Arabian Petroleum Ltd — Q4 FY25 earnings call

Call held 19 Jun 2025

Management summary

Arabian Petroleum reported strong FY25 results with significant revenue and profit growth, driven by operational expansions and new product initiatives. The company achieved positive cash flow and secured key government and OEM approvals. While facing challenges like geopolitical oil price volatility and filling capacity bottlenecks, management is implementing strategies to mitigate risks and sustain growth, including backward integration and new market entries.

Highlights

  • Revenue grew by 8.93% from ₹262 crores to ₹285 crores in FY25.

  • PAT increased by 33.5% from ₹6.8 crores to ₹9.08 crores in FY25.

  • EBITDA grew by 16.5% in FY25.

  • Company achieved operational cash flow positivity, moving from -₹9 crores to +₹12 crores.

  • Secured BRO orders for construction work in Bhutan and became the first Indian company to get Daimler trucks approval.

Concerns

  • Geopolitical issues causing speculative oil price increases and potential supply chain impacts.

  • Bottleneck in filling capacity, currently utilized at 75%, limiting full production capacity utilization.

  • Credit rating agencies reported 'non-cooperating' status, which is being revised as an administrative oversight.

Key financials

  1. Revenue ₹285 Cr +8.9%YoY
  2. PAT ₹9.08 Cr +33.5%YoY
  3. EBITDA Growth 16.5% +16.5%YoY
  4. Cash Flow ₹12 Cr
  5. Production Volume 20,000 KL +10%YoY
  6. Total Production Capacity 48,000 KL

What they filed

Q4 FY26: revenue up 61.1%, net profit up 66.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY23Q4 FY23Q2 FY24Q4 FY24Q2 FY25Q4 FY25Q2 FY26Q4 FY26
Revenue110 133 118 144 139 +26%146 +10%182 +54%232 +61%
EBITDA3 6 7 7 8 +167%8 +33%9 +29%9 +29%
Net profit1 4 3 3 5 +400%4 +0%6 +100%5 +67%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

medium confidence
  • Debt Debt disclosed
    The overall cash flow went from (-) 9 crores to about (+) 12 crores, and this was one of the concerns, or I would say that pointed out by some of our marquee investors, and we are happy to state that the company has gone operationally cash flow positive in this year, and we intend to do so in the coming years as well. ... the non- current liabilities including debt fell down by 17.94%.
  • Liquidity Liquidity disclosed Company achieved operational cash flow positivity, moving from -₹9 crores to +₹12 crores in FY25.
    The overall cash flow went from (-) 9 crores to about (+) 12 crores, and this was one of the concerns, or I would say that pointed out by some of our marquee investors, and we are happy to state that the company has gone operationally cash flow positive in this year, and we intend to do so in the coming years as well.

Guidance & targets

Operational

  • South India warehouse operationalization Operational · In the coming 2 months · High confidence Operational
    Now we have about 10 plus warehouses across India. And I obviously the South India warehouse also is going to be live in the coming 2 months. That will be also operational.

    — Manan Mehta

  • Night shift operation for filling capacity Operational · In a year or so · Medium confidence Operational
    Now we probably are assessing whether to start our night shift or not. So that in the situation that we are in currently and you know, with that probably night shift also operational in a year or so we may be exhausting our filling capacity for certain product lines.

    — Manan Mehta

Product Launch

  • Copper wire drawing products sales Product Launch · In the coming few months · High confidence Sales initiation
    Now, I am happy to share that the copper wire drawing products are also in place, and we intend to sell them also in the coming few months.

    — Manan Mehta

Margin

  • Retain margin growth rate Margin · Next 2 to 3 years · Medium confidence 20-25%
    I would say so we have. We have been growing. If we if I would say if I analyze last 5 years the margin growth has been about 20-25% and on absolute terms. We will be able to retain that over a period of next 2 to 3 years.

    — Manan Mehta

Revenue

  • Transformer business additional revenue Revenue · Next couple of years · Medium confidence 25-30 crores
    this could probably add up to about in the next couple of years to about 25-30 odd crores of revenues that would come from this segment at the same time.

    — Manan Mehta

Investor Relations

  • Monthly operational updates Investor Relations · Every month · High confidence Regular updates
    So, we would be giving every monthly update on certain platforms. This update would not be financial update. This would be more operational updates and not mentioning numbers... I think we are aligned to that. And I mean our I team along with our back-end team will definitely work on giving productive updates every month.

    — Manan Mehta

What to watch in Q1 FY26

South India warehouse operational status

Next quarter (within 2 months)
Current Going to be live
Target Operational

Why it matters

Expansion of distribution network to support growth and market reach.

And I obviously the South India warehouse also is going to be live in the coming 2 months. That will be also operational.

Risks & concerns

  • Geopolitical issues impacting oil prices and supply chain

    high

    Volatile crude oil prices due to global events can impact raw material costs and supply, though management mitigates this by maintaining 11.5 months of inventory.

    Analyst acknowledged

  • EV penetration impacting automotive lubricants demand

    medium

    Expected increase in EV penetration (4-5% to 23% in 5 years) could reduce demand for traditional lubricants, but the company is diversified and developing water-based products.

    Analyst acknowledged

  • Bottleneck in filling capacity

    medium

    Current filling capacity is 75% utilized, limiting full utilization of production capacity (48,000 KL), requiring solutions like night shifts or outsourcing.

    Analyst acknowledged

  • Credit rating 'non-cooperating' status

    low

    Two credit rating agencies reported non-cooperation, which is an administrative issue (agencies not asked by bankers) and is being revised.

    Analyst acknowledged

Q&A highlights

8 direct
FY24/FY25 Volume and Filling Capacity Direct
So, in terms of kl, we did about 20,000 kl per annum in terms of last year... So filling capacity, I would say, currently, we are at about 75% of our filling capacity when it comes to small packs in general.

Clarifies actual production volume vs. stated capacity and highlights filling as a bottleneck for future growth.

Asked by CA Varun Agarwal

Impact of Geopolitical Issues on Oil Prices Direct
I would say that you know this has become the new normal now... we normally tend to stock somewhere about 11 and a half months of inventory, so that we are not left.

Addresses a key sector risk (oil price volatility) and management's strategy to mitigate it through inventory management.

Asked by CA Varun Agarwal

Credit Rating 'Non-Cooperating' Status Direct
So basically, the agencies were not asked by our bankers to take any outside credit rating agencies. So that's why they have been mentioned that you know. The, we are not cooperating. But yes, we will be revising this, and soon we'll be getting an Updated one.

Clarifies a potential red flag for investors, indicating it is an administrative issue being resolved rather than a fundamental problem.

Asked by Sahil R

Outlook for FY26 and FY27 Top Line Direct
Yes, we are seeing robust top line growth this year... this year we are expecting a robust, you know. Increase in the top line also with you know, in line with our expectations, and the same would continue for our profitability as well.

Provides management's forward-looking view on growth and profitability, indicating continued positive momentum.

Asked by Sahil R

Margin Trajectory and Drivers Direct
one is obviously the margin growth has been you know, attributed to a lot of things one of them primarily being the I would say base oil, sourcing part where that is our major cause. So, with the working capital money that was infused by the proceeds of the IPO, we were able to really bet on a lot of good refineries...

Explains the specific factors contributing to margin improvement and how the company plans to sustain it through strategic sourcing and customer relationships.

Asked by Smit Jain

Bottling Capacity Expansion vs. Outsourcing Direct
So strategically, we don't want to invest. There is, primarily, because it's better to outsource the non-core business operations... So, we don't really foresee that we would be doing any big capex expansion in it in the current.

Clarifies the company's capital allocation strategy regarding a key operational bottleneck, favoring outsourcing over significant in-house capex.

Asked by Smit Jain

Transformer Business Growth and Revenue Contribution Direct
At the same time, we see a stabilized business of not less than maybe somewhere about 50-60 odd lakhs rupees a month. So, translating to about 60 odd crores on top line, on a annual basis... this could probably add up to about in the next couple of years to about 25-30 odd crores of revenues that would come from this segment at the same time.

Provides specific revenue figures and growth expectations for a new and expanding business segment, highlighting its potential contribution.

Asked by Smit Jain

Data Center Cooling Products Direct
Yes, that is on the cards. In fact, yesterday only we had an appointment with our company customer that for data center cooling only immersion cooling systems, as we call it. And the product is available with us.

Reveals a new product area and market opportunity for the company, indicating diversification into high-growth technology sectors.

Asked by Arjun

2 min read 6 chapters

Detailed narrative

Financial Performance and Growth Drivers

Arabian Petroleum reported a strong financial year, with revenues growing by 8.93% to ₹285 crores from ₹262 crores in FY2024. EBITDA saw a 16.5% growth, and PAT increased significantly by 33.5% from ₹6.8 crores to ₹9.08 crores. The company also achieved operational cash flow positivity, reversing from a negative ₹9 crores to a positive ₹12 crores, addressing a prior investor concern.

Operational Expansion and New Markets

The company expanded its presence, now operating in almost 22 states across India and exporting to over 25 countries. Key operational achievements include securing BRO orders for construction work in Bhutan and becoming the first Indian company to receive Daimler trucks approval for two products (10W40 and 15W40). A new warehouse facility was launched in Pune, and a South India warehouse is expected to be operational within two months, further strengthening distribution.

Product Development and Backward Integration

Arabian Petroleum is focusing on backward integration and new product development to enhance efficiency and market offerings. This includes the development of thrust protectors for submersible pumps and copper wire drawing products, which are expected to be sold in the coming months. The company is also expanding into the transformer business, currently generating ₹60 crores annually, with an expectation to add ₹25-30 crores in revenue from this segment in the next couple of years.

Capacity and Infrastructure

The total production capacity stands at 48,000 kiloliters per annum, with the potential to increase to 56,000 kiloliters by adding two more reactors. Last year's production volume was approximately 20,000 kiloliters. The current bottleneck is identified in filling capacity, which is utilized at about 75% for small packs, leading the company to consider implementing night shifts or outsourcing to co-packers to optimize output.

Margin Outlook and Risk Mitigation

Management attributes margin growth to strategic base oil sourcing and effective working capital management post-IPO, aiming to retain the 20-25% margin growth rate over the next 2-3 years. To mitigate geopolitical risks impacting oil prices, the company maintains an inventory of approximately 11.5 months. While acknowledging the long-term impact of EV penetration on automotive lubricants, management believes the company has ample room for growth and is developing water-based chemistries to offset this risk.

Investor Relations and Transparency

In response to analyst feedback, the company committed to providing monthly operational updates to investors, distinct from financial results, to enhance transparency. An issue with credit rating agencies reporting 'non-cooperating' status was clarified as an administrative oversight (agencies not being asked by bankers) and is in the process of being revised, aiming for an updated rating soon.

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