Castrol India

On behalf of your Board and Team Castrol, I am privileged to share my
 reflections in the 100th year of brand Castrol in India. Not many
 brands survive a 100 years, let alone grow and become as strong as
 Castrol in India. Today, brand Castrol and Castrol India Limited are
 brimming with youthful energy, unbounded passion and demonstrable
 ability to win in all seasons, in all conditions.
 
 Till the early nineties, the lubricant market was a regulated one where
 prices, market shares and availability were controlled. It was only
 after de-regulation that the Castrol brand took charge of its own
 destiny in the Indian market. During the nineties, the Company
 delivered an impressive growth till late in the decade. Thereafter, it
 hit a period of sustained margin pressure, fierce price competition and
 slowing market volume growth. The off-take has been largely impacted
 due to the significant structural changes in the lubricant market,
 driven by introduction of low emission, new technology engines. During
 this period, we saw a dampened sentiment about Castrol India, reflected
 in lack of growth in profits and high staff attrition.
 
 Instead of being daunted by the situation, your Companys wider
 leadership team resolved to take on bold and audacious goals to turn
 these challenges into opportunities. The goal was to more than double
 profit in four years and re-establish Castrol Indias pre-eminent
 position amongst all its stakeholders. This Power of Intent was founded
 on our strong belief in the inner strength of the brand and our people.
 
 Judging from year-on-year improving results over the last three years
 and the underpinning strategy, I am confident that we will exceed the
 demanding targets we have set for ourselves. In 2008, we delivered a
 record Profit Before Tax of over Rs.400 Crores - almost double of 2005.
 This growth has been achieved in the face of unprecedented inflationary
 environment. The cost of Base-Oil, the key raw material for lubricants,
 has gone up by about three times (in USD terms) in the past four years.
 Our strong profit delivery, operating margins and steady returns, in
 such an environment, are the result of rigorous implementation of our
 Winning in Lubricants growth strategy.
 
 Concurrently, we drove cost efficiencies while investing in right
 talent, strong brands and differentiating technology. We accelerated
 innovation in products and processes and targeted segments of future.
 We have successfully focused on growing workshop channel and achieved
 breakthrough changes in our world class distributor route to market. We
 raised our relationships with key Original Equipment Manufacturers
 (OEMs) to a new level. Our invaluable partnerships with leading
 customers like Tatas, Mahindra, Maruti and JCB, to name just a few,
 have been game changing and in true partnership spirit. With the
 emergence of international OEMs in India, we are leveraging our global
 partnerships with leading automotive manufacturers like BMW, VW, Audi
 and Ford. Our focus on personal mobility and new generation engines has
 paid rich dividends. The industrial and marine businesses have also
 shown remarkable turnaround in quality, materiality and contribution.
 
 Since late 2008, the economic environment and declining market has had
 an inevitable impact on your Company. However, the strong fundamentals
 of your Company make it well equipped to deal with the situation. This
 has enabled us to respond rapidly with pre-emptive actions. We have
 confidence which comes from faithful execution of our proven strategy
 and we firmly believe that as lubricant leaders, your Company will find
 new winning opportunities even in this downturn.
 
 Before concluding, I would like to thank you, our Shareholders, for
 maintaining confidence in your Company, as evidenced by renewed
 strength in our share price, against the drift in the equity market. I
 thank our discerning consumers and customers who continue to have faith
 in the Castrol brand and patronize our premium products for the overall
 value we deliver. Above all, a big thank you to Team Castrol India for
 its continued effort and commitment.
 
 Together we can look back in pride and look ahead with confidence.
 
 Yours faithfully,
 
 Naveen Kshatriya
 Managing Director