Castrol India Limited — Q4 FY26

Castrol India Ltd Q4 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=lqNMRXZ3Jzo Published: 2 weeks ago

0:00 Ladies and gentlemen, welcome to 1 QFI 2026 earnings conference call of Castrol India Limited. Please note that all 0:08 8 seconds participant lines will be in the listen only mode and you can ask your questions after the opening statements. If you need assistance during the call, please 0:16 16 seconds press star then zero on your touchstone phone to reach the operator. 0:21 21 seconds Also, please note that this conference call may contain certain forward-looking statements which are based on the belief, opinions, and expectations of the company as on date of this call. 0:31 31 seconds These statements are not the guarantee of future performance and involve risk and uncertainties which are difficult to predict. 0:38 38 seconds We have with us Mr. Sata Basur, who director and interim CEO Castrol India Limited and Miss Pinali Nishinasan, CFO 0:47 47 seconds and wholetime director, Castrol India Limited. I now hand the co conference over to Mrs. Satan. Thank you and over to you. 0:58 58 seconds Thank you and good afternoon everyone. 1:00 1 minute Thank you for joining us. We appreciate your continued interest in Castrol India. Uh let me start by acknowledging the broader context in which we are 1:09 1 minute, 9 seconds operating. Uh this quarter has seen amongst other things continued macro uncertaintity and towards the end of the quarter we saw the early signs of 1:17 1 minute, 17 seconds external headwinds driven by the conflict in the Middle East. Uh these have started to reflect in currency movements and raw materials prices uh in 1:26 1 minute, 26 seconds the last several months. Against this backdrop, our focus remains on change consistent execution of our strategy 1:33 1 minute, 33 seconds drive profitable growth and build a resilient business. Before I hand over to Reinalini, our CFO to talk about 1:40 1 minute, 40 seconds numbers, I wanted to take a few minutes to walk you through how the business has performed and the momentum that we've seen. 1:48 1 minute, 48 seconds The first quarter reflects sustained momentum in the business as we continue to execute our plan. Uh our rural portfolio continues to grow at high 1:56 1 minute, 56 seconds double digit rate. We have expanded our distribution to now cross 40,000 outlets. Uh we've added 700 rural service extras which cater to bikes. Uh 2:06 2 minutes, 6 seconds and we focused on expanding our reach directly into villages that have a population below 20,000. Uh this scale 2:13 2 minutes, 13 seconds gives us deep last reach through which we can make our assortment available to rural consumers. In urban India we remain focused on expanding distribution 2:21 2 minutes, 21 seconds of our premium brands while investing in activation activating them in high density consumption market especially 2:28 2 minutes, 28 seconds for the car segment. As a result, premium brands portfolio de delivered a doubledigit volume growth uh and value 2:37 2 minutes, 37 seconds growth during the quarter. We've also been consciously building strong consumer relevance by engaging with 2:44 2 minutes, 44 seconds large rider communities across platforms like spirit ofi of unity and road roadtrip united. Our corporate campaign 2:54 2 minutes, 54 seconds continues to reinforce our role in powering India's progress. Our industrial business something that we have spoken about for the last couple of 3:01 3 minutes, 1 second years continues to perform well and delivering yet another quarter of double digit growth making a s sustaining a growth trajectory of multiple quarters. 3:09 3 minutes, 9 seconds Now here our focus remains clear expand our portfolio with multiple made in India products uniquely uh tailor made 3:17 3 minutes, 17 seconds for applications in India deepen our presence with existing customers continuing to add new customers in our chosen sectors. uh we focus on services 3:27 3 minutes, 27 seconds and we continue to integrate that into our strategy. Uh innovation uh remains central to our overall uh you know go to 3:34 3 minutes, 34 seconds market alongside localization and customization of industrial products. We are strengthening our new autoare 3:41 3 minutes, 41 seconds portfolio with an expansion of the product ranges that we offer now. We've also signed an MOU with Hindustan 3:48 3 minutes, 48 seconds Petroleum Corporation Limited to explore redefined base oil ecosystem in India. 3:53 3 minutes, 53 seconds Uh our service ecosystem remains a strong pillar of our business. 800 Castrol auto services. Uh at the end of March, we now tap 34,000 independent 4:02 4 minutes, 2 seconds bike workshops across the country and we lead 13,000 multibrand workshops and cars. All of this has translated into 4:10 4 minutes, 10 seconds continued market share game reinforces that our strategy is delivering as planned. With that, I will hand over to our CO mission 4:19 4 minutes, 19 seconds to take you through the financial performance this quarter. Thank you. Good afternoon to everyone on the call. 4:28 4 minutes, 28 seconds Building on the strong operating performance that Shabato just spoke about, I'm pleased to share the results and numbers. We have delivered our 12th 4:37 4 minutes, 37 seconds consecutive quarter of stable revenue and volume growth. Our margins remained within our expected operating band despite early signs of cost pressures. 4:47 4 minutes, 47 seconds We continue to maintain strong cash flows and a robust balance sheet. 4:52 4 minutes, 52 seconds What I would like to highlight is the predictability and quality of our earnings even in a volatile environment. 4:58 4 minutes, 58 seconds You already have seen our retail results in numbers. What we've uh delivered is a revenue growth of 9% to 1545 crores. 5:09 5 minutes, 9 seconds Our EITA increased by 7% to 329 crores and our profit after tax rose 4% to 242 5:17 5 minutes, 17 seconds crores. Towards the end of the quarter, we began to see geopolitical developments starting to impact our operations. While industry related 5:26 5 minutes, 26 seconds pressures have been building ever since September, we additionally saw raw material costs increases. 5:32 5 minutes, 32 seconds Our response has been proactive and structured, taking calibrated pricing action where required, driving cost 5:39 5 minutes, 39 seconds control measures across the business and strengthening supply chain resiliently through diversified sourcing. 5:47 5 minutes, 47 seconds At this stage, the impact is visible, but we hope to navigate this potentially inflationary environment confidently. 5:54 5 minutes, 54 seconds We've also strengthened internal levers to ensure great agility in decision- making, fast responsiveness to market 6:01 6 minutes, 1 second changes, and continual protection protection of our core business fundamentals. 6:06 6 minutes, 6 seconds Our capital allocation approach remains consistent, disciplined deployment, strong cash generation, and a continued 6:13 6 minutes, 13 seconds focus on shareholder returns, balanced with future investments. 6:18 6 minutes, 18 seconds With that, I turn it back to Sho for his closing. 6:21 6 minutes, 21 seconds Thank you. Uh so, uh before we open up the line, let let me briefly address a couple of areas that are likely to be on 6:28 6 minutes, 28 seconds a mind. Uh first and foremost, the evolving situation in the Middle East at this point. While there's no significant material disruption on supply chain, we 6:36 6 minutes, 36 seconds are seeing increased pressure on sourcing both in terms of cost as well as unpredictability of lead times. Our sourcing strategy has been always 6:44 6 minutes, 44 seconds diversified and we are not depend on any single geography but we have an eye on this uh and we working through that. 6:50 6 minutes, 50 seconds More importantly over the years we have built strong structural capability to manage sub cycles. So we have strong supplier relationships in place and we 6:57 6 minutes, 57 seconds are planning our inventory uh with with an eye on uh extended lead times. From a customer standpoint, our priority first 7:05 7 minutes, 5 seconds and foremost is to be a reliable partner during times of uncertaintity. We are focused on ensuring continuity of of uh supplies to our customers and 7:14 7 minutes, 14 seconds maintaining a certain discipline in our financial frame while we do all this. So the situation is evolving. It is affecting how we source some of our key 7:21 7 minutes, 21 seconds inputs uh that go into the lubricant manufacturing business particularly feed stocks but we we are seeing 7:29 7 minutes, 29 seconds uh secondly on discussions around shareholder development at parent level as you know the deal is subject to uh closure after various approvals across 7:37 7 minutes, 37 seconds the world are received regulatory approvals from Castrol India standpoint there's no change in our structure strategy or operating model we continue 7:45 7 minutes, 45 seconds to operate as a strong independent listed listed company with a strong balance sheet as Lenny just spoke about our focus remains firmly on executing our growth strategy delivering 7:54 7 minutes, 54 seconds consistent performance and building shareholder value for the long term. In summary, uh while underlying momentum 8:01 8 minutes, 1 second remains very strong, the external environment is is increasingly volatile. 8:05 8 minutes, 5 seconds The business fundamentally remains strong uh we are actively managing near-term volatilities. We remain focused on delivering consistent high 8:12 8 minutes, 12 seconds quality earnings. uh we will continue to execute our plan of expanding distribution, invest on our brands and bring innovation into the market. So 8:20 8 minutes, 20 seconds thank you for for your time and we'll open up the call for any questions. 8:26 8 minutes, 26 seconds Thank you very much. We will now begin the question and answer session. If you wish to ask a question, please press star and one on your touchstone 8:34 8 minutes, 34 seconds telephone. If you wish to withdraw yourself from the question queue, please press star and two. Participants are requested to use handsets while asking a 8:43 8 minutes, 43 seconds question. Also, in lie of the time, we will stick to two questions per person. 8:48 8 minutes, 48 seconds If you have further questions, kindly rejoin the queue. Ladies and gentlemen, let us wait for a moment while the questions come in. 9:02 9 minutes, 2 seconds We'll take our first question from the line of Nitin Tari from Philip Capital. Please go ahead. 9:08 9 minutes, 8 seconds Hi, thank you for the opportunity. Um, I hope I'm audible. 9:12 9 minutes, 12 seconds Uh, Nathan, can you use your handset mode, please? Uh, just a second. 9:22 9 minutes, 22 seconds Hello. Yes, Nathan. Yes, please. 9:24 9 minutes, 24 seconds This Yeah. Uh, thank you so much. Um, hi Mal. Hi, Sid. Um, so, uh, my question actually is, uh, with respect to your, 9:32 9 minutes, 32 seconds uh, raw material cost. So uh we we have seen a sharp increase in crude oil prices in the month of March and that continues to be the trend in April as 9:41 9 minutes, 41 seconds well. So just wanted to understand that has that translated into our raw material cost as well in the in the uh 9:49 9 minutes, 49 seconds January to March quarter or that flow through is yet to happen and uh secondly like you know therefore uh your direction on gross margin as well. um 9:57 9 minutes, 57 seconds how are we going to navigate if there is um an increase in in uh raw material cost. So what will be the time lag 10:06 10 minutes, 6 seconds before which like you know that can be passed on through uh priceifications. So that would be the first one. 10:17 10 minutes, 17 seconds Maybe let me answer this and if you have further you can ask later. Thank you for your question. I think I'm sure this question is on multiple people's mind. 10:24 10 minutes, 24 seconds So I'll try to address and give a little bit of clarity. You are right. Uh feed stock our main feed stock which is crude 10:31 10 minutes, 31 seconds has indeed shown huge increase in uh cost. Similar increases are visibility in uh packaging material. Uh we 10:39 10 minutes, 39 seconds expecting similar in fuel. We also we've also seen similar in many of our rigitives other components that go into the manufacturing cost. Now in quarter 10:47 10 minutes, 47 seconds one you are very fair in asking whether it indicated impacted my costs or not. 10:52 10 minutes, 52 seconds Given the inventory cycle, we saw minimal impact of these raw material increases into the costs that we reported in quarter one. I spoke about 11:00 11 minutes it in my comments. The currency fluctuation uh definitely impacted us. 11:06 11 minutes, 6 seconds Most of many of these are are imported for us and we pay in dollar and the dollar rate versus last year is down I mean the rupee is down by about six and a half 7% versus same period last year. 11:16 11 minutes, 16 seconds So that to that extent my calls in Q1 was impacted but a majority of the cost increases that we are talking about they 11:23 11 minutes, 23 seconds are now pending to Q. Our strategy is relatively simple. Uh Shu spoke about it top priority is to secure 11:32 11 minutes, 32 seconds supply customers and make sure that entire pipeline that goes into making the final product is ready and we're really working on that with a with 11:39 11 minutes, 39 seconds urgency. We spoke Sha spoke about it. we will have diversified supplier networks so that we can minimize you know supply gap 11:49 11 minutes, 49 seconds great um I understand that um I just wanted to understand what is the typical time lag before um which I mean the 11:56 11 minutes, 56 seconds price is actually passed on if at all to the consumers yeah that's what I I'll come to that Nan as a second point structurally the 12:05 12 minutes, 5 seconds objective of the company is we want to maintain our structural margins in the medium to long term in the shortterm we may see a little bit 12:13 12 minutes, 13 seconds of longterm we want to go back sure about it we have around at the beginning of April actually towards the end of 12:22 12 minutes, 22 seconds March we measured all of the level 12:29 12 minutes, 29 seconds I'm sorry to interrupt sorry to interrupt ma'am your voice is you know we are losing you sometimes um yeah actually I was about to say that 12:37 12 minutes, 37 seconds yes yeah Nin I request you to stay connected let me reconnect the management Okay, ladies and gentlemen, please stay connected. 12:47 12 minutes, 47 seconds [music] 12:51 12 minutes, 51 seconds [music] 12:58 12 minutes, 58 seconds [music] 13:05 13 minutes, 5 seconds [music] 13:13 13 minutes, 13 seconds [music] 13:19 13 minutes, 19 seconds [music] 13:25 13 minutes, 25 seconds [music] 13:31 13 minutes, 31 seconds Ladies and gentlemen, thank you for holding the line. We have the management line back on call. 13:40 13 minutes, 40 seconds Try slowly. Let me know if you can or not. 13:47 13 minutes, 47 seconds Um I'm not sure if I can hear you, but I'm still like, you know, hearing you in bits and pieces. 13:53 13 minutes, 53 seconds Yeah, let me call on a different number and please disconnect. Ladies and gentlemen, please stay connected. 14:02 14 minutes, 2 seconds [music] 14:08 14 minutes, 8 seconds [music] 14:14 14 minutes, 14 seconds [music] 14:17 14 minutes, 17 seconds I feel 14:19 14 minutes, 19 seconds [music] 14:23 14 minutes, 23 seconds [music] 14:30 14 minutes, 30 seconds like I'm done. 14:32 14 minutes, 32 seconds [music] 14:36 14 minutes, 36 seconds Ladies and gentlemen, we have the management team back on call. 14:40 14 minutes, 40 seconds Yes, ma'am. Can you go ahead with the answer, please? 14:43 14 minutes, 43 seconds Yes, Nathan, I'm going to try one more time and if you don't hear me, let me know. 14:48 14 minutes, 48 seconds But uh the point I was just making to close the point was that indeed pricing, we do consider pricing. We have taken one 14:55 14 minutes, 55 seconds round of pricing already end of March and we keep our structure and loss margin right in front of us to make sure that if there's any future volatility we 15:03 15 minutes, 3 seconds will also address them as a combination of pricing and cost cutting measures. 15:08 15 minutes, 8 seconds Understood. Um and my second question would be bookkeeping ones. So what is the overall volume in this quarter? Um 15:16 15 minutes, 16 seconds and also like you know our operating cost went up um by about um 23% Q1Q and about 10% YI. So why was that? 15:26 15 minutes, 26 seconds Yes. So uh from you know on volumes and on revenue I think you would see that our revenue topline revenue has gone up 9%. So it's a high singledigit result. 15:35 15 minutes, 35 seconds Our volume is very much similarly in line. So high single digit is what we have delivered also on volume. Uh 8% specific number would be helpful please if you can help me with that. 15:46 15 minutes, 46 seconds Eight 7 to 8% volume growth is what we have delivered for the correct you're right. Okay. All right. 15:55 15 minutes, 55 seconds And now on on expenses, you're right. 15:57 15 minutes, 57 seconds Our overall expenses have grown 9% in line with the revenue while revenue grew also 9%. Uh within this uh if you look 16:05 16 minutes, 5 seconds at specifically COGS, COGS have been have grown slower and that's because of all the product costsaving and efficiency muscle that we have within 16:13 16 minutes, 13 seconds this company that the COGS has actually grown slower than volume and all of our other expenses. I I think we breaking it 16:21 16 minutes, 21 seconds down internally into structural and one-time. There have been some one-time costs here, but structurally we've actually grown our gross profit by about 11%. 16:31 16 minutes, 31 seconds Yeah, I mean that's the absolute increase and and that's possibly volume led. I was like you know referring to the operating expense uh which is about 16:38 16 minutes, 38 seconds 338 crores which has grown by about uh 10 odd% um yi and about 23%. I was 16:46 16 minutes, 46 seconds referring to that. So you mentioned that there are some one-off expenses. You can highlight what what to be the quantum of those one-off expenses and what are the related to. 16:55 16 minutes, 55 seconds Yeah. So see uh our big cost buckets are uh employee cost. We spend in advertising and media and we have we 17:03 17 minutes, 3 seconds spend a big chunk of money also as a license to operate in all of our franchising workshops. So we've seen broadbased increase in almost all of 17:11 17 minutes, 11 seconds them. Um so the onetime costs that I spoke about are more in the employee cost bucket which we don't which are not structural in nature and that should you 17:19 17 minutes, 19 seconds should see them going down in the next few quarters. 17:22 17 minutes, 22 seconds In terms of operating cost this is a more sustainable sort of run rate that's what we should assume about 340 crores per quarter. 17:31 17 minutes, 31 seconds No like I said there are some one time in this quarter so they will go away. So the future quarter should be lower than great I'll get back in the cube. Thanks for answering my questions. 17:41 17 minutes, 41 seconds Thank you Natan. 17:43 17 minutes, 43 seconds Thank you. Before we take the next question, would like to remind participants to press star and one to ask a question. 17:50 17 minutes, 50 seconds Next question is from the line of Dal Pop from Choice International. Please go ahead. 17:57 17 minutes, 57 seconds Yeah, thank you for the opportunity and for the results. Uh my uh first question is around the strategy. As you 18:04 18 minutes, 4 seconds highlighted the focus is around the motorcycles and there has been a focus on rural area for for about one or two 18:12 18 minutes, 12 seconds years that I've been reading the transformations in the annual reports but what I understand is that the key investor question still remains that around the penetration of electric 18:20 18 minutes, 20 seconds vehicles and the one segment of the automotives where the penetration is the least is of course the commercial 18:26 18 minutes, 26 seconds vehicles. Um latest Royal Enfield has also launched their electric vehicle bike now which was still not penetrated 18:36 18 minutes, 36 seconds you it was only the gears where EVs were present. So why is management not really focusing or or is there a lesser focus 18:45 18 minutes, 45 seconds on the commercial vehicle segment where there is no penetration of electric vehicle at all. That is my first question and second question is around 18:54 18 minutes, 54 seconds the so we have seen refiners particularly Indian refiners buying crude at premium and I understand basel 19:03 19 minutes, 3 seconds being procured by cashrol is mainly from Singapore and South Korea. uh given the refinery output in Asia is lower and 19:11 19 minutes, 11 seconds basil being the uh output of refineries uh do you guys also as does gestro also 19:18 19 minutes, 18 seconds seem to have been charged premium to the bas oil prices that are available in Apex region or uh are we able to 19:26 19 minutes, 26 seconds diversify it enough uh to keep the keep the premiums lower or or are there no premiums at all on the major prices of 19:34 19 minutes, 34 seconds now this is thank Thank you for your question. I just before I before I respond to that just want to check whether I'm audible clearly. 19:44 19 minutes, 44 seconds Yes, it's loud and clear. 19:46 19 minutes, 46 seconds Okay. Right. So two parts to your question. Strategy the implication of electric vehicle and commercial and therefore a focus on commercial vehicle 19:53 19 minutes, 53 seconds and then you talked about base oil sourcing and what's the kind of pricing mechanism around it. Right. So on 20:01 20 minutes, 1 second [clears throat] 20:02 20 minutes, 2 seconds let me come to strategy first uh and I'll I'll unpack it a bit. It's not that we don't focus on commercial vehicle. In fact, commercial vehicle is a big a 20:10 20 minutes, 10 seconds significant contributor to our overall volume, right? Uh what what I mentioned was that we have been pushing very heavily into rural India to build our 20:19 20 minutes, 19 seconds distribution muscle in the last few years and that is reaping rewards for us in our motorcycle business which is a very profitable part of our business 20:27 20 minutes, 27 seconds that's happening because most of the new two wheelers in this country have been bought in Google area. So if we are just playing to a strategy where we said to 20:34 20 minutes, 34 seconds change the growth profile in terms of volume growth in the business, you need to go and tap consumers where they're emerging. So that's uh that's feeding on 20:43 20 minutes, 43 seconds to um our motorcycle strategy growth plan. In commercial vehicles, there are two parts to it. There is there is the 20:50 20 minutes, 50 seconds heavy commercial trucks business and then you have the tractor agree business. Castrol has uh traditionally been very strong in both. In the trucks 20:59 20 minutes, 59 seconds commercial space, we work very closely with Tata Motors and we had announced that a few years back that we have a partnership going with them. That part of our business has also grown in double 21:07 21 minutes, 7 seconds digits. Uh and therefore we play a full portfolio across all three categories, cars, bikes and commercial vehicles. Uh 21:15 21 minutes, 15 seconds I'll briefly touch upon EVs on EV side as well. Uh we have partnerships going while this is an emerging space still 21:23 21 minutes, 23 seconds small but from our point of view we want to be prepared for the future. So for example on two wheel EV space we are working with ASA energy. We have been in 21:30 21 minutes, 30 seconds discussion with them for a few years. We are integrated into their into their product development uh thinking and the our technology team is working with them 21:38 21 minutes, 38 seconds on certain products for their future vehicles. Likewise we have been working with Tata uh mobility electric mobility vehicles and 21:47 21 minutes, 47 seconds we'll find that our transmission fluids are there in all the Tata EV vehicles which are on the road. So we are present 21:54 21 minutes, 54 seconds across ice uh enies and in between because uh we believe that the pathway to low carbon mobility will go via uh 22:03 22 minutes, 3 seconds conventional ice engine becoming more efficient. So we have thin products as we call them. These are premium products uh synthetic products. We have products 22:11 22 minutes, 11 seconds which are compatible for hybrid engine already in the market. We have products which are now compatible for E20 and gas engines. Those are also in the market. 22:19 22 minutes, 19 seconds And then we have products and partnerships going on in the EV space. 22:22 22 minutes, 22 seconds Uh so that's the first part answer to the first part of your question. The second part is about base oil. We have a diversified sourcing strategy from 22:29 22 minutes, 29 seconds across the world. We do uh import uh certain percentage of base oil from uh Singapore as well as from South Korea. 22:38 22 minutes, 38 seconds Uh this is really driven by the quality and the specification that we which we require for certain of our formulations. 22:45 22 minutes, 45 seconds We equally source base oil domestically as well. uh we source from the Indian refiners and uh and depending on what 22:53 22 minutes, 53 seconds our you know uh forecast is over the next few months we are quite we are quite open to sourcing 23:01 23 minutes, 1 second uh products from other parts of the world depend so long as they meet our quality requirements prices and of [clears throat] base oil depending on 23:08 23 minutes, 8 seconds what companies have uh structured into their contracts usually are indices driven unless some you know somebody were to buy a spot cargo. So similarly 23:16 23 minutes, 16 seconds our term contracts are all indices driven and and as the market moves up and down we get benefit of that. I hope that answers your question. 23:27 23 minutes, 27 seconds Yeah. So my question was more on given there would be scarcity of basil as well. So uh is it uh you answered that 23:36 23 minutes, 36 seconds it is in line with the indexes but is there a premium already being charged uh by the basel providers similar to what 23:44 23 minutes, 44 seconds we saw for the for the crude producers in the in the first quarter and now that we are seeing as well so is there some 23:50 23 minutes, 50 seconds kind of twe on that indices as well or no is still not in effect so indices are moved up. So when I refer to indices 23:58 23 minutes, 58 seconds when I refer to indices the two indices that you can go you can refer to one is Argus and the other is ISIS and these are publicly you know available and 24:07 24 minutes, 7 seconds those indices will move and they are moving and therefore our contracts are marked to those indices. 24:15 24 minutes, 15 seconds Uh okay I think it was okay this answers my question. I I believe there is no ST premium as such. It is in line with the 24:24 24 minutes, 24 seconds indes which are currently running. Um okay that's I I'll end that quickly. Thanks. Thank you. Thank you. 24:31 24 minutes, 31 seconds Next question is from the line of Sabri Hazarika from MK Global Financial Service. Please go ahead. 24:38 24 minutes, 38 seconds Yeah. So just a clarification on this volumes you mentioned 7 to 8% growth uh YI or is it Q 24:45 24 minutes, 45 seconds Quarter 1 Q 1 Q versus 1Q? 1Q 26 versus 25. Yeah. 24:52 24 minutes, 52 seconds 1Q 26 versus 25 is 7 to 8%. Okay, fair enough. Secondly, uh so how do you see the margin scenario u in in the current 25:01 25 minutes, 1 second year given the uh volatility in the global markets? So uh we had the AITA margin falling to around 21% now versus 25:08 25 minutes, 8 seconds 23 24%. So uh do you have a guidance uh in for this quarter for this year as a whole? 25:16 25 minutes, 16 seconds Yeah uh Sabi thank you for the question. 25:19 25 minutes, 19 seconds So I I'll take it in two parts. Firstly on the margin itself delivered in this in quarter one you would remember we 25:25 25 minutes, 25 seconds always have given the guidance of 21 to 24% will be our operating EITA margin range the reason for always giving this 25:33 25 minutes, 33 seconds range is because our cost profile from one quarter to to the other quarter really differs a lot and if you now look 25:39 25 minutes, 39 seconds at uh the Q4 that of last year we had a uh you know very high abita margin of 26%. But if you look at my Q1 of 25:47 25 minutes, 47 seconds previous years, you will see Q1 is always the softest quarter because of our cost profile. So in line with that, I don't see a huge dilution in our EITA 25:55 25 minutes, 55 seconds margin in Q1 as we completed the results. Now looking forward will be a different story because we just acknowledge that there is a lot of 26:03 26 minutes, 3 seconds geopolitical uh volatility and a lot of the raw material costs have increased while structurally we will recover the 26:11 26 minutes, 11 seconds you know structural margin for the company. we will go back want to go back into that same range of 213 24 there could be some short-term uh volatility 26:19 26 minutes, 19 seconds that we will see even in our numbers uh we've already taken one round of pricing our cost optimization is on uh 24/7 so 26:26 26 minutes, 26 seconds we will try to mitigate any such impact but in the short term there could be some impact right and just a small followup so uh so 26:34 26 minutes, 34 seconds I mean this hundred plus dollar oil equivalent of base oil price is yet to reflect right in your numbers I mean it's was there any impact in March 26:43 26 minutes, 43 seconds itself on the base oil price or we'll see them probably in the next two months or so. 26:47 26 minutes, 47 seconds Yeah, I believe Nan had also asked a similar question because of our inventory cycles. Uh when the you know the geopolitical scenario started it was 26:56 26 minutes, 56 seconds just early March. So our inventory cycle covered up for Q1 we saw minimal impact the impact was primarily on foreign exchange but uh uh to Q onwards even the raw material prices start showing up. 27:08 27 minutes, 8 seconds Okay fair enough. Thank you so much and all the best. 27:12 27 minutes, 12 seconds Thank you ladies and gentlemen to ask a question. Please press star RN1 on your phone now. We'll take our next question 27:19 27 minutes, 19 seconds from the line of Nlesh Jen from Astute Investment Management. Please go ahead. 27:26 27 minutes, 26 seconds Hi, thank you for the opportunity. Uh but first question is on the new industry or the new energy uh broadly focusing on the data center side. Uh 27:34 27 minutes, 34 seconds obviously we mentioned that we had been in the pilot stage of the payment company. We just wanted to understand uh 27:41 27 minutes, 41 seconds how does move then uh how does progress and uh when by when can we expect to at least start contributing to our you know 27:49 27 minutes, 49 seconds business uh you know if you can give any time draw timeline and uh further to that would be you know what can be the potential advisable market for us. 27:59 27 minutes, 59 seconds Thanks Nlesh. Uh so as you would know that there's a lot happening in that space. Um a lot has been announced in 28:06 28 minutes, 6 seconds terms of new data centers being developed or built in India. The team remains closely in touch with the people who are developing the data centers as 28:14 28 minutes, 14 seconds well as OEMs who uh develop the cooling system solutions around those data centers. So it is beyond pilot. There are trials that are going on and these 28:22 28 minutes, 22 seconds are long time cycle capital investments as you can understand. So as and when they scale up and and um the developers 28:30 28 minutes, 30 seconds uh have firmed up on what is their path what is the technology that they have chosen for the cooling systems the data 28:37 28 minutes, 37 seconds center then we would be able to uh see that flow through into our business. uh we can't make a guidance at the moment because this is not something we are uh 28:44 28 minutes, 44 seconds driving in terms of the implementation of or the execution of the data center but our teams are closely in touch the products that we have deployed in the 28:52 28 minutes, 52 seconds country in for pilot or or rather for trials are are the products that are being used in other parts of the world in data centers 29:02 29 minutes, 2 seconds are uh so are we not testing it domestically or it's only being done at the global level no we are testing we are we 29:11 29 minutes, 11 seconds uh tests or rather we have uh trials that are happening in India. 29:19 29 minutes, 19 seconds Okay. Okay. Given the uh we expect the penetration uh to go increase more towards liquid cooling side broadly 29:27 29 minutes, 27 seconds slowly understand so that things will move faster now compared to you know what it has been. 29:34 29 minutes, 34 seconds So we'll see I mean within liquid cooling as well there are broadly two types of technology. There is the emerging coolant and the director chip. 29:40 29 minutes, 40 seconds We have products for both. Depending on the technology which the developers choose, we will have options to participate in them. 29:49 29 minutes, 49 seconds Okay. So probably you would not able to share any market size for right for now. 29:54 29 minutes, 54 seconds Yeah. I think it's very very early uh for everyone concerned and we will see because it's an emerging space. We'll see how it develops. 30:02 30 minutes, 2 seconds Sure. Yeah. Thank you. Thank you. 30:06 30 minutes, 6 seconds Thank you. Next question is from the line of Rahul Auja from Precient Capital. Please go ahead. 30:15 30 minutes, 15 seconds Rahul, please use your handset mode. Sure. I'm audible. Yes, please go ahead. 30:23 30 minutes, 23 seconds Yeah. So, uh, firstly, congratulations on a good set of numbers. Just wanted to understand what kind of price increase we have taken in Q1 to address the 30:32 30 minutes, 32 seconds increase in cost. And my follow-up question will be regarding the advertisement expense in Q1. Can you just give me a broad picture of what uh this is as a percentage of revenue? 30:44 30 minutes, 44 seconds Yeah. Uh thank you Rah. Thanks for your uh uh congratulations and also for the two questions. Uh see castl is a 30:52 30 minutes, 52 seconds relatively diversified business even within lubricants. Uh we have a large uh retail part of portfolio with bikes, cars and commercial. We also have our 31:01 31 minutes, 1 second partnership with our manufacturer and the industrial part of the portfolio. Uh we don't go with a blanket price increase with any uh what we've done is 31:09 31 minutes, 9 seconds we've been able to narrow down individually for each of their portfolio what is the cost increase and the intent is to recover any cost increase that we 31:17 31 minutes, 17 seconds have and like I said balance between price increase and cost optimization. So I won't be able to specifically answer your price increase percentage question 31:24 31 minutes, 24 seconds but I all I can tell you is that the intent is to recover margins and hold the margins uh going forward. Um your second question was on advertising 31:32 31 minutes, 32 seconds spend. We've uh you would see our numbers historically we've spent about uh 3 to 4% on advertising and a similar trend has been spent even in one. 31:43 31 minutes, 43 seconds Okay. I just wanted to add one more question regarding you said that there's a currency impact so hedging policy with 31:51 31 minutes, 51 seconds respect to that is there any percentage which is normally hedged? Yes. Yes, we do have a hedging policy. 31:57 31 minutes, 57 seconds Uh hedging is a very critical tool for us which helps us with certainty of foreign exchange. It doesn't really uh assure us with a lower foreign exchange exposure. So let me talk you through it. 32:08 32 minutes, 8 seconds we do have a uh 60-day hedging policy and this 60-day roughly links to my inventory cycle. So, as and when we have 32:15 32 minutes, 15 seconds certain exposure, we go and hedge against that certain exposure. Um, from a raw material exposure standpoint, half 32:22 32 minutes, 22 seconds of our raw material is locally procured and half of it is uh imported. So, about half of my crops is what we hedge for. 32:33 32 minutes, 33 seconds Okay. Any base percentage for hedge? 32:38 32 minutes, 38 seconds Say more can you elaborate the question a little bit? 32:42 32 minutes, 42 seconds I just wanted to understand if is there any base percentage for hedging like percentage in terms of percentage 32:51 32 minutes, 51 seconds like I said half of my cog half of my cogs is local which we don't hedge for half of my cogs is imported so 32:59 32 minutes, 59 seconds that exposure is my dollar exposure and that's what they h for. Okay. Okay. Got it. Thank you so much. 33:06 33 minutes, 6 seconds Thank you. Next question is from the line of RDR from Nunit family office. Please go ahead. 33:16 33 minutes, 16 seconds Thank you and congratulations on set of results. I wanted to understand of the data center occasionally again uh while 33:23 33 minutes, 23 seconds we understand this is preliminary and difficult to deliver any guidance yet. 33:27 33 minutes, 27 seconds Uh the two things if you can share is one uh in terms of our global supply agreement or market share that we have 33:36 33 minutes, 36 seconds already in place uh giving us confidence uh in terms of the direction in which uh the business can potentially set to and 33:44 33 minutes, 44 seconds also wanted to understand uh the competitive intensity and profitability in that space again at a global level we understand that India's very nature this 33:53 33 minutes, 53 seconds trial success depends on a lot of factors but if you can share competition as well as profitability there. So to 34:00 34 minutes get a sense of you know where things would end up stacking over a period of time if that possible. 34:06 34 minutes, 6 seconds Thank you. Look thanks for the question Rod. Uh look at a global level too this is a fast changing uh um ecosystem. Uh a 34:17 34 minutes, 17 seconds few years back a lot of the data centers were air cooled. they are then subsequently moving to liquid cooled and beyond that going to direct chip because 34:24 34 minutes, 24 seconds all the data center develops are scavenging for power efficiency. So uh the products that we sell serve to meet 34:32 34 minutes, 32 seconds that require requirement of power efficiency. The more heat can you you remove the more efficient the data center becomes. That's the broad sort of 34:39 34 minutes, 39 seconds you know area where we working in market share numbers are not available globally uh and I wouldn't be able to you know give you guidance globally what's going 34:47 34 minutes, 47 seconds on if I can just give a broad how the ecosystem works. Uh it is a competitive space but again very fast growing and at 34:55 34 minutes, 55 seconds the same time also evolving because the technology choices are not being firmed up. So which is the reason why we we are not in a place where we can start giving 35:03 35 minutes, 3 seconds guidance. to new or rather at a very preliminary stage for us to give some headline numbers in terms of the size of the market and where it's going. I hope that that sort of answers your question. 35:14 35 minutes, 14 seconds Uh partially if I if I may uh actually push in a follow up. Uh so let's put it 35:22 35 minutes, 22 seconds as the technology evolves and and the possibility of the the changes uh continue to sustain. Uh is it fair to 35:29 35 minutes, 29 seconds assume that once you are uh an early entrance or once you actually have entrance in a certain uh offering that a 35:36 35 minutes, 36 seconds data center chooses to have uh is it possible that a coolant or or a material comparable which is used for cooling can be replaced by an alternate supplier 35:44 35 minutes, 44 seconds later and also does the technology allow a switch to an alternate provider uh once uh you are into the system or or 35:53 35 minutes, 53 seconds that's not possible like I mean like I need to ask if you become engraved into the place and replacements are not 36:00 36 minutes possible or a replacement if possible or an alternate uh you know couldn't or and 36:06 36 minutes, 6 seconds uh offer you to subsequently refill if possible. 36:12 36 minutes, 12 seconds Yeah, I I think it's a difficult question to put a very clear answer to but I'll make an attempt. Uh so the 36:19 36 minutes, 19 seconds model for uh for liquid coolant of data centers are complex. It's not just about charging a liquid in. There's a whole apparatus in terms of cooling ecosystem. 36:28 36 minutes, 28 seconds Most of them are closed loop systems which means that there are specialized people who manufacture the hardware within within which you would have 36:36 36 minutes, 36 seconds liquids that you know we manufacturers go in and that is a closed system loop which continues whether over a period of 36:43 36 minutes, 43 seconds time somebody would replace the liquid with another liquid perhaps I don't know honestly because it's the business or that industry is not mature right but I 36:51 36 minutes, 51 seconds just thought I'll help you visualize how does the whole system works one level below that as the is the approach to 36:58 36 minutes, 58 seconds that whole liquid cooling uh you know there are those who are immersing the the server blades or the chips into uh 37:07 37 minutes, 7 seconds you know a liquid pool if you were to visualize that way and though and there are those systems where the chip itself is directly cooled uh it's called direct 37:14 37 minutes, 14 seconds to chip uh where you know it's it's integrated on top of a board which is cooled uh from beneath with uh fluids moving around they have their own 37:22 37 minutes, 22 seconds dynamics it's not as simple as you know taking out one fluid and putting another fluid but given that the whole technology around it is evolving quite 37:29 37 minutes, 29 seconds quite fast. It'll be a bit premature for us to make predictions about it. Okay. Thank you. Thank you. 37:37 37 minutes, 37 seconds Thank you. 37:39 37 minutes, 39 seconds Next question is from the line of Kumar Sha from Sumangal Investments. Please go ahead. Hi, thanks for the opportunity. 37:48 37 minutes, 48 seconds So my question is regarding sales mix. 37:51 37 minutes, 51 seconds What is the contribution of two wheeler four-wheeler commercial vehicles? if you can break it down. 38:03 38 minutes, 3 seconds Yeah. Uh Ku, thanks for the question. Um you see uh traditionally Castle has been very strong in the uh commercial vehicle 38:11 38 minutes, 11 seconds space and has really grown also in the two-heer space. So those two combined do become a majority of our automotive uh 38:19 38 minutes, 19 seconds sales. I would say uh to together both of them will be about 60% of our sales. 38:25 38 minutes, 25 seconds uh cars is an emerging segment as you can imagine even India demographically is early behind early on the car uh 38:33 38 minutes, 33 seconds penetration stage. So car portfolio for us is also in the early stages. So that could be another uh 15 uh maybe 20% of 38:41 38 minutes, 41 seconds our revenue and then the rest of it is the industrial part of the portfolio. Thank you very much. 38:49 38 minutes, 49 seconds Thank you. 38:51 38 minutes, 51 seconds Next question is from the line of Namish Panda from ND Advisor. Please go ahead. 38:57 38 minutes, 57 seconds I'm audible. Thanks for this opportunity. Yes. So my I have a couple of questions. 39:03 39 minutes, 3 seconds So my first question being um as you as we all know that ruler markets are growing well. So how do margins in rural 39:11 39 minutes, 11 seconds compare with urban markets first and secondly can you break down volume growth across rural versus urban markets 39:18 39 minutes, 18 seconds and even uh between key segments like automotive and industrial? 39:27 39 minutes, 27 seconds Okay, look, I'll make an attempt on the volume growth story and then Lenny will come through and talk about my rural 39:33 39 minutes, 33 seconds business uh now has been growing volume wise on a double digit uh consistently now for several years as we build out 39:43 39 minutes, 43 seconds our direct reach into rural India. Uh the majority of the products that are sold into our rural business uh approximately 23 of it is motorcycle 39:51 39 minutes, 51 seconds products. Margins are quite good. the accredited to the business. Yeah. Um if I look at urban, urban has both commercial vehicles, cars and bikes. The 40:00 40 minutes mix is quite different. Um uh in terms of margins for us, we make uh we earn more in cars followed by bikes followed 40:07 40 minutes, 7 seconds by commercial vehicles. In urban centers, our focus is on what we internally categorize as high density consumption points, which is largely 40:15 40 minutes, 15 seconds about cars and motorcycles. In those markets, our margins are again accurative, right? But there's a large commercial vehicle business that needs service all over the country. Uh which 40:24 40 minutes, 24 seconds is lower in terms of margin compared to bikes and cars. Uh industrial fast growing in terms of volume. There are pockets of it which are very high margin 40:32 40 minutes, 32 seconds specialized application. Uh but overall at a at a weighted average level the industrial margin would be a bit lower. 40:38 40 minutes, 38 seconds Uh and again uh consistently growing at double digit for last several quarters. 40:43 40 minutes, 43 seconds Now I I just build on Yes. I just build on a small anecdotal point on the rural uh margins as you 40:52 40 minutes, 52 seconds are. I think the use cases on commercial vehicles and bikes which Shoto just said is a big part of our portfolio actually 41:00 41 minutes very closely linked to livelihoods in many cases in rural and uh and we've also learned that actually owners are 41:07 41 minutes, 7 seconds very proud owners of their motorbikes also when it comes to so they really invest in their vehicle. So while we have a portfolio of bike oils and we 41:15 41 minutes, 15 seconds have a portfolio of commercial oils, what we see play out in rural actually is that they tend to pick the active which is the premium for for them and 41:22 41 minutes, 22 seconds it's a high gloss margin for us as well as even on commercial vehicle. Uh they tend to pick the ones which are you know 41:29 41 minutes, 29 seconds uh healthy gross margins for us. So we don't see noodle as a g margin diluter for us at all. 41:36 41 minutes, 36 seconds Got it. Got it. That's it from Thank you. Thanks a lot. Thank you. 41:43 41 minutes, 43 seconds Since we have last two minutes of the call, we'll take our last question from the line of Kan Ma from Boda PNP Paragan Mutual Fund. Please go ahead. 41:53 41 minutes, 53 seconds Thank you for the opportunity. One [clears throat] question coming back on the volume growth. We have narrated that almost all segments like rural, urban, 42:02 42 minutes, 2 seconds commercial as well as industrial all of them are growing in double digit. 42:06 42 minutes, 6 seconds However, at the portfolio level, we are achieving a 7 to 8% YI growth. So, which is the pocket which is probably growing 42:15 42 minutes, 15 seconds slower and sort of impacting our overall volume growth, right? So, uh pick on what the rural and 42:24 42 minutes, 24 seconds urban are geographies, right? The way we categorize it. So, within that rural is growing at double digit. In urban, we further segment it because we think 42:32 42 minutes, 32 seconds urban has a role to play in premiumizing our mix. the premium portfolio that we sell into urban India predominantly cars 42:39 42 minutes, 39 seconds and motorcycles that also growing at double digit. If you remove this then you have uh the large commercial vehicle 42:46 42 minutes, 46 seconds business or commercial vehicle products which includes engine oil for trucks which somebody asked a while earlier. 42:52 42 minutes, 52 seconds You have speciality products like transmission fluids and diesels. All of this is quite significant part of our portfolio. It is growing but not at double digit high single digits. Okay. 43:01 43 minutes, 1 second And all of this at a blended level brings us to the kind of growth profile that we talked about. Sure. Thank you. 43:10 43 minutes, 10 seconds Thank you. 43:12 43 minutes, 12 seconds We are at time. This brings us to the end of the call. On behalf of Castrol India Limited, I thank you for joining this call. You may now disconnect your line. Wish you a good day ahead. 43:23 43 minutes, 23 seconds Thank you.