Shalimar Paints Ltd. — Investor Presentation 2021

Aug 16, 2021

Shalimar Paints Limited

Investor Presentation August 2021

Safe Harbour

This presentation and the accompanying slides (the "Presentation"), which have been prepared by Shalimar Paints Limited (the "Company'), have been prepared solely for information purposes and do not constitute any offer, recommendation or invitation to purchase or subscribe for any securities, and shall not form the basis or be relied on in connection with any contract or binding commitment whatsoever. No offering of securities of the Company will be made except by means of a statutory offering document containing detailed information about the Company.

This Presentation has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes no representation or warranty, express or implied, whatsoever, and no reliance shall be placed on the truth, accuracy, completeness, fairness and reasonableness of the contents of this Presentation. This Presentation may not be all inclusive and may not contain all of the information that you may consider material. Any liability in respect of the contents of, or any omission from, this Presentation is expressly excluded.

Certain matters discussed in this Presentation may contain statements regarding the Company's market opportunity and business prospects that are individually and collectively forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties include, but are not limited to, the performance of the Indian economy and of the economies of various international markets, the performance of the industry in India and world-wide, competition, the Company's ability to successfully implement its strategy, the Company's future levels of growth and expansion, technological implementation, changes and advancements, changes in revenue, income or cashflows, the Company's market preferences and its exposure to market risks, as well as other risks. The Company's actual results, levels of activity, performance or achievements could differ materially and adversely from results expressed in or implied by this Presentation. The Company assumes no obligation to update any forward-looking information contained in this Presentation. Any forward-looking statements and projections made by third parties included in this Presentation are not adopted by the Company and the Company is not responsible for such third-party statements and projections.

All Maps used in the Presentation are not to scale. All data, information and maps are provided "as is" without warranty or any representation of accuracy, timeliness or completeness.

1902

Two Britishers A.N. Turner and A.N. Wright - set up Colour & Varnish Company in Howrah, West Bengal. It is the first paint manufacturing plant in the South East Asia

Vision

To persevere and excel as one of the premier paint companies of the country, a leader in product innovation and customer satisfaction. We intend to build long term value relationships with all our shareholders, customers, employees and suppliers.

Mission

To maximise shareholder value by engaging and growing our employees, delivering innovative and superior quality product to every customer segment, building strong human engagement with our dealers & vendors

Company Overview

100-Year-Young Brand: Renowned for High product quality

India's iconic structures continue to use Shalimar Paints

Journey so far

Our Product Offerings

• An extensive range of decorative and protective paint products for interior and exterior segments
• Our portfolio spans across product categories and price points catering to a wide variety of consumers
• Eco friendly emulsion products certified by Griha Council
• Low VOC products that is certified by National Test House (NTH)

Decorative Paints Industrial Paints

• Pioneers in Industrial coatings Introduced notable firsts in high performance coatings such as high-build zinc coatings, radiation resistant coatings for nuclear power plants, polyurethane paint for fighter aircraft and railway coaches
• One of the largest Indian players in high-performance Protective Coatings
• Significant presence in General Industrial (Product Finish) and Packaging coatings

paints that give

walls a persona

Decorative Paints: Strategy Going Ahead

improvementspecially supply

Apr-19 Mar-20 Mar-21

• Quality of the formulations were improved

Industrial Paints: Strategy Going Ahead

• From Zonal Business structure to Vertical business structure alignment
• Each Vertical defined with visible Key Result Areas which include:
• Customer Retention with defined Value proposition
• Gain market share across various verticals
• Promoting SPL as a Service provider rather than only a paint vendor
• Strong focus on Margins

• Focus on new Verticals like Dealers, PEB/ OEM and Packaging

• Create opportunities for growth of Team Leaders to take additional responsibilities

• Upskilling the talent pool by proper training and recruitment of skilled people from relevant industries
• To work on product gaps in each Vertical. Objective would be to viz:
• Complete the product portfolio for Oil and Gas and regain lost ground
• Focus efforts on new age technology to reduce / mitigate corrosion like Ceramic coatings, Graphene based coatings

Historical Financial Performance

Impact on the entire value chain – leading to operational and financial underperformance during the period

Improved supply chain management

	Finished Goods	Cost Management	Customer Services
Challenges faced	o Used simple forecasting model to plan to produce finished goods o Distribution done through conventional method o Higher inventory days	o High Supply Chain management cost o Dealing with multiple service producer thus overlapping and higher cost	o Poor Order Management o Scope to improve Dispatch efficiency o Inefficient Delivery system
Actions taken	o Shifted to replenishment model o Identifying the reductant products and adjusting/discontinuing the loss making product o Redesigned distribution network o Finished good inventory reduced by 40%- 45%	o Change in Production & Sales model along with Cost optimization strategies helped reduce supply chain management cost o Improved product quality along with the process improvement o Deployed owned/fixed vehicles	o SLA's with internal customers o Daily review process o Stocks accuracy
Going ahead	o Batch Management o Liquidate non-moving Finished Goods o Reduce MTO Stocks TAT	o Working towards reducing supply chain management cost further through Vertical Space utilization o In-transit damages to be controlled further	o More Own / Fixed Vehicles o Expand Footprints o Process strengthening o E_Samvaad (e_POD's)

Positive outcome on financial performance

Cost Optimization Strategies

• Improve Supply / RM Chain Management
• Improve the Product Supply to Channel partners
• Increase efficiencies at Depots
• Reduce overall company related costs

Value Creation

• Volume Growth in Decorative + Industrial Segments
• Lead to Improved Operating Efficiencies
• Increase dealer network and number of depots across the country
• Optimizing dealer margins over a period of time

Improving Efficiencies

Lowering Working Capital requirements and improving profitability

360o growth strategy: started yielding results

"Launching of newer products as per the market demand & continuously improving the serviceability"

Seal-O-Prime

• Specially formulated premium quality acrylic primer with superior alkali, damp and efflorescence resistance for application on exterior and interior surfaces. It consists of a special polymer which binds with the surface giving better water seepage resistance
• It has excellent hiding, whiteness & brightness. It enhances the durability of the top coat

Shalimar Alkali Block Exterior Wall Primer

• Shalimar Alkali Block Exterior Wall Primer is a water diluteable exterior primer based on specially designed acrylic emulsion suitable for exterior walls. It gives superior alkali and efflorescence resistance to exterior masonry surfaces

Pearl Lustre

• It is a Lustre Dana Finish Interior Synthetic Enamel Solvent based paint. This is designed essentially for applications on interior masonry, concrete, wooden & metal substrates to get the designer Dana finish.
• It gives smooth, silky, stain resistant, washable, durable, anti yellowing & tough film

Xtra Tough Anti Carbonation Coating

• Xtra Tough Anti-Carbonation coating is a water based, 100% acrylic, exterior coating, offering protection against carbon dioxide diffusion to your concrete structures. It has been formulated to protect and decorate concrete and masonry surfaces
• micro-porous structure of the coating acts as a barrier to Water and Carbon Dioxide but allows passing of water vapour from the substrate to the environment and becomes breathable along with the substrate

"Business Diversification - Exploring the possibility of entering into Sanitaryware category"

Launch of a pilot project In Himachal & Chandigarh

Feasibility & scope of the project to be evaluated in the coming Financial year i.e., FY22 & will then decide on national level expansion

Will have a comprehensive range in Bath Fittings & Accessories

Portfolio to add on to the existing range of products being offered to the distribution channel; to aid in improving ROI

Business Segment Performance

*Gross Figures

Balance Sheet Strength

Profit & Loss Statement Q1-FY22

Particulars	Q1FY22	Q1FY21	Q4FY21
Revenue from Operations	65.2	44.5	111.7
Cost of Materials Consumed	42.8	19.0	77.5
Purchase of Traded Goods	3.4	2.5	7.4
Changes in Inventories of Finished Goods and Work in Progress	3.1	9.6	-2.4
Gross Profit	15.8	13.5	29.2
GP %	24.3%	30.3%	26.1%
Employee Benefits Expense	10.7	8.1	10.4
Other Expenses	14.0	10.7	20.1
EBITDA	-8.9	-5.3	-1.3
Other Income	0.0	0.1	6.6
Depreciation and Amortisation Expense	3.3	3.3	3.3
EBIT	-12.2	-8.6	2.0
Finance Costs	4.8	4.3	5.2
Exceptional Items	-2.5	-2.0	0.0
PBT	-19.4	-14.9	-3.2
Total Tax Expense	0.0	-4.2	25.4
Profit for the year	-19.4	-10.6	-28.6
EPS	-3.6	-2.0	-5.3

Increase in raw material cost:

• o From Q3 FY21, raw material prices have seen an increasing trend, which resulted into ~7%-10% increase in overall manufacturing costs
• o Compared to last year, prices of key raw material have increased by more than 50%, impacting the profitability of the company
• o During the quarter, company partially increased its selling price
• o In the coming quarters looking at the raw material trend, company will decide on the future pricing strategy

Increase in Other Expenditure:

• o Increase in the freight cost was largely due to
• Disruption in transport facilities due to COVID-19 2nd wave
• Increase in diesel prices

Demand scenario:

o With the uptake in the real estate sector on the back of consumers buying houses we expect volumes to pick up in the coming quarters

Historical Profit & Loss Statement

Particulars	FY21	FY20	FY19	FY18	FY17
Revenue from Operations	325.6	343.9	287.6	271.2	349.8
Cost of Materials Consumed	198.4	243.5	213.2	193.1	208.5
Purchase of Traded Goods	21.9	0.0	0.0	0.0	0.0
Changes in Inventories of Finished Goods and Work in Progress	2.4	-11.2	7.3	15.8	11.0
Gross Profit	102.9	111.6	67.1	62.3	130.3
GP %	31.6%	32.4%	23.3%	23.0%	37.3%
Employee Benefits Expense	36.7	48.7	42.0	39.4	35.3
Other Expenses	62.5	96.7	86.8	57.0	81.5
EBITDA	3.6	-33.9	-61.7	-34.1	13.5
EBITDA %	1.1%	-9.8%	-21.5%	-12.6%	3.9%
Other Income	7.2	1.4	2.0	0.6	2.0
Depreciation and Amortisation Expense	13.3	10.9	8.8	7.9	8.1
EBIT	-2.5	-43.3	-68.5	-41.3	7.4
Finance Costs	19.3	19.9	25.1	26.0	22.6
Exceptional Items	-2.0	7.0	-15.7	-	-
PBT	-23.8	-56.2	-109.2	-67.4	-15.2
Total Tax Expense	26.1	-18.0	-27.4	-21.8	-5.5
Profit for the year	-49.9	-38.2	-81.8	-45.6	-9.7
PAT %	-15.3%	-11.1%	-28.4%	-16.8%	-2.8%
EPS	-9.18	-7.03	-15.24	-24.04	-5.12

Balance Sheet (Assets)

Balance Sheet - ASSETS	Mar-21	Mar-20	Mar-19	Mar-18	Mar-17
Property, Plant and Equipment	278.4	288.3	245.7	249.6	221.7
Right of Use Assets	0.3	0.8	0.0	0.0	0.0
Capital Work-in-progress	0.4	0.1	23.6	0.7	13.74
Intangible Assets	4.6	5.5	-	-	-
Financial Assets
(i) Loans	1.5	1.7
(ii) Other Financial Assets	0.1	0.0	6.3	2.3	9.7
Deferred Tax Assets (Net)	19.8	45.9	0.3	0.4	0.2
Other Non Current Assets	0.2	0.2	0.0	0.0	0.0
Total Non-Current Assets	305.2	342.5	275.9	253.0	245.4
Inventories	88.8	86.6	71.4	74.0	92.6
Financial Assets
(i) Investments	-	-	-	-	2.9
(ii) Trade Receivable	77.7	71.5	99.0	105.8	124.7
(iii) Cash and Cash Equivalents	2.7	2.8	91.0	19.2	11.8
(iv) Other Bank Balances	5.0	1.8	0.0	0.0	0.0
(v) Other Financial Assets	4.5	8.5	42.8	39.6	43.3
Current Tax Assets (Net)	3.1	2.9	0.0	0.0	0.0
Other Current Assets	16.0	19.5	11.4	27.6	39.2
Total Current Assets	197.7	193.6	315.6	266.2	314.5
TOTAL ASSETS	502.9	536.1	591.5	519.2	559.8

Balance Sheet (Equity & Liabilities)

Balance Sheet - EQUITY & LIABILITIES	Mar-21	Mar-20	Mar-19	Mar-18	Mar-17
Equity Share Capital	10.9	10.9	11.0	4.1	4.2
Other Equity	212.2	262.0	294.3	134.0	179.7
Total Equity	223.1	272.9	305.3	138.1	183.8
Financial Liabilities
(i) Borrowings	24.1	18.2	18.1	24.9	23.7
(ii) Lease Liabilities	0.0	0.9	0.0	0.0	0.0
(iii) Other Financial Liabilities	0.4	1.4	0.0	0.0	0.0
Provisions	6.1	6.1	6.0	6.7	6.8
Deferred Tax Liabilities (Net)	0.0	0.0	-28.0	-0.4	21.5
Other Non-Current Liabilities	0.0	0.0	2.6	0.2	0.3
Total Non-Current Liabilities	30.5	26.7	-1.3	31.5	52.2
Financial Liabilities
(i) Borrowings	99.6	100.7	126.8	150.0	137.1
(ii) Trade payables	111.0	96.1	97.6	139.5	129.1
(iii) Other Financial Liabilities	28.7	30.2	0.0	0.0	0.0
Provisions	4.7	4.5	29.9	27.2	26.6
Other Current Liabilities	5.4	5.1	33.3	32.8	31.0
Total Current Liabilities	249.3	236.5	287.6	349.6	323.8
TOTAL EQUITY & LIABILITIES	502.9	536.1	591.5	519.2	559.9

Cashflow Statement

Cash Flow Statement	Mar-21	Mar-20	Mar-19	Mar-18	Mar-17
Cash Flow from Operating Activities
Profit before Tax	-23.8	-56.16	-109.18	-67.37	-15.21
Adjustment for Non-Operating Items	32.2	56.6	72.6	33.7	30.9
Operating Profit before Working Capital Changes	8.5	0.4	-36.6	-33.7	15.6
Changes in Working Capital	7.5	-9.6	-57.4	69.2	18.8
Cash Generated from Operations	15.9	-9.2	-93.9	35.5	34.4
Less: Direct Taxes paid	-0.2	-0.1	-0.1	0.4	-0.1
Net Cash from Operating Activities	15.8	-9.3	-94.0	35.8	34.4
Cash Flow from Investing Activities	-6.4	-27.9	-33.7	-10.5	-16.0
Cash Flow from Financing Activities	-9.5	-45.8	197.9	-17.9	-18.9
Net increase/ (decrease) in Cash & Cash equivalent	-0.2	-83.0	70.2	7.4	-0.5
Cash & Cash Equivalents at the beginning of the period	2.8	85.8	15.6	8.1	8.7
Cash & Cash equivalents at the end of the period	2.7	2.8	85.8	15.6	8.2

Brand Campaigning Initiatives

Shalimar has carried out various marketing campaigns from time to time to capture greater mind share of customers and generate pull effect for the brand

CSR Initiatives

Launched Kahaani Project

• Campaign aimed at beautifying and uplifting the village of Tauli Bhud located in Dehradun, Uttarakhand
• Empowered over 300 people and offered livelihood generation to 24 villagers
• Through this one -of-its -kind campaign, the language, traditions and values of the people of Tauli Bhud will now live forever, vibrantly painted on the village walls

14 wall arts More than 8000sq.ft. painted Support from 15 National & 4 International organisations Artists from 7 different countries 322+ Lives impacted Infinite smiles & memories

CSR Initiatives

3000+ homes painted 1000+ graffiti's 2000+ volunteers from 80+ colleges 30+ corporates and citizens from 20+ countries countless smiles and endless memories….

Thank You

Shalimar Paints Limited

CIN: L24222HR1902PLC065611

Ms. Minal Srivastava – VP Strategy

minal.srivastava@shalimarpaints.com

www.shalimarpaints.com

Company : Investor Relations Advisors :

Orient Capital (a division of Link Group)

Ms. Neha Shroff: +91 77380 73466 neha.shroff@linkintime.co.in

Mr. Deven Dhruva: +91 98333 73300 deven.dhruva@linkintime.co.in