HPCL to carve out lubricants business as separate unit to unlock value

HP's unit,, which is almost 50 years old, has more than 350 grades of lubricants, specialty products and greases.

Hindustan Petroleum Corporation (HPCL) plans to separate its lubricants business in FY24 to unlock value in a segment where growth has been buoyant on the back of strong domestic demand, undeterred by inflationary pressures, a top company official said.

"We intend to carve out this company into a separate unit. We have various options which we can follow – either we can list this company, come up with an IPO, or we can get in a strategic partner," Rajneesh Narang, director (finance), said on a post-earnings call with analysts. A decision will be made in this financial year, he added.

The unit, which is almost 50 years old, is among the key players in the domestic market, with more than 350 grades of lubricants, specialty products and greases. State-owned HPCL had decided to carve out the lubes business earlier this year.

"The formation of a new company for a PSU requires a certain regulatory approval from the government of India,” Narang said when asked about the delay. “We are waiting for the final approval from the respective regulatory authorities for the new company."

The Indian lubricants market is expected to expand at a compounded annual growth rate (CAGR) of 3 percent, with continued demand for lubricants likely, notwithstanding the emergence of electric vehicles, according to Kline's Global Lubricants 2022 market analysis report.

Last month, the oil refining and marketing company tied up with US energy giant Chevron to launch Caltex products in the Indian market. The long-term agreement with Chevron allows HPCL to license, market, manufacture, and distribute Caltex-branded lubricants in the country.

HP Lubricants has the highest market share in the industrial oils segment, according to the company's website.

HPCL posted a consolidated net profit of Rs 5,826.96 crore in the second quarter of FY24, it said on November 6. A year earlier, HPCL reported a loss due to record-high crude oil prices. However, profit in Q2 slipped from the previous quarter after crude oil prices gained momentum since July amid supply cuts and geopolitical tensions.