GULFOILLUBNSEQ3 FY 2025February 12, 2025

Gulf Oil Lubricants India Limited

7,983words

116turns

12analyst exchanges

3executives

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Management on call

Ravi Chawla

MANAGING DIRECTOR AND

Manish Gangwal

CHIEF FINANCIAL OFFICER

Sudeep Anand

SYSTEMATIX INSTITUTIONAL EQUITIES

Key numbers — 40 extracted

11%

ing. For us, this is our highest ever-quarterly volume and strong double-digit top line growth of 11% year-on-year. Crossing these 2 milestones of INR 900 crore in revenue and INR 122 crore in EBIT

INR 900 crore

olume and strong double-digit top line growth of 11% year-on-year. Crossing these 2 milestones of INR 900 crore in revenue and INR 122 crore in EBITDA for the first time ever in a quarter also shows our streng

INR 122 crore

top line growth of 11% year-on-year. Crossing these 2 milestones of INR 900 crore in revenue and INR 122 crore in EBITDA for the first time ever in a quarter also shows our strength, our resilience and our te

our highest-ever core lubricants volumes of 38,500 kl during the quarter, and this is a growth of 7% year-on-year, so that's another good thing that happened in Q3. Growth was seen across all major

good platform, We continue to build our brands. Of course, we are still trying to keep it in the 3%-3.5% range, and that's where we are. I also want to mention on Tirex. As you know, we have got a

3.5%

od platform, We continue to build our brands. Of course, we are still trying to keep it in the 3%-3.5% range, and that's where we are. I also want to mention on Tirex. As you know, we have got a major

INR 40 crore

majority share in, the subsidiary, and this continued to perform well. The 9Month top line is at INR 40 crore, which is nearly 3x growth during this period versus last year. Healthy order pipeline is there,

iary, and this continued to perform well. The 9Month top line is at INR 40 crore, which is nearly 3x growth during this period versus last year. Healthy order pipeline is there, and we are on track

INR 120 crore

ioned, we had a very healthy performance for Q3, with a double-digit revenue growth and EBITDA of INR 120 crore, which translated into an EBITDA margin at 13.5%, a sequential basis improvement of nearly 90 bas

13.5%

ouble-digit revenue growth and EBITDA of INR 120 crore, which translated into an EBITDA margin at 13.5%, a sequential basis improvement of nearly 90 basis points, which is auguring well towards our gui

90 basis point

crore, which translated into an EBITDA margin at 13.5%, a sequential basis improvement of nearly 90 basis points, which is auguring well towards our guided band of 12% to 14% towards the higher end. For the 9

12%

al basis improvement of nearly 90 basis points, which is auguring well towards our guided band of 12% to 14% towards the higher end. For the 9 Month period also, we continue to deliver very strong pe

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Guidance — 20 items

Ravi Chawla

opening

“Healthy order pipeline is there, and we are on track to close the year on a strong note in this business, which is going to add to us.”

Manish Gangwal

“We will definitely be maintaining our guided band of EBITDA, which is 12% to 14%, going forward as well, at least for Q4 and Q1 of the next year, which is what we currently estimate.”

Probal Sen

“Any guidance you would venture to give us for what target is there for FY 2026?”

Manish Gangwal

“That gives us a lot of confidence going forward that even some of the business pieces like factory fill etc, will also start firing, then obviously, we'll continue our trajectory of 2-3x the market growth rate.”

Ravi Chawla

“Between 10% and 15% is what we could aim for.”

Ravi Chawla

“I guess we will make some announcements before the next quarter.”

Yogesh Patil

“If you could provide us more details on the capital expenditure plans for next year?”

Yogesh Patil

“Also if you could elaborate more on the details on the spending side or project wise?”

Manish Gangwal

“Going forward, we estimate to have a capex of around INR 30 crore to INR 40 crore.”

Manish Gangwal

“Overall, the general capex will be in the range of around INR 30 crore to INR 40 crore.”

Risks & concerns — 3 flagged

The only thing you will see also in the results published is that the Quarter-on-Quarter finance cost has gone up, and that is because of the forex loss due to rupee depreciation, on our working capital loans, which had an impact of around INR 5 crore for this quarter.

— Manish Gangwal

Of course, as you rightly mentioned, this is offset a bit by the rupee depreciation, which has been a significant drag, but on the whole, are we confident that we can maintain this trajectory of improvement that we have seen in the last quarter over the next couple of quarters?

— Probal Sen

That should partly support the input cost in terms of overall impact, but yes, if rupee continues to behave the way it has, definitely pricing actions and/or scheme related adjustments will come in, which will neutralize part of the impact of this input cost increase.

— Manish Gangwal

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Q&A — 12 exchanges

I have a couple of questions. Firstly, as far as the margin improvement is concerned, given the way that crude has behaved where it probably strengthened a bit towards the end of the quarter, but after that has once again softened back and now is at some $75 level. How should we be looking at the margin trend? Of course, as you rightly mentioned, this is offset a bit by the rupee depreciation, which has been a significant drag, but on the whole, are we confident that we can maintain this trajectory of improvement that we have seen in the last quarter over the next couple of quarters? That was

Manish Gangwal

I think, as you rightly picked up, while there is a stability in the crude, it went up above $80 for some time, but then it stabilized in the range of around $75. As long as the crude remains in this trajectory of $75 to $80, the input costs should remain stable. Of course, the base oil follow with a lag and there is a demand-supply situation in various grades of base oil, but largely, we are hopeful that with crude stability the base oil prices remain stable, but the landed cost due to rupee depreciation obviously goes up because India imports a large part of base oil from overseas, including

Congratulations on good numbers. I have got a few questions. Firstly, with respect to your volume breakup. You mentioned about MCO, but overall, how has the different segments performed in terms of growth during Y-o-Y?

Manish Gangwal

Overall, as Ravi highlighted, our motorcycle grew double digit and Industrial also grew double digit. Rest of the volumes were in the mid-single digits. Overall, we have been able to deliver 2x growth across most categories. Agri was slightly subdued in the quarter, but overall, we have been able to deliver 2x plus volume growth of the industry. We have also seen slight improvement in the personal mobility in our mix. As Ravi mentioned also MCO had a very good growth. From the classification perspective, diesel engine oil was around 39%, and personal mobility went up by 2% to nearly 23% for th

I just had a broader question. I think it has been mentioned over the last couple of years, the attempt to sort of continue to premiumize our product portfolio and sort of grow the B2C segment because obviously, that is a higher-margin segment as compared to the basic factory fill segment. Just wanted your thoughts on how you feel the last 12 months have gone in that direction? Is it also fair to say that if the premiumization across categories continues to sort of recover. The guided EBITDA range of 12% to 14% can see an uptick over the next couple of years or rather that is the aspiration as

Ravi Chawla

Our aspiration is obviously to try to improve our margins, but given that we are present in both B2B & B2C, and currently, as you know, there is obviously products which make x margin and the premium products make higher margin. If you look at the Kline study, which talks about value and volume growth, we have seen a 3% volume growth and a 6% value growth. That is where the premium products come in and the new products come in. Our mix is also B2B and OEMs, a lot of OEMs we do business with. As a guided overall figure, we said 12% to 14%, and within each of these segments, we are now trying to

One question on the near-term volume outlook. Are we seeing uptick in the volume in the seasonally strong Q4? Would we be seeing a stronger growth than Q3 in Q4?

Manish Gangwal

Our objective has always been to grow 2x to 3x the market. Without being specific, we want to mention that we would like to continue our trajectory of 2x to 3x the market growth rate on an annual basis. Sometimes quarters could vary because of the seasonality in some of them, like our September quarter is usually a monsoon impacted quarter. But trajectory-wise, 2x to 3x growth is what we aim at on an annual basis. In terms of the margin, would there be a bit of a sequential pullback in Q4 because of the rupee depreciation, and we are taking a calibrated sort of reduction in the discounts? Yes,

Congratulations for a good set of numbers. Indian refiners are expanding our capacities, and we hope we will also be building the base oil production capacity based on the market demand. Will it help us in terms of pricing to procure base oil from domestic refiners instead of import? And will that improve any gross margins in the long run?

Manish Gangwal

We currently even buy base oil from the local refiners. The proportion, of course, is slightly lower, but when these Indian national oil companies sell office base oil prices, they consider both global base oil prices and the rupee/dollar ratio. From that perspective, the overall pricing has always been based on the global considerations and rupee/dollar. While we obviously wait for the capacities to come up, it can definitely help us in reducing our some of the working capital cycles because when it is imported, sometimes we need to store or place orders for 60-75 days in advance. But if it i

I just wanted to understand for this quarter, the minor difference between stand-alone consolidated numbers are because of Tirex, right?

Ravi Chawla

Yes. I think in the footnote, it feels like that Tirex this quarter probably broke even or is almost at a profit. Is that right? Or am I reading something wrong? No, you are right. So they were almost at EBITDA breakeven for the quarter. They have reached it in this quarter, but our consolidated number is still lower than our stand- alone number. That is mainly because of the depreciation. Understood. Fair enough, sir. The second question, just on the continuity of the previous participant. When we have the ability and if we were to run the third shift fully that would allow us to do almost 20

In terms of the expansion at Silvassa that we are looking at, what kind of capex could be involved when we are looking at expansion of line and what kind of line size? Some broad colour in terms of what we are considering?

Manish Gangwal

as I mentioned, we are looking at the plans right now. Based on that, once we form the plans, we'll obviously come back and announce. What's our current size at Silvassa? We have 90,000 kl capacity today in Silvassa plant, and Chennai plant is at 50,000 kl. What's the typical module of addition when we are considering the addition? As I mentioned, we have not yet worked up the plan. So we'll have to really work out on the basis of the requirements and the pack-wise requirements as Ravi highlighted. Based on that, we'll have to do a really detailed exercise and then we'll be able to find out.

My question actually relates to the battery segment. Could you share some bit of financial metric around the battery segment for the 3 Months and the 9 Months of this fiscal? Also, if you could talk about the localization initiatives that you were I think undertaking over there.

Manish Gangwal

Battery business, as we have been highlighting, is crossing around INR 20 crore quarterly revenues, INR 20 crore to INR 25 crore range and have turned EBITDA positive during the current year. They were earlier marginally negative, but now this year, they are at EBITDA positive. Overall we have been able to successfully localized one major SKU and working towards localization of more SKUs. Right, Secondly, in terms of the additives. A couple of things. One, do you see the overall composition of additives in your total inputs increasing? And if you could throw some light on the pricing trends ar

I wanted to check, you mentioned that you will be doubling your revenue over the previous year. Is that correct?

Manish Gangwal

We mentioned that we will be doubling our revenue for Tirex business, which is our DC fast charger subsidiary in that business, yes. Okay. Got it. The other thing I wanted to check, how are you seeing the data centre business, what kind of volumes are you doing? Or what kind of traction are you getting there? In data centre as we have got our data, the total lubricant market today is at 2,900 million liters. If you take away processed oils in India it is around 2,000 million liters. If the entire data centers, which today are not under immersion cooling and are cooled with air cool, if we were

Have you taken any price hikes in this quarter or in this financial year and to what extent?

Manish Gangwal

We have already answered this in one of the previous questions, we are looking at the rupee depreciation and the impact on the input cost, while crude has come off the highs and it is positive overall to maintain some of the stability. Base oil impact has been minimal of the crude movement and base oil has been stable. We are not seeing any major changes in base oil as of now. Rupee impacts the landed cost, and we will definitely look at margin management and recalibrate our pricing. Currently the entire rupee depreciation has accentuated in the last fortnight or so we would think. We are clos

What is the amount of battery turnover in this quarter?

Manish Gangwal

Nisha, it was around INR 21 crore for the quarter to be very specific. Okay. Is there any increment into the export percentage? What is the range on the total revenue that we have exports in this quarter? Exports are growing well for us, but there they are still at single digit of our overall volumes. That would be a higher single digit like as mentioned in the last quarter's investor call? We will not be able to give that specific number Nisha. Okay. In terms of the subsidiary Tirex that we have, is there any major improvement into the next year that we see like we see that there is a 300% gr

Thank you. Well, we'd like to, of course, thank everybody for being on the call. We tried to answer the questions to the best of our ability. Our outlook and focus remains on both strategically and also in terms of our executions to deliver consistent 2x to 3x of the market growth, which we anticipate about 3%. We continue our profitability band of 12% to 14%, and of course, volume-led growth, which is profitable in our core lubricant business is our focus. While we also strengthened the EV charging segment to become a growing contributor to our vision, both in the medium and long term. Lookin

Management

Speaking time

Manish Gangwal

Moderator

Ravi Chawla

Probal Sen

Kirtan Mehta

Sabri Hazarika

Chirag Fialoke

Yogesh Patil

Nisha Mulchandani

Pratik Dedhia

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Opening remarks

Sudeep Anand

Thank you. On behalf of Systematix Institutional Equities, we welcome you all to the Q3 and 9M-FY 2025 conference call of Gulf Oil Lubricants India Limited. From the management side, we have Mr. Ravi Chawla, Managing Director and CEO; and Mr. Manish Gangwal, CFO. I'll now hand over the call to the management for their opening remarks followed by the Q&A session. Over to you, sir.

Ravi Chawla

Thank you. This is Ravi Chawla. Good evening, to everyone who have joined us in this call. I would like to start by, of course, wishing all of you a Happy New Year. We are in the New Year 2025. We are also delighted to share with you that in Q3, we have achieved the highest ever revenue and the highest ever EBITDA in our history of Gulf Oil. We have definitely seen macroeconomic headwinds in India with the elections, other things had slowed down in Q2 and Q3, but we have been focusing on how we can capitalize on the opportunities, navigate what has been evolving. For us, this is our highest ever-quarterly volume and strong double-digit top line growth of 11% year-on-year. Crossing these 2 milestones of INR 900 crore in revenue and INR 122 crore in EBITDA for the first time ever in a quarter also shows our strength, our resilience and our team efforts to deliver even when macroeconomic conditions are facing headwinds. We are also seeing some early signs of demand recovery, so that's rea

Manish Gangwal

Thank you, Ravi. Good evening, everyone. As Ravi mentioned, we had a very healthy performance for Q3, with a double-digit revenue growth and EBITDA of INR 120 crore, which translated into an EBITDA margin at 13.5%, a sequential basis improvement of nearly 90 basis points, which is auguring well towards our guided band of 12% to 14% towards the higher end. For the 9 Month period also, we continue to deliver very strong performance with nearly 21.5% PAT growth and 14% EBITDA growth. Overall, the financial performance continues to do very well. On the gross margin side, also, you will see that there is an improvement sequentially at the gross margin level, which means that the input costs have been relatively stable, although there was a depreciation of the rupee, which started during the quarter and continues as we speak. Obviously, that requires a margin management to kick in. In spite of that, we have been able to improve our gross margin, led by product mix improvement and overall seg

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