Castrol India reported a 6.8 per cent year-on year (YoY) increase in net profit at Rs 216.2 crore for the first quarter that ended March 31, 2024. What according to you were the factors/ key areas contributing to this growth. What are your expectations from the upcoming financial year?
Our resilient performance in the first quarter can be attributed to a diversified product portfolio, strategic brand campaigns, expanded market reach, and a focus on EV readiness. Key drivers of growth included launching new products like MAGNATEC SUV and CRB ESSENTIAL, which diversified our offerings and tapped into new-margin pools.
Effective brand building played a crucial role, with campaigns such as #BadhteRahoAage Castrol CRB TURBOMAX Pragati Ki Paathshaala empowering over 12,000 truckers across India, and 'India's Ultimate MotoStar' garnering over 10,000 registrations nationally. Strategic associations, including one with Shah Rukh Khan, significantly enhanced brand awareness and customer engagement.
Rural market penetration was another key factor. Expanding our reach to 33,500 outlets in rural areas made us more accessible, opening new markets and increasing market share. Additionally, strengthening our presence in the aftermarket with over 9,000 multi-brand passenger car workshops improved margins.
Our focus on EV readiness involved investing in EV transmission fluids manufacturing in India and providing mechanic training, positioning us for future growth and innovation.
Looking ahead, we expect digital transformation and sustainable solutions to be crucial. Tools like Castrol SMART, Castrol Fastscan, and Castrol DIGICLAIM will enhance efficiency. We will continue to focus on innovation and cost optimisation through workforce productivity and asset utilisation.
How does your company approach product development and innovation to address the specialised needs of industries like automotive manufacturing, mining, machinery, and wind energy?
We prioritise cutting-edge solutions through significant investments in future-ready and sustainable development. One of our key strategies is the active participation in the global R&D initiatives of our parent company, bp. For instance, we have invested Rs 500 crore in the UK R&D centre to advance research in thermal management and EV charging solutions.
Understanding the distinct needs of commercial vehicles and passenger cars, we have tailored specific solutions. Castrol CRB ESSENTIAL, a cost-effective range of engine oils for commercial vehicles, promotes extended engine life and minimal downtime. For SUVs, we launched Castrol MAGNATEC SUV 5W30, a premium synthetic oil designed to meet the unique demands of these vehicles.
To future-proof our offerings, we introduced Castrol ON, an advanced range of EV fluids, coolants, and lubricants tailored for electric powertrains. This innovation ensures that we remain at the forefront of the evolving automotive landscape.
Recognising shifting consumer behaviour, we have also expanded into auto care with products like chain cleaners, lubricants, and polishes. This foray into auto care allows us to meet the diverse needs of our customers more comprehensively.
In the realm of industrial efficiency, we specialise in wind energy turbine and gearbox lubricants. Castrol Optigear, for example, boosts efficiency by over a per cent, which can translate to an additional $100,000 in revenue per turbine over its 25-year lifespan. We have partnered with German motion technology specialists, Schaeffler, to develop new greases for wind turbines. Additionally, our high-performance mining lubricants are formulated to reduce the risk of equipment failure, ensuring optimal performance in demanding conditions.
How do you stay ahead of the curve in terms of technology and market demands?
We are committed to maintaining a customer-focused, competitive, and sustainable supply chain. By staying attuned to the evolving needs of consumers and investing in R&D, we ensure that we remain ahead of market demands.
Our digital transformation efforts play a pivotal role in this strategy. We utilise advanced planning tools and digitalisation to gain real-time data insights and manage our supply chain efficiently. For instance, our digital solutions combine real-time data insights, order tracking, and a unified Transport Management System platform. Advanced planning tools like SO99+ further optimise demand forecasting, inventory management, and collaboration, enabling us to meet market demands seamlessly.
Sustainability is another cornerstone of our strategy. We have implemented a comprehensive sustainability plan that includes using 30 per cent post-consumer recycled materials in our packaging and launching 100 per cent PCR bottles, which reduce plastic use by 1,800 tonnes annually. These initiatives reflect our commitment to reducing our environmental impact while maintaining high standards of quality and efficiency in our supply chain.
What are the key growth opportunities and challenges that your company anticipates in the Indian market, particularly in the high-performance lubricants and metalworking fluids segments?
India, the third-largest lubricant market globally, presents a landscape rich with both opportunities and challenges. The country's rising factory and farm output, coupled with robust infrastructure development, is driving the demand for lubricants. The growing popularity of two-wheelers, SUVs, and CNG vehicles further fuels this demand. Additionally, rural markets offer significant growth potential, making them a key area of focus.
However, navigating this market is not without its challenges. Inflation poses a constant threat, as do the pressures of competition from multiple players and the ever-evolving consumer preferences. Despite these potential risks, Castrol India is well-positioned for future growth. The company's strong presence in both traditional and EV lubricants ensure it remains a leader in this dynamic market, ready to capitalise on the opportunities while adeptly managing the challenges.
How has the integration of electric vehicles impacted the traditional supply chain system?
The rise of electric vehicles is transforming the automotive landscape and reshaping the supply chain. Although EVs currently represent a small portion of new vehicle sales, with two per cent for cars and five per cent for two-wheelers, the shift towards new energy mobility is prompting significant changes. These changes bring challenges, such as the development of local manufacturing capabilities for components and enhancing vendor competitiveness against imports.
Collaborations with partners like Ki Mobility Solutions and Mahindra Insurance Brokers are crucial in keeping us aligned with market needs. These strong partnerships ensure we remain responsive and adaptive to the evolving automotive sector.
In addition, our EV-readiness training program, endorsed by India's Automotive Skills Development Council (ASDC), has been instrumental in preparing the workforce for the future. By training over 1,000 mechanics across 13 cities, we are ensuring the effective maintenance and service of electric vehicles, thereby supporting the broader transition to EVs.
How does Castrol India envision its supply chain evolving in response to market trends, technological advancements, and changing consumer preferences?
Castrol India is enhancing its supply chain through a multifaceted approach. By leveraging digital tools, data, and technology, the company is achieving end-to end visibility, uncovering optimisation opportunities, and establishing new capabilities to maximise value. This digital expertise is transforming how the supply chain operates, making it more efficient and responsive.
The company is also focusing on products and market expansion. By increasing its reach in rural areas through new routes to market and expanding its product portfolio, Castrol India is tapping into new market segments. This strategy not only broadens the company's customer base but also strengthens its presence across diverse regions.
Sustainability initiatives are a key part of Castrol India's supply chain enhancements. The company is committed to reducing plastic use and increasing the use of recycled materials in packaging. Additionally, by digitalising supply chain processes, Castrol India is reducing its environmental footprint while improving efficiency. These efforts reflect the company's dedication to sustainable development and its proactive approach to addressing environmental challenges.
How does Castrol India integrate Artificial Intelligence, machine learning, and technology into its supply chain operations? How have these technologies impacted the overall performance of Castrol India's supply chain operations?
Machine learning and decision-making algorithms are finding wide use cases creating business value. A case in point is using imaging-based technologies to monitor abnormalities in our manufacturing sites using CCTV and providing alerts to use of advance algorithms in demand sensing helps improve our ability to predict and respond to market demand.
What are the key trends and challenges shaping the lubricants market in India, especially in the segments your company operates in?
Market challenges such as economic slowdowns can significantly affect lubricant demand. The transition to electric vehicles presents both an opportunity and a challenge, particularly with the need to meet stricter emission and fuel economy regulations. Intense competition and product shortages also pose significant hurdles.
Despite these challenges, Castrol India navigates the landscape with a diversified focus. Through continuous innovation and a commitment to quality, the company implements customer-centric strategies that address the evolving needs of the market. New initiatives in emerging segments like EVs demonstrate Castrol India's adaptability and forward-thinking approach, ensuring that it remains a leader in the industry even amidst shifting market dynamics.
How is your company positioned to capitalise on emerging opportunities and navigate potential risks in the Indian market?
Castrol is well-positioned due to its strong legacy, extensive network, and commitment to innovation. The company has refreshed its brand identity and is pursuing an 'onward, upward, and forward' strategy, which includes prioritising volume growth in its core auto lubricants business, increasing the share of industrial volumes, and investing in new initiatives to be future-ready.
We are focused on long-term growth through independent workshops, premium products, and new initiatives. Castrol India remains adaptable to economic shifts and market disruptions, ready to seize opportunities in growing areas like data centre cooling and EVs.
What initiatives has your company undertaken to promote sustainability and reduce the environmental footprint of your manufacturing processes and products?
At Castrol, sustainability is a core commitment embedded across our operations and initiatives. One of our flagship programs, PATH360, sets ambitious targets aimed at achieving significant waste reduction, reducing our carbon footprint, and improving lives by 2030.
Central to our sustainability strategy is the adoption of renewable energy. We are actively increasing the use of renewable power and transitioning all our assets to renewable energy sources. This shift not only aligns with our environmental goals but also promotes cleaner, more sustainable practices throughout our operations.
Innovation in product development plays a crucial role in our sustainability efforts. We have launched carbon-neutral products and implemented the Castrol Certified Carbon Neutral program. By 2025, we aim to achieve a 50 per cent reduction in our Scope 1 and 2 greenhouse gas emissions compared to our 2019 baseline. This commitment underscores our proactive approach to combatting climate change and reducing our environmental impact.
Addressing the issue of plastic waste is another key focus area. Castrol is dedicated to cutting our plastic footprint by 50 per cent by 2030. We are actively transitioning to 100 per cent recycled plastic bottles for our premium engine oils, promoting circular economy practices and reducing the environmental impact of our packaging materials.
These initiatives highlight Castrol's steadfast commitment to sustainability, demonstrating our proactive efforts to drive positive environmental change and uphold responsible business practices across our global operations.