Focus on personal mobility will continue: Castrol India

Sonia: The volume growth that you achieved this time was the highest that you have seen in the last five years, at 9 percent. What lead to this growth and has demand picked up quite a bit?

A: I am pleased with the set of numbers that we have reported and after many quarters we have seen robust volume growth of 9 percent in the numbers. It is underpinned by our strategy as we continue to say that we focus on personal mobility, we have seen very strong double digit growth in the volumes of personal mobility. We have also seen good growth in commercial vehicle oils' volumes, which were hitherto flat or declining. However, it could be a result of economic movement that is happening around us; the industry is doing better, commercial vehicle oils will be required more because vehicle sales are doing better.

Having said this I would say that our volume driver has always been personal mobility and will remain personal mobility. We have seen good growth in Power brands, which have been pillars of our strategy contributing more than 50 percent of our volumes and we continue to focus on that growth as well to drive further volume growth.

Reema: Do you believe volume growth at 9 percent is sustainable in FY17?

A: I cannot predict this with certainty, all I can say is that we continue to do what we have been doing and that is focusing on the personal mobility sector which will see huge growth in future.

On commercial vehicle side, we will continue to take actions, some of them will be tactical and some of them will be strategic. We will continue to introduce new products and we will see how we can try to get good volume growth and that has been our strategy. However, because of economic factors, you will always see that we were earlier not able to do well in a commercial vehicle oil segment but now with the economy picking up, we are optimistic about what we could do in terms of volumes. I cannot give exact numbers of how much volume growth we can sustain whether it will be 9 percent, but I can certainly say that we can sustain the personal mobility side of the growth and we will continue to work on getting more volumes in commercial vehicle oil side.

Sonia: The other thing is that the street likes is that your margins are one of the best in the industry, sitting at almost 30 percent margins now. Now that both your verticals are doing well, personal mobility and commercial vehicles, do you think that the margin trajectory could continue to improve?

A: Unit margins per litre may or may not improve because we are the lowest point for crude oil in terms of cost of goods. However, as the portfolio improves; we focus a lot on product mix improvement and the driver that is personal mobility leads to much better product portfolio in terms of what it offers to the consumers and they are all high value added products which means different margin structure. So we are not looking at only crude prices to drive our margins and EBITDA margin is also a function of how you control your cost and Castrol has been doing extremely well keeping its cost below inflation all the time, so we continue to look at cost very carefully and we will also continue to make sure that we have a profitable volume growth which has again been our strategy.

However, considering all these factors we believe that we will have very robust margins going forward. I cannot predict whether it will be 30 percent but if you have seen history of Castrol even when the crude prices have gone up or down, we have been able to maintain good set of numbers in terms of EBTIDA margins. Most of the time we have been almost double that of our peer set in terms of percentage return on sales.

Reema: You spoke about cost optimisation, your realisations fell 2 percent this quarter due to the discounts prevalent in the market. Will the company be looking at cutting down discounts and promotions?

A: As we have said earlier, we have a very robust and very sophisticated pricing model or where we look at market prices as one competition activity as well as our strategic focus on different brands and based on that we make market interventions, be it media or some discounts or whatever the need of the hour is at that point in time and we have been doing it consistently and we will continue to do that. We cannot say that we will cut prices across the board but if a particular brand in a particular market based on our strategy we need to take actions, we will take action and we have been doing that.