Castrol India Limited
Know the Company
Castrol India Limited (Castrol), a 51% subsidiary of Castrol Limited UK, which is part of the BP Group, is the second largest lubricant company in India. Castrol was incorporated in 1979 as Indrol Lubricants and Specialities Pvt. Ltd. and later became Castrol India Limited in 1990. BP Group has a legacy of 125-year of driving technological advancements in lubricants.
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Castrol is the second-largest player in the Indian lubricant market, holding around 20% market share. The company manufactures and markets automotive and industrial lubricants and related products catering various sectors, including automotive, mining, machinery, and wind energy. Its product portfolio includes engine oils, hydraulic fluids, driveline fluids, gear lubricants, greases, brake fluids, process oils, metalworking fluids, and more. Castrol India boasts a range of well-known brands, including Castrol CRB, Castrol GTX, Castrol Activ, Castrol MAGNATEC, Castrol EDGE, and Castrol POWER1. Notably, 54% of its volumes come from the commercial vehicles segment and the rest comes from industrial segment.
Strengths
Vast Distribution Network
Castrol has a robust distribution network comprising over 450 distributors, serving around 150,000 outlets in urban and semi-urban areas. In rural India, the company reaches 36,000 retail stores through a network of sub-distributors. This widespread presence has been a key driver of volume growth, ensuring Castrol’s products are easily accessible to customers across the country.
Market Leadership and Brand Recognition
Castrol India Ltd is a market leader in the Indian lubricant industry, with a strong brand presence. The company’s brand recognition and reputation for quality products have enabled it to maintain a loyal customer base.
Diverse Product Portfolio
Castrol India Ltd offers a diverse range of lubricants, including engine oils, gear oils, and greases, catering to various industries such as automotive, industrial, and marine. The company’s product portfolio is designed to meet the specific needs of different applications, ensuring that customers receive the best possible performance and protection.
Strategic Partnerships
Castrol India Ltd has established strategic partnerships with major automotive and industrial companies, including Tata Motors, Mahindra & Mahindra, and Siemens, etc. These partnerships enable the company to develop customized lubricants that meet the specific requirements of its partners, enhancing its product offerings and strengthening its relationships with key customers. The company’s focus on research and development enables it to develop innovative products that meet the evolving needs of its customers.
Satisfactory Financials
For the 4Q 2024 (Castrol follows the calendar year as the financial year) , Castrol reported strong financial performance. Its revenue registered at Rs 1,354 crores, up 7% from 4Q 2023. Profit before tax for the period was Rs 371 crores, an increase of 14% year-on-year. For the FY2024, the company achieved a revenue of Rs 5,365 crores, a 6% increase compared to last year. Profit before tax stood at Rs 1,258 crores for the full year 2024, growing by about 6% from Rs 1,181 crores in full year 2023.
Castrol is a company with a strong balance sheet and has historically maintained a zero-debt position. It also follows a liberal dividend payout policy, which translates into a decent yield for shareholders.
Expanding Product Range and Manufacturing Facilities
Castrol continuously expanding its product portfolio. In the latest quarter, its Auto Care range added with 2 new products and developed 4 advanced rust preventive solutions. The company inaugurated its state-of-the-art technology center in Patalganga, which will drive innovation, blending, analytical testing, and advanced EV and data center solutions. It has also installed state-of-the-art filling lines at its Paharpur and Silvassa plants.
Emerging Trends
There is an emerging trend in the vehicle industry towards Electric vehicles (EVs), hybrids, and CNG powertrains. However, the demand for internal combustion engines (ICE) is expected to remain strong until 2040, with hybrid vehicles acting as a bridge in the transition. Castrol is pro-actively collaborating with OEMs to support this transition.
Additionally, as India’s digital infrastructure expands, data centers are emerging as a key growth opportunity. With the increasing demand for high-performance cooling and lubrication solutions in data centers, Castrol is well-equipped to support energy efficiency and operational reliability in this fast-growing sector.
Demand Drivers
The growth of industrial lubricants is closely tied to economic activities associated with key sectors like machinery manufacturing, electronics, and infrastructure. India’s thriving automotive sector contributes to 40% of its manufacturing GDP. Rising disposable incomes, shorter asset cycles, and increased farm mechanization drive demand for commercial and personal vehicles.
Castrol is well-positioned to tap into emerging high-growth sectors such as wind, aerospace, defense, and electronics manufacturing. Its portfolio includes high-performance lubricants and metalworking fluids designed to meet the rigorous demands of these industries.
Rising demand for higher-specification oils has led to longer oil change cycles. While this moderates overall market volumes, it presents an opportunity for value maximization — and Castrol is a company well-positioned to introduce high-specification lubricants.
Risk Factors
The lubricant industry faces several challenges, including, volatile Crude Oil and Base Oil Prices. Crude oil and base oil prices have remained volatile due to geopolitical events, affecting the industry’s cost structure. The depreciation of the Indian Rupee further added to procurement costs. High Inflation also a risk, which potentially reducing the frequency of servicing.
The growing adoption of electric vehicles, particularly in two-wheeler and small commercial vehicle segments, presents a challenge. In addition to this, Indian lubricant market remains highly competitive, with several players striving for market share.
Outlook
The lubricant oil business growth is closely tied to economic growth, as lubricants play a crucial role in various industries, including automotive, industrial, and aerospace. As economies grow, industrial production and automotive manufacturing increase, leading to higher demand for lubricants.
India, the world’s third-largest lubricant market, accounts for 10% of global demand and 21% of Asia-Pacific demand. The lubricants industry spans the automotive, industrial, and marine sectors, with industrial and automotive segments driving most of the overall demand. India’s industrial sector is growing rapidly, fuelled by infrastructure expansion, manufacturing advancements, and increasing automation. This surge is driving greater demand for high-performance lubricants.
India’s lubricant market, ranked third globally, is expected to continue growing, driven by increasing demand from the automotive and industrial sectors. India’s economic activity and GDP growth are projected to maintain momentum, positioning the country as one of the world’s fastest-growing large economies. This positive outlook supports Castrol’s expectations for sustained demand growth across various segments.
Crude oil prices directly impact the margins of lube companies. They often benefit from lower crude oil prices, as base oil—the key raw material—becomes cheaper, thereby improving profit margins. However, if crude prices rise sharply, input costs increase, potentially squeezing margins unless the additional costs can be passed on to consumers. Fortunately, in recent times, crude oil prices have remained at the lower end despite numerous geopolitical issues and are expected to stay moderate in the near future. Castrol also stands to benefit from this trend.
As a sustainable growth strategy, Castrol plans expand its reach across geographies and population areas, widen its product portfolio, strengthen workshop presence, and make substantial investments in premium brands. The company management is optimistic about the continual demand growth in industrial lubricants, driven by increasing demand from various industries. They also anticipate continued growth in the marine and energy lubricants sector and plans to focus on widening reach across key customers, increasing availability, and strengthening distributor footprint.
Sector: Oil, Gas & Consumable Fuels
Market Price: Rs. 196.20 as on today
FV: Rs 5/-
Stock Name: Castrol India Ltd
BSE Code: 500870, NSE Code: CASTROLIND
Market Cap.: Rs 19142 Cr
Book Value: Rs. 23/-
Incorporation: 1979
Headquarters: Mumbai, India
