SYNOPSIS

ON

Survey on various Lubricant companies in

India

Submitted by-
Rajdeep Rawat BBA(O&G),
5th sem
R050208057
Introduction
The Indian automotive lubricant market is the sixth largest market in the world with revenues of
approximately $1.30 billion in 2002. It is also one of the fastest growing retail markets in India.
Until 1993, it was a highly regulated market with a clear dominance of the public sector.
Companies like Bharat Petroleum (BPCL), Hindustan Petroleum (HPCL), and Indian Oil
Corporation (IOC) held more than 75 percent of the market share. In recent years, with the
advent of the increasing number of multinationals in the Indian market there is a growing
presence of private companies. Companies like Castrol, Elf ,Total-Fina, Gulf, and Shell Oil have
made their presence felt in the market.
Market Size
Total production of automotive lubricants in India is approximately 8 to 10 percent of global
lube production. Unlike other countries where lubricant demand has witnessed stagnation, the
Indian market has been growing at approximately 7 percent per annum for the past 2 years. The
public sector contributes to over 60 percent of the revenues for this market. MNC’s have 5
percent market share and the remaining share is held by the unorganized sector. Automotive
lubricants are further divided into diesel lubes and petrol lubes. Diesel lubes comprise 70 percent
of the market and petrol based lubricants cover the rest. As diesel lubes are used by commercial
vehicles, which have to cover greater distances, their market share is higher. Engine oil
constitutes around 83 percent of total sales volumes. Gear oils, transmission fluids, hydraulic
brake fluids, and engine coolants contribute to the balance.

Competitive Analysis

The first seeds of competition were sown in the early 1990’s when following the liberalization of
the Indian economy, the government decided to open the Indian market to foreign competition.
Import of base oil, the key raw material, was de-canalized with IOC losing its status as the sole
canalizing agent. Pricing of base oil was deregulated in a phased manner and currently it is
market determined. Basic custom duty on base oil stock was also reduced from a peak of 85
percent to a level of 25 percent. All quantitative restrictions were also removed. These
developments naturally encouraged the entry of foreign players on Indian shores who were
already facing a slowdown in demand in their local markets. The coming in of foreign
participants created an excess supply situation in the Indian automotive lubes market, which
made it more difficult for the Indian lube manufacturers to survive.
Recent deregulations in the lubricant market have promised many new opportunities for the
private lube manufacturers. With the dismantling of Administered Price Mechanism (APM) the
burden of subsidies is now being passed on to the government. Private participants will also gain
a presence in the Indian oil and gas sector and hence there will be competition between
participants that will ensure the growth of the sector. In the next couple of years, the industry is
going to witness sea changes. Retail networks, logistics management, and risk management are
going to be the crucial factors. The stand-alone refineries will have to be merged with the
marketing companies, as they do not have the distribution infrastructure to sell their products in a
deregulated market. Companies like Reliance are already selling their products through petrol
pumps. The monopoly of the public sector holdings will no longer exist. MNC’s will be able to
sell their products through petrol pumps. Lubes manufactured by Reliance Petroleum, Castrol,
Elf, Gulf Oil etc, which are now sold at petrol pumps. In medium to long term, Frost & Sullivan
expects private sector companies to have a market share of around 25 percent.
Distribution Structure
There are two key markets for lubricants in India. Given high levels of competition original
equipment, linkages are gaining importance. The original equipment market contributes almost
70 percent and 30 percent of the market is comprised by the retail sales segment. The channel for
replacement market or the retail segment is petrol pumps or retail stores. Almost 70 percent of
the lubricants in India are sold through petrol pumps. Most of the MNC’s have tied up with oil
majors for marketing their lubricants like Castrol with Escorts and Tata BP with Telco. After the
deregulation of the petrol pumps companies are keenly watching the developments in the lubes
market.
The distribution channel adopted by public sector units is through the petrol pumps. Other
private participants have had to set up an independent infrastructure comprising of distributors,
stockiest and retailers through out India. MNC’s and private companies sell through retail stores.
To compete with dominant public sector distribution, concepts like "Bazaars" and "Super Stores"
have also been developed. Castrol developed the concept of "Bazaars." These are outlets meant
only for lubricant sales.
The concept of "User Outlet" is another new concept developed by Castrol. In this, the consumer
selects his own brand of lube after giving his vehicle for service in the same outlet. Convenient
stores and highway stops for vehicles are being built from where the vehicle owners can get their
vehicles repaired and get their supply of lubricants. In the lube market, Indian Oil Corporation
Limited is leading the market with 30 percent market share. Castrol is next with 25 percent of the
share and HPCL and BPCL are next with about 20 percent and 15 percent shares respectively.
Other private companies hold the remaining market share.

Key Success Factors

Frost and Sullivan believe that the key factors for success in this highly fragmented and
competitive industry include:

Distribution Channels
With increasing number of players in the market, it is vital for the companies to reach a wider
segment of customers. The lubricants market in India is very highly fragmented and complex.
Public limited companies selling primarily through petrol pumps manage to achieve a deeper
penetration. Most of the MNC’s have tied up with oil majors to market their brands like Castrol
with Escorts, Tata BP with Telco. This will help the private companies to establish a wider
access, brand awareness, as well as preference.

Market Trend
In the recent past, the Indian lubricant market has witnessed a phase of consolidation.
Multinationals with better technology, brand name and finances have the power to launch
themselves on their own in the market. However, with increasing number of competitors it is not
possible for every one to carve a nich in the market. This sector has witnessed considerable
amount of mergers and acquisitions. British Petroleum’s not so recent acquisition of Castrol is
one example. The Indian lubes market is a combative market place and lubricant companies find
themselves fighting a tough battle for survival. In the OE sector also lubricant manufacturing,
companies are entering into collaborations with vehicle manufactures. Maruti Udyog, Hyundai
Motors, Hindustan Motors, TAFE, Toyota, and Skoda have entered into collaboration with IOC
and Castrol for some of their models.

Outlook
In the future, growth in the automotive lubricants industry will largely depend on the overall
performance of the economy. In the past one and a half years, the scenario has improved with
higher sales of commercial vehicles and two-wheelers. However, in the future volume growth
will be affected because of use of better quality, long drain lubes. This will increase the
replacement cycle for lubes. In the shorter term, one will witness intense competition in a slow
growing market marked by a consolidation activity, which has the potential to change the face of the
lubricant industry. Given the rising competition, success of a product would largely depend how well it is
branded and distributed.
Various Lubricant Companies in India….
Top of Form

Bottom of Form

1 Bharat Petroleum Corporation Limited (BPCL)

Large, state-owned petroleum company headquartered in Mumbai; figures in the Fortune 500 list
of companies; activities include refining, retailing (petrol pumps etc), LPG, lubricants, industrial
fuels & petrochemicals, aviation fuel etc
Petroleum Gas Lubricants

2 Hindustan Petroleum Corporation Ltd (HPCL)

State-owned company which is the second-largest integrated oil refining & marketing enterprise
in India; corporate office is in Mumbai; activities: LPG, international operations, bulk fuel &
specialities, lubricants, retail, aviation etc
Petroleum Gas Lubricants

3 Tide Water Oil Co (India) Ltd

8, Dr Rajendra Prasad Sarani, Kolkata 700001, West Bengal, India
Manufacturers of automotive & industrial lubricants under the brands Veedol & Eneos; based in
Kolkata; products include engine oils, gear & transmission oils, greases, etc; has a technical tieup
with Nippon Oil Corp, Japan; part of Andrew Yule
Lubricants

4 Balmer Lawrie & Co Ltd

Netaji Subash Road, Kolkata, West Bengal 700001, India
Public sector diversified company based in Kolkata; has interests in industrial packaging, greases
& lubricants, leather chemicals, turnkey projects, tea, travel & tours, cargo & logistics, container
freight stations & IT services
Packaging Lubricants Chemicals Agricultural Companies

5 Castrol India Ltd

Second largest lubricant company in India, manufacturing & marketing automotive (two brands -
Castrol and BP) and industrial lubricants; has 5 manufacturing units in India, and registered
office in Mumbai; part of global BP Group
Lubricants

6 Total Group, India

Global oil and gas company based in France; in India its product range covers lubricants (under
the Elf brandname) for cars and utility vehicles, motorbikes, commercial vehicles, farm
equipment, and industrial purposes, as well as LPG
Lubricants Gas
 7 Apar Industries Ltd
Manufacturers of transformer oil & specialty oils, overhead power transmission & distribution
aluminium conductors & specialty polymer; corporate office is in Mumbai; products include
industrial & automotive oils, nitrile rubber, latices etc
Lubricants Aluminium Miscellaneous Supplies

8 IPOL
Brand of industrial & automotive lubricants, speciality & process oils made by Sah Petroleums
Ltd; the company is Mumbai-based and has a production capacity of 40,000 KL; other products:
industrial greases, rubber process oils, transformer oils etc
Lubricants

9 Savita Group
Mumbai-based group comprising Savita Chemicals & Savita Polymers; product range includes
liquid paraffin, optic fibre filling compounds, transformer oils, pour point depressants, white oil,
petroleum sulfonates, auto lubricants etc
Petrochemicals Lubricants

10 Valvoline Cummins Ltd (VCL)

Manufacturers of automotive & industrial lubricants; joint venture between Valvoline &
Cummins; products incude engine oils, gear oils, cutting oils, greases, transmission oils, gas
engine oils, anti rust & anti-corrosion products; based in New Delhi
Lubricants
New

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11 Fuchs Lubricants (India) Pvt Ltd F
An ISO 9001 wholly owned Indian subsidiary o of Fuchs Petrolub AG Germany;
manufacturers of automotive oils, industrial r lubricants, corrosion-prevention products,
metalworking fluids etc; corporate head office m in Mumbai and factory at Navi Mumbai
Lubricants B
ot
12 Gagan Gases Ltd to
Indore-based organization with diverse m business interests; is a leading distributor of
LPG in the private sector in Madhya Pradesh of having its own LPG bottling plant at
Pithampur and an authorised distributor for F ESSO and Mobil branded lubricants
Lubricants Gas o
r
13 Ganesh Benzoplast Ltd m
Multi-division, multi-location flagship company of the Ganesh Group located in
Mumbai; divisions include chemical division, lube division, infrastructure division etc;
produces and supplies sodium benzoate, a food preservative Chemicals Lubricants

14 Gulf Oil Corporation Ltd (Lubricant Division)

A Hinduja Group company in Mumbai; manufactures and markets automotive lubricants and
industrial lubricants including diesel engine oils, gear oils, brake fluid, tractor oils etc; is one of
the reputed OEM suppliers to various leading brands
Lubricants

15 The Andrew Yule Group

Diversified central public sector company based in Kolkata; has interests in power, telecom,
engineering & environment, electrical, lubricants, industrial electronics, tea, turnkey contracts,
financial services & printing
Machinery Electrical Equipment Energy Telecom Services Telecom Equipment
Engineering Lubricants

16 Cenlub Industries Ltd

Firm that designs, manufactures & supplies centralised lubrication systems for machines &
machine tools (CNC lathes, presses), plants (sugar, steel, paper) & vehicles (trucks, buses, etc);
headquartered in Faridabad with offices across India
Lubricants

17 Daya Lubricants Pvt Ltd

Producer of automotive & industrial lubricants uner the brand name Shaktee and re-refiners of
used lubricants; also manufactures automotive & industrial lubricants for Gulf Oil India Ltd,
Bharat Shell Ltd, Mobil India Ltd, etc; based in Mumbai
Lubricants

18 Dropco Multilub Systems Private Ltd

Manufacturer and supplier of centralized lubrication systems offering a wide range of grease
lubrication systems, mist lubrication systems, lubrication accessories etc for different machines
and industrial applications; located in Faridabad, Haryana
Lubricants

19 Emulsichem Lubricants Pvt Ltd

An ISO 9001 manufacturer of neat type cutting oils, water soluble cutting oils, plant coolants &
lubricants; products include honing & hydraulic oils, dewatering & corrosion inhibitor fluids,
synthetic cutting oils, etc; based in Pune
Lubricants

20 Frigmaires Grease –
An ISO 9001 manufacturer of lubricant milling machines for the grease manufacturing industry;
also fabricates processing equipment like mixing cooking vessels, reactors, de-aerators, filling
lines etc; based in Mumbai

Top of Form

Bottom of Form
21 Global Technical Services
A team of professionals providing total lubrication management (TLM), fuel conservation
consultancy and technical and techno-commercial services to major consumers of petroleum
lubricants and fuels in India; based in Mumbai
Lubricants

22 Lynx Marine
Sion West, Mumbai, 400022, India
ISO certified company in Mumbai that supplies industrial gases, oxygen, acetylene, nitrogen &
calibration gases apart from Shell lubricants and greases; also distributors of SRF Ltd for their
entire range of CFC & non-CFC refrigerant gases
Industrial Gases Lubricants

23 Monisha Petrochem Pvt Ltd

Manufacturer of a complete range of automotive lubricants, industrial lubricants, metal working
oils, transformer oils, high performances oils, industrial & high temperature greases under the
brandname Monex; based in Mumbai
Lubricants

24 OKS
Brand of speciality and open gear lubricants, & maintenance and corrosion protection products,
manufactured and marketed by OKS Speciality Lubricants (India) Pvt Ltd, with offices in
Bangalore, Kolkata, & Delhi
Lubricants

25 Pentagon Lubricants
An ISO 9001 manufacturer of the entire range of industrial lubricants, automotive lubricants,
greases, marine engine oils and speciality lubricant products under the trade name Pentagon;
based in Chennai
Lubricants

26 Raj Group
Manufacturer of petroleum products and lubricants; products: transformer oils, telecom cable
compounds, specialty lubricants, quenching oils, neat cutting oils, engine oils, greases, rust
preventives etc; headquartered in Chennai
Lubricants

27 Sri Narasimha Petro Products

Automotive & industrial lubricants company based in Alandur, Chennai; products include
engine, gear, transmission, compressor, heat transfer, turbine, quenching, cutting, spindle,
cylinder, rubber processing oils etc; brand: Metrite
Lubricants

28 Witmans Group
Group of 2 companies manufacturing automotive & industrial lubricants, jewellery injection
waxes, oils (textile, spindle, rubber process, metal working, etc), greases, paints & primers, heat
exchangers, compressors, valves, etc; based in Mumbai
Lubricants Compressors

New
 Research
An overview of Lubricants Market in India
The current market for lubricants in India is characterised by stiff competition, following
the entry of number of private players after the deregulation in 1993. Further the
industry also suffers from considerable overcapacity. The lubricants market in India is
estimated at around 1.05 million Kl (Kilo litre) per annum (Rs 5500 crores) as against an
installed capacity of 1.60 million Kl per annum. However, the consumption of lubes in
India is very low compared to the rest of the world because of high population and low
penetration of automobiles.

TABLE SHOWING PER CAPITA CONSUMPTION OF LUBES

In the world market the consumption growth of lubes has

almost stagnated due to saturation in industrial activity and
stagnation in the sale of automobiles. Thus, India remains
the target market for most of the MNCs in the lubes industry
because of its potential for future growth, given its large
industrial base and booming vehicle market.
The lubes market in India can be broadly classified into two
main segments viz, Automotive segment and Industrial
segment. We expect the market for both industrial and
automotive lube segment to post a growth of more than 4-
5% in the current year, given the recovery in the industrial
activities and increase in sale of automobiles.

TABLE SHOWING SALE OF AUTOMOBILES IN INDIA

 1999 1998 %
Change

Heavy and Medium commercial 108814 78746 38.18

Vehicles

Light Commercial Vehicles 57706 55631 3.73

Passenger Cars 574287 403719 42.25

We believe, given the severe competition and overcapacity prevailing within the sector
as mentioned earlier, the scenario for lubricant market in India does not seem attractive
in the medium to short term. However given Castrol’s excellent brand value, strong
distribution channels, technology and R & D backup of the parent and management
initiatives in increasing its market share, Castrol would remain the best investment
option within the industry.

Developments & Impact

• Rising Base Oil Prices
Typically, Base Oil constitutes more than 50% of the total material costs for
Castrol. The prices of base oil have been rising in consonance with rising crude
oil prices, which may have considerable impact on the profitability of Castrol in
the current financial year.
GLOBAL PRICE TRENDS IN BASE OIL PRICES

Month Price per

tonne
(In US $)

March’99 180

September’99 240

January’2000 325

However we believe that given Castrol’s brand leadership, it would be in a

position to partially pass on this increase in cost. In fact Castrol increased, prices
 of its products twice in the last 6 months. Further, we believe that with the recent
rollback of production cuts by OPEC would bring base oil prices at realistic
levels.
• Castrol: Identifying Strategies for Future Growth
Consumer Business Segment:
This segment accounts for more than three fourth of Castrol India’s total sales.
Given the high level of competition in this segment, linkages with OEM’s (Original
Equipment Manufacturer) is becoming increasingly important to add value to
brand positioning. Castrol recently entered into strategic alliances with Telco,
LML and Apollo Tyres in a bid to provide customised products. On one hand
these; OEM’s would endorse Castrol’s range of lubricants, while on the other
hand Castrol would increase its market presence through its increasing
availability at their workshops. Castrol hopes to push its product availability in
Telco’s workshop from the present 40% to 75%. Besides, with Castrol adopting new
distribution policy of selling through distributors, the distribution reach has increased
from 6000 retailers to 35000 retailers at present. Further, the new distribution system
will also help Castrol increase focus on two wheeler segment for future growth, which
was hitherto controlled by PSU’s.

Industrial Business Segment

The industrial segment achieved a sales growth of more than 20% in 99,mainly
due to realignment in the distribution network, which helped in providing
customised solutions to particular business segments and thus further increasing
penetration into several potentially lucrative market segments. The company also
entered into strategic alliances with number of OEM’s. Further, under its new
Castrol+plus programme Castrol introduced Chemical Management Services
(CMS) and Lube Management Programme (LMP), whereby Castrol would
assume responsibility for managing the processes and facilities covering all
chemicals including lubricants. We believe this help will help the company in
maintaining direct contacts with large customers. The company has already
signed contracts to manage these processes at Delphi Automotive, Cummins
India and Timken India and many other such contracts under the Programme are
under negotiation.
• Fate of things to come
Though it would be very early to comment, we believe that the company’s
business model might undergo a change with the global takeover of business by
BP-Amoco. Over the years, Castrol has concentrated only on the lubes industry,
whereas BP-Amoco business interests varies from up-stream Oil Exploration to
downstream production and refining. Castrol India had already evinced interest in
taking over smaller companies within the industry. Further with government
aggressively considering increasing the FDI Limit in refining to 100% as well as
strategic sale of PSU Oil companies, chances exist that Castrol India might
venture into other downstream activities, though the management has not
indicated any intention of doing so. Further Castrol India Limited can also be
considered for global sourcing point by BP-Amoco for catering to the International
markets.
In light of the above, we believe the fate of things to happen at Castrol India
seems quite interesting in time to come.
 % %
Particular Chang Chang
s 1999 1998 e 1999 1998 e

Q4 Q4 FY FY

Gross 372.4 314.6 1195.5 1079.2

Sales 1 7 18.35 5 1 10.78

Other Inc. 3.67 4.78 -23.22 23.09 20.2 14.31

375.2 319.4 1218.6 1099.4

Total Inc. 1 5 17.46 4 1 10.84
Financials 299.7 255.6
Castrol Total Exp. 1 4 17.24 949.86 869.34 9.26
declared a
strong result in Op.Profit 75.44 63.81 18.23 268.78 230.07 16.83
for the year
ended Interest 0.65 0.66 -1.52 2.62 2.53 3.56
31/12/99. While
the Net Sales Gross
for the Year Profit 74.83 63.15 18.50 266.16 227.54 16.97
ended 31/12/99
Depreciati
increased by
on 3.76 2.79 34.77 10.08 8.43 19.57
10.78% to
1195.55 crores PBT 71.14 60.36 17.86 256.08 219.11 16.87
operating Profit
increased more Tax 10.6 8.72 21.56 51.7 40.75 26.87
than
proportionately PAT 60.37 51.64 16.91 204.38 178.36 14.59
by 16.83% to
Rs. 268.78 Equity 123.5 61.75 123.5 61.75
crores,
however higher Financial Ratios
depreciation
and corporate OPM (excl
taxes resulted O.I.) % 19.50 18.80 _ 20.60 19.40 _
in Net Profit
growth of OPM (incl.
14.59%. O.I) % 19.90 19.80 _ 21.80 20.70 _

Int/Sales
% 0.17 0.21 _ 0.22 0.23 _

GPM % 19.90 19.80 _ 21.80 20.70 _

Growth
NPM % 16.10 16.20 _ 16.80 16.20 _

Tax/PBT
 • Castrol continues to enjoy excellent brand image in the Indian Lube industry. In
fact it ranked 17th in the list of Most Admired FMCG Marketing Company in the
annual survey conducted by ORG-MARG. It also scored better on most of the
important parameters on Marketing Dimensions as shown below.

Marketing Dimensions Rank’99 Rank’98

Better than average success rate at new 9 13

product launches

Brand Provides Long Term Stability 10 13

Company has superior distribution network 13 12

Though the market for lubricants in India grew at a rate of 4% in 99, Castrol’s sales
increased by more than 9%, in spite of stiff competition and its product being priced at
least 10% above the industry average which goes a long way in suggesting its brand
value. We believe that though the lube industry would grow at an average rate of 4-5%,
Castrol would continue to outperform the industry growth rate.
• We believe that given Castrol India’s Cash rich position and the backing of strong
parentage of Global Oil Giant BP-Amoco, various possibilities arise for future
growth of the company. As explained earlier, Castrol India has already evinced
interest for local acquisitions. Further, Castrol India can also be considered as a
sourcing point for various projects and products Internationally. We believe that
valuations of Castrol India would depend upon these developments in time to
come.

Comparative Valuations
Comparative Valuations with Other FMCG companies

Particulars Castrol Cadbury Britannia Nestle HLL

Market Price (Rs.) 312 904 638 374 2500

Price/Earnings Ratio (x) 18.85 55.9 29.94 33.97 51.42

 Market
Capitalisation/Sales (x) 3.22 4.3 1.73 2.34 5.41

Sales Growth (YOY) 10.78 19.32 21.49 -0.04 6.97

Currently, Castrol is available at a P/E of just more than 19 times its 99 earnings. It is
available at just 17.08 and 14.85 times its KRC Research estimated earnings for 2000
and 2001 respectively.

Abstract
The Indian automotive lubricants market is largely price sensitive and volume growth is
stagnating due to longer lasting lubricants. The market is fragmented with over 22 big and small
manufacturers and with the spate of mergers and acquisitions (M&A), only a handful of big
companies enjoy a major market share.
Companies are adopting a more customer-oriented approach where they are likely to focus on
creating brand awareness through print and visual media. For example promotional campaigns
and trade shows offering gifts to their customers are methods of driving sales of automotive
lubricants.
The original equipment segment and retail trade are the two major marketing channels in the
Indian automotive lubricants market. Due to the growing competition, tie-ups with original
equipment manufacturers (OEM) are becoming important as they reinforce the value proposition
of a particular brand.
Petrol pumps form a major distribution channel in retail trade, however sales of lubricants
through retail outlets (also called ‘the bazaar trade’) has transformed the Indian automotive
lubricants market into a fast moving consumer goods (FMCG) sector. The other marketing
channels are authorized service stations, garages, rural and agricultural dealers, super markets,
and wholesale distributors
Public sector unit (PSU) companies, that manufacture their own base oil, follow different
distribution strategies as compared to private participants that solely dependent on imports.
While PSUs sell through their own wide spread network of petrol stations private manufacturers
prefer retail outlets.
Engine oil, which accounted for over 70.0 percent market share in 2004 in the Indian automotive
lubricants market, plays the most crucial role in deciding the market share of manufacturers.
Increase in demand for four stroke motorcycles, tie ups with original equipment manufacturers,
and implementation of new pollution norms are just some of the key drivers of the engine oil
segment.
The brake oil and coolant is the next largest segment in the Indian automotive lubricants market.
Demand for coolants is increasing due to continuous growth in heavy commercial vehicles,
increasing awareness among the customers, new cooling system technologies, and OEM tie-ups.
In brake oil segment, increasing growth in light commercial vehicles, introduction of new brake
systems, consumption of lubes by commercial passenger vehicles, and changing customer
mindset regarding specialty lubricants are expected to push demand further.
The market for gear oils is also growing rapidly and has a high potential due to the increasing
number of vehicles on the road. New generation vehicles with advanced gear system
technologies and automatic transmission systems require special type of lubricants resulting in
greater demand for multi axel gear oil and API synthetic gear oil, API GL-5, API MT-1, and
ultra-Matic, which reduce the oil changing intervals.
In the long term, the overall outlook for the automotive lubricants market is expected to be
positive due to the growing Indian economy along with the increased purchasing power of
consumers.