Gulf Oil Lubricants held a conference call on February 11, 2022 to discuss the results for the quarter ended December 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 25% and for the nine months period at 37% in spite of retail market sentiments being weak during third quarter with excellent growth coming from Industrial/B2B segment, OEM Franchisee Work Shops (FWSs) and from customers in the infrastructure sector.

• The company reported strong double-digit growth registered in Industrial segment on YOY basis

• The company delivered ever highest volumes in a single quarter in the OEM FWS segment with growth across product categories. Realization also improved with revised pricing in place for this segment

• Infrastructure segment continues it customer acquisition journey with new customers and construction OEMs.

• B2C also saw good volumes in diesel engine oils for commercial vehicles and passenger car motor oils, as the company has increased market share in all these segments.

• Volumes grew 9% compared to previous quarter at 36000 kilo liters leading to market share gain when market growth was flat or even 5-6% down in various categories. YTD volume growth is 21%.

• The company saw subdued demand in the rural side motorcycle oils and the agri lubricants

• B2C:B2B revenue mix was 55:45 in Q3FY22 compared to 60:40 normally

• Product mix was around 20% personal mobility, around 34% diesel engine oil, around18% industrial segments and other 28%.

• Other expense was higher due to higher advertisement and promotion expenses, higher freight rates led by increased diesel prices and increase in royalties to OEM. As and when the OEM component increases in the product mix, royalty goes up.

• Advertisement and promotion expense was around 3% of total sales in Q3FY22.

• The company mentioned that input costs impacts still persists with inflationary trend across various cost items, further fueled by continuing global supply chain disturbances.

• The company has taken series of price increases in various segments in last few quarters. In retail segment, it has taken four price increases over the last 8-9 months. And in B2B, it is a negotiation process. In OEM business mostly it is formula driven - quarterly or half yearly. This price increase covers most of the cost price increase

• Gross working capital was around 120 days in Q3FY22. Normally gross working capital for the company is around 90-95 days. The company hopes to stabilize it back around in three months.

• All players in the industry has increased the inventory for short term till that time global supply chain scenario improve to mitigate the risk of losing on inventory or in terms of stock availability.

• The company reported Rs 13 crore of topline from battery business.

• The company launched a new lubricant range in collaboration with Schwing Stetter for their after-market requirements

• The company won contract for supply of newly launched Synthetic Series Gear oils of factory fill supplies to one of the biggest global gear box manufacturers

• The company continues to remain net debt free and carry more than Rs 500 crore cash on the balance sheet.

• The company has approved buy-back upto 14,16,667 equity shares of the company at a price of Rs. 600 per equity share for an aggregate amount of Rs. 85 crore. Promoter of the company has showed intention to participate in the buyback.

• The company philosophy is to return cash to shareholders. It has been paying consistent dividends. It considers buy back the most transparent way of returning cash to shareholders.

• The company is looking at various investment opportunities currently in an all electric vehicle space, EV value chain and allied areas. The company has approved the acquisition of 26% equity stake in TechPerspect Software. Techperspect, well known for its Brand ElectreeFi, are primarily a SaaS provider having expertise in implementation of IoT based emobility solutions which include charger management software solution for EV charging, battery swapping management system, EV fleet management system and software to support smart charging and grid load management.

• Gulf Oil India intends to utilize its pan India touch points as well as relationship with automotive OEMs and industrial customers to leverage this alliance to providing superior solutions related to electric vehicle charging, EV Fleet management and battery swapping.

• The company does not see more than Rs 150 crore capex annually for next 3-4 years.