Release Date: May 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record-breaking quarter with highest EBITDA of INR115 crores.
- EBITDA margin increased to 13.5%, driven by cost management and premium products.
- Double-digit volume growth in infra and B2B segments.
- Annual EBITDA crossed INR400 crore mark, showing a 22% growth.
- Strong market share gains in Bazaar segment, led by agri and new generation commercial vehicle oils.
Negative Points
- Sequential dip in gross margins by 1.6% due to crude volatility.
- Factory fill volumes dropped by double digits, impacting overall growth.
- AdBlue, a lower margin product, saw increased volumes, affecting blended margins.
- No price increases in the retail segment for the last 12-15 months, potentially impacting margins.
- Commercial vehicle segment production slowdown affected factory fill volumes.
Q & A Highlights
Q: Congrats on a good set of numbers. Can you provide insights on the margin environment and whether it's feasible to return to the margins seen in FY16-FY21?
A: (Manish Gangwal, CFO) The input costs increased significantly post-COVID, and while we've recovered per liter margins, the percentage appears lower due to higher realizations. AdBlue volumes, which have lower margins, also impact the blended margin. We aim to return to the 14%-16% band through premiumization and product mix improvements.
Q: Regarding volume growth, should we expect low- to mid-single-digit growth due to factory fill impacts?
A: (Manish Gangwal, CFO) Factory fill is only 10% of our volumes. Excluding factory fill, our growth is 7% for the quarter and 6.5% for the year. We aim to grow 2x to 3x the market growth, which could mean high single-digit to double-digit growth depending on market conditions.
Q: What are your activities and revenue in the EV segment?
A: (Ravi Chawla, CEO) EV fluids are a small part of our business, but we are working with about 10 OEMs. Our battery business generated INR80 crores this year, and we are investing in chargers through Tirex and ElectreeFi. We aim to grow this segment aggressively.
Q: Any specific strategic moves for FY25?
A: (Ravi Chawla, CEO) We aim to grow 2x to 3x the market growth, focusing on segments where our market share is low, such as passenger cars and industrial. We will also continue premiumization, digital efforts, and focus on the EV segment, including chargers.
Q: Can you provide a breakdown of B2B and B2C sales and their growth rates?
A: (Ravi Chawla, CEO) B2C accounts for 60% of our sales, while B2B is 40%. B2C includes channel Bazaar and franchisee workshops, while B2B includes OEM factory fill and direct industries. Both segments have shown good growth, with industrial and infrastructure mining growing faster.
Q: What is the CapEx on the EV charging segment?
A: (Manish Gangwal, CFO) We invested INR103 crores in Tirex for a 51% stake. We also have investments in ElectreeFi and a UK-based AC slow charger company, totaling around INR150 crores in the EV segment.
Q: Can you explain the sequential dip in gross margins and the impact of promotional activities?
A: (Manish Gangwal, CFO) The sequential dip of 1.5% in gross margins is due to higher raw material costs and a slight reduction in A&P expenses. Despite this, we maintained a 13.5% EBITDA margin.
Q: What is the impact of price increases on volume growth?
A: (Manish Gangwal, CFO) Price increases can impact volume growth, but lubricants are semi-essential products with low price elasticity. We focus on maintaining our brand strength and distribution to manage pricing and market share.
Q: What is your expectation for demand and strategy for growth?
A: (Ravi Chawla, CEO) We expect robust demand due to strong GDP growth and manufacturing impetus. Our strategy is to grow 2x to 3x the market growth, focusing on segments with lower market share and leveraging our brand and distribution.
Q: How do raw material prices affect your margins?
A: (Manish Gangwal, CFO) Base oil, linked to crude oil, is a significant input cost. Fluctuations in crude prices can impact our margins, but we manage this through effective margin management and pricing strategies.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
