2Q 2026 Castrol India Ltd Earnings Call

August 5, 2026

Speaker #1: Ladies and gentlemen, good day and welcome to our Q2 and 1H Earnings Conference Call for Castrol India Limited. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity to ask questions after the presentation concludes.

Operator 2: Ladies and gentlemen, good day and welcome to our Q2 and H1 earnings conference call for Castrol India Limited. As a reminder, all participant lines will be in the listen only mode, there'll be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. Also, please note that this conference call may contain forward-looking statements which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict. We have with us today Mr. Saugata Basuray, Managing Director, Castrol India Limited, and Ms. Mrinalini Srinivasan, Chief Financial Officer, Castrol India Limited.

Operator: Ladies and gentlemen, good day and welcome to our Q2 and H1 earnings conference call for Castrol India Limited. As a reminder, all participant lines will be in the listen only mode, there'll be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. Also, please note that this conference call may contain forward-looking statements which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict. We have with us today Mr. Saugata Basuray, Managing Director, Castrol India Limited, and Ms. Mrinalini Srinivasan, Chief Financial Officer, Castrol India Limited.

Speaker #1: Should you need assistance during this conference call, please signal an operator by pressing star, then zero, on your touch-tone phone. Please note that this conference is being recorded.

Speaker #1: Also, please note that this conference call may contain forward-looking statements, which are based on the beliefs, opinions, and expectations of the company as of the date of this call.

Speaker #1: These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. We have with us today Mr. Saugata Ha Vasure, Managing Director, Castrol India Limited, and Ms. Mrinalini Srinivasan, Chief Financial Officer, Castrol India Limited.

Speaker #1: And now I hand the conference over to Mr. Vasure. Thank you, and over to you, sir.

Operator 2: I now hand the conference over to Mr. BasuRay. Thank you, over to you, sir.

Operator: I now hand the conference over to Mr. BasuRay. Thank you, over to you, sir.

Speaker #2: Thank you, and good afternoon, namaste to everyone. Thank you for joining Castrol India's analyst call for the second quarter and first half-year ended June 2026.

Saugata Basuray: Thank you. Good afternoon and namaste to everyone. Thank you for joining Castrol India's analyst call for Q2 and H1, year ended 30 June 2026. As a reminder, we follow the calendar year for financial reporting. I am joined today by my colleague, Ms. Mrinalini Srinivasan, our Chief Financial Officer and Wholetime Director. Moving into the commentary for the quarter, we delivered another strong quarter with broad-based growth across our consumer, industrial, and institutional business. This is in context of a very volatile operating environment marked by supply disruptions and commodity cost inflation. The performance reflects disciplined execution, the strength of our brands and the portfolio that we have, effective pricing and cost management, and the agility of our global sourcing network, which has really played out in this quarter.

Speaker #2: As a reminder, we follow the calendar year for financial reporting. I'm joined today by my colleague, Mr. Mrinalini Srinivasan, our Chief Financial Officer and full-time Director.

Speaker #2: Moving into the commentary for the quarter, we delivered another strong quarter with broad-based growth across our consumer, industrial, and institutional business, and this is in the context of a very volatile operating environment marked by supply disruptions and commodity cost inflation.

Speaker #2: The performance reflects disciplined execution and the strength of our brands and the portfolio that we have, effective pricing and cost management, and the agility of our global sourcing network, which has really played out in this quarter.

Speaker #2: Our resilient supply chain and disciplined inventory planning helped us maintain uninterrupted customer supplies while balancing growth and margins. We also continue to invest behind our brands, innovate on distribution, customer relationships, and operational excellence.

Saugata Basuray: Our resilient supply chain and disciplined inventory planning helps us maintain uninterrupted customer supplies while balancing growth and margins. We also continue to invest behind our brands, innovated on distribution, customer relationships, and operational excellence, which strengthen both current performance as well as our long-term growth foundations. Let me highlight five areas that define the quarter. Broad-based growth. Our consumer, industrial, and institutional business all performed well. In personal mobility, our power brand grew ahead of the rest of the business, supporting a healthier portfolio mix and demonstrating consumer preference for high performance lubricants. The industrial growth was supported by advanced solutions, regular supplies, and expansion in customer base. The second big theme for the quarter has been expanded reach. We maintain a national footprint of approximately 160,000 outlets.

Speaker #2: We strengthened both our current performance as well as our long-term growth functions and foundations. Let me highlight five areas that define the quarter: broad-based growth; our consumer, industrial, and institutional businesses all performed well; in personal mobility, our power brand grew ahead of the rest of the business, supporting a healthier portfolio mix and demonstrating consumers' preference for high-performance lubricants.

Speaker #2: The industrial growth was supported by advanced solutions, supplies, and the expansion of our customer base. The second big theme for the quarter has been expanded reach. We maintain a national footprint of approximately 160,000 outlets. We expanded availability of our auto care range to 40,000 outlets and strengthened our service ecosystem with 34,000 independent motorcycle workshops and 16,000 car workshops.

Saugata Basuray: We expanded availability of our auto care range to 40,000 outlets and strengthened our service ecosystem with 24,000 independent motorcycle workshops and 16,000 car workshops. The Castrol branded autos with CAS is now 850 strong. Our rural distribution continues to expand. We are now at about 45,000 outlets, and on that, we are now at 950 rural service outlets which cater to bikes. The rural business continues to grow at double digits. We also sharpened execution in key urban clusters to strengthen our premium passenger car portfolio business. The third theme is innovation and localization. We expanded our fully synthetic range. We introduced premium variants in Castrol Activ. It is called Castrol Activ Synthetic 10W-30 and 5W-30 viscometrics. We upgraded GTX 5W-30 to a fully synthetic formulation and introduced a full synthetic under GTX 0W-20. These are all focused on modern engines.

Speaker #2: The Castrol-branded auto service, CAS, is now 850 strong. Our rural distribution continues to expand; we are now at about 45,000 outlets, and on that, we have also added 900—we are now at 950 rural service express centers, which cater to bikes.

Speaker #2: The rural business continues to grow at double-digit. We also sharpened execution in key urban clusters to strengthen our premium passenger car portfolio business. The third theme is innovation and localization. We expanded our fully synthetic range and introduced premium variants in Castrol Active, called Castrol Active Synthetic 10W-30 and 5W-30 visco matrix.

Speaker #2: We upgraded GTX 5W-30 to a fully synthetic proposition and introduced a fully synthetic under GTX 0W-20. These are all focused on modern engines. We also advanced localization in our industrial portfolio by introducing Alusol SL61 XPV, which is a specialized coolant used for demanding industrial applications.

Saugata Basuray: We also advanced localization in our industrial portfolio by introducing Alusol SL 61 XBB. This is a specialized coolant used for demanding industrial applications. The third theme is the brand and consumer engagement. With Castrol Activ Fully Synthetic campaign, on the back of introduction of the products, we reached over 150 million consumers. Our other premium brand in the motorcycle portfolio, Power1. In Power1, we have engaged with 10,000 bikers and strengthened our performance credentials for the brand, and that has played out as well in this quarter. Safety continues to be the bedrock of our performance and the way we work. Our Paharpur plant completed nine years and Silvassa three years without any significant recorded incident. Silvassa plant also received the NAMC Gold Award, and Castrol India received a special jury award for championing sustainable procurement practices.

Speaker #2: The third theme is the brand and consumer engagement. So, with the Castrol Active Fully Synthetic campaign, on the back of the introduction of the product, we have reached over 150 million consumers. For our other premium brand in the motorcycle portfolio, Power1, with Power1 we have engaged with 10,000 bikers and strengthened our performance credentials for the brand.

Speaker #2: And that has played out as well in this quarter. Safety continues to be the bedrock of our performance and the way we work. Our Powai plant completed nine years, and Silvassa, three years without any significant recorded incident.

Speaker #2: The Silvassa plant also received the NAMC Gold Award, and Castrol India received a special duty award for championing sustainable procurement practices. These actions reinforce our strategy, which is to broaden our distribution reach, focus on urban clusters to premiumize our portfolio, go deep into rural markets to tap into demand for motorcycle products—especially in agri—and build a strong services-led ecosystem. We talked about our CAS network in that context.

Saugata Basuray: These actions reinforce our strategy, which is to broaden our distribution reach, focus on urban clusters to premiumize our portfolio, go deep into rural markets to tap into demand for motorcycle products, especially in AGRI, and build a strong services-led ecosystem, and we talked about our CAS network in that context. We continue to see meaningful headroom for growth in rural India. At the same time, we are also building capabilities for specialized EV fluids and working closely with OEMs while recognizing that internal combustion engines and hybrids will remain the dominant part of India's vehicle park for the next many years. With that, I will hand over to my colleague, Mrinalini, to take you through the financial performance, the drivers of the quarter, and our perspective on the outlook for the rest of the year. Mrinalini, over to you.

Speaker #2: We continue to see meaningful headroom for growth in rural India. At the same time, we're also building capabilities for specialized EV fluids and working closely with OEMs, while recognizing that internal combustion engines and hybrids will remain the dominant part of India's vehicle park for the next many years.

Speaker #2: With that, I will hand over to my colleague Mrinalini to take us through the financial performance, the drivers of the quarter, and our perspective on the outlook for the rest of the year.

Speaker #2: Mrinalini, over to you.

Speaker #3: Thank you, Sogatha, and good afternoon, everyone. For the second quarter of 2026, revenue from operations was ₹1,871 crore, which is up 25% on a year-on-year basis and 21% sequentially.

Mrinalini Srinivasan: Thank you, Sougata, and good afternoon, everyone. For Q2 2026, revenue from operations was INR 1,871 crores, which is 25% up year-on-year and 21% sequentially. EBITDA for the quarter was INR 494 crores, an increase of 41% year-on-year and 41% sequentially. Profit after tax was INR 348 crores, up 43% year-on-year and 44% sequentially. For H1, revenue was INR 3,417 crores, 17% year-on-year, and EBITDA was INR 823 crores, up 25%. Profit after tax was INR 590 crores, up 24%. This translates to an EBITDA margin of approximately 26% for the quarter and 24% for H1. The performance was driven by broad-based volume growth, pricing action, portfolio premiumization, and prudent cost management. Our global sourcing network, diversified supplier base, and disciplined inventory planning cushioned the initial impact of the supply disruptions and commodity volatility, enabling reliable customer service and strong operating leverage.

Speaker #3: EBITDA for the quarter was ₹494 crore, an increase of 41% year-on-year and 41% sequentially. Profit after tax was ₹348 crore, up 43% year-on-year and 44% sequentially.

Speaker #3: For the first half, revenue was ₹3,417 crore, up 17% year on year, and EBITDA was ₹823 crore, up 25%. Profit after tax was ₹590 crore, up 24%.

Speaker #3: This translates to an EBITDA margin of approximately 26% for the quarter and 24% for the first half. The performance was driven by broad-based volume growth, pricing action, portfolio premiumization, and prudent cost management.

Speaker #3: Our global sourcing network, diversified supplier base, and disciplined inventory planning are pushing the initial impact of the supply disruption and commodity volatility, enabling reliable customer service and strong operating leverage.

Speaker #3: We began to see the anticipated increases in costs a bit delayed, but towards the end of the quarter. We therefore expect the impact of commodity and feedstock inflation to become more visible in the third quarter.

Mrinalini Srinivasan: We began to see the anticipated increases in costs with a delay, but towards the end of the quarter. We therefore expect the impact of commodity and feedstock inflation to become more visible in Q3. We will continue to monitor costs, pricing, customer sentiment, and demand closely, balancing near-term prudence with continued investment into our brands, distribution, innovation, and customer proposition. The board this quarter has declared an interim dividend of INR 6.25 per share, which will be payable on or before 2 September 2026. This reflects the resilience of our business and our ability to continue generating healthy cash flow. With this, we bring forward cash into the hands of our shareholders while maintaining our disciplined capital allocation philosophies. Looking ahead, we remain cautious given our inflationary pressures, uneven monsoon conditions, and continued volatility in key commodities.

Speaker #3: We will continue to monitor costs, pricing, customer sentiment, and demand closely, balancing near-term prudence with continued investment into our brands, distribution, innovation, and customer proposition.

Speaker #3: The Board this quarter has declared an interim dividend of ₹6.25 per share, which will be payable on or before 2 September 2026. This reflects the resilience of our business and our ability to continue generating healthy cash flows.

Speaker #3: With this, we bring forward cash into the hands of our shareholders, while maintaining our disciplined capital allocation philosophies. Looking ahead, we remain cautious, given inflationary pressures, uneven monsoon conditions, and continued volatility in key commodities.

Speaker #3: Our focus remains on disciplined execution, careful cost management, resilient supply, and sustained investment in long-term competitiveness. Thank you, and I will hand back to Sogatha for his closing remarks.

Mrinalini Srinivasan: Our focus remains on disciplined execution, careful cost management, resilient supply, and sustained investment in long-term competitiveness. Thank you, and I will hand back to Saubhag for his closing remarks. Saubhag, over to you.

Speaker #3: Sogatha, over to you.

Speaker #2: Thank you, Leeni. And with that, we are open to questions from the people on the call.

Saugata Basuray: Thank you, Lini. With that, we are open to questions from the people on the call.

Speaker #1: Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone.

Operator 2: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. In the interest of time, we will stick to two questions per person, and if you have further questions, kindly rejoin the queue. Participants, you may press star and one to ask a question. First question is from the line of Devansh Jain from Neo Wealth Management. Please go ahead.

Operator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. In the interest of time, we will stick to two questions per person, and if you have further questions, kindly rejoin the queue. Participants, you may press star and one to ask a question. First question is from the line of Devansh Jain from Neo Wealth Management. Please go ahead.

Speaker #1: If you wish to remove yourself from the question queue, you may press star and two. RSFNs are requested to use handsets while asking your question.

Speaker #1: Ladies and gentlemen, we will wait for a moment while the question queue assembles. Also, in view of time, we will stick to two questions per person, and if you have further questions, kindly rejoin the queue.

Speaker #1: Participants, you may press star and one to answer a question. The first question is from the line of Devansh Jain from Neo Wealth Management. Please go ahead.

Speaker #4: Hello. Hello, audible?

Devansh Jain: Hello. Am I audible?

Speaker #1: Yes, sir, go ahead.

Operator 2: Yes, sir. Go ahead.

Operator: Yes, sir. Go ahead.

Speaker #4: Thank you. Yeah. Hi, sir. I wanted to know, when can we expect the open offer to conclude? Like, there are so many approvals that are pending.

Devansh Jain: Yeah. Hi, sir. I wanted to know when can we expect the open offer to conclude? There are so many approvals that are pending. What is the expected timeline?

Speaker #4: So, when—what is the expected timeline?

Speaker #3: Maybe let me take that, Devansh, if I got your name correct. For the rest of the audience, Devansh is referring to the transaction which is currently underway.

Mrinalini Srinivasan: Maybe let me take that, Devansh, if I got your name correct. For the rest of the audience, Devansh is referring to the transaction which is currently underway. BP announced as a part of a strategic review that they would divest 65% share of the global Castrol company. Stonepeak emerged as the lead bidder. The transaction currently is progressing well. Stonepeak is in the process of getting the right licenses and operating methods across the entire world, which is many countries. Such deals take time. We'll have to wait for the first deal closure statement to come as per compliance. As soon as the deal is closed, we will expect a notification from the company to send the advance to the shareholders. Following that, there are certain timelines that are described after which the open offer will go live.

Speaker #3: BP announced as part of a strategic review that they would divest 65% of their shares in the global Castrol company, and Stonepeak emerged as the lead bidder.

Speaker #3: The transaction currently is progressing well, and Stone Peak is in the process of getting the right licenses and operating methods across the entire country, across many—across the entire world, which is many countries.

Speaker #3: The deal—such deal—takes time and we'll have to wait for the first step, deal closure statement, to come as per compliance. As soon as the deal is closed, you will expect a notification from the company to say the address to the shareholders.

Speaker #3: Following that, there are certain timelines that are prescribed, after which the open offer will go live.

Devansh Jain: Any expectations on the timelines?

Speaker #4: Any expectations on the timelines?

Speaker #3: No, Mr. Den, as I said, the deal is rather large, and it goes beyond India because of many other markets and many other countries.

Mrinalini Srinivasan: No. As I said, the deal is rather large. It goes beyond India. It goes to many other markets, many other countries. I think we will have to wait for the deal closure to happen. A formal communication to come your way.

Speaker #3: I think we will have to wait for the deal closure to happen and for a formal communication to come your way.

Speaker #4: Okay, thank you.

Devansh Jain: Okay. Thank you.

Speaker #1: Thank you very much. Participants, you may press star one to ask a question. The next question is from the line of Daval Popen from Choice International Limited. Please go ahead.

Operator 2: Thank you very much. Participants may press star 1 to ask a question. Next question is from the line of Dhaval Popat from Choice International Limited. Please go ahead.

Operator: Thank you very much. Participants may press star 1 to ask a question. Next question is from the line of Dhaval Popat from Choice International Limited. Please go ahead.

Dhaval Popat: Hi. Thank you for the opportunity. Yes, sir. As far as the overall revenue growth is concerned, yes, there is strong growth. Is it possible for you to break down on volume or pricing? I understand you have guided for two times the market growth. Is it safe to assume that there would be 8% volume growth or there was broadly volume growth and less of pricing growth? That's my first question. Second question on Silvassa plant. There have been a flood-like situation and some of the other manufacturers have reported some kind of damage. Just wanted to understand the utilization levels at Silvassa plant for Castrol.

Speaker #4: Hi. Thank you for the opportunity. Yes, sir. As far as the overall revenue growth is concerned, yes, there is strong growth, but is it possible for you to break that down by volume or pricing?

Speaker #4: I understand you have guided for two weeks' market growth, so is it safe to assume that there would be 8% volume growth, or was there broadly volume growth and less of pricing growth?

Speaker #4: That's my first question. And second question: On the Silvassa Plant, there has been a flood-like situation and some of the other manufacturers have reported some kind of damage. So just wanted to understand the utilization levels at the Silvassa Plant for Castrol.

Speaker #4: These are my first two questions. Thank you.

Dhaval Popat: These are my first questions. Thank you.

Speaker #2: Right. Okay, sir. I'll answer your question, and then maybe if there are any others, you might want to join. So, the second question first, which is on the Silvasa Plant—yes, you're right.

Saugata Basuray: Right. I'll answer your question, and then maybe Nalini might want to join. On the second question first, which is about the plant. Yes, you're right. Earlier in July, after close of Q2, there were a couple of days where there was very heavy rainfall in Silvassa. We had ceased operation of our plant at that point in time in the interest of safety. I'm pleased to say that the plant is fully back up. We have our business continuity plan which kicked in, and the operating levels of the plant are at the same peak level as it was in Q2 and earlier this year. As of now, we are back on the plant. That's on your second question. The first question, I think, broad-based growth, we maintain the range of towards the market growth. We are in that range.

Speaker #2: Earlier, in July, which is after the close of the second quarter, there were a couple of days where there was very heavy rainfall in Silvasa.

Speaker #2: We had ceased operation of our plant at that point in time, in the interest of safety. But I'm pleased to say that the plant is fully back up.

Speaker #2: We have a business continuity plan, which works, which kicked in, and operational operating levels of the plant are at the same peak level as it was in Q2 and earlier this year.

Speaker #2: So, as of now, no impact on the plant. So that's on your second question. The first question, I think, Broadway's growth—we maintain the range of two weeks, the market growth.

Speaker #2: We are in that range. Different parts of our portfolio have grown at different levels. In the quarter, which is the April to June quarter, we have seen low double digits. And with that, there are two price increases that we have implemented this year, from January to June.

Saugata Basuray: Different parts of our portfolio have grown at different levels. In the quarter, which is the Q2, we have taken pricing action which are in low double-digit. With that, there are two pricing increases that we have implemented this year, January to June, in context of the supply chain volatility as well as inflation that we are seeing. There is a broad-based volume growth across our three businesses. In the consumer business, a lot of it coming from our rural operations and the utilization of the portfolio now in urban clusters. That is for the consumer business. In the industrial and institutional business, we continue to expand our portfolio as well as increase the number of customers. That's not just about this quarter, we've been doing that for the last couple of years. That enabled the volume growth.

Speaker #2: In the context of the supply chain volatility as well as inflation that we have seen, there is broad-based volume growth across our three businesses.

Speaker #2: In the consumer business, a lot of it is coming from rural operations and premiumization of the portfolio, now in urban clusters. That is for the consumer business and the industrial and institutional business.

Speaker #2: We continue to expand our portfolio, as well as increase the number of customers. That's not just about this quarter—we've been doing that for the last couple of years.

Speaker #2: So, that enabled the volume growth. And with the pricing action kicking in on top, that is purely to make sure that we manage our margins well.

Saugata Basuray: With the pricing action kicked in on top, that is purely to make sure that we manage our margins well.

Speaker #4: Makes sense, sir. Thank you.

Dhaval Popat: Makes sense. Thank you.

Speaker #1: Thank you. Next question is from the line of Tulku Marsha from Sumangal Investment. Please go ahead.

Saugata Basuray: Thank you.

Operator 2: Thank you. Next question is from the line of Vipul Kumar Shah from Samangal Investments. Please go ahead.

Operator: Thank you. Next question is from the line of Vipul Kumar Shah from Samangal Investments. Please go ahead.

Speaker #5: Hi, thanks for the opportunity and congratulations on a very good set of numbers. What was the volume this quarter, and can you give the volume for the sequential quarter and the same quarter last year?

Vipul Kumar Shah: Hi. Thanks for the opportunity, and congratulations for very good set of numbers. What was the volume this quarter, and can you give volume for sequential quarter and same quarter last year?

Speaker #3: Mr. Shah, thank you for the question. I think this is similar to what Dhaval also just asked. We do not follow segmental reporting for specifics or avoidables, but as Shobito said, lubricant industry growth is around 3–4%, and our endeavor always is to grow ahead of the industry.

Mrinalini Srinivasan: Mr. Shah, thank you for the question. I think this is similar to what Dhaval also just asked. We don't follow segmented reporting, so specifics are avoidable. As Soumitra said, lubricant industry grows 3% to 4%, and our endeavor always is to grow ahead of the industry. We've been able to do that broad-based across segments. We play in automotive across the three spaces as well as in industrial. Volume growth is broad-based and there we will leave it. Specifics on volumes, we don't really share.

Speaker #3: We've been able to do that broadly across the segments we play in—automotive across the three spaces, as well as in industrial. So, volume growth is broad-based, and that's where we would leave it.

Speaker #3: Specifically for volumes, we don't really share.

Speaker #5: In previous calls, you always shared the volume number in million liters. Have you stopped that practice now?

Vipul Kumar Shah: In previous call, you always shared the volume number in million liters. You have stopped that practice now?

Speaker #3: I think it's it's a student in the interest of shareholder that we continue with the practice. We've always maintained the same practice. You have a whole the full PNL disclosures, etc., are with you to go through.

Mrinalini Srinivasan: I think if it's prudent in the interest of shareholders that we continue with the practice, we have always maintained the same practice. You have the full P&L disclosures, et cetera, are with you to go through. Specific volume numbers, we have not declared in the past.

Speaker #3: But specific volume numbers, we have not declared in the past.

Speaker #5: Okay. And was there any inventory gain in this quarter?

Vipul Kumar Shah: Okay. Was there any inventory gain in this quarter?

Speaker #3: Can you repeat that again? Inventory?

Mrinalini Srinivasan: Can you repeat that again? Inventory gain?

Speaker #5: Inventory gain.

Vipul Kumar Shah: Inventory gain.

Speaker #3: Okay. That's a that's a good question. So indeed, the the one one fact is that cost increases are delayed into the PNL. Not all the cost increases have been incurred into Q6.

Mrinalini Srinivasan: Okay. That's a good question. Indeed, the one factor is that cost increases are being into the P&L. Not all the cost increases have been incurred into Q2. Some of it is flowing through Q2, as I said earlier. Inventory specifically that we were carrying from the earlier peak period, we did consume them in the quarter, and correspondingly, we have some part of our volume coming in at a lower consumption cost. This is normal for any business course, and that's what we've also benefited from. What I can say is that even excluding these one-time benefits of the inventory, we have grown profitability healthy in this quarter.

Speaker #3: Some of it is flowing to Q3, as I said earlier. Inventory specifically that we were carrying from the earlier peak period—we do consume them in the quarter, and correspondingly, we have some part of our volume coming in at a lower consumption cost.

Speaker #3: This is normal for any business course, and that's what we've also benefited from. What I can say is that even excluding these one-time benefits of the inventory, we have grown profitability healthily in this quarter.

Speaker #1: Thank you. Ripple Kumar, I'll request you to come back for a follow-up. Next question is from the line of Rajesh Toshnival from Family Office. Please go ahead.

Operator 2: Thank you. Vipul Kumar, I'll request to come back for a follow-up. Next question is from the line of Rajesh Toshniwal from Family Office. Please go ahead.

Operator: Thank you. Vipul Kumar, I'll request to come back for a follow-up. Next question is from the line of Rajesh Toshniwal from Family Office. Please go ahead.

Speaker #5: Congratulations on this excellent set of numbers. I just had a query—like this upcoming sector, wherein for data centers and hyperscalers, a lot of R&D products have been developed by the lubricant industry.

Rajesh Toshniwal: Congratulations on this excellent set of numbers. I just had a query, like this upcoming sector wherein for data centers and hyperscalers, a lot of products are being developed by the lubricant industry. Is Castrol India also looking into it or are they already into this stream? If yes, what kind of revenue and relevant numbers can be shared for the shareholders?

Speaker #5: Is Castrol India also looking into it, or are they already in this stream? And if yes, what kind of revenue and relevant numbers can be shared for the shareholders?

Speaker #2: Thank you for your question. Yes, there is work happening on the front of developing data centers in India, and we have, in the past, also touched upon it.

Saugata Basuray: Thank you for your question. Yes, there is work happening on the front of developing data centers in India, and we have in the past also touched upon it. We have a team that looks into it. The products are ready, and globally we do participate in the data center thermal cooling space. We have various trials that have been ongoing. This is a B2B business, and at the moment it is not a material part of the business.

Speaker #2: We have a team that looks into it. The products are ready, and globally, we do participate in the data center thermal cooling space. We have various trials that have been ongoing.

Speaker #2: This is a B2B business, and at the moment, it is not a material part of the business.

Speaker #5: Okay, I see. I see. Thank you.

Rajesh Toshniwal: I see. Thank you.

Saugata Basuray: Thank you.

Speaker #2: Thank you.

Operator 2: Thank you. Next question is from the line of Aditya Shah from Vikram Advisory. Please go ahead.

Operator: Thank you. Next question is from the line of Aditya Shah from Vikram Advisory. Please go ahead.

Speaker #1: Thank you. The next question is from the line of Aditya Shah from Vikram Advisory. Please go ahead.

Speaker #4: Sir, so could you highlight your dividend policy which is as of now and regarding the second question which is on data centers. So out of the two technologies currently available, what I know is immersive cooling and directed chip.

Aditya Shah: Sir, could you highlight your dividend policy which is as of now? Regarding the second question, which is on data center. Out of the two technologies currently available, what I know is immersion cooling and direct to chip. Which one are you more focused on in India, and what is the update about the trial runs you mentioned in the previous conference call that were ongoing for these data center things?

Speaker #4: Which one are you more focused on in India, and what is the update about the trial runs you mentioned in the previous conference call that were ongoing for these data center things?

Saugata Basuray: Okay. Let me tackle your second question, then, Anjali will address the first question on dividend. The technology is a choice by the OEMs who are setting up the data centers for the developers. Therefore, whoever is setting it up, whether they're looking for direct to chip or they're looking at immersion coolant, there are products available for that. I think we'll have to wait and watch in India which technology emerges eventually as the predominant technology, but early to say at the moment. We are positioned to participate in both. Some of the trials that we talked about have resulted in business, but many of these are long-range trials.

Speaker #2: So let me tackle your second question, and then we'll address the first question and dividend. The technology is a choice made by the OEMs who are setting up the data centers for the developers.

Speaker #2: So, therefore, whoever is setting it up—whether they're looking for direct-to-chip or they're looking for immersion coolant—there are products available for that.

Speaker #2: I think we'll have to wait and watch in India to see which technology eventually emerges as the predominant one. But it's early to say at the moment.

Speaker #2: And we are positioned to participate in both. Some of the trials that we talked about have resulted in some business, but many of these are long-range trials.

Speaker #2: And the last bit I would say is while there has a lot of announcements of development of data centers, we have to see a we have to see for a lot of them to convert into operational data centers eventually when they when the staff consuming cooling solutions.

Saugata Basuray: The last bit I would say is, while there has a lot of announcements of development of data centers, we have to see for a lot of them to convert into operational data centers, eventually when they start consuming cooling solutions.

Speaker #4: Mm-hmm. So, that could be at least two years out?

Aditya Shah: That could be at least 2 years out?

Speaker #2: It's difficult for me to say because, you know, we are just tracking it. But as it emerges, we'll be there to participate.

Saugata Basuray: Difficult for me to say, because we are just tracking it. As it emerges, we'll be there to participate.

Speaker #4: Okay. And what would the competition be like within data centers? Any competition in India?

Aditya Shah: Okay. What would the competition be like within the lubricants that we give for data centers? Any competition in India?

Speaker #2: Sir, can I just—can I just interrupt you? I have asked two questions, so if I may, I would like to request Lini to respond to your first question.

Saugata Basuray: Sir, can I just interrupt you? I have two questions. If I may just request for Limy to respond to your first question, I will interrupt.

Speaker #4: Sure, sure. Okay.

Aditya Shah: Sure. Okay.

Speaker #3: Mr. Shah, thank you for your question. Our dividend policy is on the website, so please do have a look. But let me give you a broad framework.

Mrinalini Srinivasan: Mr. Shah, thank you for your question. Our dividend policy is on the website, please do go have a look, but let me give you a broad framework. For the past many years, we've followed windows to split our dividend into one interim and one final. Usually, we're a cash-generating business, and we like to reward our shareholders with a healthy dividend payout. While we don't have a policy number, you will see that our dividend yields are usually in the range of around 5% when accumulated for interim and final dividend. Additionally, in case of you would have seen over the last 10 years, a couple of times we've also given a special dividend to reward our shareholders. That, for example, to celebrate 125 years of Castrol globally, we had done that a couple of years ago.

Speaker #3: For the past many years, we follow windows to split our dividend into one interim and one final. And usually, we catch relating business and we like to reward our shareholders with a healthy dividend payout.

Speaker #3: While we don't have a policy number, you would see that our dividend yields are usually in the range of around 5% when you accumulate interim and final dividends.

Speaker #3: Additionally, in the case of dividends, you would have seen over the last 10 years, a couple of times we've also given a special dividend to reward our shareholders.

Speaker #3: So that, for example, with 125 years of Castrol globally, we had done that a couple of years ago. So that's the broad framework with which we manage our cash and reward our shareholders.

Mrinalini Srinivasan: That's the broad framework, which manage our cash and reward our shareholders. I'm sure you've seen also that we have issued an interim dividend as per currently, framework we've advanced cash into the interim window rather than the final window.

Speaker #3: I'm sure you've seen also that we have issued an interim dividend as per the current framework. We've advanced cash into the interim window rather than the final window.

Speaker #4: Okay, so is it safe to assume that you probably intend to pay out around 80 to 90% of your earnings as dividends? Roughly?

Aditya Shah: Okay. Is it safe to assume that you probably intend to pay out around 80% to 90% of your earnings as dividends, roughly?

Speaker #3: So, intentionally, it is not given as a percentage in our policy because I think what we really are guided by is our capital allocation framework, wherein if we have an alternate use case for the cash we have, we would potentially maybe deviate from the percentage that you mentioned.

Mrinalini Srinivasan: Sir, conventionally, we've not given a percentage in our policy because I think what we really are guided by is our capital allocation framework. Wherein if we have an alternate use case of the cash, we would potentially maybe deviate from the percentage that you mentioned. Like you said, past three years, we've been in that range.

Speaker #3: But like you said, for the past three years, we've been in that range.

Speaker #1: Thank you. Aditya, I'll request you to come back for a follow-up question. I request all participants to kindly limit yourselves to two questions per participant, and you may rejoin for a follow-up.

Operator 2: Thank you. Aditya, I will request to come back for a follow-up question. I request to all the participants, kindly limit yourself to two questions per participant and rejoin for a follow-up. Next question is from the line of Ketan Mehta from Baroda BNP Paribas. Please go ahead.

Operator: Thank you. Aditya, I will request to come back for a follow-up question. I request to all the participants, kindly limit yourself to two questions per participant and rejoin for a follow-up. Next question is from the line of Ketan Mehta from Baroda BNP Paribas. Please go ahead.

Speaker #1: Next question is from the line of Kiritan Mehta from Baroda BNP Paribas. Please go ahead.

Speaker #5: Thank you for the opportunity. My first question is on the pricing side. You mentioned that we have taken two price increases between January and June, both in the low double digits.

Ketan Mehta: Thank you for the opportunity. First question is on the pricing side. You mentioned that we have taken sort of pricing action, two price increases between January to June and in the low double-digit. We heard from your competitor that probably they have been able to sort of take around four price increases between March to July, even after the end of the quarter as well. Question in this regard is, normally Castrol has been the one which has been leading the price increase in the Indian industry. Is their structure changing? Or is it that the competition is catching up with some of the discounts reverting and then sort of increasing the price at this point of time?

Kirtan Mehta: Thank you for the opportunity. First question is on the pricing side. You mentioned that we have taken sort of pricing action, two price increases between January to June and in the low double-digit. We heard from your competitor that probably they have been able to sort of take around four price increases between March to July, even after the end of the quarter as well. Question in this regard is, normally Castrol has been the one which has been leading the price increase in the Indian industry. Is their structure changing? Or is it that the competition is catching up with some of the discounts reverting and then sort of increasing the price at this point of time?

Speaker #5: We heard from your competitor that, probably, they've been able to take around four price increases between March and July, even after the end of the quarter as well.

Speaker #5: So, the question in this regard is, has it normally been Castrol that has been leading the price increases in the Indian industry?

Speaker #5: So is there a structured change, or is it that the competition is catching up with some of the discounts reverting, and then sort of increasing the price at this point of time?

Speaker #5: The second question was about the impact of the price increase: if at all the industry has taken a higher price increase, do you see a risk to volume growth as we go ahead?

Ketan Mehta: The second question was about the impact of the price increase, that if at all the industry has taken a higher price increase, do you see a risk to a volume growth as we go ahead? Would there be downtrading? How have been the experience in the past, if you can narrate on the same?

Kirtan Mehta: The second question was about the impact of the price increase, that if at all the industry has taken a higher price increase, do you see a risk to a volume growth as we go ahead? Would there be downtrading? How have been the experience in the past, if you can narrate on the same?

Speaker #5: Would there be down trading? How has the experience been in the past? If you can narrate on the same.

Speaker #2: Okay, so I think to answer your two questions: we are guided in our pricing actions by two things. One is our outlook on raw material prices.

Saugata Basuray: Okay. Let me answer your two questions. I think we are guided by pricing actions by two things. One is our outlook on raw material prices, cost, and the second is our direction on maintaining our EBITDA margin at 21% to 24%. These are the two parameters within which we run the business. Based on that, we have modeled what would be an ideal pricing scenario this year, and we executed those price actions late in Q1, and then again early in Q2. As things stand today, the pricing actions we have implemented have been sufficient to offset the raw material increases that have come from Q2, and we expect some of the raw material increase to also sustain and spill over into Q3. External environments remain very volatile. If the volatility increases or if facts change, then we stand prepared to take whatever other pricing action is required.

Speaker #2: Cost. And the second is our direction on maintaining our EBITDA margin at 21% to 24%. These are the two frames—within these are the two parameters—within which we run the business.

Speaker #2: Based on that, we have modeled what would be an ideal pricing scenario this year, and we have executed those price actions late in Q1 and then again in Q2.

Speaker #2: As things stand today, the pricing action that we've implemented has been sufficient to offset the raw material increases that have come through in Q2, and we expect some of the raw material increases to also sustain and spill over into Q3, right?

Speaker #2: And external environments remain very remain very volatile. If the volatility increases or if facts change, then we will we are we stand prepared to take whatever other pricing action is required.

Speaker #2: But we are guided by a raw material cost profile as well as our outlook on everything else. In the past, whenever such environmental changes have required us to take pricing action, we've also doubled down on activating the consumers and investing in the brand, which we continue to do right now.

Saugata Basuray: We are guided by a raw material cost profile as well as our outlook on that more than anything else. In the past, whenever such environmental changes have required us to take pricing action, we've also doubled down on activating consumers and investing in the brand, which we continue to do right now. In the short term, there may be volatility, and there might be some sort of trade-offs happening, but we are guided by, again, a history of about a decade when we have taken these kind of pricing actions in a very volatile environment. Generally, the business comes back to a 21% to 24% EBITDA, and we also sort of continue with a certain volume growth.

Speaker #2: In the short term, they they may be volatility and they might become considered sort of trade-offs happening, but we are guided by again a history of about a decade when we have taken these kind of pricing actions in a very volatile environment and and generally the business comes back to a 21 to 21 4% EBITDA and we also sort of continue with a certain volume growth rate.

Speaker #2: So we feel that, in the short term, there might be some volatility, but in the medium and long term, we're pretty certain about the direction of travel of the business.

Saugata Basuray: We feel that in the short term, there might be a volatility, but in the medium and long term, we're pretty certain in terms of the directional travel of the business.

Speaker #5: Thank you, sir. Thank you for the color.

Ketan Mehta: Thank you, sir. Thanks for the call though.

Kirtan Mehta: Thank you, sir. Thanks for the call though.

Speaker #1: Thank you. Next question is from the line of Nitin Boricha from Sequin Investments. Please go ahead.

Operator 2: Thank you. Next question is from the line of Nitin Borecha from Sekur Investments. Please go ahead.

Operator: Thank you. Next question is from the line of Nitin Borecha from Sekur Investments. Please go ahead.

Speaker #2: Hello. Hello. Can I audible?

Nitin Borecha: Hello? Hello. Am I audible?

Hiten Boricha: Hello? Hello. Am I audible?

Speaker #1: Yes, sir. Go ahead.

Operator 2: Yes, sir. Go ahead.

Operator: Yes, sir. Go ahead.

Speaker #2: Yeah, yeah. So, my question is on the opening demands. You mentioned the impact of the commodity will be more visible in Q3, right?

Nitin Borecha: My question is on the opening remarks, you mentioned the impact of the commodity will be more visible in the Q3, right? Does that mean that the low-cost inventory which we have will be visible in the Q3, so this kind of realization will continue in Q3 also?

Hiten Boricha: My question is on the opening remarks, you mentioned the impact of the commodity will be more visible in the Q3, right? Does that mean that the low-cost inventory which we have will be visible in the Q3, so this kind of realization will continue in Q3 also?

Speaker #2: So does that mean that the low-cost inventory which we have will be visible in Q3? So this kind of realization will continue in Q3 also?

Speaker #3: Mr. Boricha, if I understood your question correctly, you're trying to understand the quarterly profile of our costs. You heard me say that the environment has stepped up back in, you know, March, April.

Mrinalini Srinivasan: Mr. Borecha, if I understood your question correctly, you're trying to understand the quarterly profile of our costs. You heard me say that the environment had stepped up back in April, March.

Speaker #3: The full impact of that did not hit Q2 calls. In fact, it's because we carry older inventory at softer prices.

Mrinalini Srinivasan: The full impact of that did not Q2 calls. We started because we carry older inventory at softer prices.

Speaker #2: Exactly. Exactly that's my question. And sorry to interrupt, but I I am trying to understand. Do we have still do we have that low cost inventory which will be visible in Q3 also?

Nitin Borecha: Exactly. That's my question.

Hiten Boricha: Exactly. That's my question.

Mrinalini Srinivasan: And-

Nitin Borecha: Sorry to interrupt, I am trying to understand, do we have that low-cost inventory, which will be visible in Q3 also?

Hiten Boricha: Sorry to interrupt, I am trying to understand, do we have that low-cost inventory, which will be visible in Q3 also?

Speaker #3: No. No, Mr. Boricha. I think we are we pride ourselves in a very lean inventory profile. So we do churn our inventory fast and that's why we we are already planning for the inventory that we will use in three Q to be back that which has been bought in the end of towards the end of second quarter.

Mrinalini Srinivasan: No, Mr. Borecha. I think we pride ourselves in a very lean inventory profile.

Mrinalini Srinivasan: We do churn our inventories fast, and that is why we are already planning for the inventory that we will use in Q3 to be that which has been bought towards the end of Q2.

Speaker #2: Okay. Okay. So so ma'am, if just a follow-up on this. So if you can mention what is our inventory days we kept what kind of inventories do we kept in terms of days post this value volatility scenario?

Nitin Borecha: Okay, ma'am, just to follow on this, if you can mention what is our inventory days we kept, what kind of inventories do we kept in terms of days for this volatility scenario?

Hiten Boricha: Okay, ma'am, just to follow on this, if you can mention what is our inventory days we kept, what kind of inventories do we kept in terms of days for this volatility scenario?

Speaker #3: No.

Mrinalini Srinivasan: inventory the entire

Speaker #2: Actually, your voice is breaking in between.

Nitin Borecha: Actually, your voice is breaking in between.

Hiten Boricha: Actually, your voice is breaking in between.

Speaker #3: Okay, I'm going to try again. Do you hear me better now?

Mrinalini Srinivasan: Okay, I'm going to try again. Do you hear me better now?

Speaker #2: Yeah. Yeah, ma'am. Better.

Nitin Borecha: Yeah. Ma'am. Better.

Hiten Boricha: Yeah. Ma'am. Better.

Speaker #3: Yeah, I was just saying that the inventory we carry is a result of our supply chain's physical structure. Our raw material and supplier profiles are very diversified.

Mrinalini Srinivasan: Yeah. I was just saying that inventory that we carry is a result of our supply chain's physical structure.

Mrinalini Srinivasan: Our raw material profile, supplier profile is very diversified. We do buy a lot of our inventory locally, almost about half.

Speaker #3: We do buy a lot of our inventory locally — almost about half. And half of our inventory is also bought from international suppliers, which means that lead time in both those cases will be very different.

Mrinalini Srinivasan: Half of our inventory is also bought from international suppliers, which means that lead time in both those cases will be very different, and hence the inventory that we carry on our books will also be different. It is difficult to give a specific answer. Yes, in this volatile time, we have relooked at that. We do plan our inventory very closely to minimize any impact of these surges that we saw in this quarter. Hopefully, we can talk about that when next quarter is over.

Speaker #3: And hence, the inventory that we carry on our books will also be different. So, because we gave a specific answer—yes, in this volatile time, we have relooked at that.

Speaker #3: We do plan our inventory very closely to minimize any impact of these increase surges that we saw in the quarter. And hopefully, we can talk about that when next quarter is over.

Speaker #2: Okay. Okay. And the last one—follow-up on this, ma'am. Can you quantify the impact of this inventory gain in the last quarter in absolute numbers?

Nitin Borecha: Okay. The last one follow up on this, ma'am. Can you quantify the impact of this inventory gain in last quarter in absolute number?

Hiten Boricha: Okay. The last one follow up on this, ma'am. Can you quantify the impact of this inventory gain in last quarter in absolute number?

Speaker #3: I would stay away from specifics, Mr. Boricha, but you know that our results actually give a lot of details. If you go through the financials, you may be able to spot them.

Mrinalini Srinivasan: I will stay away from specifics, Mr. Borecha, you know that our results actually give a lot of details. If you go through the financials, you may be able to spot them. I would stay away from specifics.

Speaker #3: But I would stay away from specifics.

Speaker #2: Okay. Okay. Thank you.

Nitin Borecha: Okay. Thank you.

Hiten Boricha: Okay. Thank you.

Speaker #1: Thank you very much. A request to all the participants: kindly limit yourself to two questions per participant. Next question is from the line of Kesha from Kotak Securities.

Operator 2: Thank you very much. A request to all the participants, kindly limit yourself to two questions per participant. Next question is from the line of Keshav from Kotak Securities. Please go ahead.

Operator: Thank you very much. A request to all the participants, kindly limit yourself to two questions per participant. Next question is from the line of Keshav from Kotak Securities. Please go ahead.

Speaker #1: Please go ahead.

Keshav: Yeah. I just wanted to understand, you said that there will be margin pressures in Q3 as well, but I'm assuming you have taken two price hikes, one in Q1 and then the low double-digit price hike in Q3. Isn't that price hike enough to offset the RM costing? As I understand, after June, the prices of this has also declined. Isn't those two prices sufficient to offset the cost? Is there something else I'm missing here?

[Analyst] (Kotak Securities): Yeah. I just wanted to understand, you said that there will be margin pressures in Q3 as well, but I'm assuming you have taken two price hikes, one in Q1 and then the low double-digit price hike in Q3. Isn't that price hike enough to offset the RM costing? As I understand, after June, the prices of this has also declined. Isn't those two prices sufficient to offset the cost? Is there something else I'm missing here?

Speaker #4: Yeah, so I just wanted to understand—how can we... You said there will be margin pressures in Q3 as well, but I'm assuming you've taken two price actions: one in the January to March quarter, and then the low double-digit price action in Q3.

Speaker #4: So, isn't that price act enough to offset the RM cost increase? Because as I understand, after June, the prices of this—they shall also have declined.

Speaker #4: So, aren't those two price acts sufficient to offset the cost? Or is there something else I'm missing there?

Speaker #1: So Kesha, sorry to interrupt, but your audio is not clear. Could you please repeat your question once again, a bit louder?

Operator 2: Keshav, sorry to interrupt, your audio is not clear. Can you repeat your question once again a bit louder?

Operator: Keshav, sorry to interrupt, your audio is not clear. Can you repeat your question once again a bit louder?

Speaker #4: I just wanted to understand, are the two price actions which the company has taken in the last two quarters sufficient to offset the increase in RM cost?

Keshav: I just wanted to understand that, RM, the two price hikes which the company has taken in last two quarters sufficient to offset the increasing RM cost for Q3, as I understand, Q3, the prices have cooled off the raw material prices. Just wanted to understand on the margin outlook for Q3.

[Analyst] (Kotak Securities): I just wanted to understand that, RM, the two price hikes which the company has taken in last two quarters sufficient to offset the increasing RM cost for Q3, as I understand, Q3, the prices have cooled off the raw material prices. Just wanted to understand on the margin outlook for Q3.

Speaker #4: For the third quarter, because as I understand, in the third quarter, the prices have cooled off—the ROM remains prices. So just wanted to understand the margin outlook for Q3.

Speaker #2: Right. Okay. Thank you for your question. And I'll attempt to answer that maybe in a nonlinear to it. so we have taken a pri we have taken the two price acts with a certain, scenario built in on inventory models for quarter two, but for the rest of the year.

Saugata Basuray: Right. Okay, thank you for the question, and I'll attempt to answer that. Maybe Nani will add to it. We have taken the two price increases with a certain scenario built in on inventory models for Q2 but for the rest of the year. There's also an element of foreign exchange in that, right? As things stand today, the pricing that we have taken has modeled whatever you are seeing by and large in Q3. That being said, environment remains very volatile and as you would have seen in the last couple of weeks. Is the price absolute costs will remain.

Speaker #2: There's also an element of foreign exchange in that, right? So as things stand today, the pricing that we have taken has modeled whatever you are seeing, by and large, in Q3.

Speaker #2: That being said, the environment remains very volatile. And as you would have seen in the last couple of weeks, so is the price—volatile. But the absolute cost will remain true.

Speaker #1: Sir, sorry to interrupt. We are losing your audio.

Operator 2: Sir, sorry to interrupt. We are losing your audio.

Operator: Sir, sorry to interrupt. We are losing your audio.

Saugata Basuray: Okay, let me try again. Are you able to hear me all right?

Speaker #2: Okay, let me try again. Are you able to hear me all right?

Speaker #1: Yes, sir. Now it's better.

Operator 2: Yes, sir. Now it's better.

Operator: Yes, sir. Now it's better.

Speaker #2: Hello. Okay, so as I was saying, there are two aspects to the cost—inflation. There is the raw material price, which is predominantly base oil, and there's also foreign exchange.

Saugata Basuray: Hello. As I was saying that there are two aspects to the cost inflation. There is the raw material price, which is base oil predominantly, and there is also foreign exchange. We have modeled a certain cost of goods for Q2 as well as for H2 of the year, based on which we have taken certain pricing actions. Having said that, the environment remains very volatile, and at this point in time, the stance that we have taken is, if the cost of raw materials and/or foreign exchange further moves adversely, then we stand ready to take pricing action. That is one part of the equation. Separately, we have also done a lot in the last quarter to bring down structural costs in our raw material, as well as some of our other areas where we have intervened.

Speaker #2: We have modeled a certain cost of goods for Q2, as well as for the second half of the year, based on which we have taken certain pricing actions.

Speaker #2: Having said that, the environment remains very volatile. And at this point in time, the the the stance that we have taken is if the cost of raw materials and or foreign exchange further sort of moves adversely, then we stand ready to take, you know, pricing action.

Speaker #2: That's one part of the equation. But separately, we have also done a lot in the last quarter to bring down structural costs in our raw material, as well as in some of our other areas where we have intervened.

Speaker #2: So, we are also tackling all our cost lines to be as efficient as possible, so that we can balance our pricing actions with our ambition to grow our market share.

Saugata Basuray: We are also tackling all our cost lines to be as efficient as possible so that we also balance our pricing actions with our ambition to grow our market share.

Speaker #4: Sure, something like that. Thank you.

Keshav: Sure. Thanks. That is it. Thank you. Thank you.

[Analyst] (Kotak Securities): Sure. Thanks. That is it. Thank you. Thank you.

Speaker #1: Thank you.

Speaker #2: Thank you.

Speaker #1: Next question is from the line of Nirmal from Aditya Birla. Please go ahead.

Saugata Basuray: Thank you.

Operator 2: Next question is from the line of Nirmal from Aditya Birla. Please go ahead.

Operator: Next question is from the line of Nirmal from Aditya Birla. Please go ahead.

Speaker #4: Hello. Thank you for taking my question. Sir, you mentioned that we are present in both the cooling technologies that are used in data centers.

[Analyst] (Aditya Birla): Hello. Thank you for taking my question. Sir, you mentioned that we are present in both the cooling technologies that are used in data centers. If you can, for our understanding, explain how are these two cooling technologies different, and how does our product add value here? Also, if you can share a bit about the competition in this space. Thank you.

Speaker #4: If you can, for our understanding, explain how these two cooling technologies are different and how our product adds value here. Also, if you could share a bit about the competition in this space.

Speaker #4: Thank you.

Speaker #2: Look, at a very high level, the two cooling technologies differ in the sense that there's an immersion cooling approach, where an entire server blade is immersed into a fluid, a chamber holding a fluid, and that dissipates heat while it doesn't allow for electrical conductance. And therefore, you know, that's how the computer works.

Saugata Basuray: Look, at a very high level, the two cooling technologies are different in the sense that there's an immersion cooling approach where an entire server blade is immersed into a fluid, a chamber holding a fluid, that dissipates heat while it doesn't allow for electrical conductance. Therefore, that's how the computer works. In the other case, the architecture is such that the heat is taken off the chip directly with the way the frame has been designed, and there are liquids which flow beneath that, which are then recirculated, and they remove heat. That's at a very high level. I'm not a technical expert, but that's how the two technologies work. We have products that apply for both. From a competitor set, there are lubricant companies which operate in this space. There are also other chemical companies that operate with fluids in that space.

Speaker #2: And in the other other case, the architecture is such that, the chip directly, the heat is taken off the chip directly with, with the way the frame has been designed.

Speaker #2: And there are liquids which flow beneath that, which are then, you know, taken, recirculated, and they remove heat. That's at a very high level.

Speaker #2: I'm not the technical expert, but that's how the two technologies work. We have products that apply for both. And, as you can see from a competitor's side, this space...

Speaker #2: There are also other chemical companies that operate with fluids in that space. I hope that answers your question.

Saugata Basuray: I hope that answers your question.

Speaker #4: Yes, sir. Thank you for the answer.

[Analyst] (Aditya Birla): Yes, sir. Thank you for the answer.

Speaker #2: Thank you.

Saugata Basuray: Thank you.

Speaker #1: Thank you very much. Ladies and gentlemen, we are in the last 10 minutes of the call. Please press star one if you wish to ask a question.

Operator 2: Thank you very much. Ladies and gentlemen, we are in the last 10 minutes of the call. Please press star and one if you wish to ask a question. Next question is from the line of Arya Patel from Emkay Global. Please go ahead.

Operator: Thank you very much. Ladies and gentlemen, we are in the last 10 minutes of the call. Please press star and one if you wish to ask a question. Next question is from the line of Arya Patel from Emkay Global. Please go ahead.

Speaker #1: Next question is from the line of Arya Patel from MK Global. Please go ahead.

Speaker #5: Yeah, hi sir. Thank you for the opportunity, and congratulations on a great set of numbers. I just had one question. I see there's a loss of around ₹66 crores in the OCI.

Arya Patel: Yeah. Hi. Sir, thank you for the opportunity, and congratulations on a great set of numbers. I just had one question. I see there's a loss of around INR 66 crores in the OCI. Can I know what it's pertaining to?

Speaker #5: Can I know what 'it' is referring to?

Speaker #6: Mr. Patel, so it's not a loss as such. It is a revaluation of our investment into Key Mobility. You would recall that the company made this investment close to about four years ago.

Mrinalini Srinivasan: Mr. Patel, it's not a loss as such. It is a revaluation of our investment into Ki Mobility. You will recall that the company had made this investment close to about four years ago. Our accounting policy guides us that we must revalue this asset every six months. The method of revaluation is really based on external markets. We use similar competitive companies, and we do a revaluation of our assets. To that extent, external companies have gone through a very volatile season and hence, as a result, our valuations are impacted. We have done the job of really reflecting that valuation into our balance sheet, and that's the impact that you see here.

Speaker #6: And we so our accounting policy guides us that we must revalue this asset every, every six months. And the method of revaluation is really based on external markets.

Speaker #6: So, we use similar comparative companies, and we do have a revaluation of our assets. To that extent, external companies have gone through a very volatile season.

Speaker #6: And hence, as a result, what valuations are impacted, we have done the job of really reflecting that valuation into our balance sheet. And that's the impact that you see here.

Speaker #6: We'll continue to do this even in the following quarters, and I do expect this revaluation of the asset to keep moving up and down depending on how the external comparative companies perform.

Mrinalini Srinivasan: We'll continue to do this even in the following quarters, and I do expect this revaluation of the asset to keep moving up and down, depending on how the external competitive companies perform.

Speaker #5: Got it. Thank you for the answer. That's it. Thank you so much.

Arya Patel: Got it. Thank you for the answer. That's it. Thank you so much.

Speaker #1: Thank you. The next follow-up question is from the line of Daval Popet from Choice International. Please go ahead.

Operator 2: Thank you. Next follow-up question is from the line of Dhaval Popat from Choice International. Please go ahead.

Operator: Thank you. Next follow-up question is from the line of Dhaval Popat from Choice International. Please go ahead.

Speaker #4: Yeah, thank you for the opportunity again. So, I just wanted to understand your current mix in B2C and B2B business, and whether you're planning either to grow more on B2C or on the front of B2B.

Dhaval Popat: Thank you for the opportunity again. I just wanted to understand your current mix in B2C and B2B business and whether you're planning either to go more on B2C or either on the front of B2B, more from a strategy perspective. The second, of course, the sourcing mix. As of, I remember last time you said 55% is sourced domestically. Is that correct, or are you sourcing the 45%? Is there some change in sourcing that you have done that would have also led to increase in margins?

Speaker #4: More from a strategy perspective, and the second, of course, the sourcing mix—as I remember, last time you said 55% is sourced domestically.

Speaker #4: Is that correct, or are you sourcing 45% of— is there some change in sourcing that you have done that would have also led to an increase in margins?

Saugata Basuray: Thank you, Dhaval, for the question. I think the guidance on 55-45 broadly remains. Having said that, given this year has been very volatile, we are first focused on making sure products are made available to our customers, and we keep the market supplied with the products. Therefore, we take tactical calls during the quarter to keep our availability at the level at which we want. Broadly, the 45-55 will remain the weightage. Within a quarter, it might move around a bit. Then there has been a lot of volatility also in terms of availability of products, and we have taken action to offset that. On your first question on B2B, B2C. Our B2C business, which is the Castrol branded business that you see widely distributed in the market through retail stores, that is something that we look at independently. It's not either/or.

Speaker #2: Okay. Thank you, Daval, for the question. I think the guidance on 55/45 broadly remains. Having said that, given this year has been very volatile, we have first focused on making sure products are made available to our customers and we keep the market supplied with our products.

Speaker #2: So, therefore, we take tactical calls during the quarter to keep our availability at the level at which we want. So, broadly, the 45:55 will remain the way it is.

Speaker #2: Within a quarter, it might move around a bit. And then there has been a lot of volatility also in terms of availability of products, and we have taken action to offset that.

Speaker #2: On your first question on B2B and B2C, our B2C business, which is the Castrol branded business that you see widely distributed in the market through retail stores—that is something that we look at independently.

Speaker #2: It's not this either-or. The B2B business for us is the business that works closely with the institutional share, institutional partners such as OEM starter motors, Maruti, and so on and so forth.

Saugata Basuray: The B2B business for us is the business that works closely with the institutional partners such as OEM, Tata Motors, Maruti, and so on and so forth. On the second, we will be guided by the growth of these OEMs. As they grow, we'll participate in that growth. Separate from that, on our B2C business, we have seen that in rural India, there's a lot of opportunity to grow as mobility kicks in over there with more disposable income. In urban India, there is a big opportunity to premiumize the portfolio because more people are buying premium cars, therefore we have divided the country into those clusters, where we participate with our entire portfolio in rural India to tap into emerging consumers, and we participate with a premium portfolio in parts of urban India, where we participate in the new premium vehicles that are coming in.

Speaker #2: On the second, we will be guided by the growth of these OEMs. As they grow, we'll participate in that growth. Separate from that, on our B2C business, we have seen that in rural India there's a lot of opportunity to grow as mobility kicks in over there with more disposable income.

Speaker #2: In urban India, there is a big opportunity to premiumize our portfolio because more people are buying premium cars. Therefore, we have divided the country into clusters. We participate with our entire portfolio in rural India to tap into emerging consumers, and we participate with the premium portfolio in parts of urban India, where we focus on the new premium vehicles that are coming in.

Speaker #2: Our industrial business, which you may not have referred to but is an important part of our growth agenda, has been growing at high double digits for the last couple of years.

Saugata Basuray: Our industrial business, which you may not have referred to, but is an important part of our growth agenda, has been growing at high double digits for the last couple of years. We think with the tailwind and manufacturing, that will continue as well.

Speaker #2: And we think, with the tailwind in manufacturing, that will continue as well.

Speaker #4: Is it possible for you to just give a split, as in, I understand this is a follow-up, but how would you split your overall revenue coming from—as in, on a percentage basis—if you can provide any color?

Dhaval Popat: Is it possible for you to just give a split? I understand this is a follow-up, but how would you split your overall revenue coming from, on percentage basis, if you can provide any color?

Speaker #2: So, I'll pass on that question to my colleague Renan, and she’ll respond to that.

Saugata Basuray: I'll pass on that question to my colleague, Mrinalini. She'll respond to that.

Speaker #6: I've learned that, from talking again, the industrial business—as you would remember from the past, as we've spoken about—has contributed to about 15% of our overall business.

Mrinalini Srinivasan: Hi, sir. Hi, sir. I'm talking again. Industrial business, as you would remember in the past, we've spoken about it, has contributed about 15% of our overall business. It is growing faster than the rest of the company, and hence that percentage slowly will increase, but it is still in that ballpark range. Within automotive, what we do with our institutional sales and aftermarket, I think that split is perhaps not relevant, but I assume that you are interested more to know how industrial is doing.

Speaker #6: It is growing faster than the rest of the company, and hence that percentage will slowly increase. But it is still in that ballpark range.

Speaker #6: Within automotive, what we do with our institutional sales and aftermarket—I think that split is perhaps not relevant. But I assume that your interest is more to know how industrial is doing.

Dhaval Popat: No, just 15% across industrial and then B2B and B2C. I understand B2C is obviously high, or about 50% higher than B2B business. That's okay.

Speaker #4: No, just, so 15%, of course, industrial. And then B2B and B2C—which one would I— I understand B2C is obviously higher, about 50% higher than the B2B business.

Speaker #4: That's okay.

Speaker #2: Yeah, broadly. I think the volume will be there more than the, quite different.

Saugata Basuray: The volume will be there, margins are quite different.

Speaker #4: Okay. Thank you. Thank you.

Dhaval Popat: Okay, thank you.

Speaker #1: Thank you. Participants, we are in the last five minutes of the call. You may press * and 1 to ask a question. The next question is from the line of Muskan Patel from JK Investments.

Operator 2: Thank you. Participants, we are in the last five minutes of the call. You may press star and one to ask a question. Next question is from the line of Muskan Patel from JK Investments. Please go ahead.

Operator: Thank you. Participants, we are in the last five minutes of the call. You may press star and one to ask a question. Next question is from the line of Muskan Patel from JK Investments. Please go ahead.

Speaker #1: Please go ahead.

Speaker #7: Hello, team. Congratulations on a good set of numbers. I just wanted to know if there are any major capex plans or strategic investments that are planned over the medium term?

Muskan Patel: Hello, team. Congratulations on good set of numbers. I just was wondering and wanted to know that are there any major CapEx plans or strategic investments that are planned over the medium term?

[Analyst]: Hello, team. Congratulations on good set of numbers. I just was wondering and wanted to know that are there any major CapEx plans or strategic investments that are planned over the medium term?

Speaker #6: Hi, Musan. Thank you for the question. We've discussed this in the past. We do spend our capital either in our manufacturing units to make sure they have the latest standards of health and safety, or, you know, for capacity expansion, etc.

Mrinalini Srinivasan: Hi, Muskan. Thank you for the question. You have heard us talk about this in the past. We do spend our capital, either in our manufacturing units to make sure that we have the latest standards of health and safety or, for capacity expansion, et cetera. We spend our capital in markets to make sure that we have the right level of visibility for our dealers as well as the workshops. That continues to be in the range that we always declare for the year that we spend about INR 100 crore, almost about 50/50 amongst both of them. To your second part of question, are there any strategic investments, et cetera, being considered? We always do that. It is a part of our regular journey. We do many investments. There is nothing to share at this moment, but we will be sharing as and when we are ready.

Speaker #6: And we spend our capital in markets to make sure that we have the right level of visibility for our dealers as well as workshops.

Speaker #6: So, that continues to be in the range that we always declare. So, the year that we spent about ₹100 crore—almost about half, half—it's both of them.

Speaker #6: To your second part of the question, are there any strategic investments, etc., being considered? We always do that. It is a part of our regular journey.

Speaker #6: We do many investments. There's nothing to share at this moment, but we will be sharing as and when we are ready.

Speaker #7: I see. Thank you. That sounds wonderful. Thank you.

Muskan Patel: I see. Thank you. That sounds wonderful. Thank you.

[Analyst]: I see. Thank you. That sounds wonderful. Thank you.

Speaker #1: Thank you. Next question is from the line of Jagdeshwar from Japa Investments. Please go ahead.

Operator 2: Thank you. Next question is from the line of Jagdishwer from Japa Investments. Please go ahead.

Operator: Thank you. Next question is from the line of Jagdishwer from Japa Investments. Please go ahead.

Speaker #5: Yeah, good afternoon, sir. I have two questions. I believe Castrol is transitioning itself into full synthetic or semi-synthetic kinds of lubricants across categories.

Jagdishwer: Yeah, good afternoon, sir. I have two questions. I believe Castrol is transitioning itself into full synthetic or semi-synthetic kind of lubricant across categories. When does it start? When does the transition become full or is it more gradual? Because if we see category 3 base oil, there is a shortage and the price increase has, I think it has become 2x or 3x. How do you see the situation over the next one to two years? Second question is with respect to E20 fuel, do you see it triggers increase in more synthetic lubricant for India? Thank you so much.

[Analyst] (Japa Investment Adviser): Yeah, good afternoon, sir. I have two questions. I believe Castrol is transitioning itself into full synthetic or semi-synthetic kind of lubricant across categories. When does it start? When does the transition become full or is it more gradual? Because if we see category 3 base oil, there is a shortage and the price increase has, I think it has become 2x or 3x. How do you see the situation over the next one to two years? Second question is with respect to E20 fuel, do you see it triggers increase in more synthetic lubricant for India? Thank you so much.

Speaker #5: So, when does it start? I mean, when does the transition become, you know, full? Or is it more gradual? Because if we see category III base oil, there is a shortage, and the price increase has—I think it has become two or three times.

Speaker #5: So, how do you see the situation over the next one to two years? And second question is, with respect to E20 fuel, do you see it triggering an increase in more synthetic lubricants for India?

Speaker #5: Thank you so much.

Speaker #2: Thank you, sir, for your question. Both are very important and interesting questions. So, I think I'll tackle the first one, which is on the high grading of our portfolio in the cars business.

Saugata Basuray: Thank you, sir, for your question. Both very important and interesting questions. Let me tackle the first one, which is on the high grading of our portfolio in the cars business, and we have done it for bikes as well, where we introduced fully synthetic products. This is not new in terms of what Castrol does. We are always there to introduce the latest offering to consumers, and that is what you're seeing. At what pace this takes off and converts the entire, or changes the entire portfolio into fully synthetic, will be determined by consumer uptake and how the vehicle technology evolves over time. I don't see that becoming a biggest part of our portfolio in the next two years. We are introducing products which are world-class and making it available to Indian consumers.

Speaker #2: And we have done it for bikes as well, where we introduced fully synthetic products. So, this is not new in terms of what Castrol does.

Speaker #2: We are, we are, we are always there to introduce the latest offering to consumers. And that is what you're seeing. At what pace?

Speaker #2: This takes off and becomes—the, you know, converts the entire, or changes the entire, portfolio into fully synthetic—will be determined by consumer uptake and how the vehicle technology evolves over time, right?

Speaker #2: So I don't see that becoming a big part of our portfolio in the next two years, but we are introducing products which are world-class and making them available to Indian consumers.

Speaker #2: And then, we will invest behind the brand to premiumize our portfolio and create more opportunities—reasons for them to buy our premium products.

Saugata Basuray: We will invest behind the brand to premiumize the portfolio and create more opportunities, reasons for them to buy our premium products. That's the first part, answering the first part of your question. I think the subtext to it, which is in terms of group three base oil, yes, it's elevated, and it is being impacted by the Middle East prices. Again, as I mentioned to somebody a short while back, our pricing actions are determined by our guidance of EBITDA of 21% to 24%. If the raw material prices go up, we will take pricing actions to compensate for that. At the same time, we remain very focused on driving efficiency through our operational efficiency, through our supply chain to bring down our operating costs. We look at pricing as well as cost management.

Speaker #2: So that's the first part, answering the first part of your question. I think the subtext to it, which is in terms of Group III base oil—yes, it's elevated.

Speaker #2: And it is being impacted by the Middle East crisis. And, again, as I mentioned to somebody a short while back, our pricing actions are determined by our guidance of EBITDA of 21% to 24%.

Speaker #2: So, if raw material prices go up, then we will take pricing actions to compensate for that. At the same time, we remain very, very focused on driving operational efficiency through our supply chain to bring down our operating costs.

Speaker #2: So, we do it—we look at pricing as well as cost management. Your second point was about... if you don't mind—what, sorry?

Saugata Basuray: Your second point was about, if you don't mind.

Speaker #5: E20.

Jagdishwer: E20.

[Analyst] (Japa Investment Adviser): E20.

Speaker #2: E20. Was on E20. So that's, as you know— as most people would know right now, it's a fuel choice, right? And therefore, engines that are not being optimized for E20, there would be implications for them.

Saugata Basuray: E20. Was on E20. That, as most people would know right now, it's a fuel choice. Therefore, engines that have been not optimized for E20, there would be implications for them. That does not impact the lubricants specifically being used in those engines. We'll have to wait and watch to understand how the OEMs respond to it and how does the whole ecosystem of transporting and dispensing biofuels works out in the country. Yeah. I would also add a quick one, which is most of our brands in the passenger car business are already compliant with the requirements of operating with an E20 fuel into the engine.

Speaker #2: That does not impact the lubricant specifically in, being used in those in and we'll have to wait and watch to understand how the OEMs respond to it and how does the whole ecosystem of transporting and and dispensing, you know, biofuels works out in the country.

Speaker #2: Yeah, I would also add—and a quick one—which is most of our brands in the passenger car business are already compliant with the requirements of E, you know, operating with an E20 fuel in the engine.

Speaker #5: Thank you so much. That is quite useful.

Jagdishwer: Thank you so much. That was quite useful.

[Analyst] (Japa Investment Adviser): Thank you so much. That was quite useful.

Speaker #2: Thank you.

Saugata Basuray: Thank you.

Speaker #1: Thank you very much. Ladies and gentlemen, we are at time. This brings the conference call to an end. On behalf of Castrol India Limited, I thank you for joining this call.

Operator 2: Thank you very much. Ladies and gentlemen, we are at time. This brings the conference call to an end. On behalf of Castrol India Limited, I thank you for joining this call. You may now disconnect your lines. Wish you a good day ahead. Thank you all.

Operator: Thank you very much. Ladies and gentlemen, we are at time. This brings the conference call to an end. On behalf of Castrol India Limited, I thank you for joining this call. You may now disconnect your lines. Wish you a good day ahead. Thank you all.

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2Q 2026 Castrol India Ltd Earnings Call

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