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Gulf Oil Lubricants India Ltd
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Ladies and gentlemen, good day, and welcome to the Gulf Oil Lubricants India Limited Q1 FY '23 Earnings Conference Call hosted by YES Securities. [Operator Instructions] Please note, this conference is being recorded.
I now hand the conference over to Mr. Nitin Tiwari from YES Securities. Thank you, and over to you, sir.
Thank you, Vikram. Good day, ladies and gentlemen. On behalf of YES Securities, I welcome everyone to Gulf Oil Lubricants India Limited's First Quarter FY '23 Earnings Call. We have the pleasure of having with us today the CEO of Gulf Oil Lubricants, Mr. Ravi Chawla; and the CFO, Mr. Manish Gangwal.
I will now hand over the call to Mr. Chawla for his opening remarks, which shall be followed by a question-and-answer session. Over to you, sir.
Thank you, Nitin. Good evening and good day, ladies and gentlemen. Welcome to the quarter 1 call for Gulf Oil Lubricants India Limited.
It gives me great pleasure and happiness to share with you that we have got off to a very good start in the quarter 1 for FY '23. You will recall that quarter 4, which is usually a very high quarter last year, was a record quarter for us. And what we have seen in quarter 1 is the all-time record in terms of volume for us in terms of our Core Lubes at 34,000 KL.
The entire team here is quite satisfied with what we have done in this quarter. Of course, we look at the challenges ahead, but it's been a really a resilient growth-oriented performance by the company. There were a lot of inflationary pressures on all cost line items, many challenges around us. But having achieved the highest-ever quarterly volumes for our Core Lubricants really gives us a good start to the year, and we can look at how we're going to continue to grow our industry-leading market share growth and other objectives for the year ahead.
We have gained share in all categories. And if we look at quarter 1, we have seen robust growth in our B2B, B2C business. And what is really gratifying is that our B2C business has actually grown very well and has improved the ratios going in the last quarter, which was normally we used to have a 55-45 ratio. This has gone to 60-40. And that was our objective, to increase our distribution to increase our B2C sales, so that is very gratifying.
Of course, industrial B2B OEM continue to grow very well, and the ratios have improved also, which has helped us. Challenges of the cost has obviously impacted, but we have handled it very well. And I think we have really looked at how we manage our key input costs. There is obviously staggered price increases, good price increases announced, and margin management has been a key focus. Manish will talk about that later.
What we also mentioned in the last quarter, you'll remember, is how do we reconnect, how do we re-energize growth. We had a lot of regional meets at all levels with our trade, with our teams. And now that the markets are fully opened and operating near normal post 2 years of pandemic, and our team, which was to restart this connect and reenergize growth, has really got us back to distribution in many ways. And this is really encouraging for us. The numbers are all there. Our quarter 1 revenues crossed INR 700 crores for the first time, highest ever, so that's been a really good quarter for us. Our marketing and sales initiatives, both above the line, below the line, have reunited. And now as COVID has eased out and helped us to really gain our distribution and [ personal connect ] at all levels.
Definitely, last year quarter, if we take the year-on-year comparative that was impacted by COVID, so some of the numbers you'll see have excellent growth. But still, it's an achievement. And I think it's industry-leading again, where we have seen significant growth in terms of our numbers. Over last year quarter, EBITDA is up double, and PBT is up 80% plus, similarly, PAT. So really good numbers, a lot of challenges as we go ahead. But the start has been very promising. And of course, we'll explain a few other things as we take the questions.
Now I hand over to Manish to cover some of the other highlights. Manish, over to you.
Yes. Thanks, Ravi. So overall, as Ravi mentioned, it was a fantastic quarter, closing of INR 700 crores of top line, and the Core Lubricant volume, which came in at 34,000 KL.
You will recall that we have been doing a category called AdBlue also, which was not that high numbers in earlier quarters. So now, from this quarter onwards, we have seen a definite significant pickup in the AdBlue volumes as well. So the AdBlue volumes are over and above this 34,000 kl. So what we are talking here 34,000 KL is the Core Lubricant volumes for the quarter, which is the highest-ever lubricant volume for us. So that is quite heartening.
And from the gross margin perspective, you will see that in spite of significant cost pressures, crude going up and BS oil going up, additive costs going up and also the rupee depreciation, which caused the imported products to be costlier. We have been actually able to not only maintain our gross margin slightly improved from quarter 4. So as you can see, the improvement in the gross margin.
And overall, of course, we have delivered double -- almost double the EBITDA from last year's Y-o-Y basis. But because of certain challenges on the, I would say, inflationary pressures on the other expenses like freight going up and also at low volumes and increased the freight amount, plus we have spent more on A&P we have spent during -- we have started -- Ravi mentioned we have started reconnecting people and travel has gone up. So all those factors, including the OEM royalties, because the OEMs also is almost an all-time high number in this quarter. So OEM royalties have also gone up.
So overall, I would say, the gross margin is well maintained and pricing actions taken. Of course, slight dip in EBITDA percentage is because of the other expenses because of the factors I mentioned just now. Overall, I think, this quarter, in the month of April, we paid the buyback amount also. So the buyback, which was declared earlier, the amounts were -- the buyback amount was paid to all the shareholders in the month of April. And we closed the buyback on 25th of April.
So these are, I would say, the quarter highlights. And we would like to now take the Q&A. Thank you.
[Operator Instructions] We have a first question from the line of [ Hemal ], who's an investor.
Congratulations for great set of numbers. Just some basic ones. Working capital for this time, how much? Are we going in line with our last guidance that we're going to go towards reduce our net working capital? What was the net working capital this time?
So yes, we have been able to slightly improve from March levels in terms of number of days on both receivables and inventory. But the revenues are going up. And this quarter also, as you see, even from March quarter, there is a 10% increase in revenue. So revenues are going up.
So working capital will be in line with the revenue are going up. Because of the price increase taken, the value of the products have gone up. But overall, yes, we have been able to reduce the number of days in terms of all working capital items.
Sir, how much would it be, sir? Like would be less than 115, 110? Or...
Sorry, in terms of number of days, you are saying?
Yes, yes, yes.
So overall, number of days, I think, around 110 now we are.
110. And is it still your guidance to go back close to 100 days?
So we will continuously work on working capital. The point is that the inflationary trend is not in our hands. And if the revenue is -- because of the volume plus the price increases, then in proportion, the working capital quantum goes up. But I think we are almost at the peak of the working capital at March.
And this year, we should see the working capital further going down from March levels, what we had done in the last year. Because last year, I think, we have fully funded the working capital the [ 1st of March ]. So every quarter, we will see improvement on it.
So -- and what would be our net cash position as of end of the quarter?
As you -- as I mentioned, we have paid about INR 100 crores of buybacks in the month of April, but we continue to maintain roughly a net cash of around INR 180 crores to INR 200 crores.
INR 180 crores to INR 200 crores. Okay. And finally, from my side, as you said it rightfully so, so the base oil price, would you have an average number? Or how much it did increase quarter-on-quarter? And where do you see it going in the next 1 or 2 quarters?
You see, in every call, we highlight that there are various grades of base oils. So it is very difficult to give a range where because different rates of Group 1, Group 2, Group 3 base oils have different price levels.
In line with crude, the base oils have gone up during the quarter. And if you see our price increases, we have taken price increases in April -- March and in April. And again, we have announced more price increase towards the end of June, which will be coming in effect in the current quarter.
So yes, base oil has gone up. And I would say, additive costs, other inputs have continued to go up. But we have been able to not only manage the margin, but rather slightly optimize on that. And that is also because of the good mix. We had a very good sale of B2C. So all these have -- factors have contributed in maintaining the rate.
I would say, it's now -- crude has come off from the peak of 120, 125 [indiscernible] in the month of May. So the translation to base oil and other costs happens with the lag time of 1 to 2 months. So we'll have to really wait and watch on all the variables, including the rupee, INR versus USD, because India imports a lot of base oil. So we have to really see both, and then we'll take our margin calls.
So you believe you would...
Sir, I'm sorry to interrupt. We may come back in the question queue, Mr. Hemal.
Sure. Thank you.
We have the next question from the line of Sabri Hazarika with Emkay Global Financial Services.
Congratulations on the good set of numbers. Firstly, I just wanted to know, you have like -- you've mentioned that your volume was around [ 34 million ] liters and this is excluding AdBlue. So like-to-like, probably it's not -- I mean, from what you've been reporting in the past, I think this is slightly different.
So for example, last quarter, you reported around 37 million to 38 million liters kind of a run rate. So against that, what would be the like-to-like comparison in terms of volumes? And if you could break it up between core volumes and AdBlue volumes in total?
Yes, Sabri. Thank you. I think in the last quarter, we had close to 33,000 KL of lubricant volumes and 4,500 KL of AdBlue. But this quarter, since the AdBlue volumes went up to 14,000 KL in a single quarter, which was part of the figure -- more than last full year. So we thought it prudent to disclose those numbers separately. So 34,000 KL for the current quarter is a pure lube number and 14,000 AdBlue on top of it.
Understood. So it is like almost 48 KL -- 48,000 KL. So that...
Yes. And also, then that means that we have not only grown 36%, close to 36% on Core Lubricants over last year Q1, sequentially, we have grown our volume over March quarter by 3%, which, as you know, and everybody on this call will remember that March is usually a very high quarter for us, we got a lot of distributor incentives and et cetera, are linked for March and full year figure. But this quarter has surpassed even the March numbers in terms of Core Lubricants. So it's been an all-time high excellent quarter for us in terms of Core Lubricants.
And what about AdBlue? What's the reason behind this big jump?
Yes. So Sabri, Ravi Chawla here. See, let me explain to you. AdBlue is a complementary product, which is going into BS VI vehicles. This basically treats the emissions. It's an AdBlue solution, which is sprayed, and it is a separate chamber it is put in. It uses the NOx value of the emissions.
So this has started -- we are one of the pioneers, one of the first 2 companies in India to manufacture it here. We have a license from VDA Germany. It's -- we control the quality a lot. So we've been working with OEMs, right, from the last 8 years on this.
Now finally, after BS VI coming, BS IV -- some vehicles did change to this. And BS VI, all is compulsory. We have to have the -- both the technology, which is called EGR plus SCR. So this is basically a treatment to which it goes in. It is a separate chamber. It is roughly 3% to 4% of the petrol consumption, then can mix with petrol. So this is an add-on complementary product, which all commercial vehicles, diesel engines are using. We have a tie-up with them.
And we want to focus on the quality part of it. We don't want to get into a -- the market is huge, but we are focusing to our distribution touch points and OEMs. So it's a complementary product for our consumers, for our trade partners, for everybody. So it's an add-on margin. I would say, it's a single-digit margin, but it is doing well. And we're also seeing that the current pricing is good, and we want to focus on the high-quality segment.
We will not be going for a huge volume in this, but we'll be also ensuring we can service all our customers efficiently. Just to let you know, we have a tie-up with 10 OEMs right now on this, both commercial vehicle, all-diesel engine and cars and SUVs.
All right. Sir, just last question, just as a follow-up to this, Ravi. So definitely, the base changes drastically for the company, if we were to do a forecast using these numbers. So whatever the Q1 numbers would be probably will the realignment in terms of the EBITDA per liter as well as the volume of group. So would you suggest that we should go ahead with it? Or is there any risk of like again going back to a normalized kind of a run rate?
I think you should focus on the core lube, which is 34,000, that we have given you a track versus last quarter. So that should be the focus now.
Okay. And Q1 FY '22, what would be the core lubes?
25,000 KL. So I think the total volume was 27,500 and AdBlue was 2,500, roughly. So 25,000 KL was the core lubes.
And for the full year FY '22, just last question. For the full year FY '22, how much it tells?
It was roughly around 12,000 KL.
12,000 [indiscernible] AdBlue volumes.
Just a minute. Just a minute. Let me check the full year number. I will get back to you in a second on that.
Yes, that's all from my side and all the best.
Thank you.
We have next question from the line of [ Adesh Verma ], an investor. [Operator Instructions]
My first question is, sir, if you could just give us an idea of what were the utilization levels for the Silvassa and the Chennai plant?
So for the quarter, we were close to 90% utilization in terms of both the plants, on an average. I mean, Silvassa was almost running capacity, whereas Chennai was at around 70%, so almost 90%, close to that in terms of utilization.
Okay. Along with that sir, if you could just give us an idea on how is the outlook for growth in sales volumes for the rest of FY '23, given that you have been investing. A lot of talk about an oil slowdown market and general slowdown due to inflation, just give us an idea of what is the outlook for growth?
The slowdown we are seeing is only in the motorcycle category. Actually, we have seen a good pickup in commercial vehicles. Industrial sales are doing very well. We are seeing our PCMO also is growing well. Obviously, we have different segments.
And so if you look at the overall industry, our sort of forecast is normally, if GDP is growing, it grows half of that. And of course, there are other factors, which the long drain and lubricants and all are there. There's a growth in automobile, population of new vehicles, old vehicles servicing rural growth penetration.
So if you take all these factors, it is expected the industry will grow at least 3% to 4%, if things now and the markets are open, there is no COVID closure. And normally, we target 2 to 3x minimum in terms of volume growth. So our outlook is to obviously maintain our growth. And as you see, we have been having good growth. Even this quarter is a good demonstration of that in terms of the growth. And with all our segments, where we are focusing on, we would continue this growth. In fact, we will.
There will be obviously some pressure on the cost in quarter 2 we are expecting. And quarter 3, in fact, we're also looking that we should be able to, if things remain steady on the base oil and things are open and going. Even our margin, we hope we can look at better margins from quarter 3. But obviously, we would try even quarter 2 to see how we can maximize.
There is some pressure because pricing has gone up very high in the market for many categories like motorcycle. You see that there is obviously some pressure. But we are increasing our distribution. We are able to offset some of that with better distribution.
B2B continues to grow very well. So as you know, industries are growing very well, and lubricants are consumed right across all industries. Some slowdown happened in steel sector, maybe last few months. But other sectors, we are also improving our customer base.
Congratulations on the good number. That will be all from my end.
Thank you so much, [ Adesh ].
We have next question from the line of Bhagyesh Kagalkar with HDFC Mutual Fund.
Congratulations on a great set of numbers.
Thank you.
Thank you.
Yes. So just regarding the -- so your PCMO statement as mentioned, okay, it's a small segment that you collaborated with the machine company for the [ factory ] requirement. This must be part of the B2B. But on B2B, can you throw more light because this segment is not prone to disruption, unlike the automotive one. So volumes and your expectation of volume for next 3, 4 years, et cetera.
Yes. So you see, for us, there is a B2B industrial portfolio. And there is -- so we sell to distributors and we sell through, and we also sell directly to customers. So if you take that, obviously, our market share is not very high, but we are seeing excellent traction in these segments.
And we have a very dedicated team. And our focus is to grow both the distributor market with supplies to small and medium industries right across the sectors. And we also have direct sales to steel plants, to plastic industry, to textile industry. So all the other segments is where our focus is.
And if you take our overall market share, if it is about 7%, 8%, and our sales and industrial is half of that, 3% to 4%. And that is where we are focusing. In terms of volumes, Manish, in terms of mix of our B2B, we have been giving.
60-40.
Yes, 60-40 is there. But of course, our B2B also takes OEMs. So industrial is more -- it is part of B2B. So this is the way we look at industries per se. And our B2B is, of course, route to market more with OEMs. A good part of that is industrial, and that is growing. Including our B2B, it will include the infrastructure customers. So roughly about 15% to 16%, 17% will be pure industrial sales to manufacturing units.
We have next question from the line of Chirag Fialoke with RatnaTraya Capital.
The first thing is that can you just share the breakup of the core segments that you usually do: DEO, Personal Mobility, Industrial?
Yes. So as we have highlighted in the press release also, Diesel Engine Oil has done very good last quarter. And their share has gone up to 41% from 37%, 38%. Personal Mobility also has done very well. And actually, it was in the range of around 18%, 20% last few quarters, but this quarter, it is 21%. And Industrial is at around 14%, 15%, and Others is at around 23%, 24%. So that's the breakup. Overall, I think, led by Diesel Engine Oil and Personal Mobility, the B2C ratio has gone up, as we highlighted earlier, to 60-40. So that's a good improvement, I would say, and good performance.
Very clear. That's helpful. Sir, just a question, the Diesel Engine Oil would include the AdBlue revenues also?
No. So these numbers I'm talking are all excluding the AdBlue. This is out of the lubricant proportion. On top, we have that 14,000 KL of AdBlue, which we are now saying that it is a separate category. So this is a mix of the lubricant I am talking about.
Okay. Understood.
AdBlue is separately. AdBlue is separate, please don't -- for us, lubricants is a core lubricant. So whenever you refer to that, AdBlue will be a separate liquid.
Got it.
And for the last year, I think Sabri earlier asked about the full year figure, the last year full year volume of AdBlue was 16,000 KL.
Got it. That's helpful, sir. Just one question on the other contact management or the expenses other than the employee expense. That seems to have gone up around [ INR 30 crores ] this quarter. Could you help us understand what are the things that sort of led to that increase? And are we still running 2 shifts in most of our plants? Or has any plant shifted to more than that? Can you just throw a little bit more light on this part of the cost structure?
So for a few days, we had to run our plants on 3 shifts, but it is not all working this. Just to keep balancing the demand versus production. But overall, largely, I would say, is still operating on 2 shift basis. And hence, we have spare capacity to take care of the growth which we are projecting. Your another question was likely -- I mean, we could not hear it properly. Can you repeat that?
Sir, what I was asking was the other manufacturing expenses from quarter -- on a quarter-on-quarter basis has gone up by around [ INR 30-odd crores ]. In the opening remarks, you had mentioned a few drivers. Could you quantify that to help us understand the bridge there? How much was the A&P last quarter? How much is A&P this quarter [ on Q1 and Q2 ]?
So we usually don't give the breakup. But the key component, as I mentioned, have been higher A&P, higher travel and, of course, freight because 14,000 KL of AdBlue also, you need to transport it. So higher freight as well as the OEM royalties, which have gone up. So it is a combination of all the 4, I would say, largely.
And the OEM royalties are -- I'm sorry, sir, but what are they exactly? They are royalties paid to the OEM for the first [ sales ]?
No. So these are royalties paid to the OEMs for the sale of products in the franchisee workshop, in their franchisee workshops, in the aftermarket, in some cases. So we have different combination of arrangement with the OEMs. And on some of those products, we need to pay royalties to them.
Got it. And that number has gone up because that volume has gone up?
Yes.
Yes, yes, yes.
And we are also adding OEMs, so it goes up both ways.
Okay. Got it, sir. I'll come back in the queue.
Thank you, Chirag.
We have next question from the line of [ Ambal Shupla ], an investor.
I have a couple of questions. So first of all, I just want to know how is the procurement of base oil divided between imports and exports currently? And what are the advantages or disadvantages of maybe -- and does it occur domestically?
You see, first of all, India does not produce full requirement of base oil. So there is a lot of import that happens, and there are almost every player has to be dependent on imports for the purpose of fulfilling its requirement. So it's not about a choice. Also, the national oil companies have their own lubricant brands, so they consume their own production of base oil first for the [ nation ] and then surplus is sold out in the market. So the market dynamics is like that.
We have been importing close to 70% of our base oil from -- as imported. We have some contracts with some of the overseas partners, and that has been quite helpful for us in terms of these volatile times. Overall, I would say we buy local, but it depends on the availability. So it is a mix of both import and local depending on the availability.
Okay. Okay.
And just to add here, [ Ambal ], is the base oil that we are using, they also add to the consistent quality and the product approvals and the consistency of the base oil is also important. So these are also elements where we develop sources of base oil, which stand for -- for example, we are pioneering the long-drain oils. We have been using the best base oil there, the Group 2, Group 3. So just to highlight one more thing is that not only do we tie up with them commercially, it is also the quality and the approvals which are based on the base oil specifications for various [indiscernible].
Okay. And sir, do we have domestic supply of oil drains from base oil available?
Not all grades. We have a few grades, but some grades are only available in the inputs.
Okay. Okay. And what was that in response to the increase in base oil and in which grade of products basically?
Sorry, the question is not clear. Are you talking of which grades of base oil has seen the price increase?
Yes, yes. And then what was -- you know how pricing responds to that?
So various grades of base oil will increase based on demand-supply situation. Sometimes the Group 1 prices increase slightly more than Group 2, depending on where the demand is coming from. If the demand is coming from Asia and/or African countries, the Group 1 demand will be more because that's where the large consumption is. And if the demand is from Europe and U.S. side, then the Group 2 prices and Group 3 prices will go up. So it depends on demand and supply.
Also, the crude always has a role to play. So it's very difficult to say which one has gone up. Overall, this is the trend, depending on demand and supply and the grades of diesel. But the differences are not typically very high. If X base oil goes up $100, the other would go up in a similar range.
Okay. And then just last...
Sorry to interrupt, sir. Would you like to come back in the question queue, Mr. Shupla?
Thank you.
We have next question from the line of Hemal, an investor.
I'm sorry, I had 2 more left. So what is our battery revenue for the quarter?
Yes, it's around INR 20 crores apiece.
And the...
I n the batteries now...
Yes. Sorry, go ahead.
We have -- as mentioned in the last call, we are working out on solutions to localize the production, and we are in advanced stages. Hopefully, from quarter 3 onwards, we will be able to source some of those from India itself, and that will help us penetrate the market more.
So you do have a number for this year? Like I mean, are you -- is there like hundred -- like last couple of quarters, we have been speaking on this. But I know due to COVID, we had some restrictions. But do you have a goal as to -- in the next 2, 3 years there to reach in this battery business?
Yes. So we want to aggressively grow this category. That is what we can say, as of now, without giving any guidance on the numbers. We would say that the focus is to aggressively grow the battery segment for us.
And sir, are you giving -- because you're now giving AdBlue volume separately, are you -- what percentage of the revenue would it be contributing?
You see, again, as I mentioned, it will -- and Ravi mentioned in his remarks that it is a low-margin, high-volume product. So the realization also are much lower than the overall lubricant side of it. But we would like to not quantify the revenue part of it. But overall, you can say that this is a very low-margin and low-realization product as compared to the lubricants.
So should we consider like for the year this year, like 10% of the revenue? I mean, not asking for exact, but just less than 10% from the revenue number for the whole year?
Yes, I think so, that is roughly the estimate.
Yes. So let me tell you, Hemal, this is a complementary offering. When we offer a commercial vehicle diesel engine oil, we have to offer this for the customer, even the OEMs. So this will vary. We are going to focus on the high-quality market.
But overall, AdBlue is a single-digit margin product. And of course, it all depends on the supply chain. We are making this in both our plants, but we also have satellite plants, which are under our quality supervision. So some of these are available because it's also logistics issue on supplies of AdBlue. So we will play it by what happens.
So currently, we are seeing the quarter we just went by, we saw a good increase. And our OEMs also are asking us for these products because quality is very important. There are other products which don't meet the quality standards. And this is something which is useful, both for the environment and required for the BS VI in terms of the performance and the emission levels.
So we will have to play it by the ear. But yes, if the trend is good, we will continue, hopefully, getting a single-digit margin on this, and also the pricing is lower. It would form, roughly, what Manish mentioned, every quarter like it has in the last quarter.
Okay. And absolutely...
I'm sorry to interrupt, sir. Please come back in the question queue.
[Operator Instructions] We have next question from the line of Jimesh Sangvhi from Khoj Advisory.
Sir, can you share the percentage of advertising -- percentage to the sales revenue?
This quarter, it was around 3.5%.
3.5%. And sir, your employee cost has seen a sharp increase. So what was it relating to? Were there any bonus payouts or anything that were there during this quarter?
We follow usually the approach to March cycle in terms of performance and rewards. So you will see that, usually, there is an increase based on -- this is the starting of the first quarter, so you will see that increase. That is very -- I would say, increases from roughly 4.5%, and we are more or less in the same band, 4.6%. Also, because the top line has gone up, you see, as a percentage, the impact is not.
So should we look at that as an absolute number? Or should we look at that as a percentage of revenue? Because -- how should one look at it?
Usually, it -- I think the absolute number will give you a better indication for this quarter. We give an overall trajectory for the year.
So on an average, can we expect it somewhere around INR 30-odd crores to be the average run rate for the employee cost?
Yes. This quarter, it is around INR 32.5 crores.
Yes. So going forward, like in a normalized scenario?
That should be the average.
Okay. Okay. And sir, the other income -- or sorry, the interest expense has also seen a sharp spike. So was there any ForEx rate losses or anything or MTM losses, which were included in there?
Yes, absolutely right. So as you know, rupee depreciated quite sharply during the quarter, and the reason why our EBITDA has grown strongly, but there is some impact. And the PBT is impacted also because of the ForEx, which is part of the interest cost for us, finance cost, close to INR 8 crore on account of ForEx volatility, although we cover -- more than 50% of our positions are always hedged.
But on the open exposure, there is a mark to market. A large part of it is unrealized as of 30th June. And if rupee tends to appreciate, we can divest part of it. But overall, I would say, yes, the increase in finance cost is because of the ForEx.
We have next question from the line of Babita Chetwani, an investor.
Congratulations on the great results. I just have 2 questions.
I'm sorry to interrupt, we are not able to hear you very well. [Operator Instructions] Please repeat your question again. Thank you.
Is it better now?
Much better. Please go ahead.
Yes. So just wondered, again, on the AdBlue thing, and I know that this quarter's result, which means the INR 700 crores of turnover, does not include AdBlue. But I guess, even though it was just more volume in 2Q '21 and 1Q '22, the turnover included that part. So what was the turnover amount which was included if we have to see it on a comparative basis for 2Q '21 and 1Q '22 for the AdBlue?
You see, as I mentioned in one of the earlier questions somebody asked, you can -- because this is a figure, which we will not like to always comment on. But as a combined figure, I would say, you can take roughly 8% to 9% of the top line as AdBlue.
Okay. How about the quarter?
Yes. This figure is not to be consistently forward. It's an add-on product for us. We basically define our growth with lubricants, okay?
Yes, yes, yes. But since it is included in the last quarter, we just wanted to understand.
Yes, yes. We just to clarify because there has been a growth in this quarter.
Sure, sure. And the second part around -- I guess, you had already said that, but I guess I've missed. In the 1Q '22, where the volume was total [ 38 ] around 5% of [ ML ] was AdBlue, right?
Sorry, come again? Your line is again not clear.
[ ML ] 1Q total volume of [ 38 ], around 5 to 6 [ ML ] was AdBlue and rest is on core lubricants. Is that right?
No, no, which -- last -- are you talking about the last quarter?
1Q '22 volume. 1Q '22 and March '22.
Yes, yes, yes. Okay. You are talking from a calendar year perspective. I think you are following a lot of MNCs. Basically, it was 37,500 KL full volume. And out of that, 4,500 KL AdBlue, 33,000 KL was Core Lubricants.
Congratulations again, sir.
Thank you.
Thank you so much.
We have next question from the line of Hemal, an investor.
Yes. Sorry, so one more sort of final question you are not being able to answer. One last question was on the recharging that the company -- we had invested. Any indication -- and I remember, like we have spoken in 2000 -- around a year back, by 2021 or 2022, we would have some plan for the EV side as to how do we integrate amongst our distribution points and where are we going to go in the next 3, 4 years. Do you -- do we have any line of sight or any testing or any outcome of the testing in the area that -- from distributor?
No. We have shared that we are testing it. This is an evolving space. Once we are clear about the product success, we will make the next move. So the status remains the same, Hemal.
So no...
In fact, most of the [indiscernible].
Okay. So no time line, any time line for that? Like in October, December, January?
No, no. We are talking to a lot of -- we have to talk to a lot of people. This is a very developing area. So once we talk to OEMs and others, then we are clear we can make a move once that comes. Right now, it's not the time. We have not had any.
And then EV fluids, are you seeing any pickup at any OEM tie-ups that we may have more recent in this quarter?
No. I think you should be -- you must have read this in the [ disc ]. It is a very small stage, but we have the range, and we are approaching many of the OEMs.
We have next question from the line of Chirag from RatnaTraya Capital.
Just one clarification. Can you give us a little bit of a guidance on the EBITDA margin or EBITDA per liter? How would you -- however you look at profitability of the business, do you think this is where we are now, given the AdBlue contribution is expected to continue probably? Is this a new normal for us? Or are we hopeful to revert back to the older margins?
See, ideally, we would like to definitely go up from the level we have because, of course, AdBlue is one factor. But if you see, in spite of such a high AdBlue, our gross margins have been quite intact, and I would say, rather improved from March quarter. So it is all about adding up the sum of the parts. AdBlue is on -- as an additional line of, I would say, business is helpful, too.
But overall, from the lubricant side, there have been significant cost pressures. We have been able to successfully manage and pass on a large part of it to our customers' consumers. If there is a tailwind or help from the rupee side, from crude side and we get an upside, obviously, there is an uptick [ ripple ].
We have taken another price increase in this quarter end, towards the quarter end, which will also be realized in the current quarter. So the effect of all this, we are expecting an uptick from Q3 because everybody carries inventory of raw materials at least for 1 to 2 months. So we expect everything else remaining the same. There should be some improvement from Q3 onwards on the EBITDA margins or, I would say, gross margin side.
Very clear. And if I may squeeze in another question, if that's okay?
Yes, please.
So this is more a high level, sir. We've obviously talked about these things on the call many times and even a large competitor talked about it, but from the perspective of EVs coming in, and I see sort of the new sales of ICs going down, is my understanding correct that the stock of vehicles, which is estimated, I think, close to the 300 million, please correct me if I'm wrong, that is where 95% of our sales-wise the stock of vehicles as opposed to the new vehicles that come onboard? Can you just throw a little bit more light on this and a few more numbers? I know you've always talked about market growing [ 31 to 65 ].
Number is the same. 95% of our lubricant is for replacement and 5% is only the [indiscernible].
And 95% would then refer to the stock of vehicles, which are already on growth. So even if tomorrow...
Yes, yes, yes. That would be right. Stock vehicles, the equipments, all the machineries, all those are currently using. So basically, you see there is a vehicle part, which is there. And there is an addition to the vehicle part every day as OEMs keep selling the IC-based vehicles, which we have studied. And we foresee that for the next 10 to 15 years, there is a growth, which is going to continue in the lubricant side in terms of lubricant consumption because of new vehicles being sold and the vehicle part on the road.
And also, we have to remember that India is an underpenetrated country in terms of vehicle per capita. So while the increasing demand in some of the sectors will have some share of EV, I think a large part of the vehicles are going to continue to be on the IC side.
Right. I just want...
Sorry to interrupt, sir. Please come back in the question queue.
We have next question from the line of Jimesh Sangvhi from Khoj Advisory.
Sir, a couple of other things. How should one look at the AdBlue volumes going ahead? Should we continue to see this kind of a growth or volume number going ahead as well?
No, no. Jimesh, we have explained this that, currently, this quarter went up. That's why we explained. So we will give you a tracker for AdBlue. We will tell you about that. And this is about 12,000, 14,000 we are getting per quarter. So it should be at this level going forward. So we will report it separately here.
Okay, okay. But you don't expect it to further jump up from here on?
No, no, it can jump. If you find it, that it is decently profitable for us, we have the right distribution. We don't want to get into price products. This is just a complementary product, which we are supplying. We could even supply more, but we want to restrict ourselves to do a certain band of business in this. Of course, some of it is we have to do because commercial vehicle customers, OEMs would demand this -- that this goes as a package.
Okay. Okay.
Because you know that in the product that goes with the OEM, please remember, it's a very high-quality product, whether it's lubricant or it's AdBlue. And they would prefer to have because they sometimes, even in lubricants and in AdBlue, there is [indiscernible]. So we want to ensure that we give the right product with our customers for what they supply to their new vehicles. And of course, the older vehicles, as the BS VI vehicles get older, they would also continue consuming this AdBlue from various touch points, even petrol stations.
Okay. So do we need to have an additional capacity or something for this? Or this gets kind of...
No. We have. We have -- as I told you, there are satellite plants, which we control in terms of QC. So we have expanded there. And please take a call if it is going to be a sensible thing to do, yes?
Okay. Okay. Sir, secondly, can you share the margins that one could look at in the battery segment probably?
Which segment?
Battery.
Battery segment, which we are planning to grow.
Typically, the battery segment margins we have seen in the aftermarket because we are not into supplying batteries to the OEMs. So the margins are going to be in the similar range as lubricant -- as for lubricants.
Okay. Okay.
And we are focused on two-wheelers. We are focused on two-wheeler battery as of now. That is why we've chosen -- we have a strong brand, Gulf pride. It's the same brand. And we have 12,500 touch points, and we'll grow these now with the local supplies, which we get. So we're looking at a similar margin to what our lubricants makes.
We have next question from the line of Nemish Shah with Emkay Investment Managers.
Yes. I had just one question. I just wanted to understand what is the price, right, that we have taken in the Core Lubricants segment on both Q-o-Q and Y-o-Y?
So we have taken one price increase, as we mentioned in the last call, 3% to 4%, in our retail segment. And then there is another price increase, which has been taken towards the end of the quarter, June end, which is also to the tune of 3%, 4%. Of course, in the B2B segment, it is a bit of negotiation with the customer that keeps happening every quarter.
And OEMs are formula-based. So there is a formula every quarter, or with some OEMs, fixed monthly, where with the global base oil indices, the price increase or decrease happens. So this is the way we take our pricing call. So from the retail side, I would say, both price increases for the quarter, one in March, April and another in June, would be combined to the tune of around 7% to 8%.
We have next question from the line of [ Nida Serai ] with Abacus Investments.
Most of my questions are answered. Just one thing about this OEM royalty part, which you said has gone up this quarter. So how much is that OEM royalty this quarter vis-a-vis last quarter?
We will not be able to share the absolute number, Nida. But as the volume goes up, the OEM royalties will keep going up, depending on the quarter in which we sell how much as a percentage to OEM.
Okay. Right, right, right. And then another thing was about the...
See, OEM products are sold as factory fill as their dealerships, and it is also shown in the aftermarket for certain brands. So based on the segment where we get the traction, the royalties would differ, and these are all contracted with specific OEMs. So just to give you this, that obviously, it helps the business. OEMs also get high-quality products with good service their customers get. We also get a benefit because we are able to take the distribution up, and it helps us to sell our other products also. So it's a good win-win thing.
And last quarter, we have seen a very good growth in OEMs. They're also adding many OEMs. So as we add OEMs, some of them will have a royalty or some of them will have pricing. So this is the way the business is growing also. In addition, of course, we sell our own brands in the bazaar, which is a large part for us.
Right, right. So AdBlue would be contributing, what, about 8% to 9% of revenue this quarter? Or would it be lesser than that?
Yes, yes, yes, in that range.
Thank you. As there are no further questions from the participants, I'd now like to hand the conference back over to the management for closing comments. Over to you, sir.
Thank you so much. I think, as we mentioned in the call today, we have seen a good, strong quarter to start of the year. And we are very confident that the industry will also grow this time to a 3% to 4%. And hopefully, quarter 2, we have obviously some challenges on the margin, but Gulf is always focused on the 2, 3x of industry growth rate. So we continue that.
There are definitely exciting segments as we would look at it, our growth in PCMO, our growth in the B2C business. And side by side, we are seeing industrial growth and industrial -- industry -- industrial lubricants going up. So it's really going to be a good quarter.
I think some of re-establishing connect and re-energizing growth in the B2C business and in the other businesses is doing very well. It's bringing back a lot of personal touch at all points. And I think Gulf has this DNA that we can connect well, we can involve. We are having a lot of needs at retailer level, at our own level, with customer levels.
Our technology, Gulf Oil Technology, is available in India, one of the companies which has technology based in India with R&D. So all this is helping us. We will roll out -- as we are rolling out a lot of extensive reach program to gain distribution, to add customers, definitely focusing on our margin management. So this is what we're going to look at.
And as Manish mentioned, also, quarter 2, some challenge, but we want to get back to our margins, hopefully, sooner. And definitely, we see a lot of optimism in terms of the current year. And there is obviously the ability to pass on the cost and fees and, of course, give benefits. So we will continue to do that.
And thank you so much, everybody, for your questions. Hope we've been be able to answer them to a level of good satisfaction. Thank you again.
Thank you very much, sir. Ladies and gentlemen, on behalf of YES Securities, that concludes this conference. Thank you for joining with us, and you may now disconnect your lines.