Gulf Oil Lubricants held a conference call on May 23, 2022 to discuss the results for the quarter ended May 2022 and way forward. Mr. Ravi Chawla - Managing Director & CEO and Mr. Manish Kumar Gangwal- Chief Financial Officer of the company addressed the call.

Highlights of the Concall

• The company continued to report very good revenue growths for the quarter at 23.5% YoY and the financial year ended on a high at 32.6% YoY growth in spite of many challenges all through the year in the form of rising input costs, supply chain disturbances and unabated inflationary cycle.

• All segments of business did well and demand conditions picked up during Q4FY22.

• Diesel engine oils for commercial vehicles and passenger car motor oils saw very good volume growth, as the company has increased market share in both B2C and B2B segments. The company achieved excellent growth in industrial/B2B segment, OEM franchisee workshops (FWSs) and from customers in the infrastructure sector.

• The company continues to invest in building its brand and driving CVPs (consumer value propositions) for its sub-brands in each segment. Multiple films were shot with brand ambassador, MS Dhoni for sub-brands in the MCO and CVO segments. The company has taken an approach of regional focus and these films were specifically made for south and that reflected in the language and styling in the films.

• Q4FY22 saw a volume growth of 7% YoY at 37500 KL. Volumes were up 16.5% in FY22.

• The company has increased its market shares by 0.5% to 1% across segments.

• The company had a new OEM tie-up with International Tractors Limited (Sonalika) – for factory fill, OEM workshop & distributor channel as well as Co-branded sales in retail. It has started factory fill supplies to Hyundai Motors for some grades. It has also received first-fill business from the green projects of ThyssenKrupp & Welspun Steel.

• The company focus will continue to be profitable volume growth and rebooting initiatives on the ground as normalcy is visible on covid front with free movement of goods and people.

• The company is seeing improved demand pick up, including in rural, which gives visibility of continued growth momentum

• The company has the ability and is taking timely price interventions to manage margins despite inflation causing short term pressures mainly linked to recent crude related spikes. The company had already take price hike in retail segment of around 3-4% in April 20222 to cover up increase in base oil prices.

• Finance cost for the quarter significantly higher led by forex losses, mark-to-market. During the quarter, post Russia Ukraine crisis, the rupee became very volatile and there was a mark-to-market impact on the open forex exposes to the tune of Rs 3 crore. This also includes the forward premiums for the coverage.

• Distribution outlet expansion in retail has also witnessed a positive uptick with the company pushing to reboot the retail expansion programs as travel has normalized. The company is putting a special focus on increasing retail outlets in personal mobility in South India where it has a relatively lower market share in this segment.

• The company acquired 26% stake in a SaaS Company (M/s. Techperspect Software Private Limited) by brand name ElectreeFi in EV space in Q4FY22, its second foray after it invested in a UK based EV 4W charger manufacturing company, (M/s. Indra Renewable Technologies Limited) during FY-20-21. ElectreeFi is working extensively in providing software and IoT based solutions to EV charging, battery swapping and related areas

• The company will continue to look at the evolving space in EV and look for synergistic areas where Gulf can play a meaningful role and create differentiation in the ecosystem on the strengths of its brand, distribution reach and OEM relationships.

• The company has recently concluded buy-back of 14,16,667 fully paid up equity shares of the face value of Rs. 2/- at a price of Rs. 600/- per fully paid up equity share in cash for an amount Rs. 85 crore and with the buyback tax of Rs. 19.80 crore paid by the company, the total cash outflow on account of buyback was Rs. 104.80 crore. The buy-back process was completed subsequent to the year end on April 25, 2022 and 14,16,667 shares have been extinguished.

• The company expects incremental capex of Rs 15-20 crore annually.

• The company expects a double digit growth outlook in FY23 led by growth in GDP, increased travel with reduction in covid cases, strong consumption growth in B2B segment and infrastructure. The company is working hard to maintain its margin band of 14-16%.