Gulf Oil’s advertising expenses are expected to be 4-5% of our turnover this year: Ravi Chawla, MD & CEO
Ravi Chawla, MD & CEO, Gulf Oil Lubricants India Ltd., talk about IPL season and his expectation from it, increasing input costs and price hike plans, Ad Campaign on the 10th anniversary of World Cup 2011, acquisition of minority stakes in Indra Renewables, plans to enter into new spaces, CapEx and business outlook for FY22 among others during a candid chat with Swati Khandelwal, Zee Business.
Ravi Chawla, MD & CEO, Gulf Oil Lubricants India Ltd., talk about IPL season and his expectation from it, increasing input costs and price hike plans, Ad Campaign on the 10th anniversary of World Cup 2011, acquisition of minority stakes in Indra Renewables, plans to enter into new spaces, CapEx and business outlook for FY22 among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:
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Q: IPL season is about to start although there are concerns related to Corona. How do you see this season and what are your expectations?
A: Last year, when IPL took place, it was a soothing balm because people were at home. And, the IPL that was available on television was not played in India, which also relieved people. As we say, Cricket is a religion, so this time when IPL is coming then we are getting a little bit of caution as partial lockdowns are being implemented in Maharashtra and few other places. But, I think, IPL will continue because it is a passion and cricket has always been a religion for us. So, it is expected that a lot of promotions will be there in IPL and people will get a chance to see many brands. IPL is also a good source of entertainment and we have been associated with IPL for the last 10 years, mainly with CSK and Mahendra Singh Dhoni has been with us for all these 10 years. So our brand promotions will continue.
Q: The input cost is increasing and its impact is visible on your company. How will this impact your margins and are you ready to take price hikes, if yes, what will be the quantum for the same? Also, how will you protect your margins?
A: We have always said that our margin bans stand at 16-18%. Rightly said that our input costs have increased considerably. And, we have seen an increase over a few months, even more than crude because the demand-supply situation of base oil is slightly different. So, we have just taken a lot of price increases in the market and we have formula-based pricing for the B2B customers, and it is coming in the market and we are implementing them. So, I have a hope that the price impact will be passed on now and we want it to be delayed a bit. The demand conditions in the market are good and we have seen a 16% in the third quarter, September to December, and there was a single-digit growth in the second quarter, which was good. So, the growth conditions have been good and demand is coming. For safety, people are using personal mobility, like bike and cars. We have to balance it, but it is being passed on and the increase we are seeing is being passed to B2C and B2B.
Q: But there can a price hike in the next couple of months, if yes, what can be its quantum? You have also said that there have been price hikes, so update us about the price increases that have been undertaken and how much is expected?
A: There are different base oils for different products. So, there has been a lot of increase and that too has been passed on. We will have to see as the demand-supply situation happens at the global level and I expect that it will come down in a few months. So, when the temper comes down, we will not take the price increase but if it increases then we will have to pass on the price increase.
Q: There was a concern related to semiconductor with the auto companies which was hampering their production because the availability of semiconductors was an issue. How is it impacting your business and what is your view on the newly implemented lockdown-like conditions in a few cities and states, especially in Maharashtra, for your business?
A: As far as semiconductors are concerned, we mainly provide factory filled with commercial vehicles. We have seen that the production of commercial vehicles has increased well in the last few months. There was some impact on it and it seems that it is recovering now. So, it will not be a problem. And, as you are talking about the safety measures that have been announced in Maharashtra, partial lockdowns on weekends, then we will have to see what impact it will have on the market because, in the bazaar market, we will have to look at the spare parts and auto shops. As I have said earlier about the personal mobility in which people are using their bikes and cars more and demand has been good in it. It should be seen that how we can safely accept this challenge and since last year’s March we have been seeing the ways to counter with it and how to go ahead. I expect that the markets of the automobile will remain - partially and safely – open. In Maharashtra, we will have to see that how many months the impact will be seen.
Q: The company has also acquired a minority stake in Indra Renewables. What is your strategy as the company in the EV charging space? Also, tell us what is your plan regarding EV Space?
A: Our parent company Gulf Oil International took stakes in this company and we have taken a stake from them. This participation will be for the purpose to see how Gulf, as a brand, can participate in the EV value chain. This company has had a good market share in the UK, and it has its technology in-home charging and vehicle to grid charging. We have to bring it to India. we are looking forward to the ways to bring it to the market and how to take it ahead through tie-ups. So, I will say that this is our first investment, we are looking in other areas also to find where Gulf as a brand can enter globally in the value chain. So, this is the first entry in it.
Q: Tell us in some detail about it as your company is already present in batteries. So, are you looking towards the electric vehicle battery space and you can have some plans in that space as well? Also, tell us about the areas that you are exploring at present?
A: As far as batteries are concerned, we started two-wheelers batteries a few years back because they are traditional batteries, and we are getting good growth in the segment. So, it will remain in the market for many more years. As I have said about the value chain then it includes charging and mobility. So, these are two-three areas towards which we are looking and how we can enter into it. I will say that this is at the strategy level and we will announce anything after clearing things with the board. But a lot of discussions is going on as to where and how we can bring Gulf as a brand with its distribution and brand strengths. Currently, things are being studied and in battery, you have seen that we have invested a bit in the segment.
Q: What is the CapEx that you are planning in the area because this is a capital-intensive sector and a lot of R&D, as well as technology, is being used in the space? So, what is the CapEx for the company right now and for the future additional business opportunities?
A: It is being studied at present and the investment that has been made in Indra is an equity investment and it is not a substantial investment. And, as I have said, that we will examine the value chain of every project and we will be able to come with clarity on it and inform you about it when they are cleared.
Q: If we will talk about the business then what is your outlook on FY22 and how are anticipating the year because we have started the year with disruptions like COVID? What growth we can see in terms of top line and bottom line?
A: Gulf Oil has been 2-3 times ahead of the market for the last 10 years. We hope that if the GDP will grow by 7-8% - many are talking about more growth – then the lubricant market will also grow in FY22. I hope that as we have been doing 2-3 times, which has been our goal, and we are confident that we will look towards the market and our business in the same way. We will continue to grow our market share gain across segments. This year too, we have seen many challenges but we have grown a lot. Some segments are long term segments and a few are the segments where we have seen that the Gulf brand is increasing and has turned up to be the number 2 brand – we have seen it in our internal studies – and how it should be increased. As far as personal mobility is concerned then we also want to grow in the car segment. We are also trying a lot to grow in the industrial segment, where our market share is low. So, this is our strategy and our goal and we are confident that we will grow in the same manner.
Q: You have launched an Ad Campaign on the 10th anniversary of World Cup 2011, where India won, where MS Dhoni meets his younger self in Gulf Oil’s brand campaign. Tell us something about the Ad Campaign and how much ad spends is going to go up as compared to the last year?
A: This campaign is about a brand of motorcycle, ‘Gulf Pride’, and its value proposition is an instant pick-up, it provides smooth acceleration and this is the speciality of the product. At the same time, I would like to say that the product runs for a long distance as it runs for 10,000 km and we have improved it a bit more. The promise of consistent pick-up is a campaign thought that we provided to the agency and the creativity of the campaign is that MS Dhoni of 2005 is talking with current Dhoni and the consistent pick-up is a comparative with the consistent progress he did across his career. So, this has been a comparative campaign and very interesting timing in which he is describing his best innings in the talk, which he liked and was the final of the World Cup and its anniversary was celebrated on April 2, 2021. The main concept is of constant instant-pick-up and we have presented it through this concept. As far as advertising spends are concerned, yes we spend less last year because we all had challenges but I hope that we will be investing 4-5% of our turnover, which we normally do. And in this campaign as well we are starting investment and now IPL is coming. So, I expect that many brands that have gained strength will be taken further.
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