Investors have trusted multinational companies over the years and have been rewarded on their investments with liberal dividend payouts and stock bonuses. Multinational companies or MNCs, as they are generally referred to, are a darling to the investing community, who pass these company shares from family to family, to their children over generations. MNCs enjoy a huge edge over local companies. Since, the foreign parent company spends a lot of money on research and development, the local unit’s research spending outgo is lower compared to other indigenous competitors. With huge cash reserves built over the years, these MNCs stay clear of aggressive debt funding and hence do not pledge their holding stocks to raise funds. The return on equity has been fantastic for bluechip MNCs like Hindustan Unilever, Pfizer, Colgate Palmolive, ITC, Nestle, Glaxo, etc., and, therefore, investors have lapped up their stocks blindly over the years to reap rich returns. The last one year has not been good for midcap stocks, which have got battered badly and destroyed investor wealth. Even MNC stocks have not been spared and are down nearly 20% on an average from their peak levels. This gives an opportunity to look at various MNC companies and identify a sector and scrip which can create multibagger returns for investors over the long term. Kansai Nerolac Paints Ltd is a subsidiary of Kansai Paints Japan and a true MNC to boot. Since the paint industry depends on technology to a large extent and Kansai Nerolac Paints Ltd is in the forefront, providing high quality and cost effective sustainable solutions to its customers. 2017-18 has been an eventful year for Kansai Nerolac Paints and the paint industry in general. The introduction of GST and impact of demonetisation did disrupt the industry for a brief period, but the after effect has been very positive and the organised sector is expected to perform better as compared to the small and medium scale players. The paint industry views GST as positive and beneficial in the long run. There were other uncertainties like higher crude oil prices, exchange rate fluctuations and volatile geopolitical climate. In addition, tough environmental legislations in China impacted global supply chains of many key ingredients, adding to availability as well as inflationary pressures. Analysts are quite bullish on the Kansai Nerolac stock on the back of strong decorative volume growth and decline in input cost pressures like crude oil linked inputs and a relatively stable INR. Decorative paint demand remains strong and benefits of reduction in GST rates are excellent long term growth drivers for Kansai Nerolac Paints. Looking at the current scenario it provides an opportunity for investors to accumulate the Kansai Nerolac stock for medium to long term gains. The Kansai Nerolac stock, currently quoting at Rs 450, can be purchased for a 25% price appreciation over the next one year.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.