CASTROLIND - Castrol India Ltd Share Price

In the recent earnings call for Q2 FY 2025, Castrol India's management provided an optimistic outlook for the company, highlighting continued growth amidst macroeconomic challenges. Key financial figures reported include a 7% year-on-year increase in revenue from operations, reaching INR 1,497 crores for Q2, with EBITDA growing by 8% to INR 349 crores and PAT increasing by 5% to INR 244 crores. For the first half of the year, revenue also saw a 7% rise to INR 2,919 crores, while PAT grew to INR 477 crores, representing a 6.5% increase.

Management noted a robust performance driven by an expanding rural market presence and increasing involvement in the industrial segment, which experienced double-digit growth. A significant point of focus is the successful launch of new products, including metalworking fluids, which are now produced locally to enhance delivery efficiency. The company aims to bolster its product offerings and distribution network, ensuring alignment with the Viksit Bharat goals.

A major highlight is Castrol's strategy centered on transitioning into a service-led brand, emphasizing mobility and technology innovation. The management confirmed an ambitious target of achieving a significant share of India's burgeoning industrial market, where consistent growth has been seen for nine consecutive quarters.

Management indicated confidence in maintaining operational efficiency and profitability despite challenges in the market, supported by disciplined expense management. As the company looks forward, expectations are set on leveraging technological advancements and expanding its chemical management services. They also anticipate that performance in the first half of FY 2025 provides optimism for the full year, reinforcing their strategy to deliver high-quality products and services across automotive and industrial sectors.

Q1: "What is the volume number for the quarter and growth in different segments?"
As you remember, our overall growth has been at 8%. Bikes and cars have grown in high single digits, while the Commercial Vehicle Oils (CBO) segment also grew at 8%. Industrial experienced a robust growth of 13%. Rural segments have shown a significant growth of 12%. Overall, we achieved 8% volume growth, which translates to approximately 66 million liters of oil.

Q2: "What part of Castrol Global's business is Castrol India in terms of volume and profitability?"
Castrol India accounts for just over 10% of the global volume and slightly better than that in profitability, thanks to our focus on 2-wheelers and cars. BP's decision to carve out Castrol aims to retire debt and support growth ambitions in mobility and industrial lubricants, which we believe is beneficial for both BP and Castrol.

Q3: "What is the status of growth in the Industrial segment and margins?"
While growing at 13%, our industrial segment has surprisingly maintained good margins due to effective cost management and localization of higher-margin products. We're expanding into promising sectors like electronics and aeronautical while also delivering Chemical Management Services, which adds value and returns.

Q4: "What is your pricing strategy for automotive lubricants?"
We maintain a strategic pricing model, commanding a premium aligned with our quality and brand promise. We've implemented selective price hikes recently based on product innovations, focusing on sustaining our premium positioning in the market.

Q5: "What are the feedback and strategies regarding the data center lubricants?"
Testing is rigorous and ongoing with hyperscalers. The market shift to coolant use in data centers is promising. Margins are expected to be favorable, around $1 per liter. We are prepared to implement solutions as demand emerges.

Q6: "What kind of investment is being pumped into the rural push?"
Investment in rural strategies includes appointing around 1,000 sub-distributors to expand reach significantly and creating Castrol quick lube chain stations. Marketing expenses represent 3-4% of turnover, which supports our overall rural engagement and mechanic training initiatives.

Q7: "What is the impact of ethanol blending on Castrol's products?"
Ethanol blending is a requirement by the government, and our products are designed to support increasingly ethanol-rich fuels. We are confident that our oils can handle blends of E20 and E30 effectively, ensuring performance.

Q8: "What are the advertising expenses, pricing adjustments, and new OEMs?"
Our advertising expense for the quarter was INR 46 crores, slightly lower than last year but up 20% for the first half. We have selectively implemented price hikes, resulting in a 1.5% revenue increase from pricing. There are no new OEMs currently, but we're deepening partnerships with existing ones.

Q9: "What's the outlook for other income and working capital?"
Other income decreased by INR 11 crores due to special dividends affecting interest income. Our working capital reflects our volume growth, requiring increased inventory, though temporary disruptions should normalize in time. Expect lower levels of other income moving forward.

Q10: "Can you repeat the volume figures for this quarter?"
This quarter, our total volume is 66 million liters, an increase from 61 million liters from the same period last year, and 62 million liters from the previous quarter.