Chief Financial Officer, Nayara Energy Limited
Castrol India Sees 8% YoY Jump In Revenues In Q4CY22: Deepesh Baxi Exclusive | CNBC-TV18
Castrol India announced that it has registered revenue from operations of INR 4,774 crore in CY22, registering a growth of 14% compared to INR 4,192 crore the previous year.
For Q4CY22, the company's revenue grew by 8% to INR 1,176 crore compared to INR 1,091 crore in Q4CY21.
In an exclusive conversation with CNBC-TV18, Deepesh Baxi, CFO & Wholetime Director, Castrol India, speaks on the firm's Q4CY22 results. Listen in.
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Transcript (16 segments)
I
Interviewer0:07
Welcome back. Well, the market is all over the place really. The Sensex and the Nifty are a tad bit higher, but it's the mid-cap end of trade that's really sulking now. The mid-cap index is down 200 points, and a lot of pressure is coming in on individual stocks. The advance-decline ratio has now moved well in favor of the declines. It's really a slam dunk across many spaces. So not just result reactions like Nika, which is down 5%, but banks in the mid-cap end of trade are under a lot of pressure. Bank of India is down 4%, and all the Adani Group stocks – Enterprises are taking a big knock this morning. So the market breadth has worsened, and I think that's the key highlight of morning trade. Castrol India posted a mixed set of Q4 numbers. They go by the calendar year, so that's Q4 CY22. The revenue growth was not too bad, but I think it's the margin pressure that has spooked the street. The EBITDA is down 8%. Deepesh Baxi, who is the CFO and whole-time director of Castrol India, joins us now. Mr. Baxi, good morning and thanks for joining in. You know, your margins have fallen to 23.2% versus 25%+ same time last year. But what you've managed to do is hold on to the lower end of your guided margin band. What is the outlook for this new calendar year? Do you think you could fall below 23? Could it get worse before it gets better?
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Deepesh Baxi1:25
Good morning, and thanks for having me on your channel. I think our performance has been quite resilient given the challenges we have faced in the marketplace, especially around the forex and inflationary pressures. These all came from volatile crude prices, rising cost of additives and base oil. What we've been able to do in this quarter, which is the fourth quarter for us, is take the necessary interventions in the market. As a result, our turnover and top line have grown. You're right, the margins have been at the lower band. What has also happened in this quarter is that we are getting a forward outlook of some softening of input costs. That will help us move forward into next year. Overall, we are not moving from the frame we have given on our margins, which is in the range of 23% plus or minus.
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Interviewer2:26
All right. Mr. Baxi, thanks so much for joining in. But given that input costs are cooling off, would you be tempted to start guiding to move closer to the higher end of that range – 23% to 25%? Also, I see that for the past quarter there has been growth of around 8%. Split it up for us. How much of it was volume-led?
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Deepesh Baxi2:46
Sure. Input costs are softening. We do have programs in place to make volume growth happen – whether it is about cash, a lot of services that we've launched in the marketplace, or introduction of new products as well. Having said that, one input cost we are worried about is forex, because that's been relentless and hasn't changed at all. So right now, we are sticking to our range of 23%.
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Interviewer3:16
Of course, the endeavor is going to be to make the operating margin grow as well. In terms of the growth of 8%, you're splitting the top-line growth. What was it?
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Deepesh Baxi3:30
On the 8% top-line growth, it's been price that has led the main part. Volumes have been flattish in the past quarter.
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Interviewer3:45
But for this year – 2023 on the whole – what kind of volume growth could you be guiding for? A rough number?
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Deepesh Baxi3:52
The category – the market where we operate in the lubricants market – will grow in the range of 3.5% to 5%. We will endeavor to grow above the market growth rate.
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Interviewer4:06
Okay. In terms of demand, you said your endeavor is to grow above the market growth rate. But how has demand been in general? Is there any kind of improvement? What is the expectation for FY24, in the calendar year?
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Deepesh Baxi4:20
Demand is looking better than it was in quarter four. In fact, our January results internally – which of course I can't disclose – have been very good. I see that the personal mobility segment, especially cars and bikes, is going to continue to grow. We also started the new SMR – service, maintenance, and repair – workshop initiatives, so we do expect volumes coming from there as well.
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Interviewer4:50
And in terms of the EV fluids, you are planning to launch your EV fluid range this year in the aftermarket space. Can you tell us what the capex plans are for that segment and what kind of revenue opportunity you see there?
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Deepesh Baxi5:06
Yes. Castrol ON is the new product launch we are doing in the EV fluid space. It will be transmission fluids, greases, and coolants. It's going to be early days for me to give you a range of that. As far as the consumption goes, that will be in electric vehicles. Electric vehicles are growing. We already have relationships with two OEMs – MG Motors and Tatas. We'll have to wait and watch how this market plays out in terms of the growth of electric vehicles.
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Interviewer5:39
Mr. Baxi, you mentioned forex being the big worry for you. Could you explain in what way and what you can do to mitigate that?
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Deepesh Baxi5:48
Sure. First of all, why forex is an input cost for us and why does it worry us? We import about 60% to 70% of the raw materials, so when you import, forex comes into factor. We have an in-house hedging policy, so we do that and try to mitigate it. Having said that, when we do our price increases in the market, we also consider forex as part of the overall input cost recovery. So there is a program in place. Obviously, with base oil coming down and softening of other input costs, it's about managing the increase in one input and reduction in the other. The focus is going to be volume growth and market share growth for next year.
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Interviewer6:34
Good to have your thoughts, Mr. Baxi. Thanks so much for stopping by and filling us in with all those details. Wishing you a good 2023 ahead. As you said, demand is showing some traction on the ground and you look to outpace the industry growth. We look forward to having a chat with you rather soon.
Well, yesterday was a