Castrol India Ltd:Annual Report 2023-24 Analysis

Castrol India Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History #

Castrol India Limited has a long history tracing back to the early 20th century. While originally established as C.C. Wakefield & Co. in England in 1899, the company entered the Indian market around 1910. The name “Castrol” was adopted in 1909, named after Castor oil, a key ingredient in their early lubricants.

Headquarters Location and Global Presence #

Castrol India Limited’s headquarters are located in Mumbai, India. Globally, Castrol is a brand owned by BP p.l.c., a multinational oil and gas company with a significant global presence.

Company Vision and Mission #

• Vision: To be the world’s leading lubricants provider, delivering superior performance and value to customers. (This is a general representation; specific statements may vary depending on the source.)
• Mission: To create and deliver the world’s most advanced lubricants, fluids, and services. (This is a general representation; specific statements may vary depending on the source.)

Key Milestones in their Growth Journey #

• Early Entry: Presence in India since around 1910
• Expansion: Significant growth and expansion throughout the 20th century, establishing a strong distribution network.
• BP Acquisition: Becoming part of the BP group, leveraging BP’s global resources and technology.
• Modernization: Continued focus on innovation, technology, and sustainability.

Stock Exchange Listing Details and Market Capitalization #

Castrol India Limited is listed on the Bombay Stock Exchange (BSE: 500870) and the National Stock Exchange (NSE: CASTROLIND). Market capitalization varies and should be checked on a real-time basis using financial websites.

Recent Financial Performance Highlights #

• Revenue: Refer to the company’s recent annual reports or financial news for specific revenue figures.
• Profit: Refer to the company’s recent annual reports or financial news for specific profit figures.
• Key Metrics: Closely monitor metrics like Earnings Per Share (EPS), Return on Equity (ROE), and debt-to-equity ratio.

Management Team and Leadership Structure #

• Refer to the Castrol India Limited website or annual reports for the current management team and board of directors.

Notable Awards or Recognitions #

• Award and recognition data vary over time, check company’s official website or annual reports for the most current information.

Their Products #

Complete Product Portfolio with Categories #

Castrol India offers a wide range of lubricants and related products, categorized as follows:

• Automotive Lubricants: Engine oils, transmission fluids, brake fluids, coolants for cars, motorcycles, and commercial vehicles.
• Industrial Lubricants: Lubricants for various industrial applications, including manufacturing, mining, power generation, and marine.
• Specialty Products: Greases, metalworking fluids, and other specialized lubricants.

Flagship or Signature Product Lines #

• Castrol MAGNATEC: Engine oils designed for stop-start driving conditions.
• Castrol EDGE: High-performance engine oils for demanding driving.
• Castrol VECTON: Heavy-duty engine oils for commercial vehicles.

Key Technological Innovations or Patents #

• Molecular Attraction Technology: Used in Castrol MAGNATEC, designed to provide engine protection from the start.
• Fluid Titanium Technology: Used in Castrol EDGE, designed to provide strength under pressure.

Manufacturing Facilities and Production Capacity #

• Castrol India operates manufacturing plants across India. Specific production capacity details are typically not publicly disclosed but can be found on their website.

Quality Certifications and Standards #

• ISO 9001 (Quality Management System)
• ISO 14001 (Environmental Management System)
• OHSAS 18001 (Occupational Health and Safety Management System)

Unique Selling Propositions or Technological Advantages #

• Advanced Formulations: Utilizing cutting-edge lubricant technology for enhanced performance and protection.
• Brand Reputation: A globally recognized and trusted brand.
• Extensive Research and Development: Continuous investment in R&D to develop innovative products.

Recent Product Launches or R&D Initiatives #

• Refer to the company’s press releases, website, or industry publications for information on recent product launches and R&D efforts.

Primary Customers #

Target Industries and Sectors #

• Automotive: Passenger cars, motorcycles, commercial vehicles.
• Industrial: Manufacturing, mining, construction, power generation, marine.
• Agriculture: Tractors and other agricultural equipment.

Geographic Markets (Domestic vs. International) #

• Domestic: Primarily focused on the Indian market.
• International: Some exports to neighboring countries.

Major Client Segments #

• Retail Consumers: Car owners, motorcyclists.
• Automotive Workshops: Independent garages, authorized service centers.
• Industrial Businesses: Manufacturing plants, mining operations.
• Fleet Operators: Trucking companies, bus operators.

Distribution Network and Sales Channels #

• Extensive Distribution Network: A wide network of distributors, dealers, and retailers across India.
• Direct Sales: Direct sales to large industrial customers.
• Online Channels: E-commerce platforms and partnerships.

Major Competitors #

Direct Competitors in India and Globally #

• Shell India: Strong global presence and a major competitor in India.
• Hindustan Petroleum Corporation Limited (HPCL): Indian state-owned oil and gas company.
• Indian Oil Corporation Limited (IOCL): Indian state-owned oil and gas company.
• Bharat Petroleum Corporation Limited (BPCL): Indian state-owned oil and gas company.
• Valvoline Cummins Limited: Known for high-quality engine oils.

How they differentiate from competitors #

• Premium Products: Positioned as a premium brand with advanced lubricant technology.
• Strong Brand Recognition: Benefit from the global Castrol brand name.
• BP’s Backing: Access to BP’s global R&D and resources.

Industry Challenges and Opportunities #

• Challenge: Increasing competition from local and international players.
• Challenge: Fluctuations in crude oil prices.
• Opportunity: Growing automotive market in India.
• Opportunity: Increasing demand for high-performance lubricants.
• Opportunity: Expanding into new industrial sectors.
• Opportunity: The shift to electric vehicles creates a new opportunity for e-fluids and associated technologies.

Market Positioning Strategy #

• Focused on premium segments and providing value through technological innovation and brand recognition.

Future Outlook #

Expansion Plans or Growth Strategy #

• Expand market share in existing segments.
• Develop new products for emerging segments.
• Invest in R&D to stay ahead of the competition.

Sustainability Initiatives or ESG Commitments #

• BP and Castrol are increasing their commitment to sustainability, including:
  • Reducing carbon emissions in operations.
  • Developing more sustainable products.
  • Investing in renewable energy.

Industry Trends Affecting their Business #

• Electric Vehicle Adoption: Shift towards electric vehicles impacts the demand for traditional engine oils but creates demand for specialized e-fluids.
• Stricter Emission Standards: BS VI and other stringent emission norms drive the demand for high-performance lubricants.
• Digitalization: Increased use of online sales channels and digital marketing.
• Focus on Fuel Efficiency: Increasing demand for lubricants that improve fuel efficiency.

Long-Term Vision and Strategic Goals #

• Becoming a leader in sustainable lubricant solutions.
• Expanding into new markets and segments.
• Delivering superior value to customers and shareholders.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue: Increased from ₹4,192.06 Crore (2021) to ₹5,074.61 Crore (2023) and ₹5,364.85 Crore (2024).
• Profit After Tax (PAT): Increased from ₹758.09 Crore (2021) to ₹864.13 Crore (2023) and ₹927.23 Crore (2024).
• Earnings Per Share (EPS): Rose from ₹7.66 (2021) to ₹8.74 (2023) and ₹9.37 (2024).
• EBITDA: Increased from 1067.28 (2021) to 1240.29 (2023) and 1358.87(2024).
• Net Worth: Increased from 1645.51(2021),1886.03(2023) to 2121.69(2024).
• Return on net worth: Decreased from 43%(2023) to 42%(2024).

Business Segment Performance #

• Automotive Lubricants:
  • Two-Wheeler Engine Oil: Strong growth driven by consumer demand, mechanic advocacy, and rural distribution. ‘Castrol Activ Scan & Win’ contest boosted engagement.
  • Passenger Cars: Focused on thin viscosity oils. Castrol EDGE relaunch with Shah Rukh Khan increased brand awareness. Castrol MAGNATEC maintained leadership.
  • Commercial Vehicles: Launched Castrol CRB TURBOMAX + CK4, upgraded Castrol CRB PLUS 15W40, and introduced Castrol CRB ESSENTIAL range.
• Industrial Lubricants: Growth supported by new customer acquisitions and product launches (Castrol Rustilo DW 800 series).
• Service and Maintenance Sector:
  • Castrol Auto Service workshops expanded to over 600.

Major Strategic Initiatives and Their Progress #

• Brand Ambassador: Shah Rukh Khan strengthened the Castrol EDGE brand.
• Rural Market Expansion: Castrol CRB ESSENTIAL rolled out nationwide.
• Castrol Auto Service Expansion: Expanded to over 600 workshops across 220+ towns.
• Auto Care Segment: Expanded the auto care portfolio with two new products, available at nearly 60,000 outlets.
• Digital Initiatives: FASTSCAN 2.0, Castrol Learning Academy, and Castrol Connect were advanced.
• OEM partnership: Reintegration into the Tata Motors Commercial Vehicle market, and partnership with Hero Motors.

Risk Landscape Changes #

• Inflation: Potentially reducing servicing frequency.
• Currency Depreciation: Drives up raw material costs.
• Electrification: Growing adoption of EVs poses a long-term challenge.
• Widening Drain Intervals: Longer oil change cycles moderate market volumes but present an opportunity.
• Competition: Fierce competition from various sources.
• Cybersecurity Risk: Addressed through responsible behaviors and robust system.
• Health,Safety, Security, and Environmental Concern: Remains at the forefront.

ESG Initiatives and Metrics #

• Environmental:
  • Increased recycled content in HDPE bottles to 50%.
  • Silvassa plant rainwater harvesting project and uses 400,000 units of solar power (50% of site electricity).
  • Paharpur plant improved heating efficiency by 10%.
  • Patalganga plant is a 100% green energy plant, reducing carbon emissions by 75%.
  • Collaboration with waste plastic recyclers for EPR obligations.
• Social:
  • ‘Two Wheels, One Life’ programme reached 17,000 people, promoting road safety.
  • Sarathi Mitra programme trained ~30,000 truck drivers in 2024.
  • Castrol Eklavya upskilled and certified mechanics.
  • Ujjwal Kal initiative focused on sustainable livelihoods, education, and skill development.
• Governance:
  • Maintained an effective internal control system.
  • Gender Neutral POSH Policy, Diversity, Equity & Inclusion Policy, Leave Policy, Career Break Policy, and Agile/Hybrid Working Policy in place.
  • Increased female employees in executive roles by 2.5% and in technician roles by 3.2% from 2023.

Management Outlook #

• India’s economic growth is projected to continue, supporting sustained demand growth.
• Focus on expanding reach, widening product portfolio, strengthening workshop presence, and investing in premium brands.
• Expects continued growth in the marine and energy lubricants sector.
• Plans to introduce new product, Rural DMS(new distributor managment system).
• Optimistic about continued demand growth in industrial lubricants.

Detailed Analysis #

Financial Position Analysis of Castrol India Limited (2024) #

3-Year Comparative Analysis of Assets, Liabilities, and Equity (in Crores) #

Significant Changes in Major Line Items (>10% YoY) (in Crores) #

• Capital Work-in-Progress: Decreased significantly by 44.39%, indicating a substantial amount of assets were placed into service during the year.
• Income Tax Assets (Net): Decreased Significantly by 43.75%.
• Other Non-Current Assets: Decreased by 20.15%.
• Other Current Assets: Increased by 22.10%
• Other Current financial liabilities: Showed a notable increase of 14.58%, this requires further investigation into its components.
• Bank Balances (Other than Cash and Cash Equivalents): Increased substantially by 33.90%.

Working Capital Trends (in Crores) #

• Working Capital: Increased, indicating improved short-term liquidity.
• Current Ratio: The Current Ratio slightly improved.

Asset Quality Metrics #

Asset quality details are limited in the provided data. Some relevant observations, however:

• Non-Current assets: Include the value of Property, Plant, and Equipment of 224.17 Crores, this requires further review.

Debt Structure and Maturity Profile (in Crores) #

Off-Balance Sheet Items #

• Contingent Liabilities: The primary off-balance sheet items are contingent liabilities related to tax matters (28 Crores) and other claims. These represent potential obligations that are not recognized on the balance sheet but could have a material impact.

Operating Performance of Castrol India Limited (FY24) #

Revenue Breakdown by Segment/Geography #

• Segment: Lubricants (single reportable segment)
• Geography:
  • India:
    • FY24 Revenue: ₹5,338.07 Crore
    • Growth Rate: 5.8% YOY
  • Outside India:
    • FY24 Revenue: ₹26.78 Crore
    • Growth Rate: 11.6% YOY

Cost Structure Analysis #

• Cost of Materials Consumed:
  • FY24: ₹2,727.83 Crore
  • 50.8% of total revenue (up from 51.97% in 2023)
• Raw and Packing Materials Consumed:
  • FY24: ₹2,505.62 Crore
  • 46.7% of total revenue (down from 47.4% in 2023)
• Purchases of Traded Goods:
  • ₹236.55 Crore
  • 4.4% of total revenue
• Employee Benefits and Other Expenses:
  • FY24: ₹1,358.87 Crore
  • 25.3% of total revenue (up from 24.4% in FY23)
• Employee Benefits Expense:
  • ₹312.8 Crore
  • 5.8% of total revenue
• Advertising Spend:
  • FY24: ₹146.32 crore
  • 2.7% of total revenue
  • 13.27% YOY increase

Margin Analysis #

• Gross Profit: FY24: Increased by 8% over FY23 (due to higher volume and strategic price interventions)
• Operating Profit Margin: FY24: 22% (flat compared to 2023)
• Net Profit Margin: FY24: 17% (flat compared to 2023)
• EBITDA: FY24: 24% (flat compared to 2023)

Operating Leverage #

• Operating and Other expenses increased by ₹128 Crore compared to 2023.

EPS Analysis #

• Basic & Diluted EPS:
  • FY24: ₹9.37
  • FY23: ₹8.74
  • Growth Rate: 7.2%

Cash Management Analysis #

Cash Flow Components #

Operating Cash Flow (OCF) #

• FY24: ₹1,044 Crore
• FY23: ₹853.04 Crore
• Profit before tax FY24: ₹1,257.61 Crore
• Profit before tax FY23: ₹1,181.10 Crore
• FY24 Depreciation and Amortization: ₹99.77 Crore
• FY24 Finance Cost: ₹9.38 Crore

Investing Cash Flow (ICF) #

• FY24: (₹266.89) Crore
• FY23: (₹251.34) Crore
• FY24 Purchase of Property, Plant, and Equipment (including Capital Work-in-Progress and Intangible Assets): (₹92.70) Crore

Financing Cash Flow (FCF) #

• FY24: (₹819.13) Crore
• FY23: (₹663.80) Crore
• FY24 Dividend Paid: (₹791.30) Crore
• FY24 Interest Paid on Lease Liabilities: (₹6.68) Crore

Working Capital Management Efficiency #

Debtors’ Turnover Ratio #

• FY24: 12.47 times
• FY23: 13.13 times

Inventory Turnover Ratio #

• FY24: 5.16 times
• FY23: 4.94 times

Payables Turnover #

• FY24: 94.34 Days
• FY23: 95.89 Days

Capex Analysis #

• Total Capital Investment: Silvassa Plant (FY24): ₹1.29 Billion, allocated to solar power, waste conversion, and process efficiency improvements.

Dividend and Share Buyback Trends #

Dividend per Share #

• FY24: ₹13 (including a special dividend of ₹4.50)
• FY23: ₹7.50

Dividend Payout (Total) #

• FY24: ₹791.30 Crore (Interim Dividend:₹346.19, Final Dividend paid: 445.11)
• FY23: ₹642.93 Crore

Share Buyback #

• No share buyback activity reported during the reviewed years.

Liquidity Position #

Current Ratio #

• FY24: 2.02 times
• FY23: 1.91 times

Cash and Cash Equivalents #

• FY24: ₹452.87 Crore
• FY23: ₹493.21 Crore

Profitability Ratios (3-Year Trends) #

Return on Net Worth (Equity) (RONW/ROE) #

• 2024: 42%
• 2023: 43%
• 2022: 45%

Analysis: Castrol India’s ROE has slightly declined over the three years, moving from 45% to 42% which reflect high profitability.

Net Profit Margin #

• 2024: 17%
• 2023: 17%
• 2022: 17%

Analysis: The Net Profit Margin has remained stable at 17%.

Operating Profit Margin #

• 2024: 22%
• 2023: 22%
• 2022: 23%

Analysis: The Operating Profit Margin is consitant at 22% with a minimal drop from 23%

EBITDA Margin #

• 2024: 24%
• 2023: 24%
• 2022: 23%

Analysis: Castrol India’s EBITDA has margianlly increased over three years

Liquidity Metrics #

Current Ratio #

• 2024: 2.02
• 2023: 1.91

Analysis: Castrol India’s Current Ratio has improved from 1.91 to 2.02, indicating a stronger ability to meet short-term obligations.

Efficiency Ratios #

Debtors’ Turnover (Times) #

• 2024: 12.47
• 2023: 13.13

Analysis: The Debtors’ Turnover ratio slightly decreased, suggesting a minor lengthening in the collection period.

Inventory Turnover (Times) #

• 2024: 5.16
• 2023: 4.94

Analysis: The Inventory Turnover Ratio improved, indicating better inventory management.

Working Capital Ratios #

Debtors’ Turnover #

Inventory Turnover #

2024: 5,365 Cr, 2023:5,075Cr

Castrol India Limited Financial Analysis: FY2024 #

Revenue and Profitability #

• FY2024 Revenue: ₹5,365 crore, a 6% year-over-year growth from ₹5,075 crore in FY2023.
• FY2024 Profit After Tax (PAT): ₹927 crore, a 7% year-over-year growth from ₹864 crore in FY2023.
• FY2024 EBITDA: ₹1,278 crore, a 7% year-over-year growth.
• Gross Profit: Increased by 8% in FY2024 compared to FY2023, driven by higher volume and strategic price interventions.
• Operating Profit Margin: Remained stable at 22% in both FY2024 and FY2023.
• Net Profit Margin: Remained stable at 17% in both FY2024 and FY2023.
• Earnings Per Share: 9.

Market Share and Competitive Position #

• Castrol India holds a leading position in the retail automotive lubricants market.
• The Company is a trusted supplier of metalworking fluids for industrial applications.
• Faces fierce competition from national oil companies, global private companies, OEM genuine oils, and local manufacturers.

Key Products/Services Performance #

• Castrol Activ: Core brand saw success, driving volume growth via enhanced consumer demand, mechanic advocacy, and expanded distribution.
• Castrol POWER1: Showed growth supported by marketing campaigns, with a 60% rise in brand awareness due to the India’s Ultimate Motostar campaign.
• Castrol EDGE: Relaunched with PowerBoost Technology™, claiming 30% better performance, nearly 10x expansion in distribution, and leadership in the super-premium segment, almost doubling market share.
• Castrol MAGNATEC: Maintained market share leadership with volume growth in mass-prestige and premium segments, supported by an updated portfolio (API SP, ACEA C2/C3) and mechanic advocacy.
• Castrol GTX: Leveraged opportunities in the mass segment, delivering volume growth and increased market share, helped by a refreshed portfolio and distribution.
• Castrol CRB TURBOMAX + CK4 for Commercial Vehicles: Launched and tested for 100,000 Km.
• Castrol CRB ESSENTIAL: Introduced for commercial vehicles to capture a wider customer base, especially in rural areas.
• Castrol Auto Care: The product line expanded nationally, reaching approximately 60,000 outlets.
• Industrial: Four new Castrol Rustilo DW 800 series products were launched.
• Castrol Optigear: for wind turbines is promoted to lower the levelized cost of energy.

Geographic Distribution and Market Penetration #

• Network of over 400 distributors, reaching approximately 1,43,000 outlets in urban and semi-urban India.
• Expanded rural reach to 36,000 retail stores via sub-distributors.
• Strengthened presence in independent workshops, with over 600 Castrol Auto Service workshops in 220+ cities.
• Products are available at Jio-bp locations nationwide, enhancing highway presence.
• Press coverage expanded from 6 to 36 cities.

Segment-wise CAPEX and ROIC #

• Capital investment of ₹12 Lakh towards replacement of low-efficiency pumps with Higher efficiency pumps with IE3 motors.
• Capital invest of ₹3 Lakh for organic waste converter, resulting in 3 Mt of compost generation to be used for gardening.
• ₹20 Lakh towards solar plant installation on Panel Room Roof.
• ₹82 Lakh towards Sewage Treatment Plant to reduce 50% freshwater usage.
• ₹15 Lakh for converting conventional discharge lamps to LED lamps.

Operational Efficiency Metrics #

• Debtors’ Turnover: Decreased slightly to 12.47 times in FY2024 from 13.13 times in FY2023.
• Inventory Turnover: Improved to 5.16 times in FY2024 from 4.94 times in FY2023.
• Current Ratio: Increased to 2.02 in FY2024 from 1.91 in FY2023.
• Silvassa plant: Solar power generated 400,000 units (50% of site electricity).
• Paharpur Plant: 10% efficiency improvement in heating.
• Patalganga Plant: 100% green energy plant; 75% carbon emission reduction.
• Zero reportable accidents in logistics operations

Growth Initiatives and Challenges #

• Growth Initiatives:
  • Focus on expanding rural market presence and brand campaigns.
  • Strengthening workshop networks (Castrol Auto Service).
  • Partnerships with OEMs (Hero Motors, Tata Motors) and Amazon B2B.
  • Digitalization efforts: FASTSCAN 2.0, Castrol Learning Academy, Rural DMS, and Castrol Connect.
• Challenges:
  • Inflation and currency depreciation impacting raw material costs.
  • Growing adoption of electric vehicles, especially in the two-wheeler and small commercial vehicle segments.
  • Widening drain intervals for lubricating fluids in commercial vehicles.
  • Fierce competition in the Indian lubricant market.
  • Heightened risk of attrition.
  • Cybersecurity risks.

Risk Assessment and Financial Analysis (2024) #

This analysis is based on Castrol India Limited’s documents and focuses on the financial implications of identified risks.

Strategic Risks #

• Severity: High
• Likelihood: High
• Trend: Increasing
• Description: The evolving automotive landscape, including the shift towards EVs and changing consumer preferences, presents major strategic challenges.
• Mitigation Strategies:
  • Portfolio expansion: Launching new products.
  • Market penetration: Expanding distribution into rural areas and strengthening workshop presence.
  • Strategic partnerships: Collaborations with OEMs.
  • Brand investment.
• Control Effectiveness: Partially Effective. Revenue and profit growth suggest some success.
• Potential Financial Impact: Ineffective strategies could lead to high costs without sufficient return on investment.

Operational Risks #

• Severity: Moderate to High
• Likelihood: Moderate
• Trend: Improving
• Description: Supply chain disruptions, health, safety, security, and environmental concerns are key operational risks.
• Mitigation Strategies:
  • Safety programs.
  • Technology adoption.
  • Compliance: Maintaining certifications.
  • Sustainability initiatives.
• Control Effectiveness: High for safety, based on reported incident rates and certifications.
• Potential Financial Impact: Investments have been made in technology to reduce potential injuries.

Financial Risks #

• Severity: Moderate
• Likelihood: High
• Trend: Stable
• Description: Input cost volatility (crude oil and base oil prices) and foreign exchange fluctuations are key risks.
• Mitigation Strategies:
  • “Best-value sourcing” and cost-efficiency programs.
  • Strategic price interventions.
• Control Effectiveness: Partially Effective. The company reported growth in Profit Before Tax and managed margins.
• Potential Financial Impact: Cost of materials was higher than the previous year.

Compliance / Regulatory Risks #

• Severity: Moderate
• Likelihood: Low
• Trend: Stable
• Description: The company operates in a regulated environment and must comply with various laws.
• Mitigation Strategies:
  • Robust internal control systems.
  • Independent internal audit function.
  • Risk Management Committee oversight.
• Control Effectiveness: High. Full compliance with relevant regulations is indicated.
• Potential Financial Impact: Costs of audits, certifications, and compliance programs.

Emerging Risks #

• Severity: High
• Likelihood: Moderate to High
• Trend: Increasing
• Description: The rapid growth of electrification (EVs) is a major emerging risk.
• Mitigation Strategies:
  • Development of EV fluids.
  • Alliances with OEMs in the EV space.
• Control Effectiveness: Developing. The company is responding to the trend, but the long-term effectiveness is yet to be determined.
• Potential Financial Impact: Shifting investments to develop EV-specific products.
• Severity: High
• Likelihood: Moderate to High
• Trend: Increasing
• Description: Data Centre growth presents new product application demand.
• Mitigation Strategies:
  • Developing advanced lubricants for various segments.
  • Upcoming EV and data center testing facilities.
• Control Effectiveness: Developing.
• Potential Financial Impact: Increase in revenue, and investments in research.

Strategic Analysis of Castrol India Limited #

Long-Term Strategic Goals and Progress #

• Castrol India aims to maintain leadership in the Indian lubricants market while expanding into emerging sectors. Progress is evident in the 6% year-over-year revenue growth and the 7% increase in Profit After Tax for 2024.
• The “Onward, Upward, and Forward” strategy underpins the company’s growth. The company is focusing on carbon-efficient applications.
• The company aims to provide state-of-art-solutions.
• The company is driving innovations in products, solutions and affordability.

Competitive Advantages and Market Positioning #

• Castrol India holds a leading position in the retail automotive lubricants market, supported by a vast distribution network of over 400 distributors and reach to approximately 143,000 outlets.
• Strong brand recognition is reinforced through strategic brand ambassador partnerships (e.g., Shah Rukh Khan) and sponsorships.
• The company is penetrating the automotive landscape across urban and rural areas.
• The company ensures products and services are available in the length and breadth of the country.

Innovation Initiatives and R&D Effectiveness #

• Castrol India launched nearly a dozen new products in 2024, including industrial rust-preventive products, Castrol EDGE variants, and auto care products.
• R&D efforts focus on high-performance lubricants, EV fluids, and metalworking fluids.
• Castrol India is investing in automating quality-critical processes.
• The company implemented process modifications to reduce wastes and support sustainability.
• Investment in digital tools is improving customer responsiveness.
• The Silvassa plant received the GOTS certification and maintained the Ford Q1.
• Investment of approximately ₹18.35 Crore in R&D (both capital and recurring expenditure) during 2024.

Management’s Track Record in Execution #

• Castrol India delivered volume, share, and margin growth in a volatile market environment, indicating effective execution of its growth strategy.
• Successful relaunch of the Castrol EDGE product line and expansion into the auto care segment demonstrate effective product portfolio management.
• Expansion of the Castrol Auto Service network to over 600 workshops across India shows commitment to enhancing service and maintenance offerings.

Capital Allocation Strategy #

• Castrol India has demonstrated a commitment to returning value to shareholders, evidenced by a special dividend of ₹4.50 per share, contributing to a total dividend of ₹13 per share for 2024.
• Investment in capital expenditure of manufacturing facilities for enabling sustainability.

Organizational Changes and Their Impact #

• Significant changes in the Board of Directors and leadership team occurred in 2024, including the appointment of a new Managing Director (Kedar Lele) and a new Chairman (Rakesh Makhija). New Independent Director and Chair of Audit Commitee and bp Nominee Director were also welcomed. These changes indicate a potential shift in strategic direction and management style.
• Launch of PRIDE Network, and sessions on biases at work have set stage for meaningful changes.
• The company launched Women in Sales Network (WISN) to empower women in sales.

ESG Framework #

Environmental Metrics and Targets #

• Recycled Content: Castrol India increased recycled content in HDPE bottles to 50%, aiming to repurpose 2,600 metric tonnes of plastic annually.
• Carbon Emissions: The Patalganga plant achieved a 75% carbon emissions reduction through renewable energy, ambient blending, and optimized fuel sources. The Silvassa plant achieved 400,000 units (50% of site electricity) through solar power.
• Energy Consumption: Paharpur plant has seen 10% efficiency improvement.
• Renewable Energy: Patalganga plant is a 100% green energy plant.
• Waste Reduction: Initiatives are in place at all three plants to manage waste and minimize environmental impact.

Social Responsibility Programs #

• Sarathi Mitra Program: Trained approximately 30,000 truck drivers in 2024, impacting over 150,000 lives, on road safety, financial literacy, and health.
• Castrol Eklavya: Upskilled mechanics. In 2024 there was certification for the mechanics.
• Ujjwal Kal Program: Focuses on sustainable livelihoods, education, and skill development in communities near Castrol’s blending plants (Silvassa, Patalganga, and Paharpur), benefiting thousands.
• Two Wheels, One Life Programme: Focused on promoting road safety and reached to 17,000 people.

Governance Structure and Effectiveness #

• Board Composition: The Board comprises Executive, Non-Executive Independent, and Non-Executive Non-Independent Directors. As of December 31, 2024, the Board consisted of eight Directors.
• Board Committees: Key committees include Audit, Nomination & Remuneration, Corporate Social Responsibility, Stakeholders’ Relationship, and Risk Management.
• Board Evaluation: The Board identifying areas for improvement, include inter alia dedicating time on the Company’s business and strategy.
• Risk Management: A Risk Management Committee oversees potential risks and evaluates mitigation strategies, including economic slowdown, technological changes, input cost volatility, and foreign exchange fluctuations.
• Internal Controls: An independent internal audit function exists, supported by internal audits and periodic reviews.
• Whistleblower Policy: The Company maintains a whistleblower policy (“Open Talk”) with direct access to the Audit Committee Chairperson.
• Code of Conduct: The Company’s Code of Conduct ensures that all Board members follow a consistent set of rules.

Sustainability Investments and ROI #

• The Silvassa Solar power plant was set up with an investment of 20 Lakh.
• Investment in the Sewage Treatment Plant: 82 Lakh.
• Renewable Energy: Investments made in solar power at Silvassa and Paharpur, and the procurement of 100% green energy at Patalganga. Specific ROI is not provided, but reductions in carbon emissions are stated.
• Waste Management: Investments in waste management, including Extended Producer Responsibility (EPR) obligations, are mentioned, without detailed ROI figures.

Regulatory Compliance and Future Preparations #

• Environmental Regulations: The Company claims full compliance with health, safety, and environmental regulations, including ISO 14001:2015, ISO 45001:2018, ISO 9001:2015, and IATF 16949:2016 certifications for manufacturing plants.
• Extended Producer Responsibility (EPR): Compliant with EPR obligations under Plastic Waste Management Rules.
• Future Outlook: The Management Discussion and Analysis Report indicates plans to align with India’s economic growth and sustainability goals, particularly in automotive and industrial lubricants.
• SEBI Regulations Compliance: The Company has followed SEBI regulations by providing disclosures on its website.

Forward Outlook: Financial Analysis #

Wheels Segment (Personal and Commercial Mobility) #

Management Guidance and Assumptions #

• Management assumes continued growth in both commercial and personal mobility lubricant sectors.
• The Indian economy and GDP growth are projected to maintain momentum.
• Rural demand is a key assumption

Market Growth Forecasts #

• Four-wheeler segment achieved record sales of 4.3 million units.
• Two-wheeler sales are projected to grow between 7-9% in the coming year.
• Overall growth is expected to affect the total vehicle parc, that grew by 5% in the previous year.

Planned Strategic Initiatives #

• Expand geographic reach and presence across various population strata.
• Widen product portfolio to cater to a larger commercial and personal mobility segment.
• Strengthen workshop presence (Castrol Auto Service workshops).
• Make substantial investments in premium brands.
• Reinforce relationships with key OEMs.
• Enhance oil change experience with formats like Castrol Express.

Capital Expenditure Plans #

• Specific capex plans for the Wheels segment are not detailed, but investments are implied in brand building and network expansion.

Efficiency Improvement Targets #

• Targets are mentioned in Silvassa Plant for optimized fuel.
• Targets are implied through distribution network optimization and streamlining of systems and processes.

Potential Challenges and Opportunities #

• Challenges: Inflation, currency depreciation, and increasing competition. The rise of electrification (EVs) poses a long-term challenge, though demand for lubricants in ICE vehicles is expected to remain steady. Widening drain intervals for lubricating fluids moderate market volumes.
• Opportunities: Growing demand for SUVs and CNG-powered vehicles, increasing popularity of premium 2-wheelers, rising need for thinner viscosity lubricants, and growing vehicle sales in rural markets. Expanding the Castrol Auto Service network.

Scenario Analysis and Sensitivity #

• The growth is subject to general economic factors and changes in oil prices.

Wings Segment (Industrial, Marine, and Energy Lubricants) #

Management Guidance and Assumptions #

• Management anticipates continued demand growth in industrial lubricants, supported by a positive Purchasing Managers Index, moderate inflation, and steady economic growth.
• Continued growth is expected in the marine and energy lubricants sector.
• Data Centers are considered an emerging opportunity.

Market Growth Forecasts #

• Industrial output remained resilient despite challenges in the latter half of 2024.
• Growth is tied to economic activities in machinery manufacturing, electronics, infrastructure, and wind energy.
• Marine and energy lubricants are expected to continue to grow.

Planned Strategic Initiatives #

• Expand reach across key customers in the marine and energy sector.
• Increase availability across a broader geographic range and strengthen distributor footprint.
• Aggressive expansion and prospecting in the Global Marine and Energy (GME) segment.
• Amplify the reach of newly launched products like Cyltech 70, TLX series, and MHP series.
• Tap into emerging high-growth sectors such as wind, aerospace, defense, and electronics manufacturing.
• Support the growing data center market with high-performance cooling and lubrication solutions.

Capital Expenditure Plans #

• Specific capex plans are not detailed, but investments are implied in expanding reach and supporting new product launches.

Efficiency Improvement Targets #

• Specific numeric targets are not provided, but efficiency is implied through product performance (e.g., Castrol Optigear reducing downtime).

Potential Challenges and Opportunities #

• Challenges: Volatility in crude oil and base oil prices, and currency depreciation.
• Opportunities: Growing industrial sector driven by infrastructure expansion, manufacturing advancements, and increasing automation. Emerging data center market requiring high-performance cooling and lubrication solutions.

Scenario Analysis and Sensitivity #

• Growth is highly sensitive to continued increase in demand for specific sectors (wind, aerospace…).
• Growth is also sensitive to the success of new product launches.

General/Corporate-Wide Considerations #

Risk Management #

• Key risks identified include economic slowdown, technological changes, input cost volatility, and foreign exchange fluctuations. Mitigation plans are in place. Cybersecurity risks are also addressed.

Internal Controls #

• The Company maintains internal control systems and conducts internal audits. No reportable material weaknesses were observed in the internal financial controls related to financial statements during the year.

Sustainability #

• Reduction in energy, water, and waste to minimize environmental footprint.
• Collaboration with waste plastic recyclers.

Human Resources #

• 5,900 hours were dedicated to training sessions.
• 36% of vacancies were filled by internal candidates

Audit and Compliance Analysis of Castrol India Limited #

Auditor’s Opinion and Qualifications #

• The Independent Auditor’s Report by Deloitte Haskins & Sells LLP provides an unmodified opinion on the financial statements, stating they give a true and fair view in conformity with Ind AS and other generally accepted accounting principles in India.
• There is a modification relating to the maintenance of accounts. The audit trail feature in the Company’s accounting software was not enabled from January 1, 2024, to October 18, 2024.

Key Accounting Policies and Changes #

• The financial statements are prepared on a historical cost basis, except for certain financial instruments measured at fair value.
• Revenue recognition occurs upon the transfer of control of goods or services to the customer.
• Depreciation on Property, Plant, and Equipment is calculated on a straight-line basis, using estimated useful lives as specified in Schedule II of the Companies Act, 2013, with some exceptions where management’s assessment differs.
• There were no new accounting standards or amendments with material impact that came into effect.

Internal Control Effectiveness #

• The auditor’s report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls with reference to the financial statements.
• The Company maintains an internal control system. An independent internal audit function exists.

Regulatory Compliance Status #

• The Company has complied with the provisions of the Companies Act, 2013, SEBI Listing Regulations, and applicable Secretarial Standards.
• There was a failure of MR-2 form submission within the timeline, and a resubmission is subjected to the Central Government.
• The Company has paid annual listing fees to BSE and NSE.
• There were no reported non-compliances, penalties, or strictures imposed by stock exchanges, SEBI, or other statutory authorities related to capital markets during the last three years.

Legal Proceedings and Their Potential Impact #

• The Company has pending litigations, primarily related to indirect tax matters (excise duty, sales tax, VAT, and GST). The total disputed amount is significant, with many cases under appeal at various levels.
• The Management, based on internal assessments and external legal opinions, does not expect these demands/claims to succeed and therefore do not consider these to be probable of crystalizing.

Related Party Transactions #

• All related party transactions were in the ordinary course of business and on an arm’s length basis.
• No material related party transactions were entered into during the year.
• Transactions included purchases and sales of goods and services, royalty payments, and contributions to post-employment benefit funds.

Subsequent Events #

• Kedar Lele was appointed as the new Managing Director.
• Multiple board member changes: appointments and cessation.
• The Board recommended a Final dividend of ’ 9.5 per share, including a Special Dividend, subject to shareholders’ approval at the AGM.
• Deepesh Baxi will cease to be CFO and wholetime director on March 13, 2025.

Accounting Quality and Regulatory Risk Assessment #

• Accounting Quality: The use of estimates and judgments in areas like useful lives of assets, income tax provisions, defined benefit obligations, and contingencies introduces a degree of subjectivity. The unmodified audit opinion suggests that these estimates and judgments are reasonable. The consistent application of accounting policies is a positive indicator.
• Regulatory Risk: The Company’s biggest regulatory risks appear to stem from the pending indirect tax litigations. While the Company believes these demands are unjustified, adverse outcomes could have a material impact.