In conversation with Manish Gangwal - CFO and President- Strategic Sourcing, IT and Legal at Gulf Oil Lubricants India Limited

It’s time to unlock the next level of growth and success in this competitive scenario and changing industry landscape. We have all the growth pillars in place to enable us to scale new heights, affirms Manish Gangwal - CFO and President- Strategic Sourcing, IT & Legal at Gulf Oil Lubricants India Limited.

In FY24, the company's revenue increased by 9.50 per cent from FY23 to Rs 3,284 crore, and the PAT stood at Rs 308 crore, a growth of 32 per cent in FY24, both of which are the highest ever. What factors contributed to the company's strong financial performance?

Overall demand conditions were mostly favourable and yes we maintained our growth momentum of growing 2-3 times the market and clocked the highest ever yearly revenue, EBITDA and PAT. Our focus remained on operational excellence and enhancing profitability. Revenues have grown with rural markets starting to do well and on the back of improved product mix.

During the year we also launched new products that were value-driven to cater for demands from specific market segments. All these efforts were directed towards achieving such business excellence. Further, PAT has grown 33 per cent on the back of solid EBITDA with continued prudent cost management efforts and a stable input costs environment for most parts of the year. So, overall it was a very good year for Gulf.

Can you elaborate on your ‘Unlock 2.0’ strategy and what you aim to achieve with this initiative?

At Gulf, we keep things simple. Our ‘Unlock 2.0’ strategy is also simple. We have been growing 2-3x of industry volume growth rate over the last decade and maintained our growth momentum and retained our strong position in the years gone by. It’s time to unlock the next level of growth and success in this competitive scenario and changing industry landscape. We have all the growth pillars in place to enable us to scale new heights.

There are 3 broad strategies for this-

Accelerate, where we plan to accelerate the growth in core business which is lubricants by capitalising on the growing Indian economy, changing demographics, automotive growth and India shifting to a manufacturing-led economy. We have a robust business model in place catering to a balanced B2C and B2B segments and strong brand recall and distribution strength. All this will help in the accelerated growth of continued 2-3x volume growth, grow overall market share and grow higher in certain categories where we have less market share and enhance our profitability.

Premiumize, we intend to improve the value proposition through product premiumization. India is 3^rd largest lubricants consuming country and is projected to grow 3 per cent volume growth and even higher 6 per cent value growth with premiumization over the next decade as per the latest study by Kline & Co. We have a state-of-the-art R&D facility in Chennai and product innovation is one of our core strategies.  We have been a pioneer in launching long-drain products in the Indian market with superior value proposition. We are focused on raising our share of premium products via PCMO, EV fluids for hybrid and fully EV, and synthetic and semi-synthetic products.

Transform, is capturing various initiatives such as thrust on digital infrastructure, brand investments, and EV charging solutions. There is core transformation focusing on sharper ways of working and training & developments, digital initiatives, S&OP modernisation, and transforming beyond lubricants into playing a role in the EV eco-system by establishing new products in e-mobility where we are charged up and have the complete range of EV charging portfolio with 3 acquisitions (Indra, ElectreeFi & Tirex). Cultivating a digital-centric organization culture in our process and systems will be a key focus of Unlock 2.0. So, we believe we are future-ready, geared up and charged up for the next level of growth & success.

What are your expansion plans for the EV fluids business? Also, could you please elaborate on your future plans for the EV segment?

Yes, we have EV Fluids products for hybrid and full EVs, launched in 2021. The basket consists of transmission lubricants, coolants, grease, and brake fluids. Currently, it’s a very small business of our overall volume but we are already present with over 10 OEMs in this segment and looking to add a few more so that’s going to be continuing journey for EV fluid.

To further make a meaningful play in the EV value chain, we have made 3 strategic investments in EV- Indra renewables (Slow AC home chargers), ElectreeFi (an EV Saas Co.) and recently Tirex Transmission (DC fast charger manufacturer). These 3 investments total Rs 150 crore and with this, we feel we can participate in a complete EV charging portfolio.

In Tirex, which is our subsidiary (51 per cent stake), we have invested Rs 103 crore and this should be sufficient for the next 2-3 years mostly utilised for plant expansion, working capital and R&D for product development. However, we keep on evaluating the space where we can leverage our strengths of brand and distribution and also leverage Hinduja Group’s larger strengths.

What is the capital expenditure plan for FY '25? Additionally, can you provide guidance on your FY25 topline and bottom line?

Our usual capex in the core lubricants business is Rs 20-25 crore, which we have been guiding. This is towards augmenting some of the filling capacity and storage capacity around on the lubricant parts. For EV, the investments made so far should be sufficient for the next 2-3 years. We are evaluating the opportunities where we have the synergy of brand and distribution since it is a very nascent and evolving space. However, our focus on growing core lubricants will continue to be there since ICE will continue to grow despite de-carbonisation.

On guidance, we aim to continue to grow 2-3x industry volume growth and added value growth with premiumization. Effective margin management and enhancing profitability has always been our mantra and we are committed to overall business excellence and profitable growth and operating leverage kicking in going forward to also contribute to margin expansions.

Your current EBITDA margin is 12.8 per cent for FY24 which is very much within your guided band of 12-14 per cent. How should we see the margin profile from here and what are the levers you are looking at to take the margin to a higher band?

Yes, our continuous efforts on prudent margin management and better product mix translated into 12.8 per cent EBITDA for the full year FY24. Also, to mention, our Q4 FY24 EBITDA was 13.5 per cent. We will continue to focus on this strategy to maintain our EBITDA in 12-14 per cent band. Crude has been stable now at USD 83-85/barrel.

So as long as crude is below USD 90, we see stability and unless the geopolitical situations turn unpleasant, we see crude to be in this range to augur well for the margins. Further, with premiumization, improved product mix and operating leverage, we aim to move to a higher band of 14-16 per cent over a medium-term period.

At the moment, what are your top strategic priorities?

Our core strategy is to continue to outperform the industry and continue to grow 2-3x of industry volume growth rate. Simultaneously we aim to gain market share; offer value products and focus on premiumization; gradually expand margins; grow the EV business with the investments made in EV charging space and enhance profitability and maximising return to shareholders.