s) arrived at after providing for depreciation in accordance with the provisions of the Act and remaining undistributed, or out of both. The Company may, before the declaration of any dividend in any financial year, transfer such percentage of its profits for that financial year as it may consider appropriate to the reserves of the Company.

The Company shall follow the provisions of the Act and all the relevant rules and regulations issued thereunder and/ or any regulatory enactment(s) as may be applicable while declaring and paying dividend for any financial year.

The rate of Dividend shall be fixed by the Board of Directors of the Company. Final dividend proposed by the Board of Directors, if any, would be subject to the approval of the shareholders at the Annual General Meeting.

The Board of Directors shall recommend dividend in compliance with this policy, the provisions of the Companies Act, 2013 and Rules made there under and other applicable legal provisions.

The Company will consider various internal and external factors, including but not limited to the following before making any recommendation for dividends:

i. Internal factors:

a. Profitable growth of the Company and specifically, profits earned during the financial year as compared with previous years and internal budgets,

b. Cash flow position of the Company,

c. Accumulated reserves,

d. Stability of earnings,

e. Future cash requirements for organic growth/ expansion and/or for inorganic growth,

f. Contingent liabilities,

g. Deployment of funds in short term marketable

investments and/or long term investments,

h. Capital expenditure(s), and

i. The ratio of debt to equity.

ii. External factors:

a. Economic environment,

b. Cost and availability of alternative sources of financing,

c. Inflation rate,

d. Industry outlook and stage of business cycle

for underlying businesses,

e. Prevailing Taxation Policy or any amendments

expected thereof, with respect to Dividend distribution,

f. Changes in the Government policies, industry specific rulings & regulatory provisions, and

g. Any other relevant factors that the Board may deem fit to consider before declaring Dividend.

Apart from the above, the Board also considers past dividend history and track record of previous Dividends distributed by the Company. The Board may additionally recommend special dividend in special circumstances.

Subject to the applicable regulations, the Company''s retained earnings shall be applied for:

• Funding inorganic and organic growth needs including working capital, capital expenditure, repayment of debt, etc.

• Buyback of shares subject to applicable limits,

• Capitalisation of shares,

• Issue of Bonus shares,

• Payment of Dividend in future years,

• Investment in new business(es) and/or additional investment in existing business(es),

• General corporate purposes, including contingencies,

• Any other permissible usage as per law.

The Company currently has only one class of shares, viz. Equity shares, for which this policy is applicable. The policy will be subject to review if and when the Company issues different classes of shares.

The Dividend Distribution Policy of the Company is also available on the website of the Company at https://nerolac. com/financial/policies.html#scroll.

The declaration of dividend by the Company is in compliance with the Dividend Distribution Policy.

19. 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, branches, depots and manufacturing locations etc. The policy is applicable to non-employees as well i.e. business associates, vendors, trainees etc.

The Company has complied with 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 financial year under review, the Company did not receive any complaints of sexual harassment and no cases were filed under the POSH Act.

20. General Shareholder Information

General Shareholder Information is given as Item No. 11 of the Report on Corporate Governance forming part of this Annual Report.

21. 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.

22. Conservation of Energy, Technology Absorption & Foreign Exchange

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.

23. Share Capital

The paid up Equity Share Capital as at 31st March, 2021 stood at ? 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 nor has granted any stock options or sweat equity or warrants. There has been no change in the capital structure of the Company during the year.

24. Annual Return

Pursuant to Section 92(3) read with Section 134(3)(a) of the Act, the Annual Return as on March 31, 2021 is available on the website of the Company in the following link https://www.nerolac.com/our-financial-results.html

25. Details of Unclaimed Suspense Account

Details pertaining to Unclaimed Suspense Account of the Company are separately disclosed in this Annual Report, as a part of the General Shareholder Information.

26. Investor Education and Protection Fund ("IEPF")

Transfer of Unclaimed Dividend to IEPF

During the year under review, dividend amounting to ? 11.14 Lakhs that had not been claimed by the shareholders for the year ended 31st March, 2013, was transferred to the credit of IEPF as required under Sections 124 and 125 of the Act.

Unclaimed dividend as on 31^st March, 2021

As on 31st March, 2021, dividend amounting to ? 2.37 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 Darashaw Consultants Private Ltd. (formerly known as TSR Darashaw Ltd.), 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, 2020, on the website of the Company i.e. 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, 48,120 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 2020-21. Details of such shares transferred have been uploaded on the website of the Company, i.e. 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 i.e. www.nerolac.com.

27. 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 JHR & Associates is annexed to this Report as Annexure 4. There is no qualification or adverse remark in their Report.

Further, in terms of the provisions of the Circular No. CIR/CFD/CMD1/27/2019 dated 8th February, 2019 issued by Securities and Exchange Board of India, the Company has obtained the Annual Secretarial Compliance Report for the financial year ended 31st March, 2021, confirming compliance of the applicable SEBI Regulations and circulars/ guidelines issued thereunder, by the Company.

The Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

28. Cost Audit

In terms of the provisions of Section 148 of the Act, the Company had appointed D. C. Dave and Co., Cost Accountants (Registration No.000611), as the Cost Auditor to conduct an audit of its Cost Accounting Records for the financial year 2019-20, pertaining to products of the Company as required by the law. The Cost Audit Report

submitted by the Cost Auditor for the previous year, was clean and there was no qualification in their Report. The same was duly filed with Ministry of Corporate Affairs on 23rd October, 2020.

The Company had re-appointed D.C. Dave & Co., Cost Accountants, as the Cost Auditor for the year ended 31st March, 2021, and the Cost Audit Report when submitted by them, will be duly filed with Ministry of Corporate Affairs.

Further, the Company has re-appointed D.C. Dave & Co., Cost Accountants, as the Cost Auditor for the Financial Year 2021-22, to conduct an audit of its Cost Accounting Records pertaining to said products, at a remuneration of ? 2,50,000 plus Goods and Service tax and 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. vide Resolution No. 5 of the Notice of the ensuing Annual General Meeting.

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 limits specified under Section 141 of the Act and Rules framed thereunder.

29. Business Responsibility Report

A Business Responsibility Report describing the initiatives taken by the Company from an environmental, social and governance perspective, as required in terms of the provisions of Regulation 34(2)(f) of SEBI Listing Regulations, separately forms part of this Annual Report.

30. 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 in a challenging environment.

For and on behalf of the Board

P.P. Shah

Chairman

Mumbai, 7th May, 2021

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Mar 31, 2019

Dear Members,

The Directors of your Company are pleased to present the 99th Annual Report and the Audited Financial Statements (Standalone and Consolidated) for the year ended 31st March, 2019 (“year under review/ FY 2018-19”).

The section on Management Discussion and Analysis includes a review of the financial performance of the Company -Financial Highlights of the Company’s 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. Directors’ Responsibility Statement

As stipulated under the provisions contained in Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013, (‘the Act’), the Board of Directors, to the best of its knowledge and belief and according to the information and explanations obtained by it, hereby states that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed and there are not material departures;

(ii) the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company for that period;

(iii) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) the directors have prepared the annual accounts of the Company on a going concern basis;

(v) the directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

(vi) the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

2. Collaboration

The Directors record their appreciation for the contribution made and support provided by Kansai Paint Co. Ltd., Japan (KPJ), our holding company. KPJ continues to provide support on process design, quality improvement, world class technology which has helped the Company in maintaining market leadership in the industrial business including automotive coatings, by servicing existing customers better and adding new lines. KPJ also provides technology for manufacture of architectural coatings.

The Company also has Technical Assistance Agreement with Oshima Kogyo Co. Ltd., Japan for manufacturing heat resistance coatings, Cashew Co. Ltd., Japan for manufacturing coatings products MICRON TXL SK-1 and Thinner for MICRON and with Protech Chemicals Limited, Canada for manufacturing powder coating products. The Directors record their appreciation for the co-operation from these collaborators.

3. New Projects

The Shareholders were informed last year about the progress made by the Company in setting up of paint manufacturing units at Sayakha Industrial Estate in Gujarat, Goindwal Sahib near Amritsar in Punjab and a R&D Centre at Vashi, Navi Mumbai. The Shareholders were also informed last year about the project initiated by the Company at Achutapuram, Vishakhapatnam district in Andhra Pradesh to set up a paint manufacturing unit.

The Company’s paint manufacturing unit at Sayakha Industrial Estate in Gujarat became operational during the financial year. Also, the R&D Centre at Vashi, Navi Mumbai has commenced its operations during the year under review.

At Goindwal Sahib near Amritsar in Punjab, all construction activities of the unit have been completed and is likely to commence operations during the current financial year. At Achutapuram, Visakhapatnam district in Andhra Pradesh, the project is in the planning stage.

4. Directors

During the year under review, Mr. Anuj Jain was appointed as a Whole-time Director for a period of 5 years with effect from 1st April, 2018 to 31st March, 2023, in terms of the approval of the Shareholders at the 98th Annual General Meeting held on 21st June, 2018. There was no change in Directors of the Company other than the above.

In terms of the provisions of the Act and the Articles of Association of the Company, Mr. Hidenori Furukawa and Mr. Anuj Jain would be liable to retire by rotation at the ensuing 99th Annual General Meeting and being eligible offer themselves for re-appointment.

None of the Directors are disqualified for appointment/ re-appointment under Section 164 of the Act. As required by law, this position is also reflected in the Auditors’ Report.

All the Independent Directors on the Board have given a declaration of their independence to the Company as required under Section 149(6) of the Act and Regulation 16(1)(b) of the SEBI Listing Regulations. In the opinion of the Board, they fulfil the conditions of independence as specified in the Act and the SEBI Listing Regulations and are independent of the management.

Details with respect to the composition of the Board, the meetings of the Board held during the year and the attendance of the Directors thereat have been provided separately in the Annual Report, as a part of the Report on Corporate Governance.

For the year ended 31st March, 2019, Mr. H. M. Bharuka, Vice Chairman and Managing Director, received a remuneration of Rs. 77.57 Lakhs during the year as a Non-Executive Director of Kansai Paint Co. Ltd., Japan.

5. Key Managerial Personnel

Consequent to the appointment of Mr. Anuj Jain as a Whole-time Director with effect from 1st April, 2018, the Company has the following Key Managerial Personnel in terms of Section 203 of the Act : Mr. H. M. Bharuka, Vice Chairman and Managing Director, Mr. Anuj Jain, Executive Director, Mr. P. D. Pai, Chief Financial Officer and Mr. G. T. Govindarajan, Company Secretary.

6. Board Evaluation

In terms of the applicable provisions of the Act, the SEBI Listing Regulations, Nomination and Remuneration Committee and the Board of Directors have approved a framework, which lays down a structured approach, guidelines and processes to be adopted for carrying out an evaluation of the performance of all the Directors, the Board as a whole and its Committees. The evaluation process has been separately explained in this Annual Report, as a part of the Report on Corporate Governance.

During the year under review, the Board carried out the evaluation of its own performance and that of its Committees and the individual Directors and the evaluation results, as collated and presented, were noted by the Board.

7. Audit Committee

The Company has an Audit Committee in place, duly constituted in terms of the provisions of Section 177 of the Act, as follows:

Names of the Members	Designation
Mr. P. P. Shah (Chairman	Chairman and
of the Audit Committee)	Independent Director
Mr. N. N. Tata	Independent Director
Mrs. Brinda Somaya	Independent Director

The recommendations made by the Audit Committee to the Board, from time to time during the year under review, have been accepted by the Board.

Other details with respect to the Audit Committee such as its terms of reference, the meetings of the Audit Committee and attendance thereat of the members of the Committee, are separately provided in this Annual Report, as a part of the Corporate Governance Report.

Further, detailed information with respect to the other Committees of the Board is also provided in this Annual Report, as a part of the Corporate Governance Report.

8. Statutory Auditors

B S R & Co. LLP, Chartered Accountants (Firm Registration No. 101248W/W-100022), were appointed as the Statutory Auditors of the Company, for a period of 5 years from the 94th AGM till the ensuing 99th AGM. Their appointment, as Statutory Auditors of the Company, was ratified by the Shareholders at the 98th AGM held on 21st June, 2018, in terms of the then applicable provisions of Section 139(1) of the Act read with the Companies (Audit and Auditors) Rules, 2014.

The Auditors’ Report on the Financial Statements (Standalone and Consolidated) of the Company for the year under review, “with an unmodified opinion”, as given by the Statutory Auditors, is disclosed in the Financial Statements forming part of this Annual Report. The Auditors’ Report is clean and there are no qualifications in their Report. Also, no frauds in terms of the provisions of Section 143(12) of the Act have been reported by the Statutory Auditors in their report for the year under review.

The Notes to the Financial Statements (Standalone and Consolidated) are self-explanatory and do not call for any further comments.

Further, the term of B S R & Co. LLP, Chartered Accountants, as the Statutory Auditors of the Company, will expire at the ensuing 99th AGM to be held on 21st June, 2019. In terms of the applicable provisions of the Act, they will not be eligible for re-appointment as Statutory Auditor of the Company, since they have completed two terms of 5 consecutive years.

Accordingly, as per the recommendation of the Audit Committee, the Board has appointed S R B C & CO LLP, Chartered Accountants (Firm Registration No. 324982E / E300003), as the Statutory Auditors of the Company, to hold office for a period of 5 years from the ensuing 99th AGM till the 104th AGM, subject to the approval of the Shareholders at the ensuing 99th AGM. Business with respect to the same forms part of the Notice of the ensuing 99th AGM of the Company.

The Company has received a certificate from S R B C & CO LLP, Chartered Accountants, confirming that they are not disqualified from being appointed as Statutory Auditors of the Company.

9. Particulars of Loans, Guarantees or Investments under Section 186 of the Companies Act, 2013

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act, are separately disclosed in this Annual Report, as a part of the notes to the Financial Statements.

10. Related Party Transactions

All Related Party Transactions entered into during the year under review were approved by the Audit Committee and the Board of Directors, from time to time and the same are disclosed in the Financial Statements of the Company for the year under review. Further, pursuant to the provisions of the Act and the SEBI Listing Regulations, the Board of Directors has, on recommendation of its Audit Committee, adopted a Policy on Related Party Transactions and the said policy is available on the website of the Company i.e. www.nerolac.com.

In terms of the provisions of Section 188(1) of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 23 of the SEBI Listing Regulations, all contracts/ arrangements/ transactions entered into by the Company with its related parties, during the year under review, were in the ordinary course of business of the Company and on an arm’s length basis. There were no material Related Party transactions during the year. Accordingly, Form No. AOC-2, prescribed under the provisions of Section 134(3) (h) of the Act and Rule 8 of the Companies (Accounts) Rules, 2014, for disclosure of details of Related Party Transactions, which are “not at arm’s length basis” and also which are “material and at arm’s length basis”, is not provided as an annexure to this Report as it is not applicable.

11. Corporate Governance

The Company is in full compliance with the requirements and disclosures that have to be made in terms of the requirements of Corporate Governance specified in SEBI Listing Regulations.

Further, in terms of the provisions of Schedule V(C) of the SEBI Listing Regulations, a detailed Report on Corporate Governance, together with a Certificate from the Statutory Auditors of the Company confirming compliance with the requirements of Corporate Governance as specified in SEBI Listing Regulations, forms part of this Annual Report.

12. Remuneration Policy

The Board of Directors has adopted a Policy which deals with (i) criteria for determining qualifications, positive attributes and independence of a Director, and (ii) Remuneration Policy for Directors, Key Managerial Personnel and other employees (“Remuneration Policy”).

The features of the Remuneration Policy are as follows:

- The Company, while constituting the Board shall draw members from diverse fields such as finance, law, management, architecture, technical, marketing, manufacturing, corporate governance, operations or other disciplines related to the Company’s business. There shall be no discrimination on the basis of gender, while determining the Board composition.

- A director shall be a person of integrity, who possesses relevant expertise and experience. He shall uphold ethical standards of integrity and probity and act objectively and constructively. He shall exercise his responsibilities in a bona-fide manner in the interest of the Company; devote sufficient time and attention to his professional obligations for informed and balanced decision making; and assist the Company in implementing the best corporate governance practices.

- An Independent director should meet the requirements of the Act and the SEBI Listing Regulations, concerning independence of directors. The Company shall also obtain certification of independence from the Independent Director in accordance with the Act.

- The objective of the policy is to have a compensation framework that will reward and retain talent.

- The remuneration will be such as to ensure that the correlation of remuneration to performance is clear and meets appropriate performance benchmarks.

- Remuneration to Key Managerial Personnel, Senior Management and other employees will involve a balance between fixed and variable pay reflecting short and long term performance objectives of the employees in line with the working of the Company and its goals.

- For Directors, the Performance Pay will be linked to achievement of Business Plan.

- For Heads of Department, the Performance Pay will be linked to achievement of functional plan which is derived from the business plan. The functional plan includes both, short-term and long-term objectives.

- The above will take into consideration industry performance, customer performance and overall economic environment.

- For other management personnel, the Performance Pay will be linked to achievement of individual set objectives and part of this will also be linked to overall Company performance.

The Remuneration Policy is also available on the website of the Company at https://nerolac.com/financial/ policies.html#scroll.

13. Risk Management Policy

The Company has identified the risk areas in its operations along with its probability and severity, department wise. An effective Risk Management Framework is put in place in the Company in order to analyze, control and mitigate risk. Risk profiling is also put in place for all the areas of operations in the Company and well integrated in the business cycle. The various risks to which the Company is exposed are disclosed as a part of Management Discussion and Analysis, hereinabove.

The Risk Management Framework of the Company comprises of Risk Management Committee and the Risk Officers.

The Risk Management Committee was re-constituted by the Board of Directors, at its meeting held on 29th January, 2019, in terms of the amended provisions of Regulation 21 of SEBI Listing Regulations, as follows:

Names of the Members	Designation
Mr. H. M. Bharuka (Chairman of the Risk Management Committee)	Vice Chairman and Managing Director
Mr. Anuj Jain	Executive Director
Mr. Jason Gonsalves	Chief Risk Officer

The functional Heads are the Risk Officers of their respective functions. The Board and the Audit Committee review the effectiveness of the Risk Management framework and provide advice to the Risk Management Committee at regular intervals.

The functions of the Risk Management Committee include preparation of company-wide framework for risk management, fixing roles and responsibilities, communicating the risk management objective, giving direction for managing cyber security, drawing action plan and allocating resources, determining criteria for defining major and minor risks, deciding strategies for escalated major risk areas, updating company-wide Risk register and preparing MIS report for review of Audit Committee.

The Risk Management Framework aims to:

(a) address our Company’s strategies, operations and compliances and provide a unified and comprehensive perspective.

(b) establish the risk appetite.

(c) be simplistic and intuitive to facilitate a speedy and appropriate identification of potential and actual risks and its communication.

(d) seek escalation of the identified risk events to the appropriate persons to enable a timely and satisfactory risk response.

(e) reduce surprises and losses, foresee opportunities and improve deployment of resources.

(f) develop a mechanism to manage risks.

Systems and processes are set through the Risk Management framework, to identify, gauge and mitigate any potential risk promptly and efficiently in order to manage and control them effectively. Clearly defined work profiles and assigned responsibilities are well at place, throughout the organization, at all levels and all functions, ensuring smooth flow of information across various levels within the organization.

14. Vigil Mechanism - Whistle Blower Policy

The Company has a Whistle Blower Policy to report genuine concerns and grievances. The policy provides adequate safeguards against victimisation of persons who use the Whistle Blower mechanism. Details with respect to implementation of the Whistle Blower Policy are separately disclosed in this Annual Report, as a part of the Report of Corporate Governance. The same is also available on the website of the Company at https://nerolac.com/financial/policies.html#scroll.

15. Corporate Social Responsibility

The Board of Directors has constituted a Corporate Social Responsibility (“CSR”) Committee in terms of the provisions of Section 135 of the Act, as follows ;

Names of the Members	Designation
Mr. H. M. Bharuka (Chairman of the CSR Committee)	Vice Chairman and Managing Director
Mr. N. N. Tata	Independent Director
Mr. Anuj Jain	Executive Director

The functions of the CSR Committee are to:

(a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the Company as 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.

The Board has also framed a CSR Policy for the Company, on the recommendations of the CSR Committee and the same is available on the website of the Company at https://nerolac.com/financial/policies.html#scroll.

The Annual Report on CSR activities as required under Companies (Corporate Social Responsibility) Rules, 2014, including a brief outline of the Company’s CSR Policy, is annexed to this Report as Annexure 1.

16. Dividend Distribution Policy

The Dividend Distribution Policy of the Company has been formulated to ensure compliance with the provisions of Regulation 43A of SEBI Listing Regulations.

The Board of Directors will assess the Company’s financial requirements, including present and future organic and inorganic growth opportunities and other relevant factors as mentioned in this policy before declaring dividend in any financial year.

The Board may consider not declaring dividend or may recommend a lower payout for a given financial year, after analyzing the prospective opportunities and threats or in the event of challenging circumstances such as regulatory and financial environment.

The Dividend (including interim and/or final) for any financial year shall be declared or paid by the Company for any financial year out of the profits of the Company for that year arrived at after providing for depreciation in accordance with the provisions of the Companies Act, 2013 or out of the profits of the Company for any previous financial year(s) arrived at after providing for depreciation in accordance with the provisions of the Companies Act, 2013 and remaining undistributed, or out of both. The Company may, before the declaration of any dividend in any financial year, transfer such percentage of its profits for that financial year as it may consider appropriate to the reserves of the Company. The Company shall follow the provisions of the Companies Act and all the relevant rules and regulations of the Companies Act and/or any regulatory enactment(s) as may be applicable while declaring and paying dividend for any financial year.

The rate of Dividend shall be fixed by the Board of Directors of the Company. Final dividend proposed by the Board of Directors, if any, would be subject to the approval of the shareholders at the Annual General Meeting.

The Board of Directors shall recommend dividend in compliance with this policy, the provisions of the Companies Act, 2013 and Rules made there under and other applicable legal provisions.

The Company will consider various internal and external factors, including but not limited to the following before making any recommendation for dividends:

(i) Internal factors:

a. Profitable growth of the Company and specifically, profits earned during the financial year as compared with previous years and internal budgets,

b. Cash flow position of the Company,

c. Accumulated reserves,

d. Stability of earnings,

e. Future cash requirements for organic growth/ expansion and/or for inorganic growth,

f. Contingent liabilities,

g. Deployment of funds in short term marketable investments and/or long term investments,

h. Capital expenditure(s), and

i. The ratio of debt to equity.

(ii) External factors:

a. Economic environment,

b. Cost and availability of alternative sources of financing,

c. Inflation rate,

d. Industry outlook and stage of business cycle for underlying businesses,

e. Prevailing Taxation Policy or any amendments expected thereof, with respect to Dividend distribution,

f. Changes in the Government policies, industry specific rulings & regulatory provisions, and

g. Any other relevant factors that the Board may deem fit to consider before declaring Dividend.

Apart from the above, the Board also considers past dividend history and track record of previous Dividends distributed by the Company. The Board may additionally recommend special dividend in special circumstances.

Subject to the applicable regulations, the Company’s retained earnings shall be applied for:

- Funding inorganic and organic growth needs including working capital, capital expenditure, repayment of debt, etc.

- Buyback of shares subject to applicable limits,

- Capitalisation of shares,

- Issue of Bonus shares,

- Payment of Dividend in future years,

- Investment in new business(es) and / or additional investment in existing business(es),

- General corporate purposes, including contingencies,

- Any other permissible usage as per law.

The Company currently has only one class of shares, viz. Equity shares, for which this policy is applicable. The policy will be subject to review if and when the Company issues different classes of shares.

The Dividend Distribution Policy of the Company is also available on the website of the Company at https://nerolac.com/financial/policies.html#scroll.

17. Prevention of Sexual Harassment at workplace

In line with the provisions of the Prevention of 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, branches, depots and manufacturing locations etc. The policy is applicable to non-employees as well i.e. business associates, vendors, trainees etc.

A Complaints Committee has also been set up to redress complaints received on sexual harassment as well as other forms of verbal, physical, written or visual harassment.

During the financial year under review, the Company did not receive any complaints of sexual harassment and no cases were filed under the POSH Act.

18. General Shareholder Information

General Shareholder Information is given as Item No. 9 of the Report on Corporate Governance forming part of this Annual Report.

19. Particulars 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.

20. Conservation of Energy, Technology Absorption & Foreign Exchange

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.

21. Share Capital

The paid up Equity Share Capital as at 31st March, 2019 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 nor has granted any stock options or sweat equity or warrants.

22. Extract of the Annual Return

An Extract of the Annual Return in Form No. MGT-9, as required in terms of the provisions of Section 92(3) of the Act and the Companies (Management and Administration) Rules, 2014, is annexed to this Report as Annexure 4 and in terms of the provisions of Section 134(3) (a) of the Act, the same is also available on the website of the Company i.e. www.nerolac.com.

23. Details of Unclaimed Suspense Account

Details pertaining to Unclaimed Suspense Account of the Company are separately disclosed in this Annual Report, as a part of the General Shareholder Information.

24. Transfer to Investor Education and Protection Fund (“IEPF”)

Transfer of Unclaimed Dividend to IEPF

During the year under review, dividend amounting to Rs. 11.89 Lakhs that had not been claimed by the shareholders for the year ended 31st March, 2011, was transferred to the credit of IEPF as required under Sections 124 and 125 of the Act.

Unclaimed dividend as on 31st March, 2019

As on 31st March, 2019, dividend amounting to Rs. 197.57 lakhs 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 Darashaw Ltd., for unclaimed dividend.

Pursuant to the provisions of Investor Education and Protection Fund (Uploading of Information regarding unpaid and unclaimed amounts lying with Companies) Rules, 2012, the Company has uploaded the details of unpaid and unclaimed amounts lying with the Company on 21st June, 2018 (date of the last Annual General Meeting) on the website of the Company, www.nerolac.com. The same are also available on the website of the Ministry of Corporate Affairs, www.mca.gov.in.

Transfer of Equity Shares

As required under Section 124 of the Act, 1,73,830 Equity Shares, in respect of which dividend has not been claimed by the members for seven consecutive years or more, have been transferred by the Company to the IEPF Authority during the financial year 2018-19. Details of such shares transferred have been uploaded on the website of the Company, www.nerolac.com. The same are also available on the website of the Ministry of Corporate Affairs, www.mca.gov.in.

25. 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 JHR & Associates 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 the Circular No. CIR/CFD/CMD1 /27/2019 dated February 8, 2019 issued by SEBI, the Company has obtained the Annual Secretarial Compliance Report, thereby confirming compliance of the applicable SEBI Regulations and circulars / guidelines issued thereunder, on behalf of the Company.

The Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

26. Cost Audit

In terms of the provisions of Section 148 of the Act, the Company had appointed D. C. Dave and Co., Cost Accountants (Registration No. 000611), as the Cost Auditor to conduct an audit of its Cost Accounting Records for the financial year 2017-18, pertaining to products of the Company as required by the law. The Cost Audit Report submitted by the Cost Auditor for the previous year, was clean and there was no qualification in their Report. The same was duly filed with Ministry of Corporate Affairs on 27th September, 2018.

The Company had re-appointed D. C. Dave & Co., Cost Accountants, as the Cost Auditor for the year ended 31st March, 2019, and the Cost Audit Report when submitted by them, will be duly filed with Ministry of Corporate Affairs.

Further, the Company has re-appointed D. C. Dave & Co., Cost Accountants, as the Cost Auditor for the Financial Year 2019-20, to conduct an audit of its Cost Accounting Records pertaining to said products, at a remuneration of Rs. 2,50,000 plus Goods and Service tax and 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. vide Resolution No. 6 of the Notice of the ensuing Annual General Meeting.

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 limits specified under Section 141 of the Act and Rules framed thereunder.

27. Business Responsibility Report

A Business Responsibility Report describing the initiatives taken by the Company from an environmental, social and governance perspective, as required in terms of the provisions of Regulation 34(2)(f) of SEBI Listing Regulations, separately forms part of this Annual Report.

28. Acknowledgements

Your Directors wish to express their grateful appreciation for the co-operation and support received from customers, parent company, collaborators, vendors, investors, shareholders, financial institutions, banks, regulatory authorities and the society at large.

Deep appreciation is also recorded for the dedicated efforts and contribution of the employees at all levels for their focus, commitment and hard work in driving the consistent growth of the Company.

For and on behalf of the Board

P. P. Shah

Chairman

Mumbai, May 2, 2019

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Mar 31, 2018

Dear Members,

The Directors are pleased to present the 98th Annual Report and the Audited Accounts for the year ended 31st March, 2018.

1. Financial Highlights

	1st April, 2017 to 31st March, 2018	1st April, 2016 to 31st March, 2017
	Rs. in Crores	Rs. In Crores
Gross Sales and Other Operating Income	5197.77	4936.05
Net Sales and Other Operating Income	4737.01	4531.05
Profit Before Interest, Depreciation and Tax	789.77	730.69
Less: Depreciation	75.79	69.49
Profit Before Interest and Tax	713.98	661.20
Add: Other Income	72.42	98.22
Profit Before Tax	786.40	759.42
Less: Tax (including Deferred Tax)	270.00	253.48
Profit After Tax	516.40	505.94
Other Comprehensive Income	(1.09)	(4.73)
Total Comprehensive Income for the Year	515.31	501.21

2. Dividend

The Directors recommend for consideration of the Members, a normal dividend of Rs.2.60 ( 260%) per share of the face value of Rs.1 each for the year.

This compares with a normal dividend of Rs.2.50 per share (250%) and a special dividend of Rs.0.50 per share (50%), thus aggregating to a total dividend of Rs.3.00 per share (300%) of the face value of Rs.1 each declared last year.

3. Unclaimed Dividend

During the year, dividend amounting to Rs.3.98 lacs that had not been claimed by the shareholders for the year ended 31st March, 2010, was transferred to the credit of Investor Education and Protection Fund as required under Section 124 and 125 of the Companies Act, 2013. As on 31st March, 2018, dividend amounting to Rs.101.19 lacs has not been claimed by shareholders of the Company. Shareholders are required to lodge their claims with the Registrar, TSR Darashaw Ltd., for unclaimed dividend. Pursuant to the provisions of Investor Education and Protection Fund (Uploading of Information regarding unpaid and unclaimed amounts lying with Companies) Rules, 2012, the Company has uploaded the details of unpaid and unclaimed amounts lying with the Company on 21st June, 2017 (date of the last Annual General Meeting) on the website of the Company, www.nerolac.com. The same is also available on the website of the Ministry of Corporate Affairs, www.mca.gov.in.

4. Collaboration

The Directors record their appreciation for the contribution made and support provided by Kansai Paint Co. Ltd., Japan (KPJ). KPJ continues to provide support on process design, quality improvement, world class technology which has helped the Company in maintaining market leadership in the industrial business including automotive coatings, by servicing existing customers better and adding new lines. KPJ also provides technology for manufacture of architectural coatings.

The Company also has Technical Assistance Agreement with Oshima Kogyo Co. Ltd., Japan, for manufacturing heat resistance coatings, Cashew Co. Ltd., Japan for manufacturing coatings products MICRON TXL SK-1 and Thinner for MICRON and with Protech Chemicals Limited, Canada for manufacturing powder coating products. The Directors record their appreciation for the co-operation from these collaborators.

5. Overseas Operations:

a. Operations in Nepal

For the financial year ended 31st March, 2018, the Turnover of KNP Japan Private Limited, the subsidiary of our Company in Nepal, increased to Rs.64.14 crores as compared to Rs.53.95 crores for the financial year ended 31st March, 2017.

Profit before Tax has increased to Rs.9.05 crores as compared to Rs.6.87 crores last year. Profit after Tax has increased to Rs.6.51 crores as compared to Rs.5.12 crores last year.

b. Operations in Srilanka

Our subsidiary in Srilanka, Kansai Paints Lanka Pvt. Ltd., commenced operations in April 2017. The Turnover for the year 2017-18 was Rs.8.06 Crores. The Company incurred a loss of Rs.6.83 crores as the Company was able to stabilize its operations only in the fourth quarter of financial year 2017-18.

Consolidated financial statement of the Company and of the subsidiaries, forms part of the Annual Report. A separate statement containing the salient features of the financial statement of KNP Japan Private Limited and Kansai Paints Lanka Pvt. Ltd. is part of this Annual Report.

Annual Audited Accounts of KNP Japan Private Limited and Kansai Paints Lanka Pvt. Ltd. are available on the website of the Company.

6. Acquisition of Marpol Private Limited

In April 2018, our Company acquired 100% equity shareholding in Marpol Private Limited, Goa (Marpol), which too, like our Company, is one of the leading companies in powder coating business, for an aggregate consideration of Rs.36 crores before adjustments due to legal and financial due diligence. Marpol is a pioneer in powder coating business and its brand is very reputed. Marpol manufactures products such as epoxy polyester, pure polyester, pure epoxy and polyurethane powder. Our Company expects post acquisition synergy benefits in raw material and other miscellaneous costs. The necessary disclosures regarding the acquisition were made to BSE and NSE, where the shares of our Company are listed.

7. New Projects

The Shareholders were informed last year that the Company had started setting up of paint manufacturing units at Sayakha Industrial Estate in Gujarat, Goindwal Sahib near Amritsar in Punjab and a Global R & D Centre at Vashi, Navi Mumbai. The Shareholders were also informed last year that the Company had initiated a project at Achutapuram, Vishakhapatnam district in Andhra Pradesh to set up a paint manufacturing unit.

At Sayakha Industrial Estate in Gujarat, all activities of Phase-1 of the manufacturing unit have been completed and the unit is likely to commence operations shortly. At Goindwal Sahib near Amritsar in Punjab, the construction work of the manufacturing unit is in full swing and operations are likely to commence during the year. At Achutapuram, Visakhapatnam district in Andhra Pradesh, land acquisition is over and the project is in the planning stage. The construction activities at Global R&D Centre at Vashi, Navi Mumbai have been completed and the unit is likely to commence operations in 2018-19.

8. Cost Audit

The Company had appointed D. C. Dave and Co., Cost Accountants, to audit its cost accounting records relating to Thinners and Resins for the financial year 2016-17. The Cost Audit Report submitted by D.C. Dave & Co. for the financial year 2016-17 is clean and there are no qualifications in their Report. The Cost Audit Report was filed with Ministry of Corporate Affairs on 18th October, 2017.

The Company has appointed D. C. Dave & Co. as the Cost auditor for the financial year 2018-19 to conduct cost audit of its cost records pertaining to the products falling under the product categories - Organic & Inorganic chemicals, Ores and mineral products, Plastics & Polymers and Rubber & Allied products. The products of the Company covered under the aforesaid categories are different types of thinners, floor coating products, powder coating products & hardeners and Construction Chemicals. D. C. Dave & Co. are appointed on a remuneration of Rs.2,50,000 plus service tax and out of pocket expenses. The Company is seeking the ratification of the Shareholders for the remuneration to be paid to D. C. Dave & Co. vide Resolution No. 7 of the Notice of the Annual General Meeting.

9. Directors

In accordance with Articles of Association of the Company, Mr. Masaru Tanaka, Mr. Hidenori Furukawa and Mr. Katsuhiko Kato retire by rotation at this Annual General Meeting and being eligible offer themselves for re-appointment.

Mr. Pravin Chaudhari, Whole-time Director resigned from the Board of Directors of the Company with effect from the close of business on 31st March, 2018. The Board of Directors place on record their sincere appreciation and gratitude for the immense contribution made by Mr. Chaudhari for the Company during his association with the Company.

Mr. Anuj Jain was appointed as a Whole-time Director on the Board for a period of 5 years with effect from 1st April, 2018 to 31st March, 2023, subject to the approval of the Shareholders at the ensuing Annual General Meeting to be held on 21st June, 2018. The material terms of the appointment of Mr. Anuj Jain are stated in the Explanatory Statement at Item No. 8 of the Notice of the Annual General Meeting.

None of the Directors is disqualified for appointment/ re-appointment under Section 164 of the Companies Act, 2013. As required by law, this position is also reflected in the Auditors’ Report.

All the Independent Directors on the Board have given a declaration of their independence to the Company as required under section 149(6) of the Companies Act, 2013.

The composition of the Board, meetings of the Board held during the year and the attendance of the Directors thereat have been mentioned in the Report on Corporate Governance in the Annual Report.

For the year ended 31st March, 2018, Mr. H. M. Bharuka, Vice Chairman and Managing Director, received a remuneration of Rs.17.25 lacs as a member of the Global Steering Committee of Kansai Paint Co. Ltd., Japan, holding Company and also received a remuneration of Rs.54.11 lacs during the year as a Non-Executive Director of Kansai Paint Co. Ltd., Japan.

10. Key Managerial Personnel

Consequent to the resignation of Mr. P. D. Chaudhari as Whole-time Director with effect from the close of business on 31st March, 2018 and appointment of Mr. Anuj Jain as a Whole-time Director with effect from 1st April, 2018, the Company has noted that Mr. H. M. Bharuka, Vice Chairman and Managing Director, Mr. Anuj Jain, Whole-time Director, Mr. P. D. Pai, Chief Financial Officer and Mr. G. T. Govindarajan, Company Secretary are the Key Managerial Personnel of the Company in terms of Section 203 of the Companies Act, 2013.

11. Board Evaluation

The evaluation of all the Directors, the Board as a whole and its Committees was conducted based on the criteria and framework adopted by the Board. The evaluation process has been explained in the Report on Corporate Governance in this Annual Report. The Board noted the evaluation results that were collated and presented to the Board.

12. Remuneration Policy

The Board of Directors of the Company has adopted a Remuneration Policy for determining qualifications, positive attributes and independence of a Director and criteria for Director’s appointment and remuneration. The features of the Policy are as follows:

- The Company, while constituting the Board shall draw members from diverse fields such as finance, law, management, architecture, technical, marketing, manufacturing, corporate governance, operations or other disciplines related to the Company’s business. There shall be no discrimination on the basis of gender, while determining the Board composition.

- A director shall be a person of integrity, who possesses relevant expertise and experience. He shall uphold ethical standards of integrity and probity and act objectively and constructively. He shall exercise his responsibilities in a bona-fide manner in the interest of the Company; devote sufficient time and attention to his professional obligations for informed and balanced decision making; and assist the Company in implementing the best corporate governance practices.

- An Independent director should meet the requirements of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, concerning independence of directors. The Company shall also obtain certification of independence from the Independent Director in accordance with the Companies Act, 2013.

- The objective of the policy is to have a compensation framework that will reward and retain talent.

- The remuneration will be such as to ensure that the correlation of remuneration to performance is clear and meets appropriate performance benchmarks.

- Remuneration to Key Managerial Personnel, Senior Management and other employees will involve a balance between fixed and variable pay reflecting short and long term performance objectives of the employees in line with the working of the Company and its goals.

- For Directors, the Performance Pay will be linked to achievement of Business Plan.

- For Heads of Department, the Performance Pay will be linked to achievement of functional plan which is derived from the business plan. The functional plan includes both, short-term and long-term objectives.

- The above will take into consideration industry performance, customer performance and overall economic environment.

- For other management personnel, the Performance Pay will be linked to achievement of individual set objectives and part of this will also be linked to overall Company performance.

13. Risk Management Policy

Risk profiling is put in place for all the areas of operations in the Company and well integrated in the business cycle. The Company has identified the risk areas in its operations along with its probability and severity, department wise. The various risks to which the Company is exposed are as mentioned in the Management and Discussion Analysis Report under the relevant heading. An effective Risk Management Framework is put in place in the Company in order to analyze, control and mitigate risk.

The Risk Management Framework comprises of Risk Management Committee and the Risk Officers. The Risk Management Committee of our Company consists of the Management Committee and the Chief Risk Officer. The Vice Chairman and Managing Director, the Executive Director and the functional heads constitute the Management Committee. The Company Secretary is the Chief Risk Officer. The Risk Officers have been appointed by the functional heads and represent the various functions. The requirements of Regulation 21 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, with regard to the constitution of a Risk Management Committee are not applicable to our Company as this Regulation is applicable only to top 100 listed entities, determined on the basis of market capitalization, as at the end of the immediate previous financial year. The Board of Directors and the Audit Committee review the effectiveness of the Risk Management framework and provide advice to the Risk Management Committee at regular intervals.

The functions of the Risk Management Committee includes preparation of company-wide framework for risk management, fixing roles and responsibilities, communicating the risk management objective, allocating resources, drawing action plan, determining criteria for defining major and minor risks, deciding strategies for escalated major risk areas, updating company-wide Risk register and preparing MIS report for review of Audit Committee.

The Risk Management Framework aims to:

(a) address our Company’s strategies, operations and compliances and provide a unified and comprehensive perspective;

(b) establish the risk appetite;

(c) be simplistic and intuitive to facilitate a speedy and appropriate identification of potential and actual risks and its communication;

(d) seek escalation of the identified risk events to the appropriate persons to enable a timely and satisfactory risk response;

(e) reduce surprises and losses, foresee opportunities and improve deployment of resources;

(f) develop a mechanism to manage risks.

Through the Risk Management framework, system and process are set to identify, gauge and mitigate any potential risk promptly and efficiently in order to manage and control them effectively. Clearly defined work profiles and assigned responsibilities are well at place, throughout the organization, at all levels and all functions, ensuring smooth flow of information across various levels within the organization.

14. Dividend Distribution Policy

The Dividend Distribution Policy of the Company has been formulated to ensure compliance with the provisions of Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Board will assess the Company’s financial requirements, including present and future organic and inorganic growth opportunities and other relevant factors as mentioned in this policy before declaring dividend in any financial year.

The Board may consider not declaring dividend or may recommend a lower payout for a given financial year, after analyzing the prospective opportunities and threats or in the event of challenging circumstances such as regulatory and financial environment.

The Dividend (including interim and/or final) for any financial year shall be declared or paid by the Company for any financial year out of the profits of the Company for that year arrived at after providing for depreciation in accordance with the provisions of the Companies Act, 2013 or out of the profits of the Company for any previous financial year(s) arrived at after providing for depreciation in accordance with the provisions of the Companies Act, 2013 and remaining undistributed, or out of both. The Company may, before the declaration of any dividend in any financial year, transfer such percentage of its profits for that financial year as it may consider appropriate to the reserves of the Company. The Company shall follow the provisions of the Companies Act and all the relevant rules and regulations of the Companies Act and/or any regulatory enactment(s) as may be applicable while declaring and paying dividend for any financial year.

The rate of Dividend shall be fixed by the Board of Directors of the Company. Final dividend proposed by the Board of Directors, if any, would be subject to the approval of the shareholders at the Annual General Meeting.

The Board of Directors shall recommend dividend in compliance with this policy, the provisions of the Companies Act, 2013 and Rules made there under and other applicable legal provisions.

The Company will consider various internal and external factors, including but not limited to the following before making any recommendation for dividends:

(i) Internal factors:

a. Profitable growth of the Company and specifically, profits earned during the financial year as compared with previous years and internal budgets,

b. Cash flow position of the Company,

c. Accumulated reserves,

d. Stability of earnings,

e. Future cash requirements for organic growth/ expansion and/or for inorganic growth,

f. Contingent liabilities,

g. Deployment of funds in short term marketable investments and/or long term investments,

h. Capital expenditure(s), and

i. The ratio of debt to equity.

(ii) External factors:

a. Economic environment,

b. Cost and availability of alternative sources of financing,

c. Inflation rate,

d. I ndustry outlook and stage of business cycle for underlying businesses,

e. Prevailing Taxation Policy or any amendments expected thereof, with respect to Dividend distribution,

f. Changes in the Government policies, industry specific rulings & regulatory provisions, and

g. Any other relevant factors that the Board may deem fit to consider before declaring Dividend.

Apart from the above, the Board also considers past dividend history and track record of previous Dividends distributed by the Company. The Board may additionally recommend special dividend in special circumstances.

Subject to the applicable regulations, the Company’s retained earnings shall be applied for:

- Funding inorganic and organic growth needs including working capital, capital expenditure, repayment of debt, etc.

- Buyback of shares subject to applicable limits,

- Capitalisation of shares,

- Issue of Bonus shares,

- Payment of Dividend in future years,

- Investment in new business(es) and / or additional investment in existing business(es),

- General corporate purposes, including contingencies,

- Any other permissible usage as per law.

The Company currently has only one class of shares, viz. Equity shares, for which this policy is applicable. The policy will be subject to review if and when the Company issues different classes of shares.

The Dividend Distribution Policy of the Company is also available on the website of the Company at https://nerolac.com/financial/policies.html#scroll.

15. Corporate Social Responsibility

The Board has constituted a Corporate Social Responsibility (CSR) Committee as per the provisions of Section 135 of the Companies Act, 2013. The functions of the CSR Committee are to:

(a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the Company as 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.

The members of the CSR Committee, upto 31st March, 2018, were Mr. H. M. Bharuka, Mr. N. N. Tata and Mr. P. D. Chaudhari.

With effect from 1st April, 2018, Mr. H.M. Bharuka, Mr. N. N. Tata and Mr. Anuj Jain are the members of the CSR Committee.

Mr. H.M. Bharuka is the Chairman of the CSR Committee. Mr. N. N. Tata is the independent Director on the CSR Committee.

The Board has also framed a CSR Policy for the Company, on the recommendations of the CSR Committee. The Report on CSR activities as required under Companies (Corporate Social Responsibility) Rules, 2014, including a brief outline of the Company’s CSR Policy, total amount to be spent under CSR for the financial year and details of amount spent on CSR during the year is set out at Annexure - 1 forming part of this Report.

16. Particulars of Loans, Guarantees or Investments under Section 186 of the Companies Act, 2013

Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013, are given in the notes to the financial statements provided in this Annual Report.

17. Related Party Transactions

All transactions entered into with the Related Parties in terms of Section 2(76) and Section 188 of the Companies Act, 2013 read with Regulation 2 (zc) and Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 during the financial year were in the ordinary course of business and on arm’s length basis and do not attract the provisions of Section 188 of the Companies Act, 2013. There were no Material Related Party transactions during the year. Thus, disclosure in Form AOC-2 is not required.

18. Audit Committee

The Company has an Audit Committee in place, constituted as per the provisions of Section 177 of the Companies Act, 2013. The members of the Audit Committee, its terms of reference, the meetings of the Audit Committee and attendance thereat of the members of the Committee is mentioned in the Corporate Governance Report under the appropriate heading.

19. Whistle Blower Policy

The Company has a Whistle Blower Policy to report genuine concerns and grievances. The implementation of the Whistle Blower Policy has been mentioned in the Report of Corporate Governance.

20. Prevention of Sexual Harassment at workplace

The Company has adopted a policy with the name “Policy on Appropriate Social Conduct at Workplace”.

The policy is applicable for all employees of the organization, which includes corporate office, branches, depots and manufacturing locations etc.

The policy is applicable to non-employees as well i.e. business associates, vendors, trainees etc.

A Complaints Committee has also been set up to redress complaints received on sexual harassment as well as other forms of verbal, physical, written or visual harassment.

During the financial year under review, the Company has not received any complaints of sexual harassment.

21. Corporate Governance

As required by Schedule V(C) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a detailed report on Corporate Governance is given as a part of the Annual Report. The Company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors’ Certificate of the compliance with Corporate Governance requirements by the Company is attached to the Report on Corporate Governance.

22. General Shareholder Information

General Shareholder Information is given in Item No. 9 of the Report on Corporate Governance forming part of the Annual Report.

23. Business Responsibility Report

Regulation 34(2)(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended with effect from 1st April, 2016, requires that in case of the top 500 listed companies based on market capitalisation, the Annual Report shall contain a Business Responsibility Report describing the initiatives taken by the Company from an environmental, social and governance perspective, in the format specified by SEBI. The Business Responsibility Report in the format suggested by SEBI forms part of the Annual Report.

24. Particulars regarding Employees Remuneration

The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report as Annexure - 2.

25. Directors’ Responsibility Statement

As stipulated under the provisions contained in Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013 the Directors hereby state that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) the Directors have prepared the annual accounts on a going concern basis;

(v) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

(vi) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

26. Energy, Technology Absorption & Foreign Exchange

Statement giving the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under Section 134(3)(m) read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is enclosed as Annexure - 3 to this Report.

27. Extract of Annual Return

In accordance with Section 134 (3)(a) of the Companies Act, 2013, an extract of the Annual Return in the prescribed format is appended as Annexure - 4 to this Report.

28. Statutory Auditors

The Company Auditors, B S R & Co. LLP, Chartered Accountants, have been appointed for a period of 5 years from the 94th AGM till the 99th AGM. Pursuant to provisions of Section 139(1) of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, the appointment of B S R & Co. LLP, as Auditors of the Company for a period of 5 years shall be subject to ratification by shareholders at every AGM. Accordingly, the appointment of B S R & Co. LLP, as the Auditors of the Company from this AGM till the conclusion of next AGM is put forth for your approval.

The Auditors’ Report is clean and there are no qualifications in their Report.

29. Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Company had appointed JHR & Associates, Company Secretaries, as the Secretarial Auditor of the Company for the year 2017-18 to conduct secretarial audit and to ensure compliance by the Company with various Acts applicable to the Company. The Secretarial Audit Report for the financial year 2017-18 issued by JHR & Associates is annexed to this Report as Annexure - 5. There are no qualifications or adverse remarks in their Report.

30. Acknowledgements

Your Directors wish to express their grateful appreciation for the co-operation and support received from customers, parent company, collaborators, vendors, shareholders, financial institutions, banks, regulatory authorities and the society at large.

Deep appreciation is also recorded for the dedicated efforts and contribution of the employees at all levels, as without their focus, commitment and hard work, the Company’s consistent growth would not have been possible, despite the challenging environment.

For and on behalf of the Board

P. P. Shah

Chairman

Mumbai, 2nd May, 2018

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Mar 31, 2017

Dear Members,

The Directors are pleased to present the 97th Annual Report and the Audited Accounts for the year ended 31st March, 2017.

1. Financial Highlights

	1st April, 2016 to 31st March, 2017	1st April, 2015 to 31st March, 2016
	Rs, in Crores	Rs, In Crores
Gross Sales and Other Operating Income ....................................	4936.05	4604.36
Net Sales and Other Operating Income .......................................	4531.05	4245.52
Profit Before Interest, Depreciation and Tax .................................	730.69	579.98
Less: Depreciation ..............................................................................	69.49	67.72
Profit Before Interest and Tax ...........................................................	661.20	51 2.26
Add: Other Income ...........................................................................	98.22	27.35
Profit Before Tax .................................................................................	759.42	539.61
Exceptional Item- Profit on sale of land ........................................	-	535.34
Profit Before Tax .................................................................................	759.42	1074.95
Less: Tax (including deferred tax) ...................................................	253.48	176.10
Profit After Tax ....................................................................................	505.94	898.85
Other Comprehensive Income (Net of tax) .................................	(4.73)	(4.93)
Total Comprehensive Income for the year ...................................	501.21	893.92

2. Dividend

The Directors recommend for consideration of the Members, a normal dividend of '' 2.50 per share (250%) and a special dividend of '' 0.50 per share (50%), thus aggregating to a total dividend of '' 3.00 per share (300%) of the face value of '' 1 each for the year.

This compares with a normal dividend of '' 1.80 per share (180%) and a special dividend of '' 1.25 per share (125%), thus aggregating to a total dividend of '' 3.05 per share (305%) of the face value of '' 1 each declared last year.

[A] INTRODUCTION

Kansai Nerolac Paints Limited (KNPL) has come a long way since first being established as Gahagan Paint & Varnish Company Limited in 1920. Kansai Nerolac Paints Limited (KNPL) is a subsidiary of Kansai Paint Co. Ltd, Japan.

The Company is in the business of paints and caters to customers in Businesses Segments such as Decorative, Automotive, Auto Refinish, Wood Coatings, General Industrial, Performance Coatings and Powder Coatings. The Company has international operations in Nepal and Sri Lanka through Joint Ventures with Kansai Nepal and Capital Holdings Maharaja Group respectively.

KNPL is the market leader in the Industrial Paints Market. It takes great pride in being the vendor of choice to the major automotive companies operating in India as well as major Industrial houses. KNPL has been able to achieve this due to its relentless focus on customer satisfaction built on superior coating systems and leveraging global technology.

In the Decorative Paints segment as well, KNPL is well known for its many innovations in products, service and branding as it builds on its strong brand equity built over the decades.

KNPL has four geographically spread manufacturing facilities working round the clock to produce paint of the highest quality and need located at Lote in Maharashtra, Bawal in Haryana, Jainpur in UP and Hosur in Tamil Nadu. To boost the production capability, KNPL is creating new production facilities at Saykha in Gujarat, Amritsar in Punjab and Vishakhapatnam in Andhra Pradesh. The new state of the art plants built using modern production technologies will strengthen the reach and capability of the Company thus helping KNPL to serve its customers in both the Industrial and Decorative divisions in the year ahead.

KNPL prides itself to be at the forefront of New Product Innovations, and has a state of the art R&D centre in Mumbai. A new R&D centre is set to open at Vashi in Navi Mumbai, which will help KNP maintain its edge in innovation.

KNPL has always considered IT as strategic. Since 2013, the Company has been making rapid progress on driving the digitalization agenda across the Company bringing with it benefits in customer responsiveness, efficiency, speed and productivity. This year the entire decorative sales force has been migrated to the mobility platform of SAP thus making them more agile in the market.

With a tagline of Healthy Home Paints, KNPL demonstrates its commitment to environmental preservation and sustainable manufacturing. The Company commits resources towards ensuring high standards of Environment, Health and Safety (EHS) across its manufacturing facilities. The Company publishes an Annual Sustainability Report every year.

Various customer awards as well as industry awards bestowed on KNPL serves to motivate us to strive even harder to ensure that our products, solutions and operations offer unique value to our esteemed customers and our stakeholders.

[B] INDUSTRY PROGRESS

2016-17 was a year with moderate growth for the paint industry. Growth picked up pace during the second quarter of this fiscal, owing to a good monsoon and a positive investment climate in the country. However, due to the Demonetization activity undertaken by the government, pace of growth was impacted in both the Decorative and Industrial Markets in the third and fourth quarter.

Post demonetization, the Automotive Industry is gradually seeing a revival. Consumer demand has also picked up signaling a stabilization of the economy.

The first half of the year saw a deflationary trend, which lead to a reduction in raw material prices. From the second half of the year, the industry has been witnessing an inflationary trend. This trend is expected to accelerate in the new financial year further putting pressure on costs.

The rupee remained volatile, oscillating between frequent highs and lows due to an uncertain global landscape and changing conditions in the domestic economy. This volatility is expected to continue to create challenges for the industry.

Going forward, GST is expected to impact the industry. GDP is growing at a steady pace and will outpace major economies of the world. Policy decisions taken by the government in recent times to boost consumer and infrastructure demand are expected to impact the industry positively.

[C] MARKETING - OUTLOOK

Decorative

Marketing is an integral part of the Decorative paints business which aims to make the consumer aware of products available, as well as attracting them to the value proposition that KNPL offers - Healthy Home Paints.

This year saw many media campaigns across marketing channels to strengthen the Nerolac Brand. Television campaigns across channels and products were run periodically throughout the year. Regional advertisements were run during important events in West Bengal. Focus was put on products that are important to a particular region.

Excel Mica Marble, India''s first acrylic emulsion with Mica particles and marble boosters, a new premium offering which is targeted at consumers who want their exterior paint to last long and provide additional protective and aesthetic properties, was well received in the market. Pan India as well as regional marketing campaigns was conducted to effectively communicate the Product Value proposition.

KNPL showcased its innovation capabilities by launching a first of its kind product, ReadyMix (Primer Putty). This product eliminates the need to apply primer and putty on the wall separately, resulting in significant cost savings for the customer and increased ease of application.

KNPL launched Alkali Prime and Construction Chemicals during the year and increased distribution of the newly launched range of Soldier Paints.

KNPL associated with the IPL Team Gujarat Lions, in the 2016 IPL edition, a first for any Paint Company in India. To tie all the promotional activities surrounding IPL 2016 together, KNPL coined a new hash tag - #aShadeBetter. This Hash Tag was promoted heavily on Social media through contests like "Predict and Win", "Colour me Orange" and a Nerolac & Gujarat Lions Dubsmash activity - #GameKiRaunak.

In soccer, KNPL associated with the ISL team North East United FC in the Soccer League ISL 2016 edition.

Nerolac Premium Painter program has been a very successful initiative for the Company over the years, and this year, the Company was able to build on the success of the previous years as well.

Industrial

KNPL is the market leader in industrial coatings, and has endeavored to strengthen its leadership position over the years owing to innovative product and service offerings to industrial customers.

Despite numerous challenges in the business environment during the year, KNPL has not only maintained its leadership position, but also increased its market share. KNPL has added value to its customers and shareholders by its cutting edge technology and unique market offerings.

Technology has always been the cornerstone of KNPL solution to customers and KNPL has continued to focus on technology providing High Quality, Cost Effective and Sustainable Solutions to its automotive customers. Quality standards have been consistently enhanced by the Auto OEMs in their crusade to provide better value to their consumers. Client interaction and business acquisition remained high this year, with the Company bagging repeat business from its esteemed clients, as well as winning new business from clients.

KNPL has worked closely with the Auto Industry and this year has introduced enhanced products like a superior Mar and Scratch Resistant Clear Coat and Medium Solid Base Coats. KNPL also enhanced its range of colours for Car Interior Coatings, which are eco-friendly, free of

Hazardous Air Pollutants (HAPs) and meet international coating standards.

KNPL has introduced Monocoat Metallic System for Two Wheeler industry, replacing existing two coat system. In addition, KNPL worked closely with raw material suppliers for innovative product development and this year we have developed Super Weather ability Monocoat Product with enhanced properties as per customer requirements. We have also introduced Water Based Top Coat for Two wheelers frame which has helped in elimination of one baking cycle.

The Company has introduced a next generation CED with better corrosion resistance, high throwing power, low baking loss and reduction in consumption. With such sustained innovations and product improvements, KNPL managed to maintain its market leadership in the CED segment, with many new CED lines added this year.

KNPL had pioneered the practice of providing Technical service on Customer Production lines. It has further strengthened its capability on this front. KNPL has worked extensively on this front to deliver maximum value to its customers. The Company provides its Industrial customers with Value Additions and Value Engineering ideas aimed towards quality improvement and cost reduction. This year KNPL has also added value to its customers by imparting valuable trainings.

KNPL continued the thrust on traditional segments like Oil & Gas, Power, Infra, Metals and Chemical Plants to drive the growth. The focus was also on new segments like Floor, Railways and Coil Coating where KNPL has increased its presence.

The Company works closely with Industry organizations like NACE (National Association of Corrosion Engineers) and SSPC (Society for Surface Protective Coatings). The Company was well represented at NACE, SSPC and CII events which ensured visibility and connect with key industry stakeholders.

KNPL has a majority stake in OEM business catering to segments like Fans, Drum & Barrels, Construction Equipment, Helmet, LPG etc. KNPL continues to enjoy the majority market share in above segments with new product developments like water base coatings, DTM coatings etc.

KNPL is a leader in the Powder Coating Segment and this year too, the Company has further strengthened its share in segments like Auto Ancillaries, Furniture, White Goods. This year KNPL was able to leverage its tie up with Protech, Canada for introducing new products.

KNPL is the fastest growing Company in the Auto Refinish Business. KNPL provides complete range of products in the Auto Refinish market. The Company has a stabilized growth both in terms of retail customers as well as winning body shop business. Its strong focus in this industry and teamwork helped in building network across the length and breadth of the country.

It is engaging in providing multiple technical programs to develop the skills and knowledge of their customers. The Company is now focusing in water borne system and other future technology in the auto refinish segment.

[D] OPPORTUNITIES AND THREATS

Opportunities

- GST

The introduction of GST is expected to be a game changer for Indian Industry.

- Favorable demographics

India''s young population represents a huge opportunity as more and more young Indians join the workforce and will have disposable income available. The trend towards nuclear family augurs well for the paint Industry.

- Per Capita Paint Consumption

Per capita consumption of Paint in India is much lower than the global average, and that of developed nations. Along with favorable demographics this represents a significant opportunity for the paint industry.

- Infrastructure focus

With infrastructure sector reforms being the top priority of the current government and keeping in mind its Smart City initiatives, demand for coatings from the infrastructure sector is going to see healthy growth.

- Growing Auto Market

Automotive Paints Division is a significant part of KNPL, and this Sector is expected to continue to grow in the years to come. This translates into a long term opportunity for KNPL as well which KNPL being the market leader can capitalize on.

- Real Estate Sector & Interest Rates

The Real Estate sector witnessed stagnancy during the last year and demonetization affected the sector sentiment further. However, after demonetization, coupled with low Housing loan interest rates, this sector is poised to grow and activity is expected to increase.

Threats

- New Competitors

New Competitors are entering the Indian Paint Market, in both Decorative and Industrial Divisions, as they have realized the growth potential that India has to offer. KNPL endeavors to be proactive in countering any challenges that may arise due to increased competition in the market.

- Inflation

Over the past few months, inflation is showing an increasing trend which can be a threat to KNPL in the new financial year.

- Below-par monsoon

A below par monsoon due to the El Nino effect could have an adverse impact on customer spending, ultimately impacting paint consumption in a negative way.

[E] SEGMENT WISE PERFORMANCE

The Company has only one segment of activity named paints, in accordance with the definition of "Segment" covered under Indian Accounting Standard (Ind AS) 108 on Operating Segments. The performance of the Company is discussed in this Report.

[F] RISKS AND CONCERNS

In a business environment that is constantly under churn, Risk Management becomes a top priority for KNPL in order to guard against any eventuality, while at the same time, being able to extract maximum benefit out of favorable conditions.

The Company follows a Risk Management framework, where the risk committee meets regularly to identify imminent and potential risks, as well as documenting risk mitigation measures to eliminate or reduce the event impact.

The Company has classified its risks under the following heads.

- Strategic Risk

These risks relate to risks around brand, technology, industry dynamics like takeovers and alliances. These risks have the potential to impact future business plans of the Company. Identifying and mitigating these are a strategic priority at KNPL.

- Operational Risks

Operational Risks for KNPL include risks related to delivery, service and quality which could impact KNPL''s capability to serve its customers. KNPL has a strict review mechanism to ensure these risks do not pose a threat to the Company. In addition to this, supplier risks as well as market risks are monitored carefully.

- Statutory Risk

With a network spanning across India and overseas, KNPL makes sure that the business operates within the ambit of law and necessary legal compliances are followed. Combining in-house expertise and knowledge of statutory compliances along with professional legal services, KNPL ensures that there are no lapses on the regulatory front, and the Company functions within the legal and statutory framework.

- Financial Risks

Finance risks originating out of currency fluctuations and market volatility have the potential to affect Company bottom line directly. Thus, these risks are dealt with advance planning, taking necessary steps for hedging against such outcomes.

- System risk

With all operations conducted using business software, ensuring high availability of systems as well as proper controls to ensure that operations are not compromised remains a top management priority. The Company takes many steps proactively to ensure that potential risks are minimized.

- People Risk

Retaining existing talent and attracting new talent takes centre stage as KNPL aims to grow aggressively. The Company has a structure in place for mitigating this risk.

This year the Company has been able to automate the Risk Management framework into a dashboard which helps track the risks more effectively.

[G] RESEARCH And DEVELOPMENT

Innovation through Research & Development is one of the key Objectives at KNPL which has also been incorporated into the Company''s Vision statement. KNPL''s aim is to leverage the global technical know-how available with the Kansai group for innovation.

New products were developed for the Automotive division including new shade development. High Solid/ Medium Solid products, anti-corrosive primer, monocot metallic’s, Acrylic/Epoxy Red CED, Super Petrol Taping Lacquer for the two wheeler industry, heavy metal free Epoxy Paint for Auto Ancillaries were a few of the innovative products developed during the financial year.

In the Automotive Refinish segment, the Company has enhanced its shade range and portfolio to strengthen its offering.

New products were also introduced in the Decorative division such as Excel Mica Marble, ready mix primer cum putty, Excel alkali Primer and Impression Glitter -Gold and Silver. Similarly the wood coating range was enhanced.

Optimization of formulation was done by undertaking Value Engineering leading to optimum mix for cost savings. Research and Development continues to be in focus and innovation still remains the driving force behind Customer service.

[H] INFORMATION TECHNOLOGY

For 2016-17, Digitization, mobility and security were the three core IT initiatives. All these initiatives were leveraged to design improved performance and faster decision making to all the core functions in the organization.

Continuing from the last year digitization initiative, exploiting the IT investment done in the "in-memory" computation capabilities, various business processes were re-engineered and systematized in the area of Marketing, supply chain, manufacturing and finance. This would enable deeper insight; enhance the service capabilities of the supply chain, quicker response to the markets and influencers and real time information to the customers.

KNPL has always believed into data being a strategic asset. The decision capabilities were given a boost by providing next generation exception analytics at an individual employee level across the organization which has helped provide visibility into the impact of action on the Key Performance indicator that they are responsible for.

As part of our mobility initiative this year our decorative sales team was moved to the mobility platform. In addition off-line digital content mobile application was developed for the sales team. The work towards making KNPL GST ready continued in the current year. Being conscious about the changing IT environment and to safeguard against the vulnerabilities, the Company has implemented various security solutions.

[I] PEOPLE

At KNPL, we believe that people are essential part of the organization, as they provide inspiration, creativity, vision and motivation that keeps us going. People provide the skills and competencies necessary to make organizational strategies work. With the advancements in technology, the significance of people gets augmented multi-fold. Many efforts are taken to engage the energies and enthusiasm of our people in the most effective way.

This year too, we continued with our Endeavour to maintain a ‘Performance driven, fair and transparent'' culture. The Organizational Business Plan is aligned with the Key Result Areas for each position. The performance review mechanism has now been digitalized to ensure greater transparency and accuracy. The daily performance dashboard is available to all the employees and it enables every employee to remain focused on the priorities and continue to contribute to the organization''s goals. We have made progress on focused initiatives and have grown on our key performance indicators over the year 2016-17. This has complimented our commitment to provide a high quality of service to our customers.

KNPL treats the development of its employees with utmost importance. New training programs for frontline staff in both the Decorative and Industrial Divisions were conducted in order to skill them with new sales techniques and drive the top-line of the Company. We also introduced a new training program called "Leap" for our Decorative sales force with an objective to rejuvenate the workforce with sales techniques that would enhance their performance. Assessment & Development centers were conducted to objectively evaluate the managerial potential of select personnel.

In order to enhance employee engagement, we also introduced an employee recognition platform called GEMS. GEMS is a framework for employees to acknowledge support and help by colleagues in their day to day interaction. It is a company-wide rewards program that fosters an environment of appreciation. In-house training workshops on people management, excellence and KNPL competency framework, have been designed and conducted by HR.

KNPL strongly believes in Healthy living, and adopted the theme of "Be Healthy, Be Better" for the sales team. KNPL encouraged employees to make small changes in their lifestyle to lead a fit and healthy life.

HR has leveraged IT to bring about a culture of excellence by focusing on increased personal effectiveness. This was done through several digital Interventions like opinion polls, interactive quiz, extending attendance system to field, e-exit module, inviting new ideas through idea management campaigns, amongst others.

The in-house knowledge management portal is leveraged to foster a learning work culture. Through this the employees can learn from each other and keep up the momentum of a learning organization. KNPL continues with its good practices of Corporate Governance through the Whistle Blower Policy, encouraging growth of individuals irrespective of gender, religion, caste or community and policy on "Appropriate Social Conduct at Workplace". All these policies add up to a congenial work environment to drive performance that is free from threat or fear.

The above mentioned HR initiatives at KNPL attempt to support and uphold organization''s goals by fostering an engaging work environment in the dynamic business scenario.

All the above-mentioned initiatives have helped us retain key talent. Our employee strength is 2697 on 31st March, 2017.

[J] AWARDS AND RECOGNITION

Awards by External Agencies:

- KNPL Technical Wins 3rd Prize in Indian Paint Association (IPA) Technical Paper Competition.

- Mr. H M Bharuka, MD, KNPL was awarded the Best CEO in the Chemicals category by Business Today at the 4th edition of the Business Today - Best CEO Awards in December 2016.

- KNPL Quality Team - Bawal won the Silver Award at "Quality Circle Forum of India".

- Lote plant was awarded Certificate of Merit in the Paints & Allied Products Sector on 6th December, 2016 by Bureau of Energy Efficiency, Ministry of Power for its initiatives done under ENCON (Energy Conservation) in last 3 years.

- Bawal Plant secured Runner-up position in QIMPRO Convention - All India level under Improvement category.

- KNPL, Lote was awarded "Certificate of Merit" from National Safety Council (NSC) for the 4th consecutive year - Maharashtra chapter for achieving Zero Accident Frequency Rate in the year 2015.

- Bawal Quality Team won the Silver Category Award from the Quality Circle Forum of India.

- Lote plant received the Certification of Appreciation from NSC in group B under chemical manufacturing industries for appreciable achievement in Occupational safety and health.

- Jainpur Plant (PE) won an award for "Excellence in Coating Developments - Industry Research & Promotion" in 13th International Symposium on Surface Engineering & Paint Coatings.

Awards by Customers:

- Daimler India Commercial Vehicles, Chennai (DICV) has presented a memento to KNPL in September 2016 as an appreciation of our contribution.

- Kansai Nerolac Paints received 4 awards from Mahindra & Mahindra:

1) Innovation Award for Automotive and Farm Sector.

2) Award for ‘The Tough and Stylish TUV 300''.

3) Award for ‘KUV 100''.

4) Award for ‘Technologically Advanced Mahindra Yuvo''.

- KNPL has been honored with best vendor award in paints category by Suzuki Motorcycles India Pvt Ltd.

- Best supplier Award to Hosur Plant by Toyota Kirloskar Motor Limited.

- Awarded "Best Vendor" in Paints category by M/s Plastic Omnium.

[K] community development

Corporate Social Responsibility (CSR) is generally understood as the way through which a Company can achieve balance of economic, environmental and social imperatives. Thus, it can be said that the CSR approach is holistic and integrated with the core business strategy for addressing social and environmental impacts of businesses. Now, it is a well-known fact that CSR needs to address well-being of all the stakeholders and not just the Company''s shareholders.

At KNPL, we undertake several outreach programs under the umbrella of Environment, Health, Education, Community Living, Livelihood and Skill Enhancement and protection of Heritage sites.

These CSR initiatives are largely done through the involvement and participation of a large section of employees thereby instilling a sense of pride and purpose amongst the employees beyond the conduct of day to day business activities.

Many of the CSR activities are carried out in partnership with government and other stakeholders so as to create a meaningful impact in the society and improve overall quality of life of people in general and of rural community in particular.

KNPL in collaboration with SBI, conducted several Basic painting training programs to the unemployed rural youth, thereby enabling them to not only be self-employed but also giving rise to entrepreneurs.

KNPL also carries out various CSR activities under Rural/ Community development Program thereby contributing to make civil society strong and to extend hand in providing basic amenities to the needy. These programs include Health camps in rural area, construction of toilets, bore wells, financial assistance to various educational Institutes to meet their educational requirements, Environmental sustenance etc. Preference is given to the local area, where the Company operates, viz. near Plant locations and sales depots.

KNPL will continue to support National and State programs and partner with local and government bodies so as make a impactful and effective contribution to society at large, with the involvement and engagement of its employees in the process.

Nerolac launched its first ever ‘Cyclathon'' across 46 cities to commemorate the second anniversary of the Swachh Bharat campaign. The event brought both ‘Swaasth'' or health & ‘Swachhata'' or cleanliness into focus as it included cycling for around 5 km followed by a painting activity at a school. The event was a fun activity involving Nerolac''s local teams, painters and dealers rallying together as a community to champion health.

[L] ENVIRONMENT, HEALTH & SAFETY

Environment, Health & Safety (EHS) is of utmost importance for KNPL. Fire prevention, emergency preparedness and response and safety at workplace come under the aegis of Safety. Last year, KNPL focused on enhancing safety awareness amongst its employees through specially designed "Danger Experience Training program". Employees were provided with practical experience of safety hazards involved in various paint manufacturing processes at the safety laboratory. The Company intends to continue this experiential training program in the coming year and strengthen "Safety First" culture. KikenYochi Training (KYT) is being exercised aggressively on shop floor to gather employee feedback on safety hazards in their respective work areas and increase awareness level to avoid unsafe acts. In addition to this, the Company has invested in up gradation of fire-fighting installations at its plants to strengthen emergency preparedness.

Occupational health is one of the important factors of Safety. To cater to employee health, all KNPL manufacturing sites are equipped with dedicated Occupational Health Centre (OHC) and Ambulance for an emergency situation. The Company facilitates periodic medical check-up for its employees. Last year, Company enhanced focus on employee visits to OHC (Occupational Health Center).

Internal training to healthcare workers is arranged at all the manufacturing units of the Company. Training is focused on ensuring compliance with respect to Bio-Medical Waste Management Rules, 2016. It includes key topics such as bio-medical waste segregation, packaging, transportation, safe handling and storage and its disposal methods etc. 18 personnel were provided training during the year 2016-17. 8 personnel will be provided training in the forthcoming year.

Under environmental domain, Reduction and recovery of material losses is one of the key focus areas for KNPL.

KNPL focuses immensely on water conservation through its water reuse, reduce and recycle themes. The Company has embraced water efficient technologies in its process to help reduce water consumption at source. Zero effluent discharge facilities at our plants led us to re-utilize whole treated water back into processes.

On the sustainability front, Energy Management is key focus area for the Company. In order to curtail energy consumption, KNPL has invested in energy efficiency measures as well as in up gradation of machine utilities. KNPL has been proactive in substitution of nonrenewable energy sources by renewable energy sources. The Company continued to harness solar energy through various initiatives like solar plant, sola tubes amongst others. Further, it switched to renewable energy sources through mechanisms such as power purchase agreement and wind wheeling. In upcoming years, the Company would extend the proportion of renewable energy used.

The Company publishes its Environmental and social performance through Sustainability report which is available on the website of the Company.

[M] supply chain

Supply Chain is an integral and a vital cog in the wheel of KNPL and this year saw increased focus on optimizing processes in this area.

This year also saw an increase in the number of depots, which has enhanced the reach of KNPL and will help serve customers better. Besides being a nodal point for material transfer, depots also serve as a check point to connect to the consumers and influencers directly.

Tinting is a vital element of the paint manufacturing process. The Company has combined IT with paint manufacturing technology to develop a system to address this element of the manufacturing process.

[P] FINANCIALS

Gross sales and other operating income for the year aggregated toRs,4936.05 Crores reflecting a growth of 7.2% over the previous year.

Depreciation for the year isRs,69.49 Crores as againstRs,67.72 Crores in the previous year.

Other Income was substantially higher atRs,98.22 Crores as compared toRs,27.35 Crores for the previous year mainly due to surplus funds arising out of gain on sale of Chennai land in March 2016, deployed in mutual funds during the year.

The Company continued with its initiatives to reduce procurement cost and to reduce operational costs. These initiatives helped the Company in the current year to keep the operational costs under control and improve the bottom line.

Profit Before Depreciation, Interest and Tax (PBDIT) for the year is higher atRs,730.69 Crores compared toRs,579.98 Crores last year reflecting a growth of 26%. Profit Before Tax (PBT) for the year isRs,759.42 Crores as compared toRs,539.61 Crores (before extraordinary income) of the previous year which is a growth of 40.7% over previous year.

The Company spentRs,6.46 Crores towards Corporate Social Responsibility compared toRs,5.29 Crores in the previous year.

The Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013, during the year.

There are no significant or material orders passed by any Regulators, Courts or Tribunals against the Company which could impact the going concern status and Company''s operations in future.

There has been no change in the nature of business during the year.

There have been no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this Report.

Cautionary Statement

Statements in this Management Discussions and Analysis Report describing the Company''s objectives, estimates and expectations may be “forward looking statements" within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied.

4. Unclaimed Dividend

During the year, dividend amounting toRs,3.67 lacs that had not been claimed by the shareholders for the year ended 31st March, 2009, was transferred to the credit of Investor Education and Protection Fund as required under Section 205A read with Section 205C of the Companies Act, 1956. As on 31st March, 2017, dividend amounting toRs,87.68 lacs has not been claimed by shareholders of the Company. Shareholders are required to lodge their claims with the Registrar, TSR Darashaw Ltd., for unclaimed dividend. Pursuant to the provisions of Investor Education and Protection Fund (Uploading of Information regarding unpaid and unclaimed amounts lying with Companies) Rules, 2012, the Company has uploaded the details of unpaid and unclaimed amounts lying with the Company on 22nd June, 2016 (date of the last Annual General Meeting) on the website of the Company, www.nerolac.com. The same is also available on the website of the Ministry of Corporate Affairs, www.mca.gov.in.

5. Collaboration

The Directors record their appreciation for the contribution made and support provided by Kansai Paint Co. Ltd., Japan (Kansai). Kansai continues to provide support on process design, quality improvement, world class technology which has helped the Company in maintaining market leadership in the industrial business including automotive coatings, by servicing existing customers better and adding new lines. Kansai also provides technology for manufacture of architectural coatings.

The Company also has Technical Assistance Agreement with Oshima Kogyo Co. Ltd., Japan, for manufacturing heat resistance coatings, Cashew Co. Ltd., Japan for manufacturing coatings products MICRON TXL SK-1 and Thinner for MICRON and with Protech Chemicals Limited, Canada for manufacturing powder coating products. The Directors record their appreciation for the co-operation from these collaborators.

6. Overseas Operations:

a. Operations in Nepal

During the year, the name of our subsidiary

company in Nepal was changed from Kansai

Paints Nepal Pvt. Ltd. to KNP Japan Private Limited.

For the financial year ended 31st March, 2017, the

Turnover of KNP Japan Private Limited increased toRs,53.95 Crores as compared toRs,40.16 Crores for the financial year ended 31st March, 2016.

Profit Before Tax has increased toRs,6.87 Crores as compared toRs,4.09 Crores last year. Profit After Tax has increased toRs,5.12 Crores as compared toRs,3.05 Crores last year.

Consolidated financial statement of the Company and of the subsidiaries, forms part of the Annual Report. A separate statement containing the salient features of the financial statement of KNP Japan Private Limited is part of this Annual Report.

Annual Audited Accounts of KNP Japan Private Limited are available on the website of the Company.

b. Operations in Srilanka

Our subsidiary in Srilanka, Kansai Paints Lanka Pvt. Ltd. has commenced its operations on 26th April, 2017.

Consolidated financial statement of the Company and of the subsidiaries, forms part of the Annual Report. A separate statement containing the salient features of the financial statement of Kansai Paints Lanka Pvt. Ltd. is part of this Annual Report.

Annual Audited Accounts of Kansai Paints Lanka Pvt. Ltd. are available on the website of the Company.

7. New Projects

The Shareholders were informed last year that the Company undertook a comprehensive review of its manufacturing capacities and had started setting up of a paint manufacturing unit at Saykha Industrial Estate in Gujarat and also a paint manufacturing unit at Goindwal Sahib near Amritsar in Punjab. It was also informed that the Company had started setting up a Global R & D Centre at Vashi, Navi Mumbai.

The construction of manufacturing unit at Saykha Industrial Estate in Gujarat and at Goindwal Sahib near Amritsar in Punjab and also the construction of Global R & D Centre at Vashi, Navi Mumbai are in process as per the planned schedule.

The Company has initiated a project at Achutapuram, Visakhapatnam district in Andhra Pradesh to set up a paint manufacturing unit having a capacity of 60,000 KL per year, which is expandable in phases, at an estimated cost ofRs,304 crores.

8. Cost Audit

The Ministry of Corporate Affairs (MCA), vide Notification dated 14th July, 2016, amended the Companies (Cost Records and Audit Rules) 2014, through Companies (Cost Records and Audit) Amendment Rules, 2016. As per the Amendment Rules, 2016, the Company is required to conduct cost audit of the cost records of its products - Thinners and Resins. The Board of Directors has appointed D. C. Dave & Co., Cost Accountants as the Cost Auditor to conduct cost audit of the cost records of products - Thinners and Resins for the financial year 2016-17 and financial year 2017-18.

The remuneration of the Cost Auditor as recommended by the Audit Committee and approved by the Board of Directors is required to be ratified subsequently by the Shareholders. Hence the resolutions at Item nos. 6 and 7 of the Notice of the Annual General Meeting (AGM).

9. Directors

In accordance with Articles of Association of the Company, Mr. Masaru Tanaka and Mr. Hidenori Furukawa retire by rotation at this Annual General Meeting and being eligible offer themselves for re-appointment.

Mr. Shinji Asatsuma, a nominee of Kansai Paint Co. Ltd., Japan, resigned from the Board of Directors of the Company with effect from 29th July, 2016. The Board of Directors has placed on record its sincere appreciation and gratitude for the valuable and outstanding contribution made by Mr. Asatsuma during his association with the Company as a Director.

Mr. Katsuhiko Kato, a nominee of Kansai Paint Co. Ltd., Japan was appointed as a Director with effect from 29th July, 2016, in the casual vacancy caused by the resignation of Mr. Shinji Asatsuma. Mr. Kato holds office till the ensuing Annual General Meeting. Notices in writing have been received from some Shareholders of the Company proposing his candidature for the office of the director.

Mr. D. M. Kothari, Vice Chairman has retired from the Board of Directors of the Company with effect from the close of business on 2nd May, 2017. The Board of Directors has placed on record its sincere appreciation and gratitude for the very valuable and outstanding contribution made by Mr. Kothari during his long and fruitful association with the Company as a Director, then as the Managing Director and subsequently as the Vice Chairman of the Company.

Mr. H. M. Bharuka, Managing Director, is now appointed as the Vice Chairman and Managing Director of the Company for the period from 3rd May, 2017 to 31st March, 2022, subject to the approval of the Shareholders at the ensuing Annual General Meeting to be held on 21st June, 2017. The material terms of appointment of Mr. Bharuka are stated in the explanatory statement to the Notice of the AGM at item no. 8.

None of the Directors is disqualified for appointment/ re-appointment under Section 164 of the Companies Act, 2013. As required by law, this position is also reflected in the Auditors'' Report.

All the Independent Directors on the Board have given a declaration of their independence to the Company as required under Section 149(6) of the Companies Act, 2013.

The composition of the Board, meetings of the Board held during the year and the attendance of the Directors thereat have been mentioned in the Report on Corporate Governance in the Annual Report.

Mr. H. M. Bharuka, Managing Director, is a member of the Global Steering Committee of Kansai Paint Co. Ltd., Japan, the holding company. Mr. H. M. Bharuka received a remuneration ofRs,73.10 lacs during the year as a member of the Global Steering Committee.

10. Key Managerial Personnel

As required under Section 203 of the Companies Act,

2013, the Company has noted that Mr. H. M. Bharuka, Managing Director, Mr. P. D. Chaudhari, Whole-time Director, Mr. P. D. Pai, Chief Financial Officer and Mr. G. T. Govindarajan, Company Secretary are the Key Managerial Personnel of the Company.

11. Board Evaluation

The evaluation of all the Directors, the Board as a whole and its Committees was conducted based on the criteria and framework adopted by the Board. The evaluation process has been explained in the Report on Corporate Governance in this Annual Report. The Board noted the evaluation results that were collated and presented to the Board.

12. Remuneration Policy

The Board of Directors of the Company has adopted a Remuneration Policy for determining qualifications, positive attributes and independence of a Director and criteria for Director''s appointment and remuneration. The features of the Policy are as follows:

- The Company, while constituting the Board shall draw members from diverse fields such as finance, law, management, architecture, technical, marketing, manufacturing, corporate governance, operations or other disciplines related to the Company''s business. There shall be no discrimination on the basis of gender, while determining the Board composition.

- A director shall be a person of integrity, who possesses relevant expertise and experience. He shall uphold ethical standards of integrity and probity and act objectively and constructively. He shall exercise his responsibilities in a bona-fide manner in the interest of the Company; devote sufficient time and attention to his professional obligations for informed and balanced decision making; and assist the Company in implementing the best corporate governance practices.

- An Independent director should meet the requirements of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, concerning independence of directors. The Company shall also obtain certification of independence from the Independent Director in accordance with the Companies Act, 2013.

- The objective of the policy is to have a compensation framework that will reward and retain talent.

- The remuneration will be such as to ensure that the correlation of remuneration to performance is clear and meets appropriate performance benchmarks.

- Remuneration to Key Managerial Personnel, Senior Management and other employees will involve a balance between fixed and variable pay reflecting short and long term performance objectives of the employees in line with the working of the Company and its goals.

- For Directors, the Performance Pay will be linked to achievement of Business Plan.

- For Heads of Department, the Performance Pay will be linked to achievement of functional plan which is derived from the business plan. The functional plan includes both, short-term and long-term objectives.

- The above will take into consideration industry performance, customer performance and overall economic environment.

- For other management personnel, the Performance Pay will be linked to achievement of individual set objectives and part of this will also be linked to overall company performance.

13. Risk Management Policy

Risk profiling is put in place for all the areas of operations in the Company and well integrated in the business cycle. The Company has identified the risk areas in its operations along with its probability and severity, department wise. The various risks to which the Company is exposed are as mentioned in the Management and Discussion Analysis Report under the relevant heading. An effective Risk Management Framework is put in place in the Company in order to analyze, control and mitigate risk.

The Risk Management Framework comprises of Risk Management Committee and the Risk Officers. The Risk Management Committee of our Company consists of the Management Committee and the Chief Risk Officer. The Managing Director, the Executive Director and the functional heads constitute the Management Committee. The Company Secretary is the Chief Risk Officer. The Risk Officers have been appointed by the functional heads and represent the various functions. The requirements of Regulation 21 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, with regard to the constitution of a Risk Management Committee are not applicable to our Company as this Regulation is applicable only to top 100 listed entities, determined on the basis of market capitalisation, as at the end of the immediate previous financial year. The Board of Directors and the Audit Committee review the effectiveness of the Risk Management framework and provide advice to the Risk Management Committee at regular intervals.

The functions of the Risk Management Committee includes preparation of company-wide framework for risk management, fixing roles and responsibilities, communicating the risk management objective, allocating resources, drawing action plan, determining criteria for defining major and minor risks, deciding strategies for escalated major risk areas, updating company-wide Risk register and preparing MIS report for review of Audit Committee.

The Risk Management Framework aims to:

(a) address our Company''s strategies, operations and compliances and provide a unified and comprehensive perspective;

(b) establish the risk appetite;

(c) be simplistic and intuitive to facilitate a speedy and appropriate identification of potential and actual risks and its communication;

(d) seek escalation of the identified risk events to the appropriate persons to enable a timely and satisfactory risk response;

(e) reduce surprises and losses, foresee opportunities and improve deployment of resources;

(f) develop a mechanism to manage risks.

Through the Risk Management framework, system and process are set to identify, gauge and mitigate any potential risk promptly and efficiently in order to manage and control them effectively. Clearly defined work profiles and assigned responsibilities are well at place, throughout the organization, at all levels and all functions, ensuring smooth flow of information across various levels within the organization.

14. Dividend Distribution Policy

The Dividend Distribution Policy of the Company has been formulated to ensure compliance with the provisions of Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Board will assess the Company''s financial requirements, including present and future organic and inorganic growth opportunities and other relevant factors as mentioned in this policy before declaring dividend in any financial year.

The Board may consider not declaring dividend or may recommend a lower payout for a given financial year, after analyzing the prospective opportunities and threats or in the event of challenging circumstances such as regulatory and financial environment.

The Dividend (including interim and/or final) for any financial year shall be declared or paid by the Company for any financial year out of the profits of the Company for that year arrived at after providing for depreciation in accordance with the provisions of the Companies Act, 2013 or out of the profits of the Company for any previous financial year(s) arrived at after providing for depreciation in accordance with the provisions of the Companies Act, 2013 and remaining undistributed, or out of both. The Company may, before the declaration of any dividend in any financial year, transfer such percentage of its profits for that financial year as it may consider appropriate to the reserves of the Company. The Company shall follow the provisions of the Companies Act and all the relevant rules and regulations of the Companies Act and/or any regulatory enactment(s) as may be applicable while declaring and paying dividend for any financial year.

The rate of Dividend shall be fixed by the Board of Directors of the Company. Final dividend proposed by the Board of Directors, if any, would be subject to the approval of the shareholders at the Annual General Meeting.

The Board of Directors shall recommend dividend in compliance with this policy, the provisions of the Companies Act, 2013 and Rules made there under and other applicable legal provisions.

The Company will consider various internal and external factors, including but not limited to the following before making any recommendation for dividend:

(i) Internal factors:

a. Profitable growth of the Company and specifically, profits earned during the financial year as compared with previous years and internal budgets;

b. Cash flow position of the Company;

c. Accumulated reserves;

d. Stability of earnings;

e. Future cash requirements for organic growth/ expansion and/or for inorganic growth;

f. Contingent liabilities;

g. Deployment of funds in short term marketable investments and/or long term investments;

h. Capital expenditure(s); and

i. The ratio of debt to equity.

(ii) External factors:

a. Economic environment;

b. Cost and availability of alternative sources of financing;

c. Inflation rate;

d. I ndustry outlook and stage of business cycle for underlying businesses;

e. Prevailing Taxation Policy or any amendments expected thereof, with respect to Dividend distribution;

f. Changes in the Government policies, industry specific rulings & regulatory provisions; and

g. Any other relevant factors that the Board may deem fit to consider before declaring Dividend.

Apart from the above, the Board also considers past dividend history and track record of previous Dividends distributed by the Company. The Board may additionally recommend special dividend in special circumstances.

Subject to applicable regulations, the Company''s retained earnings shall be applied for:

- Funding inorganic and organic growth needs including working capital, capital expenditure, repayment of debt, etc.

- Buyback of shares subject to applicable limits

- Capitalization of shares

- Issue of Bonus shares

- Payment of Dividend in future years

- Investment in new business(es) and/or additional investment in existing business(es)

- General corporate purposes, including contingencies

- Any other permissible usage as per law.

The Company currently has only one class of shares, viz. Equity shares, for which this policy is applicable. The policy will be subject to review if and when the Company issues different classes of shares.

The Dividend Distribution Policy of the Company is also available on the website of the Company at https://nerolac.com/financial/policies.html#scroll

15. Corporate Social Responsibility

The Board has constituted a Corporate Social Responsibility (CSR) Committee as per the provisions of Section 135 of the Companies Act, 2013. The functions of the CSR Committee are to:

(a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the Company as 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.

The members of the CSR Committee are Mr. D. M. Kothari, Mr. H. M. Bharuka, Mr. N. N. Tata and Mrs. Brinda Somaya. Mr. D. M. Kothari is the Chairman of the CSR Committee. The independent Directors on the CSR Committee are Mr. D. M. Kothari, Mr. N. N. Tata and Mrs. Brinda Somaya.

With effect from 3rd May, 2017, the CSR Committee will be re-constituted as follows:

Mr. H. M. Bharuka (Chairman), Mr. N. N. Tata and Mr. P. D. Chaudhari.

The CSR Committee meetings held during the year and attendance of the members of the CSR Committee at the meetings are as follows:

Date of Meeting	Members Present at the Meeting
29-07-2016	Mr. D. M. Kothari Mr. H. M. Bharuka Mr. N. N. Tata Mrs. Brinda Somaya
27-03-2017	Mr. D. M. Kothari Mr. N. N. Tata Mrs. Brinda Somaya

The Board has also framed a CSR Policy for the Company, on the recommendations of the CSR Committee. The Report on CSR activities as required under Companies (Corporate Social Responsibility) Rules, 2014, including a brief outline of the Company''s CSR Policy, total amount to be spent under CSR for the financial year, amount unspent and the reason for the unspent amount, is set out at Annexure-1 forming part of this Report.

16. Particulars of Loans, Guarantees or Investments under Section 186 of the Companies Act, 2013

Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013, are given in the notes to the financial statements provided in this Annual Report.

17. Related Party Transactions

All transactions entered into with the Related Parties in terms of Section 2(76) and Section 188 of the Companies Act, 2013 read with Regulation 2(zc) and Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 during the financial year were in the ordinary course of business and on arm''s length basis and do not attract the provisions of Section 188 of the Companies Act, 2013. There were no Material Related Party Transactions during the year. Thus, disclosure in Form AOC-2 is not required.

18. Audit Committee

The Company has an Audit Committee in place, constituted as per the provisions of Section 177 of the Companies Act, 2013. The members of the Audit Committee, its terms of reference, the meetings of the Audit Committee and attendance thereat of the members of the Committee is mentioned in the Corporate Governance Report under the appropriate heading.

19. Whistle Blower Policy

The Company has a Whistle Blower Policy to report genuine concerns and grievances. The implementation of the Whistle Blower Policy has been mentioned in the Report of Corporate Governance.

20. Prevention of Sexual Harassment at workplace

The Company has adopted a policy with the name "Policy on Appropriate Social Conduct at Workplace".

The policy is applicable for all employees of the organization, which includes corporate office, branches, depots and manufacturing locations etc.

The policy is applicable to non-employees as well i.e. business associates, vendors, trainees etc.

A Complaints Committee has also been set up to redress complaints received on sexual harassment as well as other forms of verbal, physical, written or visual harassment.

During the financial year under review, the Company has not received any complaints of sexual harassment.

21. Corporate Governance

As required by Schedule V(C) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations,

2015, a detailed report on Corporate Governance is given as a part of the Annual Report. The Company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors'' Certificate of the compliance with Corporate Governance requirements by the Company is attached to the Report on Corporate Governance.

22. General Shareholder Information

General Shareholder Information is given in Item No. 9 of the Report on Corporate Governance forming part of the Annual Report.

23. Business Responsibility Report

Regulation 34(2)(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended with effect from 1st April, 2016, requires that in case of the top 500 listed companies based on market capitalisation, the Annual Report shall contain a Business Responsibility Report describing the initiatives taken by the Company from an environmental, social and governance perspective, in the format specified by SEBI. The Business Responsibility Report in the format suggested by SEBI forms part of the Annual Report.

24. Particulars regarding Employees Remuneration

The statement containing particulars of employees as required under Section 197(12) of the Companies Act,

2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report as Annexure-2.

25. Directors’ Responsibility Statement

As stipulated under the provisions contained in Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013 the Directors hereby state that:

(i) i n the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) the Directors have prepared the annual accounts on a going concern basis;

(v) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

(vi) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

26. Energy, Technology Absorption & Foreign Exchange

Statement giving the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under Section 134(3)(m) read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is enclosed as Annexure-3 to this Report.

27. Extract of Annual Return

In accordance with Section 134(3)(a) of the Companies Act, 2013, an extract of the Annual Return in the prescribed format is appended as Annexure-4 to this Report.

28. Statutory Auditors

The Company Auditors, B S R & Co. LLP, Chartered Accountants, have been appointed for a period of 5 years from the 94th AGM till the 99th AGM. Pursuant to provisions of Section 139(1) of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, the appointment of B S R & Co. LLP, as Auditors of the Company for a period of 5 years shall be subject to ratification by shareholders at every AGM. Accordingly, the appointment of B S R & Co. LLP, as the Auditors of the Company from this AGM till the conclusion of next AGM is put forth for your approval.

The Auditors'' Report is clean and there are no qualifications in their Report.

29. Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Company had appointed M/s Ragini Chokshi & Co., Practicing Company Secretaries, as the Secretarial Auditor of the Company for the year 2016-17 to conduct secretarial audit and to ensure compliance by the Company with various Acts applicable to the Company. The Secretarial Audit Report for the financial year 2016-17 issued by M/s Ragini Chokshi &. Co., is annexed to this Report as Annexure-5. There are no qualifications or adverse remarks in their Report.

30. Acknowledgements

Your Directors wish to express their grateful appreciation for the co-operation and support received from customers, parent company, collaborators, vendors, shareholders, financial institutions, banks, regulatory authorities and the society at large.

Deep appreciation is also recorded for the dedicated efforts and contribution of the employees at all levels, as without their focus, commitment and hard work, the Company''s consistent growth would not have been possible, despite the challenging environment.

For and on behalf of the Board

P. P. Shah Chairman

Mumbai, 2nd May, 2017

---

Mar 31, 2015

Dear Members,

The Directors are pleased to present the 95th Annual Report and the Audited Accounts for the year ended 31st March, 2015.

1. Financial Highlights

1st April, 2014 1st April, 2013 to to 31st March, 2015 31st March, 2014 Rs. in Crores Rs. in Crores

Sales & Operating Revenue. 4211.64 3739.02

Net Sales/Income from operations (Net of excise and discounts) 3532.41 3145.77

Other Income 21.79 10.33

Profit before Interest, Depreciation, Tax and Appropriation 466.61 372.42

Interest 0.02 0.45

Depreciation 67.69 64.98

Profit Before Exceptional Item 398.9 306.99

Exceptional Item - -

Profit Before Tax. 398.9 306.99

Tax 127.23 100.42

Profit After Tax 271.67 206.57

Balance brought forward from previous year. 931.52 814.97

Balance available for appropriations 1203.19 1021.54

Appropriations:

Proposed Dividend 75.45 59.28

Tax on proposed dividend 15.78 10.08

General Reserve 27.17 20.66

Amount spent towards Corporate Social Responsibility Activities under Section 135 of the Companies Act, 2013. 4.51 -

Impact of depreciation pursuant to adoption of useful lives as per Part C of Schedule II of the Companies Act, 2013 and management estimate of useful lives 3.49 —

Deferred tax impact on the above 1.19 —

Balance retained in Profit and Loss Account. 1077.98 931.52

1203.19 1021.54

2. Dividend

The Directors recommend for consideration of the Members, a dividend of Rs. 1.40 (140%) per equity share of the nominal value of Rs. 1 each for the year ended 31st March, 2015 as against Rs. 11.00 per equity share (110%) paid last year on every equity share of the face value of Rs. 10 each.

4. Unclaimed Dividend

During the year, dividend amounting to Rs. 2.74 lacs that had not been claimed by the shareholders for the year ended 31st March, 2007, was transferred to the credit of Investor Education and Protection Fund as required under Section 205A read with Section 205C of the Companies Act, 1956. As on 31st March, 2015, dividend amounting to Rs. 57 lacs has not been claimed by shareholders of the Company. Shareholders are required to lodge their claims with the Registrar, Sharepro Services (India) Pvt. Ltd., for unclaimed dividend. Pursuant to the provisions of Investor Education and Protection Fund (Uploading of Information regarding unpaid and unclaimed amounts lying with Companies) rules, 2012, the Company has uploaded the details of unpaid and unclaimed amounts lying with the Company on 20th June 2014 (date of the last Annual General Meeting) on the website of the Company (www.nerolac.com), as also on the website of the Ministry of Corporate Affairs (www.mca.gov.in).

5. Collaboration

The Directors record their appreciation for the contribution made and support provided by Kansai Paint Co. Ltd., Japan (Kansai). Kansai continues to provide support on process design, quality improvement, world class technology which has helped the Company in maintaining market leadership in the industrial business including automotive coatings, by servicing existing customers better and adding new lines. Kansai also provides technology for manufacture of architectural coatings.

The Company also has Technical Assistance Agreement with Oshima Kogyo Co. Ltd., Japan, for manufacturing heat resistance coatings, Cashew Co. Ltd., Japan for manufacturing coatings products MICRON TXL SK-1 and Thinner for MICRON and with Protech Chemicals Limited, Canada for manufacturing powder coating products. The Directors record their appreciation for the co-operation from these collaborators.

6. Subsidiary in Nepal

The Company has 8,84,000 equity shares constituting 68% of the paid-up equity share capital of Kansai Paints Nepal Pvt. Ltd., Nepal (Kansai Paints Nepal).

Pursuant to provisions of Section 2(87) of the Companies Act, 2013, Kansai Paints Nepal is the subsidiary of our Company.

For the financial year ended 31st March, 2015, the Gross Turnover of Kansai Paints Nepal increased to Rs. 39.36 Crores as compared to Rs. 30.43 Crores for the financial year ended 31st March, 2014. Profit before Tax rose to Rs. 4.60 Crores from Rs. 2.95 Crores. Profit after Tax rose to Rs. 3.52 Crores from Rs. 2.20 Crores.

Consolidated financial statement of the Company and of the subsidiary, Kansai Paints Nepal, forms part of the Annual Report. A separate statement containing the salient features of the financial statement of Kansai Paints Nepal is part of this Annual Report.

Annual Audited Accounts of Kansai Paints Nepal are available on the website of the Company.

7. Proposed Joint venture in Sri Lanka

The Company has entered into a Joint Venture agreement with Capital Holdings Maharaja Pvt. Ltd., a group Company in Maharaja Group. Maharaja Group is a diversified group in Sri Lanka having presence in Businesses like Media, Hardware, FMCG products etc. The Company seeks to take advantage of Maharaja Group''s strong presence in hardware outlets. Our Company now intends to start a JV by incorporating a Company. The total project cost is estimated to be 65 Crores LKR. The equity contribution of the Company in this proposed JV would be 60% amounting to around 39 Crores LKR (INR 18.4 Crores).

8. Cost Audit

The Ministry of Corporate Affairs (MCA) vide Notification dated 31st December, 2014 made amendment in the Companies (Cost Records and Audit) Rules 2014, through Companies (Cost Records and Audit) Amendment Rules, 2014. As per the Amendment Rules, our Company is exempted from the requirement to conduct Cost Audit. Our Company has availed the exemption granted by the MCA.

9. Directors

During the year under review, Mr. Hidenori Furukawa and Mr. Shinji Asatsuma have been appointed as

Additional Directors of the Company with effect from 22nd July, 2014 and 30th January, 2015, respectively. Mr. Hidenori Furukawa and Mr. Shinji Asatsuma shall hold office of Director upto the date of the forthcoming Annual General Meeting. The Company has received letters from shareholders recommending the appointment of Mr. Hidenori Furukawa and Mr. Shinji Asatsuma as Directors of the Company. The proposal of their appointment has been put forth for approval of the shareholders of the Company in the Notice of the AGM. A brief resume of the Directors seeking appointment at the forthcoming Annual General Meeting and other details as required to be disclosed in terms of Clause 49 of the Listing Agreement forms part of the Notice.

Mrs. Brinda Somaya was appointed as an Additional Director with effect from 22nd July, 2014. Thus the Company has complied with the requirement of Section 149 of the Companies Act, 2013 read with Rule 3 of the Companies (Appointment and Qualifications of Directors) Rules, 2014, in regard to the appointment of a Woman Director. Mrs. Somaya also satisfies the criteria for being an Independent Director of the Company and has given a declaration to the Company of her independence as required under Section 149 of the Companies Act, 2013 read with Clause 49 of the Listing Agreement. In pursuance of Section 149 (10) of the Companies Act, 2013, read with Clause 49 of the Listing Agreement, Mrs. Brinda Somaya has been appointed as an Independent Director for a term of 5 years from 22nd July, 2014 to 21st July, 2019 vide shareholders'' approval obtained through Postal Ballot.

In pursuance of Section 149 (10) of the Companies Act, 2013, read with General Circular No. 14/ 2014 dated 9th June, 2014 issued by the Ministry of Corporate Affairs (MCA) and Clause 49 of the Listing Agreement :

(a) Mr. P. P. Shah, Independent Director on the Board of the Company has been appointed for a term of 5 years from 30th January, 2015 to 29th January, 2020, vide shareholders approval obtained through Postal Ballot;

(b) Mr. N. N. Tata, Independent Director on the Board of the Company has been appointed for a term of 5 years from 30th January, 2015 to 29th January, 2020, vide shareholders approval obtained through Postal Ballot.

All the Independent Directors on the Board have given a declaration of their independence to the Company as required under section 149(6) of the Companies Act, 2013.

In accordance with Articles of Association of the Company, Mr. P. D. Chaudhari and Mr. Masaru Tanaka retire by rotation at this Annual General Meeting and are eligible for re-appointment.

Dr. J. J. Irani retired from the Board with effect from 20th June, 2014.

Mr. H. Nishibayashi, nominee of Kansai Paint Co., Ltd., Japan, on the Board, resigned from the directorship with effect from 22nd July, 2014.

Mr. Y. Takahashi, nominee of Kansai Paint Co., Ltd., Japan, on the Board, resigned from the directorship with effect from 30th January, 2015.

The Board of Directors has placed on record its sincere appreciation and gratitude for the very valuable and outstanding contribution made by Dr. J. J. Irani, Mr. H. Nishibayashi and Mr. Y. Takahashi during their association with the Company as Directors.

None of the Directors is disqualified for appointment/ re-appointment under Section 164 of the Companies Act, 2013. As required by law, this position is also reflected in the Auditors'' Report.

The composition of the Board, meetings of the Board held during the year and the attendance of the Directors thereat have been mentioned in the Report on Corporate Governance in the Annual Report.

Mr. H. M. Bharuka, Managing Director, is a member of the Global Steering Committee of Kansai Paints Co. Ltd., Japan, the holding Company. Mr. H. M. Bharuka received a remuneration of Rs. 57.61 lacs during the year as a member of the Global Steering Committee.

10. Key Managerial Personnel

As required under Section 203 of the Companies Act, 2013, the Company has noted that Mr. H. M. Bharuka, Managing Director, Mr. P. D. Chaudhari, Wholetime Director, Mr. P. D. Pai, Chief Financial Officer and Mr. G. T. Govindarajan, Company Secretary are the Key Managerial Personnel of the Company.

11. Board Evaluation

The evaluation of all the Directors and the Board as a whole was conducted based on the criteria and framework adopted by the Board. The evaluation process has been explained in the Report on Corporate Governance in the Annual Report. The Board noted the evaluation results that were collated and presented to the Board.

12. Remuneration Policy

The Board of Directors of the Company has adopted a Remuneration Policy for determining qualifications, positive attributes and independence of a Director and criteria for Director''s appointment and remuneration. The features of the Policy are as follows:

- The Company, while constituting the Board shall draw members from diverse fields such as finance, law, management, architecture, technical, marketing, manufacturing, corporate governance, operations or other disciplines related to the Company''s business. There shall be no discrimination on the basis of gender, while determining the Board composition.

- A director shall be a person of integrity, who possesses relevant expertise and experience. He shall uphold ethical standards of integrity and probity and act objectively and constructively. He shall exercise his responsibilities in a bona-fide manner in the interest of the Company. Devote sufficient time and attention to his professional obligations for informed and balanced decision making. Assist the Company in implementing the best corporate governance practices.

- An Independent director should meet the requirements of the Companies Act, 2013 and Clause 49 of the Listing Agreement concerning independence of directors. The Company shall also obtain certification of independence from the Independent Director in accordance with the Companies Act and the Listing Agreement.

- The objective of the policy is to have a compensation framework that will reward and retain talent.

- The remuneration will be such as to ensure that the correlation of remuneration to performance is clear and meets appropriate performance benchmarks.

- Remuneration to Key Managerial Personnel, Senior Management and other employees will involve a balance between fixed and variable pay reflecting short and long term performance objectives of the employees in line with the working of the Company and its goals.

- For Directors, the Performance Pay will be linked to achievement of Business Plan.

- For Heads of Department, the Performance Pay will be linked to achievement of functional plan which is derived from the business plan. The functional plan includes both, short-term and long-term objectives.

- The above will take into consideration industry performance, customer performance and overall economic environment.

- For other management personnel, the Performance Pay will be linked to achievement of individual set objectives and part of this will also be linked to overall Company performance.

13. Risk Management Policy

Risk profiling is put in place for all the areas of operations in the Company and well integrated in the business cycle. The Company has identified the risk areas in its operations along with its probability and severity, department wise. The various risks to which the Company is exposed are as mentioned in the Management and Discussion Analysis Report under the relevant heading. An effective Risk Management Framework is put in place in the Company in order to analyze, control and mitigate risk.

The Risk Management Framework comprises of Risk Management Committee and the Risk Officers. The composition of the Risk Management Committee and its functions are mentioned in the Report on Corporate Governance under the heading "Risk Management". The Risk Officers have been appointed by the functional heads and represent the various functions. The Board of Directors and the Audit Committee review the effectiveness of the Risk Management framework and provide advice to the Risk Management Committee at regular intervals. The composition and functions of the Risk Management Committee are given in the

Report on Corporate Governance forming part of the Annual Report.

The Risk Management Framework aims to:

(a) address our Company''s strategies, operations and compliances and provide a unified and comprehensive perspective;

(b) establish the risk appetite;

(c) be simplistic and intuitive to facilitate a speedy and appropriate identification of potential and actual risks and its communication;

(d) seek escalation of the identified risk events to the appropriate persons to enable a timely and satisfactory risk response;

(e) reduce surprises and losses, foresee opportunities and improve deployment of resources; and

(f) develop a mechanism to manage risks.

Through the Risk Management Framework, system and process are set to identify, gauge and mitigate any potential risk promptly and efficiently in order to manage and control them effectively. Clearly defined work profiles and assigned responsibilities are well at place, throughout the organization, at all levels and all functions, ensuring smooth flow of information across various levels within the organization.

14. Corporate Social Responsibility

The Board has constituted a Corporate Social

Responsibility (CSR) Committee as per the provisions of Section 135 of the Companies Act, 2013. The functions of the CSR Committee are to:

(a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the Company as 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.

The members of the CSR Committee are Mr. D. M. Kothari, Mr. H. M. Bharuka, Mr. N. N. Tata and Mrs. Brinda Somaya. Mr. D. M. Kothari is the Chairman of the CSR Committee. The Independent Directors on the CSR Committee are Mr. D. M. Kothari, Mr. N. N. Tata and Mrs. Brinda Somaya.

The CSR Committee meetings held during the year and attendance of the members of the CSR Committee at the meetings are as follows:

Date of Meeting Members Present at the Meeting

22nd October, Mr. D.M. Kothari 2014 Mr. H.M. Bharuka

Mr. N.N. Tata Mrs. Brinda Somaya

12th December, Mr. D.M. Kothari 2014 Mr. H.M. Bharuka

Mr. N.N. Tata Mrs. Brinda Somaya

9th March, 2015 Mr. D.M. Kothari Mr. N.N. Tata Mrs. Brinda Somaya

The Board has also framed a CSR Policy for the Company, on the recommendations of the CSR Committee. The Report on CSR activities as required under Companies (Corporate Social Responsibility) Rules, 2014 including a brief outline of the Company''s CSR Policy, total amount to be spent under CSR for the financial year, amount unspent and the reason for the unspent amount, is set out at Annexure-1 forming part of this Report.

15. Sub-division of share capital of the Company

In order to improve the liquidity of the Company''s shares in the Stock market and to make it affordable to the small investors, the Company has subdivided each equity share of the Company from face value of Rs.10 each to 10 equity shares of face value of Rs. 1 each vide shareholders approval obtained through Postal Ballot. The old shares having face value of Rs. 10 are no longer tradable on the Stock Exchanges. The shareholders holding share certificates in physical form have been issued new share certificates with face value of Rs. 1 each. Credit is given with the amount of sub-divided shares to the demat account of the shareholders holding shares in demat mode. The revised structure of the Authorised Capital, Subscribed Capital and Paid-up capital of the Company is reflected in the financial statements. Consequential amendments to the Clause V of the Memorandum of Association and Article 3 of the Articles of Association of the Company is also made to give effect to the subdivision of shares of the Company vide approval of shareholders obtained by the Company through Postal Ballot.

16. Particulars of Loans, Guarantee or Investments under Section 186 of the Companies Act, 2013

Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013, are given in the notes to the financial statements provided in this Annual Report.

17. Internal Financial Controls

The Board of Directors of the Company has laid down adequate internal financial controls which are operating effectively. During the year, policies and procedures are adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to the Company''s policies, safeguarding of its assets, the prevention and detection of its frauds and errors, the accuracy and completeness of the accounting records and the timely preparations of reliable financial information.

18. Related Party Transactions

All transactions entered into with the Related Parties as defined under the Companies Act, 2013 and Clause 49 of the Listing Agreement during the financial year were in the ordinary course of business and on arm''s length basis and do not attract the provisions of Section 188 of the Companies Act, 2013. There were no Material Related Party transactions during the year. Thus, disclosure in Form AOC-2 is not required.

19. Audit Committee

The Company has an Audit Committee in place, constituted as per the provisions of Section 177 of the Companies Act, 2013. The members of the Audit Committee, its terms of reference, the meetings of the Audit Committee and attendance thereat of the members of the Committee is mentioned in the Corporate Governance Report under the appropriate heading.

20. Whistle Blower Policy

The Company has a Whistle Blower Policy to report genuine concerns and grievances. The implementation of the Whistle Blower Policy has been mentioned in the Report of Corporate Governance.

21. Postal Ballot

During the year, pursuant to the provisions of Section 110 of the Companies Act, 2013 read with Companies (Management and Administration) Rules, 2014, the Company has passed certain resolutions through Postal Ballot. In pursuance of the provisions of Clause 35 B (i) of the Listing Agreement, the shareholders were also provided with the facility of e-voting through CDSL for the Postal Ballot.

Mrs. Ragini Chokshi, Partner of Ragini Chokshi & Co., Practicing Company Secretaries, was appointed as the Scrutinizer for conducting the Postal Ballot/e-voting process in a fair and transparent manner. The Postal Ballot Notice dated 30th January, 2015 was dispatched to all the shareholders on 12th February, 2015. The e-voting period was open from 14th February, 2015 to 15th March, 2015. The Postal Ballot forms received upto the close of working hours on 15th March, 2015 were considered and the Results of Postal Ballot were announced on 16th March, 2015 at the Registered Office of the Company.

The resolutions passed by Postal Ballot with requisite majority are as under:

1. Ordinary Resolution for sub-division of 1 Equity Share of the face value of Rs. 10 into 10 Equity Shares of face value of Rs. 1 each.

2. Special Resolution for alteration of Capital Clause of Memorandum of Association to facilitate sub-division of shares.

3. Special Resolution for alteration of Capital Clause of Articles of Association to facilitate sub-division of shares.

4. Ordinary Resolution for appointment of Mr. Pradip P. Shah as an Independent Director for a term of five consecutive years from 30th January, 2015 to 29th January, 2020.

5. Ordinary Resolution for appointment of Mr. Noel N. Tata as an Independent Director for a term of five consecutive years from 30th January, 2015 to 29th January, 2020.

6. Ordinary Resolution for appointment of Mrs. Brinda Somaya as an Independent Director for a term of five consecutive years from 22nd July, 2014 to 21st July, 2019.

22. Corporate Governance

As required by the existing Clause 49(X) of the Listing Agreement entered into with the Stock Exchanges, a detailed report on Corporate Governance is given as a part of the Annual Report. The Company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors'' Certificate of the compliance with Corporate Governance requirements by the Company is attached to the Report on Corporate Governance.

23. General Shareholder Information

General Shareholder Information is given in Item No. 9 of the Report on Corporate Governance forming part of the Annual Report.

24. Particulars regarding Employees Remuneration

The statement containing particulars of employees as required under Section 197 (12) of the Companies Act, 2013 read with Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report as Annexure-2.

25. Directors'' Responsibility Statement

As stipulated in the provisions contained in Section 134 (3) (c) read with Section 134 (5) of the Companies Act, 2013, the Directors hereby state that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) the Directors have prepared the annual accounts on a going concern basis;

(v) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

(vi) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

26. Energy, Technology Absorption & Foreign Exchange

Statement giving the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under Section 134(3)(m) read with Rule 8 (3) of the Companies (Accounts) Rules, 2014 is enclosed as Annexure-3 to this Report.

27. Extract of Annual Return

In accordance with Section 134 (3)(a) of the Companies Act, 2013, an extract of the Annual Return in the prescribed format is appended as Annexure-4 to this Report.

28. Statutory Auditors

The Company Auditors, B S R & Co. LLP, Chartered Accountants, have been appointed for a period of 5 years from the 94th AGM till the 99th AGM. Pursuant to provisions of Section 139(1) of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, the appointment of B S R & Co. LLP, as Auditors of the Company for a period of 5 years shall be subject to ratification by shareholders at every AGM. Accordingly, the appointment of B S R & Co. LLP, as the Auditors of the Company from this AGM till the conclusion of next AGM is put forth for your approval.

The Auditors'' Report is clean and there are no qualifications in their Report.

29. Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Company has appointed M/s Ragini Chokshi & Co., Practicing Company Secretaries, as the Secretarial Auditor of the Company for the year 2014-15 to conduct secretarial audit and to ensure compliance by the Company with various Acts applicable to the Company. The Secretarial Audit Report for the financial year 2014-15 issued by M/s Ragini Chokshi & Co. is annexed to this Report as Annexure-5. There are no qualifications or adverse remarks in their Report.

30. Acknowledgements

Your Directors wish to express their grateful appreciation for the co-operation and support received from customers, parent company, collaborators, vendors, shareholders, financial institutions, banks, regulatory authorities and the society at large.

Deep appreciation is also recorded for the dedicated efforts and contribution of the employees at all levels, as without their focus, commitment and hard work, the Company''s consistent growth would not have been possible, despite the challenging environment.

For and on behalf of the Board

P. P. Shah Chairman

Mumbai, 8th May, 2015

---

Mar 31, 2014

Dear Members,

The Directors are pleased to present the 94th Annual Report and the Audited Accounts for the year ended 31st March, 2014.

1. Financial Highlights

1st April, 2013 1st April, 2012 to to 31st March, 2014 31st March, 2013 Rs. in Million Rs. in Million

Sales & Operating Revenue 37390.18 33756.49

Net Sales/Income from operations (Net of excise and discounts) 31543.54 28566.19

Other Income 103.31 163.17

Profit before Interest, Depreciation, Tax and Appropriation 3724.18 3524.15

Interest 4.51 0.16

Depreciation 649.76 471.07

Profit Before Exceptional Item 3069.91 3052.92

Exceptional Item (Reversal of excess depreciation in respect of earlier years) - 1,149.25

Profit Before Tax 3069.91 4202.17

Tax 1004.20 1280.35

Profit After Tax 2065.71 2921.82

Balance brought forward from previous year 8149.65 6213.57

Balance available for appropriations 10215.36 9135.39

Appropriations:

Proposed Dividend 592.81 592.81

Tax on proposed dividend 100.75 100.75

General Reserve 206.57 292.18

Balance retained in Profit and Loss Account 9315.23 8149.65

10215.36 9135.39

2. Dividend

The Directors recommend for consideration of the Members a dividend of Rs. 11 (110 %) per equity share of the nominal value of Rs. 10 each for the year ended 31st March, 2014 as against Rs. 11.00 per equity share (110%) paid last year.

3. Unclaimed Dividend

During the year, dividend amounting to Rs. 0.34 million that had not been claimed by the shareholders for the year ended 31st March, 2006, was transferred to the credit of Investor Education and Protection Fund as required under Section 205A read with Section 205C of the Companies Act, 1956. As on 31st March, 2014, dividend amounting to Rs. 4.84 million has not been claimed by shareholders of the Company. Shareholders are required to lodge their claims with the Registrars, Sharepro Services (India) Pvt. Ltd., for unclaimed dividend.

4. Collaboration

The Directors record their appreciation for the contribution made and support provided by Kansai Paint Co. Ltd., Japan (Kansai). Kansai continues to provide support on process design, quality improvement, world class technology which has helped the Company in maintaining market leadership in the industrial business including automotive coatings, by servicing existing customers better and adding new lines. Kansai also provides technology for manufacture of architectural coatings.

The Company also has Technical Assistance Agreement with Oshima Kogyo Co. Ltd., Japan, for manufacturing heat resistance coatings, Cashew Co. Ltd., Japan for manufacturing coatings products MICRON TXL SK-1 and Thinner for MICRON and with Protech Chemicals Limited, Canada for manufacturing powder coating products. The Directors record their appreciation for the co-operation from these collaborators.

5. Subsidiary in Nepal

The Company has 8,84,000 equity shares constituting 68% of the paid up equity share capital of Kansai Paints Nepal Pvt. Ltd., Nepal. Pursuant to provisions of section 2(87) of the Companies Act, 2013, as well as section 4 (1) (b) (ii) of the Companies Act, 1956, Kansai Paints Nepal Pvt Ltd. is the subsidiary of our Company.

The Ministry of Corporate Affairs through their General Circular No. 8/ 2014 dated 4th April, 2014 have notified that the financial statements (and documents required to be attached thereto) in respect of financial year 2013-2014 shall be governed by the relevant provisions/schedules/ rules of the Companies Act, 1956.

Pursuant to provisions of Section 212 (8) of the Companies Act, 1956, read with Circular no. 2/ 2011 dated 8th February, 2011 of the Ministry of Corporate Affairs, the Board of Directors of the Company has passed the requisite resolution and consented for not attaching the balance sheet of the subsidiary with the Annual Report of the Company. However the Annual Accounts of the subsidiary and the related detailed information shall be available to the shareholders of our Company as well as the shareholders of the subsidiary seeking such information at any point of time. The annual accounts of the subsidiary company are available for inspection by any shareholder of our Company as well as of the subsidiary company at the registered office of the Company on any working day except Saturday during the business hours of the Company. The consolidated financial statements are presented in this Annual Report.

6. Auditors'' Report

The Auditors'' Report is clean and there are no qualifications in their Report.

7. Cost Audit

The Company had appointed N.I. Mehta and Co., Cost Accountants, to audit its cost accounting records relating to synthetic resins, paints and varnishes for the financial year 2012-13. The due date for fling the Cost Audit Report with the Ministry of Corporate Affairs was 27th September, 2013. The Cost Audit Report was fled with Ministry of Corporate Affairs on 25th September, 2013.

The Company is seeking the ratification of the Shareholders for the appointment of N.I. Mehta and Co., Cost Accountants as the Cost Auditors of the Company for the financial year 2014-15 vide resolution No. 6 of the Notice of AGM.

8. Directors

In accordance with the Articles of Association of the Company, Dr. J. J. Irani, Mr. D. M. Kothari and Mr. H. Nishibayashi retire by rotation at this Annual General Meeting and are eligible for re-appointment.

Dr. J. J. Irani has informed the Board that he does not seek re-appointment. The Board of Directors has placed on record its sincere appreciation and gratitude for the very valuable and outstanding contribution made by Dr. J. J. Irani during his association with the Company as a Director and then as the Chairman.

However Mr. D. M. Kothari and Mr. H. Nishibayashi offer themselves for re-appointment. In terms of Section 149, 150, 152 and other applicable provisions of the Companies Act, 2013, Mr. Kothari being eligible and offering himself for appointment, is proposed to be appointed as an Independent Director for a term of five consecutive years from the date of this Annual General Meeting.

Mr. H. Ishino, a nominee of Kansai Paint Co. Ltd., Japan, on the Board, resigned from the Directorship with effect from 31st May, 2013. The Directors have placed on record their sincere appreciation for the very valuable contribution made by Mr. Ishino during his tenure as a Director.

None of the Directors of the Company is disqualified under Section 274(1) (g) of the Companies Act, 1956. As required by law, this position is also reflected in the Auditors'' Report.

In accordance with provisions of section 149 of the Companies Act, 2013 and the Listing agreement with the Stock Exchanges, Dr. J. J. Irani, Mr. D. M. Kothari, Mr. P. P. Shah and Mr. N. N. Tata have given a declaration to the Company that they meet the criteria of independence as mentioned in Section 149 (6) of the Companies Act, 2013 read with Clause 49 (I) (A) (iii) of the Listing Agreement.

9. Corporate Governance

As required by the existing Clause 49 VII of the Listing Agreements entered into with the Stock Exchanges, a detailed report on Corporate Governance is given as a part of the Annual Report. The Company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors'' Certificate of the compliance with Corporate Governance requirements by the Company is attached to the Report on Corporate Governance.

The Company is in compliance with the Secretarial Standards issued by the Institute of Company Secretaries of India.

10. General Shareholder Information

General Shareholder Information is given in Item No. 9 of the Report on Corporate Governance forming part of the Annual Report.

11. Particulars regarding Employees

Particulars of Employees as required under Section 217(2A) of the Companies Act, 1956, and the Companies (Particulars of Employees) Rules, 1975, as amended by the Companies (Particulars of Employees) Amendment Rules, 2011, forms part of this Report. As per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.

12. Directors'' Responsibility Statement

As stipulated under the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm as under:

(i) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

(iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts on a going concern basis.

In accordance with the Corporate Governance Voluntary Guidelines, 2009 issued by the Ministry of Corporate Affairs, Government of India, it is hereby confirmed that proper systems are in place to ensure compliance of all laws applicable to the Company.

13. Energy, Technology Absorption & Foreign Exchange

Statement giving the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under the Companies (Disclosures of particulars in report of the Board of Directors) Rules, 1988, is annexed.

14. Auditors

The Company Auditors, B S R & Co. LLP, Chartered Accountants, retire at the conclusion of the forthcoming Annual General Meeting and are eligible for re- appointment. In accordance with Section 139 (1) of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, it is proposed to appoint B S R & Co. as statutory auditors of the Company for a term of 5 consecutive years at this Annual General Meeting.

15. Acknowledgements

Your Directors wish to express their grateful appreciation for the co-operation and support received from customers, parent company, collaborators, vendors, shareholders, financial institutions, banks, regulatory authorities and the society at large.

Deep appreciation is also recorded for the dedicated efforts and contribution of the employees at all levels, as without their focus, commitment and hard work, the Company''s consistent growth would not have been possible, despite the challenging environment.

For and on behalf of the Board

J. J. Irani

Chairman

Mumbai, 30th April, 2014

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Mar 31, 2013

Dear Members, The Directors are pleased to present the 93rd Annual Report and the Audited Accounts for the year ended 31st March, 2013. 1. Financial Highlights 1st April, 2012 1st April, 2011 to to 31st March, 2013 31st March, 2012 Rs. in Million Rs. in Million Sales & Operating Revenue 33756.49 30198.84 Net Sales/Income from operations (Net of excise and discounts) 28566.19 26005.72 Other Income 163.17 242.66 Profit before Interest, Depreciation, Tax and Appropriation 3524.15 3615.67 Interest 0.16 0.86 Depreciation 471.07 563.53 Profit Before Exceptional Item 3052.92 3051.28 Exceptional Item (Reversal of excess depreciation in respect of earlier years) 1149.25 - Profit Before Tax 4202.17 3051.28 Tax 1280.35 892.43 Profit After Tax 2921.82 2158.85 Balance brought forward from previous year 6213.57 4959.59 Balance available for appropriations 9135.39 7118.44 Appropriations: Proposed Dividend 592.81 592.81 Tax on proposed dividend 100.75 96.17 General Reserve 292.18 215.89 Balance retained in Profit and Loss Account 8149.65 6213.57 9135.39 7118.44 2. Dividend The Directors recommend for consideration of the Members a dividend of Rs. 11.00 (110%) per equity share of the nominal value of Rs. 10 each for the year ended 31st March, 2013 as against Rs. 11.00 per equity share (110%) paid last year. 3. Unclaimed Dividend During the year, dividend amounting to Rs. 0.19 Million that had not been claimed by the shareholders for the year ended 31st March, 2005, was transferred to the credit of Investor Education and Protection Fund as required under Section 205A read with Section 205C of the Companies Act, 1956. As on 31st March, 2013, dividend amounting to Rs. 4.46 Million has not been claimed by shareholders of the Company. Shareholders are required to lodge their claims with the Registrars, Sharepro Services (India) Pvt. Ltd., for unclaimed dividend. 4. Collaboration The Directors record their appreciation for the contribution made and support provided by Kansai Paint Co. Ltd., Japan (Kansai). Kansai continues to provide support on process design, quality improvement, world class technology which has helped the Company in maintaining market leadership in the industrial business including automotive coatings, by servicing existing customers better and adding new lines. Kansai also provides technology for manufacture of architectural coatings. The Company also has Technical Assistance Agreements with Oshima Kogyo Co. Ltd., Japan, for manufacturing heat resistance coatings and with Cashew Co. Ltd., Japan for coatings products MICRON and Thinner for MICRON. The Directors record their appreciation for the co-operation from these collaborators. 5. Subsidiary in Nepal During the year, the Company acquired 8,84,000 equity shares constituting 68% of the paid up equity share capital of Nepal Shalimar Paints Pvt. Ltd., Nepal, now known as Kansai Paints Nepal Pvt. Ltd. amounting to Rs. 78.63 Million. The Company has also advanced loan to Kansai Paints Nepal Pvt. Ltd. amounting to Rs. 63.81 Million to fund its working capital requirement. Pursuant to provisions of section 4(1)(b)(ii) of the Companies Act, 1956, Kansai Paints Nepal Pvt. Ltd. has become the subsidiary of our Company. Pursuant to provisions of section 212 (8) read with Circular no. 2/2011 dated 8th February, 2011 of the Ministry of Corporate Affairs, the Board of Directors of the Company has passed the requisite resolution and consented for not attaching the balance sheet of the subsidiary with the Annual Report of the Company. However the Annual Accounts of the subsidiary and the related detailed information shall be available to the shareholders of our Company as well as the shareholders of the subsidiary seeking such information at any point of time. The annual accounts of the subsidiary company are available for inspection by any shareholder of our Company as well as of the subsidiary company at the registered office of the Company on any working day except Saturday during the business hours of the Company. The consolidated financial statements are presented in this Annual Report. 6. Auditors' Report The Auditors' Report is clean and there are no qualifications in their Report. 7. Cost Audit Report The Company had appointed N.I. Mehta and Co., Cost Accountants, to audit its cost accounting records relating to synthetic resins, paints and varnishes for the financial year 2011-12. The due date for filing the Cost Audit Report with the Ministry of Corporate Affairs was 31st January, 2013. The Cost Audit Report was filed with Ministry of Corporate Affairs on 4th January, 2013. 8. Directors In accordance with the Articles of Association of the Company, Mr. P. P. Shah, Mr. N. N. Tata and Mr. Y. Takahashi retire by rotation and being eligible, offer themselves for re-appointment. Mr. M. Tanaka, a nominee of Kansai Paint Co. Ltd., Japan, has been appointed as an Additional Director on the Board from 4th May, 2013. Pursuant to section 260 of the Companies Act, 1956, Mr. Tanaka holds office till the ensuing Annual General Meeting but being eligible, offers himself for re-appointment and the Company has received notices in writing from some Shareholders proposing his candidature for the office of Director of the Company. None of the Directors of the Company is disqualified under Section 274(1 )(g) of the Companies Act, 1956. As required by law, this position is also reflected in the Auditors' Report. 9. Corporate Governance As required by the existing Clause 49 VII of the Listing Agreements entered into with the Stock Exchanges, a detailed report on Corporate Governance is given as a part of the Annual Report. The Company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors' Certificate of the compliance with Corporate Governance requirements by the Company is attached to the Report on Corporate Governance. The Company is in compliance with the Secretarial Standards issued by the Institute of Company Secretaries of India. 10. General Shareholder Information General Shareholder Information is given in Item No. 9 of the Report on Corporate Governance forming part of the Annual Report. 11. Particulars regarding Employees Particulars of Employees as required under Section 217(2A) of the Companies Act, 1956, and the Companies (Particulars of Employees) Rules, 1975, as amended by the Companies (Particulars of Employees) Amendment Rules, 2011, forms part of this Report. As per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company. 12. Directors' Responsibility Statement As stipulated under the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm as under: (i) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; (ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period; (iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) that the Directors have prepared the annual accounts on a going concern basis. In accordance with the Corporate Governance Voluntary Guidelines, 2009 issued by the Ministry of Corporate Affairs, Government of India, it is hereby confirmed that proper systems are in place to ensure compliance of all laws applicable to the Company. 13. Energy, Technology Absorption & Foreign Exchange Statement giving the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under the Companies (Disclosures of particulars in report of the Board of Directors) Rules, 1988, is annexed. 14. Auditors The Company Auditors, M/s B S R & Co., Chartered Accountants, retire at the conclusion of the forthcoming Annual General Meeting and are eligible for re- appointment. 15. Acknowledgements Your Directors wish to express their grateful appreciation for the co-operation and support received from customers, parent company, collaborators, vendors, shareholders, financial institutions, banks, regulatory authorities and the society at large. Deep appreciation is also recorded for the dedicated efforts and contribution of the employees at all levels, as without their focus, commitment and hard work, the Company's consistent growth would not have been possible, despite the challenging environment. For and on behalf of the Board J. J. Irani Chairman Mumbai, 4th May, 2013

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Mar 31, 2012

The Directors are pleased to present the 92nd Annual Report and the Audited Accounts for the year ended 31st March, 2012.

1. Financial Highlights

1st April, 2011 1st April 2010 to to 31st March, 2012 31st March, 2011 Rs in Million Rs in Million

Sales & Operating Revenue 30198.84 24957.01

Net Sales/Income from operations (Net of excise and discounts) 26005.72 21412.39

Other Income 242.66 225.44

Profit before Interest, Depreciation, Tax and Appropriation 3615.67 3132.56

Interest 0.86 1.35

Depreciation 563.53 493.55

Profit Before Exceptional Item 3051.28 2637.66

Exceptional Item - 253.67

Profit Before Tax 3051.28 2891.33

Tax 892.43 831.48

Profit After Tax 2158.85 2059.85

Balance brought forward from previous year 4959.59 3732.07

Balance available for appropriations 7118.44 5791.92

Appropriations:

Proposed Dividend 592.81 538.92

Tax on proposed dividend 96.17 87.43

General Reserve 215.89 205.98

Balance retained in Profit and Loss Account 6213.57 4959.59

7118.44 5791.92

2. Dividend

The Directors recommend for consideration of the Members a dividend of Rs 11.00 (110%) per equity share of the nominal value of Rs 10 each for the year ended 31st March, 2012 as against Rs 10.00 per equity share (100%) paid last year.

4. Unclaimed Dividend

During the year, dividend amounting to Rs 0.13 million that had not been claimed by the shareholders for the year ended 31st March, 2004, was transferred to the credit of Investor Education and Protection Fund as required under Section 205A read with Section 205C of the Companies Act, 1956. As on 31st March, 2012, dividend amounting to Rs 5.46 million has not been claimed by shareholders of the Company. Shareholders are required to lodge their claims with the Registrars, Sharepro Services (India) Pvt. Ltd., for unclaimed dividend.

5. Collaboration

The Directors record their appreciation for the contribution made and support provided by Kansai Paint Co. Ltd., Japan (Kansai). Kansai continues to provide support on process design, quality improvement, world class technology which has helped the Company in maintaining market leadership in the industrial business including automotive coatings, by servicing existing customers better and adding new lines. Kansai also provides technology for manufacture of architectural coatings.

The Company also has Technical Assistance Agreement with Oshima Kogyo Co. Ltd., Japan, for manufacturing heat resistance coatings and with PPG International Performance Coatings & Finishes, USA ( formerly Ameron International Performance Coatings and Finishes ) for High Performance Coatings. The Directors record their appreciation for the co-operation from these collaborators.

6. Auditors' Report

The Auditors' Report is clean and there are no qualifications in their Report.

7. Cost Audit Report

The Company had appointed N.I. Mehta and Co., Cost Accountants, to audit its cost accounting records relating to synthetic resins, paints and varnishes for the financial year 2010-11. The due date for filing the Cost Audit Report with the Ministry of Corporate Affairs was 27th September, 2011. The Cost Audit Report was filed with Ministry of Corporate Affairs on 27th September, 2011.

8. Directors

In accordance with the Articles of Association of the Company, Dr. J.J. Irani and Mr. D.M. Kothari retire by rotation and being eligible, offer themselves for re-appointment.

Mr. H. Nishibayashi, a nominee of Kansai Paint Co. Ltd., Japan, was appointed as a Director on the Board in casual vacancy caused by the resignation of Mr. Y. Tajiri with effect from 30th July, 2010. Pursuant to Section 262 read with section 256 of the Companies Act, 1956, Mr. Nishibayashi holds office till the ensuing Annual General Meeting but being eligible, offers himself for re-appointment and the Company has received notice in writing from some Shareholders proposing his candidature for the office of Director of the Company.

None of the Directors of the Company is disqualified under Section 274(1)(g) of the Companies Act, 1956. As required by law, this position is also reflected in the Auditors' Report.

9. Corporate Governance

As required by the existing Clause 49 VII of the Listing Agreements entered into with the Stock Exchanges, a detailed report on Corporate Governance is given as a part of the Annual Report. The Company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors' Certificate of the compliance with Corporate Governance requirements by the Company is attached to the Report on Corporate Governance.

The Company is in compliance with the Secretarial Standards issued by the Institute of Company Secretaries of India.

10. General Shareholder Information

General Shareholder Information is given in Item No. 9 of the Report on Corporate Governance forming part of the Annual Report.

11. Particulars regarding Employees

Particulars of Employees as required under Section 217(2A) of the Companies Act, 1956, and the Companies (Particulars of Employees) Rules, 1975, as amended by the Companies (Particulars of Employees) Amendment Rules, 2011, forms part of this Report. As per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.

12. Directors' Responsibility Statement

As stipulated under the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm as under:

(i) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with the explanation relating to material departures;

(ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

(iii) that the Directors have taken proper care of the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts on a going concern basis.

In accordance with the Corporate Governance Voluntary Guidelines, 2009 issued by the Ministry of Corporate Affairs, Government of India, it is hereby confirmed that proper systems are in place to ensure compliance of all laws applicable to the Company.

13. Energy, Technology Absorption & Foreign Exchange

Statement giving the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under the Companies (Disclosures of particulars in report of the Board of Directors) Rules, 1988, is annexed.

14. Auditors

The Company Auditors, M/s. B S R & Co., Chartered Accountants, retire at the conclusion of the forthcoming Annual General Meeting and are eligible for re-appointment.

15. Acknowledgements

Your Directors wish to express their grateful appreciation for the co-operation and support received from customers, parent company, collaborators, vendors, shareholders, financial institutions, banks, regulatory authorities and the society at large.

Deep appreciation is also recorded for the dedicated efforts and contribution of the employees at all levels, as without their focus, commitment and hard work, the Company's consistent growth would not have been possible, despite the challenging environment.

For and on behalf of the Board

J. J. Irani

Chairman

Mumbai, 2nd May, 2012

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Mar 31, 2011

The Directors are pleased to present the 91st Annual Report and the Audited Accounts for the year ended 31st March, 2011.

1. Financial Highlights

1st April, 2010 1st April 2009 to to 31st March, 2011 31st March, 2010 Rs. in lacs Rs. in lacs

Gross Sales 249319.23 197170.53

Net Sales/Income from operations (Net of excise and discounts) 213873.02 170638.36

Other Income 2346.09 2038.2

Profit before Interest, Depreciation, Tax and Appropriation 31396.34 28406.9

Interest 84.28 119.99

Depreciation 4935.48 4425.98

Profit Before Exceptional Item 26376.58 23860.94

Profit on Sale of Associate Company 2536.65 —

Profit Before Tax 28913.23 23860.94

Tax 8314.78 7310.89

Profit After Tax 20598.45 16550.05

Balance brought forward from previous year 37320.73 27143.88

Balance available for appropriations 57919.18 43693.93

Appropriations:

Proposed dividend 5389.20 4041.89

Tax on proposed dividend 874.26 671.3

General Reserve 2059.85 1660.00

Balance retained in Profit and Loss Account 49595.87 37320.73

57919.18 43693.93

2. Dividend

The Directors recommend for consideration of the Members a dividend of Rs. 10 (100 %) per equity share of the nominal value of Rs. 10 each for the year ended 31st March, 2011 on the enhanced share capital after the Bonus Issue of 1:1 in June 2010 as against Rs. 15.00 per equity share (150%) paid last year.

3. Issue of Bonus Shares

During the year, the Company issued Bonus Shares in the proportion of one New Equity Share for every one Equity Share held. The approval of the Shareholders for the issue of Bonus Shares was obtained by means of postal ballot.

5. Fixed Deposits

The Company has not accepted any Fixed Deposits (FD) during the year. The Company has refunded all the deposits, which were due for payment as on 31st March, 2011. During the year, unclaimed deposits amounting to Rs.0.85 lacs were transferred to the credit of the Investor Education and Protection Fund (IEPF) as required under Section 205C of the Companies Act, 1956.

6. Unclaimed Dividend

During the year, dividend amounting to Rs. 1.31 lacs that had not been claimed by the shareholders for the year ended 31st March, 2003, was transferred to the credit of Investor Education and Protection Fund as required under Section 205A read with Section 205C of the Companies Act, 1956. As on 31st March, 2011, dividend amounting to Rs. 43.60 lacs has not been claimed by shareholders of the Company. Shareholders are required to lodge their claims with the Registrars, Sharepro Services (India) Pvt. Ltd., for unclaimed dividend.

7. Collaboration

The Directors record their appreciation for the contribution made and support provided by Kansai Paint Co. Ltd., Japan (Kansai). Kansai continues to provide support on process design, quality

improvement, world class technology which has helped the Company in maintaining market leadership in the industrial business including automotive coatings, by servicing existing customers better and adding new ines. Kansai also provides technology for manufacture of architectural coatings.

The Company also has Technical Assistance Agreement with Oshima Kogyo Co. Ltd., Japan, for manufacturing heat resistance coatings and with PPG International Performance Coatings & Finishes, USA (formerly Ameron International Performance Coatings and Finishes) for high Performance Coatings. The Directors record their appreciation for the co-operation from these collaborators.

8. Auditors Report

The Auditors Report is clean and there are no qualifications in their Report.

9. Directors

In accordance with the Articles of Association of the Company, Mr. H. Ishino, Mr. N. N. Tata and Mr. P D. Chaudhari retire by rotation and being eligible, offer themselves for re-appointment.

Mr Y . Tajiri, a nominee of Kansai Paint Co. Ltd., Japan, on the Board, resigned from the Directorship with effect from 30th July, 2010. The Directors have placed on record their sincere appreciation for the very valuable contribution made by Mr Tajiri during his tenure as a Director. With effect from 30th July 2010, Mr H. Nishibayashi, a nominee of Kansai Paint Co. Ltd., Japan, has been appointed on the Board in the casual vacancy caused by the resignation of Mr Y . Tajiri.

None of the Directors of the Company is disqualified under Section 274(1)(g) of the Companies Act, 1956. As required by law, this position is also reflected in the Auditors Report.

10. Corporate Governance

As required by the existing Clause 49 VII of the Listing Agreements entered into with the Stock Exchanges, a detailed report on Corporate Governance is given as a part of the Annual Report. The Company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors Certificate of the compliance with Corporate Governance requirements by the Company is attached to the Report on Corporate Governance.

The Company is in compliance with the Secretarial Standards issued by the Institute of Company Secretaries of India.

11. General Shareholder Information

General Shareholder Information is given in Item No. 9 of the Report on Corporate Governance forming part of the Annual Report.

12. Particulars regarding Employees

Particulars of Employees as required under Section 217(2A) of the Companies Act, 1956, and the Companies (Particulars of Employees) Rules, 1975, as amended by the Companies (Particulars of Employees) Amendment Rules, 2011, forms part of this Report. As per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining

a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.

13. Directors Responsibility Statement

As stipulated under the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm as under:

(i) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with the explanation relating to material departures;

(ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

(iii) that the Directors have taken proper care of the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts on a going concern basis.

In accordance with the Corporate Governance Voluntary Guidelines, 2009 issued by the Ministry of Corporate Affairs, Government of India, it is hereby confirmed that proper systems are in place to ensure compliance of all laws applicable to the Company.

14. Energy, Technology Absorption & Foreign Exchange

Statement giving the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under the Companies (Disclosures of particulars in report of the Board of Directors) Rules, 1988, is annexed.

15. Auditors

The Company Auditors, M/s B S R & Co., Chartered Accountants, retire at the conclusion of the forth- coming Annual General Meeting and are eligible for re-appointment.

16. Acknowledgements

Your Directors wish to express their grateful appreciation for the co-operation and support received from customers, parent company, collaborators, vendors, shareholders, financial institutions, banks, regulatory authorities and the society at large.

Deep appreciation is also recorded for the dedicated efforts and contribution of the employees at all levels, as without their focus, commitment and hard work, the Companys consistent growth would not have been possible, despite the challenging environment.

For and on behalf of the Board

J. J. Iran Chairman

Mumbai, 28th April, 2011

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Mar 31, 2010

The Directors are pleased to present the 90th Annual Report and the Audited Accounts for the year ended 31st March, 2010.

1. Financial Highlights

1st April, 2009 1st April, 2008 to to 31 st March, 2010 31st March, 2009

Rs. in lacs Rs. in lacs

Gross Sales............. 197170.53 166373.85 Net Sales/ Income from operations

(Net of excise and discounts)............... 170638.36 137451.92

Other Income............. 2038.21 2219.50 Profit before Interest, Depreciation,

Tax and Appropriation...... 28406.91 17963.20

Interest................... 119.99 183.80

Depreciation............... 4425.98 3760.50

Profit Before Tax.......... 23860.94 14018.90

Tax........................ 7310.89 4160.00

Profit After Tax........... 16550.05 9858.90 Balance brought forward from previous year.......... 27143.88 22053.93

Balance available for appropriations............... 43693.93 31912.83 Appropriations: Proposed Dividend............ 4041.89 3233.52 Taxon Proposed Dividend...... 671.31 549.54

General Reserve............... 1660.00 985.89

Balance retained in Profit and Loss Account............ 37320.73 27143.88

43693.93 31912.83

2. Dividend

The Directors recommend for consideration of the Members a dividend of Rs. 15.00 (150%) per equity share of the nominal value of Rs. 10 each for the year ended 31 st March, 2010 as against Rs. 12.00 per equity share (120%) paid last year.

3. Bonus Shares

The Directors have recommended, subject to the approval of the Shareholders and such other approvals as may be required, an issue of Bonus Shares in the proportion of one New Equity Share for every one Equity Share held on a Record Date to be advised later. The approval of the Shareholders for the proposed issue of Bonus Shares is being sought by means of postal ballot.

4. New manufacturing facility at Hosur

During the last quarter of the year, commercial production commenced at the Companys green-field state-of-the-art paint manufacturing facility at Hosur.

6. Fixed Deposits

The Company has not accepted any Fixed Deposits (FD) during the year. Deposits aggregating to Rs. 1.75 lacs, due for re-payment have not been claimed by the FD holders as on 31st March, 2010. Barring these, the Company has refunded all the deposits, which were due for payment as on 31st March, 2010. During the year, unclaimed deposits amounting to Rs. 0.20 lac were transferred to the credit of the Investor Education and Protection Fund (IEPF) as required under Section 205C of the Companies Act, 1956.

7. Unclaimed Dividend

During the year, dividend amounting to Rs. 1,21,955 lacs that had not been claimed by the shareholders for the year ended 31st March, 2002, was transferred to the credit of Investor Education and Protection Fund as required under Section 205A read with Section 205C of the Companies Act, 1956. As on 31st March, 2010, dividend amounting to Rs. 43.90 lacs has not been claimed by shareholders of the Company. Shareholders are required to lodge their claims with the Registrars, Sharepro Services (India) Pvt. Ltd., for unclaimed dividend.

8. Collaboration

The Directors record their appreciation for the contribution made and support provided by Kansai Paint Co. Ltd., Japan (Kansai). Kansai continues to provide support on process design, quality improvement, world class technology which has helped the Company in maintaining market leadership in the industrial business including automotive coatings, by servicing existing customers better and adding new lines. Kansai also provides technology for manufacture of architectural coatings.

The Company also has Technical Assistance Agreement with Oshima Kogyo Co. Ltd., Japan, for manufacturing heat resistance coatings and with PPG International Performance Coatings & Finishes, USA (formerly Ameron International Performance coatings and Finishes) for High Performance coatings. The Directors record their appreciation for the co-operation from these collaborators.

9. Auditors Report

The Auditors Report is clean and there are no qualifications in their Report.

10. Directors

In accordance with the Articles of Association of the Company, Mr. D. M. Kothari, Mr. S. M. Datta and Mr. P. P. Shah retire by rotation and being eligible, offer themselves for re-appointment.

Mr. Y Kawamori, a nominee of Kansai Paint Co. Ltd., Japan, on the Board, resigned from the Directorship with effect from 26th March, 2010. The Directors have placed on record their sincere appreciation for the very valuable contribution made by Mr. Kawamori during his tenure as a Director. With effect from 26th March, 2010, Mr. Y. Takahashi, a nominee of Kansai Paint Co. Ltd., Japan, has been appointed as an Additional Director on the Board. Mr. Takahashi holds office upto the date of the Annual General Meeting, but being eligible, offers himself for re-appointment.

None of the Directors of the Company is disqualified under Section 274(1 )(g) of the Companies Act, 1956. As required by law, this position is also reflected in the Auditors Report.

11. Corporate Governance

As required by the existing Clause 49 VII of the Listing Agreements entered into with the Stock Exchanges, a detailed report on Corporate Governance is given as a part of the Annual Report. The Company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors Certificate of the compliance with Corporate Governance requirements by the Company is attached to the Report on Corporate Governance.

The Company is in compliance with the Secretarial Standards issued by the Institute of Company Secretaries of India.

12. General Shareholder Information

General Shareholder Information is given in Item No. 9 of the Report on Corporate Governance forming part of the Annual Report.

13. Particulars regarding Employees

Particulars of Employees as required under Section 217(2A) of the Companies Act, 1956, and the Companies (Particulars of Employees) Rules, 1975, as amended, forms part of this Report. As per the provisions of Section 219(1 )(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.

14. Directors Responsibility Statement

As stipulated under the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm as under:

(i) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with the explanation relating to material departures;

(ii) that the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

(iii) that the Directors have taken proper care of the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts on a going concern basis.

In accordance with the Corporate Governance Voluntary Guidelines, 2009 issued by the Ministry of Corporate Affairs, Government of India, it is hereby confirmed that proper systems are in place to ensure compliance of all laws applicable to the Company.

15. Energy, Technology Absorption & Foreign Exchange

Statement giving the particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under the Companies (Disclosures of particulars in report of the Board of Directors) Rules, 1988, is annexed.

16. Auditors

The Company Auditors, M/s BSR & Co. Chartered Accountants, retire at the conclusion of the forthcoming Annual General Meeting and are eligible for re-appointment.

17. Acknowledgements

Your Directors wish to express their grateful appreciation for the co-operation and support received from customers, parent company, collaborators, vendors, shareholders, financial institutions, banks, regulatory authorities and the society at large.

Deep appreciation is also recorded for the dedicated efforts and contribution of the employees at all levels, as without their focus, commitment and hard work, the Companys consistent growth would not have been possible, despite the challenging environment.

For and on behalf of the Board

J.J. Irani Chairman Mumbai, 3rd May, 2010.