Gulf Oil Lubricants India Limited (GULFOILLUB) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Gulf Oil Q2 FY27 Earnings Conference Call hosted by ICICI Securities Ltd. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note this conference is being recorded. I now hand the conference over to Mr. Probel. Thank you, and over to you, sir.

Yeah, thank you so much. Thank you to everyone for making the time to attend this post-Q2 discussion call for Gulf Oil Lubricants. As always, we are joined by the members of the senior management of the company. Mr. Ravi Chawla, who is the managing director and CEO, and Mr. Manish Kangwal, the whole-time director and the CFO of the company. The format will be As always, Ravi, sir, and Manish, sir, will give their opening brief on the results, and thereafter, we can get into an interactive Q&A session. So, without further ado, I'll hand over to the management. Ravi, sir.

Yeah. Thank you. Good afternoon, everyone, and good to call. Obviously, passing on our festive greetings to all of you in advance, the coming season, and very happy to share with you that very robust quarter. We've continued with the strong lubricants volume growth, which obviously we saw in quarter one. Quarter one, I would say, was also a quarter where there were supply issues and we showed agility and we grew more than three, four times the market. And quarter two, again, kind of is a testimony to our strong business model, which is very robust and consistent. So the 16% growth in a quarter in which we expected the monsoon being a low seasonal quarter would play its role. But really delighted to share with you that the team has come up with these results, which are again, I think, industry-leading with 16% growth. Despite a tough situation internally in terms of cost challenges and also West Asia crisis, we are seeing obviously the costs remaining what they were. And I think for that, it's obviously been a very, very good all-round show by all segments. So each and every segment of ours has been able to grow. Even the B2C segment has obviously shown that we were able to get primary, secondary sales. Definitely the two segments which came out very well as we have given an up-rest release is the OEM Franchise Workshop, even OEM Factory Phil picked up for us, double digit. In fact, OEM Franchise Workshop's high double digit. And the B2B industrial segment also was a very good segment for us in this quarter, again going into high double digit. We continued our focus to also look at new customers, and I think some of the B2B industrial customers that came in, nearly a third of the incremental growth is from new customers. A large number of OEM franchisee workshops, about 7,000 numbers with OEMs, which have been with us, and we have went from the commercial vehicle to the car OEMs, to the tractor OEMs, to industrial OEMs right across India. So that has really been a very good positive for us. We've been able to really show the agility continued in a challenging environment. Manish will talk a bit more later about some of those things, but I think our calibrated price increases have also been able to, you know, really give us a good return overall given that there were lots of challenges in the market as we have seen. And, you know, we also are happy to share that we started the biggest investment ever in the history of Gulf in terms of an advertising campaign with our campaign for a Pride product And also our repositioning of our, you know, positioning on pond to be beehad, what we say kuj beehad kar, that is actually performance. That was the start of our motorcycle campaign. Our mechanic engagement, BTL activities continued with greater vigor, and we also continue to focus on premiumization as part of our strategy, and continue to gain momentum in these. The Chennai plant, as you know, working towards a lot of ESG and environment initiatives, the Chennai plant was awarded the IGPC Platinum Certification, and really that is a significant milestone, again, showing our strong commitment to sustainability. I think overall a very good quarter for us and given what we are seeing in the monsoon quarter, a very good result for us. And definitely there are challenges, but as we see our growth engines are going very strong. And one of the key is the agility in execution, strategic pricing interventions, effective opportunity conversion supported by customer acquisition and growth. And now I hand over to Manish to give a bit of granularity on a few things and of course we will be happy to take your questions after that.

Manish. Thank you, Ravi. Good afternoon, everyone. So, as Ravi mentioned, we had a very strong quarter. On the back of a back-to-back, we have delivered another quarter of 16%. We have delivered a strong 37% growth on quarter-on-quarter basis. I want to note that we have been able to go to 14%. The margins for the quarter are 11.8%, which is very close to our guided band. And on the per litre basis, which we have been highlighting in our previous call also, that in these inflationary environment situations, it is better to look at, you know, per litre, which we have been able to protect our per litre margins, which means the cost increases have been passed on to customers, consumers on per litre basis. And that is in such a challenging environment where, you know, the supply security was important for our customers, our consumers. We have been able to deliver every single liter, which our customers and our partners, our OEM partners were looking forward to. So, you know, it has been a very agile performance in the environment, given outside environment was very challenging. Cost increases were happening, price increases were taken on a timely basis, and the result is that we have delivered one of our strongest quarter, which is quarter 2. Our core lubricant volume was 47,000 KL versus last year 40,500 KL, which means we have added 6,500 KL during the quarter, and that gives us 16% growth. AdBlue and YTD 95,000 KL, which means over last year H1, we have grown 17% in volume, roughly. AdBlue, in this quarter, we all know that this was a monsoon quarter, so there were some lesser movements of vehicles during this quarter, especially if the truck movements are slightly lower because of monsoons in various parts of India, and that results in slightly lower And one of the reasons why our AdBlue, which is 33,000KL in this quarter, that is, there was slight sort of a lesser volume, we would say, as compared to our usual. But on the H1 basis, we are almost flat on the AdBlue. We have delivered close to 73,000KL, which is flattest kind of AdBlue delivery. But on the core-loop volumes, we have done exceptionally well. Clearly, 3 to 4x of the industry growth, we have been able to deliver in H1. I think with this, we would be happy to take questions.

Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Pankaj from Avis Capital. Please go ahead.

Very good afternoon. Thank you.

Thank you for the opportunity and congratulations from the great set of results.

I have a quick question on, first question is on working capital. So, our inventory days and debtor days have meaningfully increased in H1 if we compare it with FY26 numbers. So, just wanted a little more color and clarity on that. Is it a normalized kind of working capital requirement we have kind of done in H1 or are we looking forward to see some improvement in coming times?

Yeah. So, you see, as we mentioned that there have been significant cost increases and price increases. Yes, so both inventory values and receivable values have gone up, which are reflecting in the working capital increase. In terms of number of days, we are still in the usual, our band of, you know, gross 95 to 105 days. So, in terms of number of days, we have not seen any meaningful increase, but yes, absolute values have gone up here because of the pricing, which has been tremendously high.

The working capital historically has been at a kind of sub-AT levels. Are we expecting that to increase to, say, 100 odd days level? Is that what the guidance for the coming time there?

See, it all depends, again, on the, you know, pricing situation. If the prices remain at these levels, you know, we have to support our customers. We have to support our distributors with slightly, you know, increased working capital because their working capital requirement in turn also goes up. So we have to be very pragmatic in that. But in terms of overall number of days and all, we would say the trajectory that we have, the amount which we have reached should be one of the near two peaks. And from here on, if the prices are not escalating further significantly, we should see some moderation.

Okay, thank you. And my second and last question is, So, recently you had a fire incident at Valsar. So, what is the quantum of loss, and is it all covered by insurance, or are we expecting something to come at our P&L also?

No, so the stocks are covered under insurance, and obviously the entire fire has been since doused, and we see that close to 4-5 days of equivalent of production has been lost in terms of inventory, which some extra shifts in both our plants. Plus, we also have, both our plants are running fully, and all over India, other 25 warehouses which we have are fully operational, and if required, we will shift some material from other places also. So, we don't anticipate any sort of disruption to our customer supplies.

Okay, great. Thank you, and all the best.

Thank you. Next question is on the line of Mukund Agarwal from BMC Advisors. Please go ahead.

Hello, sir. Thank you for the opportunity, and congratulations on the great set of numbers. Hello, am I audible?

Yeah, please go ahead.

Sir, I wanted to know how does H2 look like compared to H1?

Sorry, in terms of which parameters you are asking?

In terms of sales.

Sales? Yes.

Sorry, for sure.

How does H2 look like?

So, you see, now, for us, Q1 has been very good growth, 17%. We mentioned there that supply security was also an added element, but obviously we did very well. Water 2 has come at 16% growth, which again a good robust quarter. If you look at normally, H2, when the festive season comes now, October, November, December, and then Jan, March is also, H2 is normally having good conditions. We are expecting that H2 will be good, but because, you see, H1 has also We also had a bit of a, I would say, because of the supply issue. We expect H2 to have the normal 3-4% growth in the industry. No, 3-4% growth which lubricant industry takes in terms of average lubricant growth. And we will do 2-3 times that. So that's the way we look at H2. And we are hoping that, of course, you know, the situation for us is always better because we've been able to put some of the segments. There is a little bit of weak demand coming in from the agri season as we look at this month and that is of course something which we will have to factor in but we will obviously try to push to get that 2 to 3x growth which will take us close to double digit growth in the H2 in volume terms.

Also, if the crude price is from here, will it be possible for us to pass on the price to the consumer and maintain the same margin?

So, we have to actually have a very close watch on the crude movement. As we all know, and we have been briefing our investors on many earlier occasions, that base oil, which is our key raw material, which is a derivative of crude, has a time lag in terms of, you know, the crude effect coming to base oil. So, we have to wait and watch. So far, we are not seeing any major change in the base oil pricing of the recent crude rally, which is from $100 to $115. But we have to clearly, you know, keep watching that very, very closely. And if required, we will have to take calibrated actions on pricing. But as of now, we are not seeing that in the base oil. And we carry inventory also for at least 45 days to sometimes 60 days of base oil which are there. So, not immediate one, but if the crude sustains at these levels and rise further, we may have to take certain actions to pass on further price increases.

Okay. And so, also like in the multiple concord mentioned before, like we have been saying that right now we are targeting a margin of 12 to 14 percent, But in the coming time, we will target it to 14% to 15%. So, by which year do we start expecting those kind of margins?

See, our trajectory in the medium to long term is to go to that 14% to 16% band, which we have been highlighting earlier also. We have to also factor in that what has happened in the last six months is a quite inflationary situation, where our top line has gone up significantly, whereas our endeavor is to protect our per litre margin. And that's why we have been guiding our investors to focus more on per litre, because if your top line and bottom line goes up by the same amount, you know the percentages drop. So that is where we are seeing that this time also we are at 11.8%, although per litre wise, perhaps we are slightly higher than our even previous years. So, our endeavor is to protect per liter, and whenever there is an opportunity and the price is stabilized, we will again start our journey towards 14% to 16%. But it is on a medium to, you know, slightly medium term basis. It's not going to happen in one to two quarters.

Okay. And sir, this year also will we be passing on similar dividends compared to last year, like the percent rate rise in terms of profit?

So, over the years, we have been increasing our dividend payouts, and we have, you know, last year, I think we had around close to 65-70% dividend payouts, and obviously, we are looking at utilization of cash, which we carry on the balance sheet very, very closely. We keep looking at, you know, our other, you know, strategies to be implemented in terms of M&A, etc. And if there are opportunities to invest money in terms of our existing business or agencies around the businesses which we are looking at in terms of M&A, we will be prioritizing that. And if we continue to generate cash, so obviously we would like to return the cash to shareholders based on our past trends whenever we are surplus and we don't have an immediate utilization of cash.

Okay, sir. Thank you. Thank you. That's all from my side, sir. Thank you.

Thank you. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. Next question is from the line of Dhawal from Choice International Limited. Please go ahead.

Thank you for the opportunity and congratulations on Grace's set of numbers. My first question is on revenue for Tirex for SAF, if it is possible for you to provide any color on that. And second, if possible, sorry if I have not been on the forefront, but then B2B, B2C share that you have right now as a part of the revenue, and why do we expect the B2C share to be probably one year down the line, if you can provide some color on that?

So, on Tyrex, Manish will add, but we have had a good quarter. I think Tyrex 78% growth in revenue. Of course, the bases are low, but still we have done, I think last year was 18 crores. Now, we have done about 33 plus. So, as you can see that EV cars are selling more. We also see the buses going up. So, requirements both in terms of the OEMs, the kind of CPOs also we have started talking to. So, I think for us, Tyrex, as we also announced, we are going to take the capacity up to 3,000 chargers, and that will happen sometime end of this year. So, clearly for us, Tyrex with a good portfolio in the DC market, buses, we are now obviously also looking at expanding the product portfolio. So, good quarter to look at how the sort of EV requirements in terms of chargers are going up. So, positive thing, and of course, we are also looking at some segments like mining and, you know, some construction equipment. We're going to use this. And a lot of synergy with our software as a service company, Electrify, is going to materialize. And we are seeing we're adding new OEMs there. And also, you know, glad to say that a lot of private buses and construction equipment is also now, you know, looking at options. So, a good quarter, quarter two for Tyrex, and we'll also be having the expanded capacities which will come, and new products which will be in the pipeline. I think the second part you asked on B2C. So, you know, B2C business is also dependent on our brand, and of course, our distribution and distributors. So, happy to share that we have distribution, growth is going well. We used to talk about 90,000 outlets, but that's It's growing by about 10-15% every quarter we try to take it up over previous year, and we've seen a 16% growth in terms of our number of outlets, and also that given our brand is number two, we need to obviously create more touch points, we are investing back with the mechanics, etc., and we expect that our B2C growth will at least be close to that requirement of two times the market growth rate, in fact, we want to exceed it, but given In last quarter, there were some challenges on that, and we will focus on getting at least two times growth to the market in terms of the B2C segment for ourselves, and we are in the right direction there. H1, we have seen two times the market growth rate in B2C, just to clarify to you.

That is helpful.

Thank you. Next question is from the line of Arya from NK Global. Please go ahead.

Thank you for the opportunity and congratulations on our website of Manweb. So, my question was regarding the future outlook as to the food prices are still elevated and, you know, with my basal prices moving with a lag of almost one month or two months, the incremental uptick in the basal prices is yet to be seen. So, how do we see our quarter 3 and quarter 4 from the cost point of view? And also, are we looking at any price hikes or any other price hikes that stand for the performance quarters? Yeah, that's it. That is my question.

So, I think we replied just in the previous question. Some participants asked for this similar thing. We have already replied to this question. But just to reiterate, you know, we are watching very closely the crude movement and its impact on eventually base soils. Some of our other cost components like additive, etc., have been strengthening further in terms of cost, and additive companies have been taking some prices high. But we have to wait and watch for the sustainable, you know, rise in crude, because the short-term movements in crude are really not impacting base oil, because it has a time lag, and by the time it absorbs the increases, you know, there is sufficient time to recalibrate. So, if crude sustains at an elevated level and it impacts base soils in a down-the-line 40-50 days, we may have to look at price hives segment twice, but again, we have taken enough price increases so far to pass on the current impacts and protected our per litre margins. We will continue to do that and keep recalibrating based on the movement in base soil and other input costs.

Sure, thank you. That was my question.

Thank you. Next question is from the line of Duwani from Equitri Capital. Please go ahead.

Hello, am I audible?

Yes, please.

Sir, first of all, congratulations on good set of numbers. First, I wanted a clarity on tirage revenue of 33 crore. Was it for the quarter or was it for the H1?

This is for quarter 2.

It's for quarter 2. Okay, okay. Thank you, sir. And to the question that I have is, like, what is the cumulative price increase taken across our lubricant portfolio since September 25? Like, how much of the input cost inflation have you passed on? And is further pricing action expected?

So, again, Dhani, we have just replied in the previous question, the same thing.

Can you quantify that or something?

So, we just want to again highlight that we operate in many segments. We have our B2C, we have OEM businesses, we have B2B businesses, industrial businesses. So, each segment demands different pricing actions. If we give you an idea, in channel business, which is our B2C, we have taken three price increases so far. In OEM businesses, which is a good part of our business, we have quarterly price variation clauses, and we are in a position to pass on or pass back depending on how the input costs move. Of course, in these times, last six months, most of the OEMs have been helping us with monthly price variations. So, because the movement in raw material cost was so fast and swift that we had to re-approach them with monthly requests. So, with different B2B, you have to do a bit of negotiation and you have to work with the customers and understand and explain our price increase rationale. So, that takes slightly longer time. So, overall, different segments have different pricing actions and pricing levels, and they operate at different price points also. So, depending on that, we are calibrating. Our endeavor at the end, we keep reiterating is to protect for liquor margins.

Okay, so understood. So, have you gained any market share recently?

Yeah, so, we have been actively growing 2 to 3x the market, I think, over the last many, many years. So, Dhoni, if we are continuing that with the 17%, 16%, I think we are gaining market share quite well in terms of overall market. I think we are 7-8% total market share, so if we are growing 2-3x the market, we would definitely be gaining that market share year-on-year, quarter-on-quarter.

Okay, sir. Thank you, sir. All the way.

Thank you.

Thank you. Next question is from the line of Hardik from ICICI. Please go ahead.

Thanks for the opportunity, sir. A couple of questions. Also, number one, if you can just help us in giving a guidance for the AdBlue volume for the rest of the year and for next financial year. Secondly, on the, you know, the pricing part, if you look about the blending pricing versus cash toll, what would be the pricing gap between us and, you know, the cash toll. Thirdly, if you can just help us understand, you know, as you mentioned that, you know, our share would be 7 to 8 percent, and we are going at, you know, 2 to 3x of the industry. So, by what percentage ONC's share would have dropped in the last, you know, 6 to 12 months?

So, coming to AdBlue, you see, this quarter has been slightly deep, as we have highlighted earlier, and being a monsoon quarter, the volumes are usually lower. But going forward, as in the coming years, our endeavour is to now grow ADDU volumes near double-digit. Because ADDU is only applicable to BH6 vehicles. And as the population of BH6 vehicles goes up, we see the demand going up. But that will be now, it will not be exponential the way it used to be last five years. It will be now celebrated in line with the market, market growth, and the vehicle population of BS6. So we estimate that we should grow our ad book volumes by double digit 10 to 15 percent is what our guidance had been in the past. So we stick to that going forward.

About the pricing gap between Kestrel and ours?

First, we have our price point based on various strengths in our product categories. In case of, for example, we have a very strong brand in terms of our two-wheeler motorcycle range and in terms of our diesel engine oils, which are really strong products with a lot of USPs in the market. And our pricing positioning is also categories. And there are certain categories where we have to keep working and increase our brand position and keep taking pricing actions accordingly. So, pricing depends on various segments and product categories, but we have our own price connectors and price positioning where we operate.

Just to give you one more input, as a brand, we believe we are in the top two, top three in the categories, most of the categories, overall joint top two. So, based on that, the positioning can change, and of course, it aligns to it rather not change. So, that's really where we pitch ourselves in terms of the bazaar market.

In terms of, you know, what market share the OMCs would have lost in the last 12 months?

We don't have that data right now. So, as you look at the industry, these are all estimates of gaining and market share.

That's really helpful. Thank you, sir.

Thank you. Next question is from the line of Vartarajan from Antique Limited. Please go ahead.

Thanks for the opportunity, sir.

Look at the rates and other incidental costs of trade these days. Are you also seeing similar kind of a thing in terms of procurement of base oils? Apart from the quoted prices, is there a significant escalation in the rate and the incidence and the other incidentals?

So, Mr. Vargasan, I think the freight rates have gone up, cheap rates have gone up, because, you know, everybody is recalibrating their supply chain, including the refiners, where from we are buying most of our base oil. So, everybody is facing those elongated periods of, you know, vessel movements, when the state of Hormuz is not operating fully. And obviously, those prices reflect in the overall base oil cost. We have our most of the purchases on CIF basis. So, all these are built in the base oil cost or the global price indices. There is no additional, you know, incremental impact which we see because our prices are always CIFR, CIF basis.

Thank you.

Next question is from the line of Raga from BMC Advisors, Private Limited. Please go ahead.

Yeah. Congratulations on the good side of numbers, sir. So, sir, my question is, over the last two quarters, we have seen an unusually significant change in inventories in the consolidated P&L, which inventory adjustments of approximately 109 crores in Q1, FI27, and 88 crores in Q2, FI27, compared with relatively insignificant amounts in the preceding four quarters. So, sir, can you give a reason for that?

No, so prices have gone up. You know, as we have been highlighting, that the prices have gone up always because of the pricing being higher for end products, whether it is for our lubricant business or for our charger business, there also the copper prices, et cetera, have gone up significantly. So, overall, these inflationary impacts are there. Plus, we have had certain extra, you know, buying to secure supplies. Because sometimes when we get a cargo and we want to secure for future, we have been trying to buy those tactical buying also. So, the combined impact is that you see elevated values. But if the situation comes back to normalization, whenever it comes, we will see moderation in these two.

Okay. Thank you, sir. Thank you.

Thank you. Next question is from the line of Devang from Sameeksha Capital. Please go ahead.

My question was on the EBITDA to CFO conversion, which has been low for last half-year and as well as this half-year. Has some seasonality come into our cash flows, how they're generated between first half and second half?

There is no particular pattern about it. It's that this first half has been really about this crisis, We have been explaining in earlier questions, that the prices have gone significantly higher and we have to deploy that additional working capital. Mostly you are seeing this because of the additional working capital requirements. We had a similar pattern, but there is no particular seasonality which comes into effect here. It's just that it is coincidental that both H1 have been similar. But this particular H1 had a clear way to support our customers also with additional receivable days or amount.

So, since the time crude and base oil prices remain elevated, are working capital also remain elevated?

No, so, as we are seeing that the current cost dynamics we have factored in already in the H1 cash flows. So, now, from here on H2, if the prices remain at these levels or trend in this range, the incremental cash generation should be all added to the cash flows rather than going into working capital. We are pretty much close to the peak of the working capital. If things remain at the current level.

Got it, sir. That's all for me. Thank you.

Thank you.

Thank you. A reminder to all the participants, anyone who wishes to ask a question may press star and 1 on their touchstone telephone. Next question is from the line of Dhaval Popat from Choice International Limited. Please go ahead.

Thank you, Rupas. I just wanted to have more color on the gas deployment already about the micro, I mean, the centers will just keep growing with time. So if you can provide some color on how we deploy this and what we saw something.

Thank you, Mr. Dhaval. Again, we have just answered this point in the previous question that we have been cognizant of the fact that we carry 1,200 crore of cash on the balance sheet. And the plan is to clearly have a war chest for M&A opportunities within the lubricant space, within our current business, adjacencies around that where we are focusing very clearly on industrial segment as a big driver of growth for the Indian economy as well as for the lubricant sector in the coming years or decades. Plus, we are looking at mobility as a big We are a driver of Gulf Oil's next growth phase, and we keep looking. We have done some investment, as you all know, and we need to, we are exploring opportunities in and around those EV businesses and the value chain, and also we keep ourselves open to looking at M&A opportunities. So, that's how we have been, you know, watching the space. And also, in the mid-term, we have increased the dividend payouts as well. Wherever there was a, you know, there was a need that we felt that we don't have an immediate need of the cash. We have increased the payouts to now close to 65-70%.

Thank you, thank you. Thank you.

Thank you. Next question is from the line of Prashant from Gulls Oil. Please go ahead.

Hello, sir. Thank you for the opportunity. Can you please update us about the ongoing capex plan and the progress of the ongoing construction?

Yes, so the expansion and we should be able to have the increased capacity by the end of this quarter. Spillwasa capacity expansion is progressing well, but we see that there can be some 1-2 months of delay, and the spillover may happen to Q1 of next year in terms of readiness, as against our earlier target of March 27, so maybe we should be ready by quarter 1 of next year. In the interim, we are running third shifts at both the plants wherever required to fulfill our needs.

Okay. And, sir, how much is the capital outgo for this ongoing capex for both plants included?

We were estimating 55 crore earlier, which was announced, and we see that there is an incremental need of 5 to 7 crore rupees, which the board has sanctioned recently. So, now the total capex for expansion is around 60-62 crore.

Okay. Thank you very much, sir. That's it.

Thank you.

Thank you. Next question is from the line of Ankit, an individual investor. Please go ahead.

Good evening, sir. Congratulations on a very good set of numbers. I have two questions. One is on the personal mobility front, or overall loops front, if you can just mention the split of B2C and B2B channel. And within the loops segment, what will be our exports contribution?

So, B2C, B2B ratio has been in and around 55-45, you know, 55 being B2C and 50-45 being B2B roughly. In this quarter, it was slightly around, let's say, around 50-50, I would say, where B2C, B2B, where 50-50, it will be in the range of that 50-55%, which is B2C. So, that's our industrial business as well. In terms of personal mobility, Ravi, you may want to add.

Yeah, so personal mobility, we are quite strong. About 21% of our volume comes from personal mobility, but we have a large motorcycle, both with the bazaar and the OEMs. Our market share in PCMO, passenger car, is less than 5%. So that is where we are making a lot of investments. We are looking at new independent workshops with a program called Custom Car Stock We lose sight on our motorcycle. We've just launched the Pride campaign. So I think passenger car, we want to make further inroads. And I think there, again, there is a lot of focus. And ideally, we'd like our personal mobility to go up by at least 3-4%, with a large part coming from the passenger car.

Sure. Noted, sir. Just one more clarification. On the 45% that you mentioned for B2B, that includes the industrial bit, or is it industrial is separate from this?

No, it is including industry. Nankit, just to add, just to add in terms of our motorcycle range and car range, we are moving towards a lot of high-end synthetic. That is another endeavor which hopefully in the second half we will see definitely some traction. Yes, this is a range which we want to over a period of next three to four years make it synthetic range about 10% of our portfolio.

And, sir, will it be safe to assume that the exports would be around 9% to 10% of the overall loops business?

Yeah, in the last six months, exports have gone up because of the global supply situation as well, supply-demand situation. We have been able to export even higher amounts. So, as we speak, currently, it is in the range of around 10%.

Sure. Thank you so much, sir. That's it from my side.

Thank you. Next question is on the line of Mohit from Indium Investments. Please go ahead.

Hello. Congratulations on a good set of numbers, sir. My question is on other expenses. It is now 283 crores this quarter versus 321 crores last quarter. Would you please explain the rationale for this reduction?

There are many elements in that other expenses. The big components, I would say, are linked royalties. So it depends on the OEM sales, how much is the percentage of OEM sales to the total sales, that also determines, and the ad-blue volumes have been lower, so that reduces the freight cost. You know, these are the two, of course, remains in the similar level to slightly higher, Because we had a mega campaign, as Ravi was highlighting, on our pride range, which is a motorcycle product. But there are these two, three major items which impact, which are, some of them are linked to volumes. Some of them are linked to the mix where we sell.

Got it. Thank you.

Thank you.

Thank you. Next question is from the line of Tobol Sen from ICICI. Please go ahead.

Thank you for the opportunity, sir. Still, instead of numbers, I just wanted to understand the margin profile and, you know, the outlook. Just your thoughts on, obviously, right now, it's a fairly challenging environment. One understands even when price increases, one cannot really hope for a margin expansion. But just in terms of the other aspect, Ravi, sir, mentioned about the OEM franchisee workshop driving volume growth, particularly in this quarter and probably in the last couple of quarters as well. Is there a sort of move back to a more B2B kind of a share, also sort of maybe, you know, driving a little bit more muted margin profile in the current environment? If one were to really look at the next two to three, assuming B2B or OEM relationships continue to drive volume growth, should we then expect margins to maybe stay at the lower end of your target band or does that not really have any relevance? Just your thoughts on the whole thing.

So, you know, it is a competitive field. We have a segment-wise strategy. The strategy is obviously to go to a higher margin band. The last six months have been very challenging. So, if you look at our Unlocked 2.0, it's about acceleration, premiumization, transformation. We've been talking about that in some forums. When you saw premiumization, it's premiumization in all our businesses, including OEM franchise workshop, even if you look at our bazaar business, and bazaar business is where we believe the brand being number two and we continue to invest in the brand. The distribution needs to be obviously at a higher level. So I think for us, and I spoke about some of the motorcycle products like Sintrac, so if it was an ideal world, then premiumization would have kicked in the margin. But as we know, the challenging environment is there. We are not trying to increase more in a particular segment, but if we get business, we will not say no. So if we get business, we will go for volume and the margin we are making, and each segment will make their margin. So I think that's been our philosophy. So obviously we want to grow in B2C, we want to grow in high products, but if we get more OEM franchisee workshop, and it is going to be profitable, we will not say no to it. But there is no attempt to go after that and change the sort of way we want to approach this. As Manish was also saying, you know, it's 55-45, B2C, B2B, we would be happy that all go up together, and wherever there's an opportunity in the segment, we would go ahead, because the market is going to be dynamic.

No, sir, I appreciate the fact. I was only referring to the fact that if the ratio were to remain in the current view, is it fair to then assume that, you know, I'm not saying that we are necessarily targeting that kind of thing. But if that is the kind of mix that happens, given how challenging the environment is anyway, looking at, you know, or rather as analysts, we should be factoring in maybe the slightly lower to mid-range of the margin guidance rather than factoring in expansion.

No, so I think as we have been highlighting in some of the earlier questions also, that the percentages in these short-term inflationary environments are slightly optically looking lower, whereas, you know, as a per litre, our margins have been very stable to rather grown. If you see over the last year H1 or over the last year Q2, YOY basis as well, even sequentially. Even from quarter one, if you see our pollinator margins have gone up. So what we are trying to say here is that our endeavor is threefold. Even if the mix remains, the bases are slightly different. If our B2C grows at a certain percentage, let's say 2x the market, and our B2B grows at 3x the market also, The margin profile is so different that that 2x growth will be higher, much higher in terms of margin contribution than the balance. So, even if we protect this range of 55-45 and grow our volumes faster in both categories, one at 2x and one at even 3x, our margin profile should go up. And with the incremental volumes of operating leverage, which we keep talking about, obviously always kicks in. And that should add up to the percentage in margins at the EBITDA level. So, I think we are very confident that our targeted 14-16% will happen. Plus, as Ravi highlighted in earlier question, that focus on synthetic products, high-end products continues to be very strongly driven within the company. And as in when the percentage of that contribution goes up, our margin profile will keep further improving. So, with that, I think over a medium term, we are confident of going higher in that trajectory.

And if I may ask just one last question, from a market perspective, have you seen any difference in the way that the OMC have been basically operating in the lubricant market? I ask this only in the context of, you know, their priorities being to sort of supply essential fuels in the market, prioritizing APG production at the cost of even petrochemicals and so on. Has that also had an impact in your view of whatever you are seeing in terms of their momentum or aggressiveness in the implement market in the last six months?

Well, you see, the OFCs, obviously, they form 30-35% of the market. In fact, they are expanding their base oil capacity to obviously have less of the base oil to manufacture here. And they were also augmenting the capacities for looking at making more product in-house. I think that's one way. So, I think the market is quite attractive and everybody is obviously having a certain market share based on their workings. In terms of a pattern, I don't know because the question is obviously going to be they have a lot of other businesses besides the focus is going to be multifold. And I think for us, it is to focus on what we believe we are good at and that we have continued to do for the last 15 years, as you know, and we'll continue further. So, there is no change in that particular way we are looking at things. Of course, we want to see the base oil supplies might actually improve for us, because if they are offering us, on the lubricant side, I think it's more or less similar to what we've been seeing them in the past decade and more, even more.

Thank you so much for the detailed answers. Back to you, operator.

Thank you. That was the last question for today. I now hand the conference over to the management for closing comments.

Thank you so much. Well, before we come to the comments, I would like to share this news with all of you. Some of you may know that Gulf as a brand was born in 1901, and that was in the USA as one of the seven oil sisters. So we are completing about, we are completing 125 years on November 10th this year. So we have announced, obviously kicked off our celebrations yesterday on the 125th year, but we are a young brand. The Hinduja group has been there more than four decades, and we've had a kicking off the celebrations just yesterday Today we had our chairman, we had brand ambassadors MS Dhoni and Smithi Mandana and we had a kickoff of the celebration, so happy to share with you. And the theme of this launch, not launch, the celebration brand launch was to talk about our new brand positioning, which is Kuch Behatkar for India, which is in line with our global positioning of Together We Are Unstoppable. And it's also to define performance beyond limits. And the theme yesterday was born to be Behat. So we believe that we have always set a limit and set a limit beyond what is happening and the limits we have crossed like our long-drain oils, like our 2-3x growth in the market. So just to share with you, happy to celebrate, not many brands reached that far, but very proud of that and thank you for all your support. In terms of outlook, we continue to look at our, you know, always been our strategic and operational executional priority to grow 2 to 3x the market. And we see that as continued momentum, which is also you have seen in quarter two. In fact, quarter one, quarter two have been well ahead of that. We continue to have agility in our execution. We are looking at, you know, obviously timely interventions in terms of making sure that we get the perlite margin as Manish is talking about. Obviously, we have a sustainable EBITDA margin band. One of the changes we are making from our master brand is to look at category brands, which will help us to increase further market share across categories. We are quite strong with OEM, franchisee workshops, B2B. We will continue doing that. We will continue trying to gain customers and definitely focusing on that. And the coming quarter is a festive quarter. And of course, except the agri, which I mentioned, we see all other things to give us the growth that the market has been giving 3 to 4 percent and where Gulf has been able to grow ahead of the market. In Tyrex, as I mentioned to you, we will get our plant expansion done in this coming quarter and hopefully start the changeover to having higher production, which will give us an opportunity to leverage it. Also, our software as a service company is also gaining traction in terms of the whole EV environment where India is seeing decent traction in cars. Just to give you an example, the number of cars, EV cars sold in the first half are nearly equal to what was sold in the full year last year. More models coming in. So a good sort of core and, I would say, transformation in terms of looking at this. I look forward to the, you know, catching up with you. And again, as I started with greeting you for the festival, I leave a happy Diwali to all of you and your families and look forward to catching up with you again. Thank you, sir.

Thank you. On behalf of ICICI Security is Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.