Castrol Expands With 3 Plants; Q1 Net Profit Up 6.8% to ₹216 Crore

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00:00 Hello and welcome. We have with us a very special guest, a company that has been quarter

00:10 on quarter performing well and of course, delivering stable earnings is Castrol India.

00:15 This time around while the top line looks good, there has been a little bit of contraction

00:18 on the margins. But we have with us Mr. Bakshi, who joins in to talk to us about the quarter

00:24 gone by and giving us a sense of what lies ahead in FY25. Mr. Bakshi, thank you very

00:29 much for joining us today on the show. It's great to have you on NDTV Profit. Mr. Bakshi,

00:34 give us some color about the quarter that's gone by. Your net profit is up nearly 7%.

00:39 What are the factors that led to that? Apparently and also the sense that we get is revenue

00:44 is muted and margins have contracted a little bit. So, wrap that up for us and also tell

00:50 us what lies ahead for FY25 in terms of a guidance.

00:54 Amina, thank you very much for having me on your channel. It's a pleasure talking to you.

01:00 I think it was a resilient quarter and the quarter started with a bit of a slowness in

01:06 the consumer demand. But February and March, we did pretty well as a result of which we

01:12 managed to grow volume above the market levels. The margin range that we give a guidance is

01:18 around 22% to 25%. And we have been in that range for a while consistently. This quarter,

01:26 we delivered about 22% as well. We put a lot of actions in the marketplace. We've been

01:32 continuously investing in our brands. We signed up with Shah Rukh Khan, who's going to be

01:38 our brand ambassador. We're also investing in being performance partner with MI Indian,

01:46 which is the IPL team and KTM Cup. So, overall, with all of this and new products, the rest

01:54 of the year looks good as well. That's exciting. In terms of what you had

02:01 guided for on the margin front was about 23% to 26%. Margins have been lower than that.

02:08 Now, is this a one-off as we go into FY25? Do you think the range of 23% to 26% still

02:15 stands for Castor Oil? I think it will. And this quarter, basically,

02:24 there has been volatility in the crude prices as well. And crude is our key input in terms

02:29 of our raw material. And as I said, the year started a bit slow in terms of the consumer

02:36 demand. So, we think we will still continue with that margin. We're not giving any other

02:41 margin as yet. So, that range is something that we will aim to get and deliver.

02:47 Fingers crossed on that one, Mr. Bakshi. Also, give me a sense of raw material. You alluded

02:51 to that just a little bit in this question, but elaborate on that. What does the environment

02:56 look like? Do you feel like there could be some more upside risk on raw material prices

03:00 going ahead, which could then potentially impact margins? A lot of that is already hedged

03:05 in that sense. So, look, I think crude price is expected

03:11 to go up slightly than what it was in 1Q. I would also like to share that because we

03:17 import crude, there is a foreign exchange impact that comes onto our input prices as

03:21 well overall. So, of course, that is something that we have to deal with. But we've been

03:28 doing this for a while. We have pricing models in place and we continuously look to add value

03:34 to our consumers. And if the pricing in terms of the input cost goes above a particular

03:40 band, then we take pricing in the market as well.

03:43 So, from that point of view, I think we should be able to manage the better margins. At the

03:49 same time, I think our focus is on to grow volumes. We have taken several initiatives

03:53 to grow volumes, including expanding our workshops, which are the independent workshops, both

03:59 in cars and bikes. And we also recently went into diversification on products like AutoCare.

04:05 So, that's doing well as well. Right. So, Bakshi, you talked about how your

04:11 focus is going to be on top line and give me a sense of that. You've talked about products

04:15 as well that you've been launching. Any new products that are expected or that we can

04:18 expect from the Castrol stable in F525? Certainly, I think firstly, we would be launching

04:27 a product into personal mobility. And this is in line with our principle of both protecting

04:34 the engines as well as looking at how we can give a performance delivery at the high end.

04:40 So, that's something that we will do. We will also be looking at technological advancement

04:45 continuously. So, there will be products in that range. And most importantly, on electric

04:51 vehicles, we launched a few products last year and in fourth quarter. So, we will continue

04:56 to expand on those products as we respond to the electric vehicles opportunity that

05:02 is in the market. And all this revenue increase that the company

05:06 is currently focusing on will not come in at the price of profitability, right? So,

05:10 you won't let go of your margins to build revenues?

05:13 No, I mean, that's see, look, I think it is ultimately a trade-off and it is cost benefit

05:19 and lots of factors play into the whole dynamics. But having said that, we are saying we will

05:27 be in that margin of 22%, 23%, 26% the guidance that we have given. So, yeah, I mean, that's

05:34 the range. I think we need that elbow room mainly because with the sensitivity of the

05:39 crude price, there is always a lag in terms of your response by the time consumers get

05:45 the product and by the time we get the imports in. So, therefore, that lag should be looked

05:49 at it more from a point of view of the margin growth within a band over a period of time

05:54 as opposed to just one quarter. And therefore, this quarter is not really a question of worry

05:58 for us. You know, I do know that you will have launched

06:00 Castrol on that helps improve performance of EVs and that's the space that you talked

06:05 about as well that you are making investments in. How significant will this be, say, over

06:10 the next couple of years in terms of top line contribution? And is this a good profitable

06:15 business to get into or are you just taking a leap from your customers where they are

06:19 in the business and hence you have no choice but to venture into it?

06:24 I think there are various threats to responding to the EV opportunity, if I would say. Firstly,

06:30 the Castrol on product or the products that help electric vehicles. I mean, these are

06:35 coolants, transmission fluids, greases, etc. And, you know, we have almost top three or

06:44 four OEMs in India to whom we supply these products. Currently, the volumes of these

06:49 products is small, but as the EV sort of segment starts growing, I think we'll be able to supply

06:54 more and, you know, it will contribute to the top line. But currently, I would say this

06:59 is a small insignificant part of our top line. The second part of the EV is really around

07:05 battery management, thermal fluid, thermal management. And there is a lot of research

07:09 that is going on globally. We invested about 50 million pounds in our R&D centre in the

07:14 UK. And, you know, an offshoot of that, there are use cases being worked for opportunity

07:19 in data centre and data centre fluids. So, I think there is a lot of work that is happening

07:25 and, you know, the technology of EV fluids in India and electric vehicles in India is

07:30 fast evolving. And therefore, you know, we are far ahead in terms of our products given

07:36 that we've launched products in other parts of the world as well, for example, China,

07:40 Western markets. So, the learnings from there will be brought into India very easily and

07:44 we have that global advantage as well. So, we look pretty positive around the response

07:49 on EV plans.

07:51 Subhakshi, what is capacity utilisation standard and what are your CAPEX plans for FI25? Are

07:57 you looking to make more investments and if you can quantify that for us, it would be

08:00 useful.

08:01 Yeah, sure. So, capacity is about 80-85% utilisation. And in terms of the CAPEX plan, look, I think

08:11 we will spend about anything between 100-250 crores. And this CAPEX is, I'm talking about

08:18 the organic CAPEX. And as we grow into the market and, you know, we want to make investments,

08:26 for example, in rural, we have a new route to market and where we are going to be investing

08:32 into rural, I think that's one area where the CAPEX is going to grow.

08:36 Oh, well, congratulations, Subhakshi and good luck. Hopefully, FI25 turns out to be a profitable

08:42 one for the company and we'll hopefully catch you soon.

08:46 Thank you so much.

08:47 Thank you very much, Mr. Subhakshi.

08:48 Thank you.

08:49 Thank you.

08:50 Thank you.

08:51 Thank you.

08:51 (upbeat music)

08:53 you

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