Castrol India Limited — Q4 FY25 earnings call

Call held 29 Apr 2025

Management summary

Castrol India commenced FY25 with a strong Q1 performance, driven by robust volume growth across its automotive segments and significant rural expansion. Despite macroeconomic headwinds and increased brand investment, the company delivered healthy top-line and bottom-line growth, underscoring its focus on operational efficiency and strategic market penetration. The company also highlighted its efforts in product innovation, network expansion, and exploring new growth avenues like data center cooling and the Auto Care segment.

Highlights

  • Revenue from operations stood at INR 1,422 crores, marking a 7% YoY increase.

  • Profit before tax grew by 7% YoY to INR 313 crores.

  • Profit after tax increased by 8% YoY to INR 233 crores.

  • Overall volume growth was 8% quarter-on-quarter (Q1 2024 to Q1 2025), reaching over 63 million liters.

  • Automotive segment, comprising 85% of the business, saw double-digit volume growth in commercial vehicles and cars, and high single-digit growth in 2-wheelers.

  • Rural expansion achieved double-digit growth, contributing significantly to overall performance.

  • EBITDA margin was at the lower end of the 22-24% guidance range, impacted by increased brand investment.

Key financials

  1. Revenue from Operations ₹1,422 Cr +7%YoY
  2. Profit Before Tax ₹313 Cr +7%YoY
  3. Profit After Tax ₹233 Cr +8%YoY
  4. Total Volume 63 million liters +8%QoQ

What they filed

Q1 FY27: revenue up 25.0%, net profit up 42.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,288 1,354 1,422 1,497 1,363 +6%1,440 +6%1,545 +9%1,871 +25%
EBITDA286 376 307 350 323 +13%368 −2%329 +7%494 +41%
Net profit207 271 233 244 228 +10%245 −10%242 +4%348 +43%
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.

Guidance & targets

Profitability

  • EBITDA Margin Profitability · ongoing · High confidence 22-24%
    The EBITDA margin that you're talking about is, of course, at the lower end of the guidance that we have given for a while now, which is 22% to 24%-odd.

    — Kedar Lele, Managing Director

Volume

  • 2-wheeler park growth Volume · every year · High confidence 7-8%
    ICE-based 2-wheelers actually fuelling our overall continued growth of 7% to 8% as the industry or the as the park size of the 2-wheeler grows.

    — Kedar Lele, Managing Director

Market Share

  • EV share of new 2-wheeler sales Market Share · by 2030 · Medium confidence 30%
    by 2030, my expectation is if government supports it and the EV charging infrastructure at home also grows and they become more safe to ride on, you should see about 30%, as you rightly said, of the numbers getting sold becoming EV

    — Kedar Lele, Managing Director

  • EV share of total 2-wheeler park Market Share · by 2030 · Medium confidence <10%
    which means of the park, that number will still be less than 10%.

    — Kedar Lele, Managing Director

What to watch in Q1 FY26

EBITDA Margin performance

next quarter
Current Lower end of 22-24% guidance (Q1 FY25)
Target Movement towards the mid-to-upper end of 22-24% range

Why it matters

Indicates the effectiveness of strategic investments and cost management in improving profitability.

The EBITDA margin that you're talking about is, of course, at the lower end of the guidance that we have given for a while now, which is 22% to 24%-odd.

Risks & concerns

  • Macroeconomic headwinds (input costs, forex volatility)

    medium

    Management noted these factors but emphasized the company's resilience in navigating them.

    Management acknowledged

  • EV transition impact on lubricant volumes

    medium

    Projected a 10% correction in total 2-wheeler lubricant volume in 5-8 years due to EV penetration, but noted continued growth from ICE vehicles.

    Analyst acknowledged

Q&A highlights

8 direct
Data center cooling product development Direct
we have been working already with bunch of data centers across the world where the coolants for immersive cooling as well as direct-to-chip cooling technology has been adopted, developed and now being prospected with large data centers

Reveals Castrol's strategic entry into a new, high-growth technology segment beyond traditional lubricants.

Asked by CA Shaishav Vora

Volume mix breakdown and rural growth Direct
overall level. Higher proportion of our volume growth comes from automotive segment because that's almost 85% of our business. But I should first say that all parts of our automotive segment, which is commercial vehicle, cars, 2-wheelers have grown handsomely in this quarter. Volume growth in commercial vehicle has been in double digits.

Provides granular detail on the drivers of the reported 8% volume growth, highlighting strong performance across key automotive sub-segments and rural areas.

Asked by Nitin Tiwari

EBITDA margin and investment strategy Direct
we invested a bit more fuel for growth that should be advertising and support or promotion budget that we have, and that has helped us gain that momentum. So -- and did we could we do a little better? We could, but this is the right time to invest ahead of the time so that rest of the year, we get the benefit of that momentum.

Explains the slight dip in EBITDA margin relative to guidance, attributing it to strategic brand investments for future growth momentum.

Asked by Harshit Nagpal

Long-term strategy for industrial business Direct
Now we have to play the role of being a specialist high-quality specific industries that require our products. For example, I spoke about rust preventers for tube industry or I spoke about the chemical management solution that we can offer to chemical industries or industries like steel and cement in the future.

Outlines Castrol's differentiated strategy in the industrial segment, focusing on specialized, high-value products rather than low-margin general fluids, and its long-term growth potential.

Asked by Apurva

Impact of crude oil price correction on financials Direct
the correlation between the prices of crude oil to base oil is very low... So net-net, if I look at next 2 to 3 quarters, as I stand today, it looks like our total COGS will be range bound and will not be very different as far as base oil is concerned.

Clarifies that crude oil price movements have a limited and lagged impact on Castrol's cost of goods sold due to low correlation with base oil prices and forex effects.

Asked by Nishant Chowhan

BP's strategic review of Castrol business Direct
BP announced the strategic review of its Castrol business globally with the intention of accelerating Castrol's next phase of value delivery. It is very clear that BP would want to unlock value out of Castrol and Castrol itself has significant growth ambitions, which includes growing our core mobility business, expanding our participation in industrial lubricants that I just spoke about and also enhancing our mobility services and diversifying into central or data center fluids, right?

Provides context on the global strategic review, emphasizing BP's intent to unlock value and Castrol's growth ambitions across various segments, including new areas like data center fluids.

Asked by Abinash S

Impact of 2-wheeler EV penetration on Castrol Direct
So 5 to 8 years, hence, the total market for 2-wheeler lubricant, which would have grown by then, will see a 10% correction in total volume requirement... ICE-based 2-wheelers actually fuelling our overall continued growth of 7% to 8% as the industry or the as the park size of the 2-wheeler grows.

Addresses a key long-term risk for lubricant companies, providing a quantified estimate of market correction due to EV adoption while also highlighting continued growth from ICE vehicles.

Asked by Rohit Maheshwari

Auto Care segment potential and contribution Direct
It's already a INR2,500 crores market in India of Auto Care products... this business is not a business of liters. This is a business of units... it's growing in high double-digits... towards next year is when I'm thinking I'll bring these numbers in light for everyone to see once I've established this business at scale.

Highlights a new, high-growth, high-margin segment for Castrol that offers more frequent brand interaction and is currently in a 'seeding stage' with future disclosure planned.

Asked by Rohit Maheshwari

2 min read 6 chapters

Detailed narrative

Strong Q1 FY25 Performance Driven by Volume Growth

Castrol India reported a robust start to FY25 with revenue from operations growing 7% YoY to INR 1,422 crores. Profit before tax also increased by 7% YoY to INR 313 crores, and profit after tax rose 8% YoY to INR 233 crores. This performance was underpinned by an 8% quarter-on-quarter volume growth, reaching over 63 million liters, demonstrating resilience against macroeconomic headwinds.

Automotive Segment and Rural Expansion Fuel Growth

The automotive segment, which constitutes approximately 85% of the business, was the primary driver of volume growth. Commercial vehicle and car segments achieved double-digit volume growth, while the 2-wheeler business saw high single-digit growth. Rural areas were a key focus, with expansion efforts yielding double-digit growth in both volume and profitability, contributing to a pan-India network of 148,000 outlets, including over 40,000 rural workshops and retail outlets.

Strategic Investments Impact EBITDA Margin

The company's EBITDA margin for Q1 FY25 was at the lower end of its 22-24% guidance range. Management attributed this to strategic investments in brand building and marketing, including an additional INR 18 crores spent on advertising, digital, and mechanic activation for campaigns featuring Shah Rukh Khan. An increase of INR 14 crores in Joint Business Royalty (JBR) due to deeper OEM partnerships also contributed to higher costs, reflecting a deliberate choice to invest for future momentum.

New Growth Avenues: Data Center Cooling and Auto Care

Castrol is actively developing products for data center cooling, including immersive and direct-to-chip coolants, partnering with hyperscalers and data center providers. While currently a negligible contributor, this segment is projected to be significant in 10 years. Additionally, the Auto Care segment, estimated at INR 2,500 crores in India, is experiencing high double-digit growth, offering frequent brand interaction and healthy margins, with management planning to disclose specific numbers next year.

Industrial Business Focus on Specialized High-Quality Products

The industrial business, representing 12-15% of Castrol's operations, is pursuing a strategy focused on high-quality, specialized products for specific industries like tube manufacturing (rust preventers) and chemical management solutions for steel and cement. While industrial margins are generally lower than automotive, the absence of significant advertising costs and the long-term nature of customer relationships make it a sustainable business with EBITDA margins comparable to the overall company.

BP’s Strategic Review of Castrol Business

BP has initiated a global strategic review of its Castrol business with the aim of accelerating value delivery. Castrol India views this as an opportunity to enhance effectiveness and innovation, aligning with its growth ambitions in core mobility, industrial lubricants, mobility services, and new areas like data center fluids. The company expects the outcome of this review to support its continued growth and collaboration opportunities.

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