In an interview with CNBC-TV18, Chawla also shared details of Gulf Oil’s recent extension of its strategic partnership with Piaggio Vehicles until 2030.
The partnership focusses on co-branded, high-performance lubricant solutions for Piaggio’s small commercial vehicles across retail, factory-fill, and export markets.
This is the verbatim transcript of the interview.
Q: How is this renewed agreement with Piaggio different compared to what you had in the past? What would be the incremental revenues?
A: We have been having a relationship with Piaggio in the past also. So the renewal is obviously up to 2030 they have a full range of commercial vehicles as we know. We have also been supplying them EV fluids for their three-wheelers, which are electric three-wheelers. And what we have now is growing with them as they grow in the market in various segments.
And it is an area where we are going to supply a complete range of lubricants across all the channels. So it is a continued partnership, and we are happy to share that we have renewed it up to 2030.
As our strategy has been to work with the original equipment manufacturers (OEMs), we have over 40 OEMs in automotive, industrial construction, EV fluids. So this is part of the strategy. Piaggio is one of our top five customers. So the incremental will be the growth that Piaggio gets, and how we can penetrate the market. So in line with our 2-3x market growth rate, this is another area where we can continue doing that.
Q: How much of your revenues right now is coming in from Piaggio, and would that continue to be the number as well going forward, now that you are seeing Piaggio is growing, the market is growing, what kind of incremental revenues would you see on the existing number?
with us for the last five, six years, and this is a renewal. So as they grow, we grow with them. So OEMs for us we have certain OEMs where we have a relationship across their channels. Some we have in various like the franchisee workshop or aftermarket. So OEMs do make up more than 20% of our business. In fact, some segments are higher.
So this is part of that. And as we see the vehicle penetration go up, and the EV go up for Piaggio, we will continue to grow. So usually, our target has been 2-3x industry growth. Similarly, in this area, if the industry of commercial vehicle oils is growing and overall growth is 3-4%, we expect to grow two times that at least.
Q: What does quarter three volume look like? You saw double-digit growth, there was good performance in B2B as well. Can you give us a sense of whether quarter three or the second half will be better than the first half?
A: Usually the second half is better than the first half. You are right, because H2 is October, November, and December, and then you have the closing in January, February, and March, where a lot of push happens. But if you take a consumption point of view, the monsoons, which are July, August, and September are generally a low quarter. But this time with the elections, we saw that they were in the festivals coming together, we did see a slight challenge in quarter two.
I think now H2 is certainly going to be better for the industry in terms of overall demand. For Gulf, we are focused on our segments. So most of our segments, we are clocking in good high single digit, close to double digit, as we mentioned. But, one segment, where we supply majorly to the commercial vehicles, that is about 7-8% of our business, and that is down 15-20%. I hope it picks up in H2.
So things will look better in H2 and November, and December, we hope that we will see an increase in terms of demand, and in our strategy, we have been growing well. And I think what we shared also in quarter two, a lot of our segments have done well, except factory-fill, which I mentioned, is slightly down. But even that is expected to pick up going forward.
Q: Some in the market believe that despite growing 2-3x of the industry, your core volume growth will still be in high single digits from FY24 to FY27 at 8-9%. Is that a fair assessment? And you had spoken about margins of 12 to 14% what about over the longer term in the next 3-4 years? Is there scope for you to expand margins, given the premiumisation efforts, dedicated marketing initiatives, and cost management?
A: On margin, we have said it is the 12 to 14% band and we are focusing a lot on our premium products. So the focus internally is to try to double the growth rate for premium products, which we also mentioned in quarter two. So the focus is there. But you see the segments that we are in today, we are growing in all the segments so obviously we will not say no to growth. The volume growth if you take our 15-year average is also above 9% where the industry has grown. And recently, last two years, the growth has been double-digit in volume for lubricants.
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So we would like to go to that 2-3x and in many segments, we have less than 5% market share – passenger cars, motor oils, industrials, tractors, scooters. So we see that we can, in fact, grow a bit faster. So our endeavour is to do that. But definitely to give a commitment on margin and what is going to be – there is competitive pricing, there is raw material inputs, and some of the things do have a lag time in terms of the B2B segments also. So our endeavour and our objective is always been to try to go to the next band. And I think if things work well across the input cost, premiumisation, and, of course, competitive pricing, we should be able to see our band improve.
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