We Are Trying To Balance Topline Growth With Bottomline Growth: Castrol India | CNBC TV18
Summary
TLDRIn an interview, Mr. Sandeep Sangan, Managing Director of Castrol India, discusses the company's performance with muted Q2 results, revealing a 5% revenue growth and a 3% rise in PBT. He emphasizes Castrol's focus on balancing topline and bottom line growth, with investments in branding and new product launches like the Castol Edge portfolio. Sangan also highlights the potential of data center thermal management, where Castrol is investing in R&D for immersion cooling technologies, although the timeline for market implementation remains uncertain.
Takeaways
- 📈 Castol India's stock has performed well this year, but the second quarter showed low single-digit growth in revenue and flat profit margins.
- 🔑 Mr. Sandep Sangan, the Managing Director of Castol India, discussed the company's performance and future outlook.
- 📊 The company reported a 5% growth in revenue and a 3% rise in PBT in the second quarter, supported by brand investments and a new campaign featuring Shah Rukh Khan.
- 💡 Historically, Castol's topline growth has been around 2-3%, and the company is now focusing on balancing topline and bottom line growth.
- 🚀 Castol India launched new products in the second quarter, including Castol Edge for SUVs, hybrids, and European cars, which is a top-performing product globally.
- 📚 The company's volume growth was in line with revenue growth, and they aim to grow a couple of points ahead of the market, which is growing at about 4-5%.
- 🌐 Castol India is expanding its auto care range of products, which are now available in 45,000 outlets, aiming to scale the business further.
- 💰 Advertising expenses have increased by about 16% in the first half of the year, which is part of the strategy to continue building the brand.
- 🌡 The company is exploring opportunities in data center thermal management, investing in R&D for immersion cooling technologies.
- 🌐 The data center market is expected to grow, and Castol is testing and piloting its cooling products with big data center players.
- 🔮 While the data center opportunity is still in development stages, Castol sees it as a significant area for future growth and is investing accordingly.
Q & A
How has Castol India's stock performance been this year?
-Castol India's stock has performed phenomenally well this year, despite the muted performance in the second quarter.
What was the revenue growth for Castol India in the second quarter?
-Castol India delivered a 5% growth in revenue in the second quarter.
What was the rise in PBT (Profit Before Tax) for Castol India in the second quarter?
-There was a 3% rise in PBT for Castol India in the second quarter.
What marketing campaign did Castol India launch to boost their brand?
-Castol India launched a campaign featuring Shah Rukh Khan for Castol EDGE.
How does Castol India's topline growth compare historically?
-Historically, Castol India's topline growth used to be in the region of 2-3%, and they are now aiming to balance topline and bottom line growth.
What new product did Castol India launch in the second quarter for specific vehicle types?
-In the second quarter, Castol India launched the Castol EDGE portfolio for SUVs, hybrids, and European cars, which is a top-performance product in their global car portfolio.
What was the volume growth for Castol India's core business in Q1?
-The volume for Castol India's core business, lubricants, grew by 5-6% in Q1.
What is Castol India's outlook on the core lubricants business growth?
-Castol India's outlook for the core lubricants business is to continue growing at about 5-6%.
How does Castol India plan to achieve higher volume growth?
-Castol India plans to achieve higher volume growth by beating category growth and adding revenues from playing in adjacencies, such as their Autocare range of products.
What is the current status of Castol India's data center thermal management opportunity?
-Castol India sees data center thermal management as a big opportunity and is investing in R&D for technologies like immersion cooling, with products already available and in testing with big data center players.
How does Castol India maintain its profit margins amidst increased advertising expenses?
-Castol India has maintained its profit margins at about 23-24%, and they plan to continue investing in brand building, as they believe in the long-term benefits of such investments.
What is the potential of the data center opportunity for Castol India in terms of profit margins?
-While the share of volume for the data center opportunity might be low, it could potentially have a high share of profit due to its efficiency and lower energy consumption compared to traditional cooling methods.
Outlines
📈 Castol India's Growth and Brand Strategy
In the interview, Mr. Sandeep Sangan, Managing Director of Castol India, discusses the company's performance in the second quarter, which showed low single-digit growth in revenue and flat profit margins. Despite this, Castol India reported a 5% revenue growth and a 3% increase in PBT due to investments in branding, such as the Shah Rukh Khan campaign for Castol Edge. Historically, the company's topline growth was around 2-3%, and the current focus is on balancing topline and bottom line growth. The company also launched new products, including the Castol Edge portfolio for SUVs, hybrids, and European cars, which is a top-performing product globally. Mr. Sangan emphasizes the importance of driving topline growth while maintaining margins and hints at the potential for higher volume growth through market diversification and adjacency plays, such as the Autocare range of products launched the previous year.
🌐 Data Center Opportunities for Castol India
The second paragraph delves into the potential of data center thermal management for Castol India. The company is investing in R&D for cooling technologies, such as immersion cooling, which is more efficient than traditional air cooling systems. Castol India has access to its parent company's R&D facilities in the UK and is currently testing immersion cooling products with global data center players. While the market in India is currently small, it is expected to grow rapidly, offering Castol India an opportunity for expansion in this sector. Mr. Sangan highlights that while the volume share of this market might be low, the profit share could be high due to the efficiency and lower energy consumption of the immersion cooling technology. The exact timeline for the full deployment of this technology in Castol India is dependent on customer feedback and the outcome of ongoing tests and pilot programs.
Mindmap
Keywords
💡Castol India
💡Revenue Growth
💡PBT (Profit Before Tax)
💡Brand Investments
💡Topline Growth
💡Volume Growth
💡Market Growth
💡Diversification
💡Advertising Spend
💡Margins
💡Data Center Thermal Management
Highlights
Castol India's stock performance has been phenomenal this year, despite muted Q2 results with low single-digit growth in revenue and flattish profit margins.
Managing Director, Sandeep Sangan, discusses Castol India's performance and future expectations.
The company reported a 5% growth in revenue and a 3% rise in PBT in Q2, attributed to brand investments and the launch of the Shah Rukh Khan campaign for Castol EDGE.
Historically, Castol's topline growth was around 2-3%, and the company is now balancing topline and bottom line growth, with a focus on volume and revenue growth.
Castol India launched new products in the second quarter, including the Castol EDGE portfolio for SUVs, hybrids, and European cars, which is a top-performing product globally.
Volume growth for Castol's core business lubricants has been around 5-6%, with an intent to grow ahead of the market, which is growing at about 4-5%.
The company is investing in brand and product innovation, with a focus on driving topline growth and maintaining margins.
Castol India has launched an Autocare range of products, now available in 45,000 outlets, aiming to scale the business with a portfolio of five to six products.
Advertising expenses have increased by about 16% in the first half of the year, as part of a strategy to continue building the brand and supporting innovation.
Margins have been maintained at around 23-24%, with the intent to continue investing in brand and product development.
Data center thermal management is a significant opportunity for Castol globally, with an investment of 500 crores in R&D facilities in the UK.
Castol is developing immersion cooling technologies for data centers, which are more efficient than traditional air cooling systems.
The company is currently testing and piloting immersion cooling products with big data center players.
The data center cooling market in India is expected to grow rapidly, with new capacity and big players entering the market.
While the data center opportunity may be a small percentage of total volume, it could represent a high-margin product for Castol.
The exact timeline for the adoption of data center cooling technology in Castol India is uncertain, depending on customer requirements and test outcomes.
Castol India is committed to continuing its focus on innovation and brand building, even amidst market challenges.
Transcripts
castol India is the next company that we
are speaking with stocks done uh
phenomenally well this year and but the
performance in the second quarter was a
bit muted low single digit growth in
revenue and uh profit margins were also
kind of flattish we have Mr sandep
sangan managing director at castol India
to talk more about this Mr San great to
have you with us here good morning
thanks very much for your time Prashant
de side uh so you know so q1 has been uh
sorry this quarter has been muted even
H1 overall has not been all that great
could you give us an indication of what
we should expect for the full year in
terms of volume and value growth
F525 yeah first of all I think uh thanks
for having me on your
channel and let me give you a
perspective I think we've delivered a 5%
growth in Revenue uh in the second
quarter and a 3% rise in PBT on the back
of continued investments in Our Brands
uh we launched the Shah ruk Khan
campaign on castol edge and uh if I uh
also compare it to uh what we've done
historically is our Topline growth used
to be in the region of 2 3% and I think
uh what we're trying to do is balance
out Topline growth and bottom line
growth and we very happy with the
Topline growth volume and revenue
profile that we're building now okay and
uh our volumes have been pretty much in
the same level as Revenue growth and uh
the other thing is we continue to invest
behind Our Brands launch new products
for example in second quarter we
launched castol Edge portfolio for SUVs
for hybrids and uh European cars and
this is the top performance product in
our cars portfolio globally so uh muted
depends on which perspective you uh see
it from I think uh what we are focused
on is now driving Topline growth
balanced with maintaining our margins
that's that's way V so can you give us
the exact number sandep what was the
volume growth that you did in q1 and for
the rest of the fiscal what is the kind
of average volume growth that you are
expecting so so I think our volume has
grown in the level of 5 6% okay uh
that's the Core Business lubricants and
I think as far as the uh fer is
concerned we want to grow a couple of
points ahead of the market okay and this
Market grows at about 4 5% and I don't
know where the volume will
at the year end but our intent is to uh
Drive Topline growth through volume
growth so you're saying that there is no
scope of double digigit growth in the
lubricant industry uh not just for your
own company but even for the industry
overall this year I I think depends on
uh where uh we play and where our uh uh
competitors or other colleagues in the
industry play and I think uh we can get
to double digit growth levels but a lot
will depend on that diversification also
but the core lubricants business will
continue growing at about 5 6% that's
our Outlook and if you can beat that
category growth and then add on some uh
revenues on top uh from uh uh playing in
adjacencies I think that can get us to a
much higher volume growth profile just
to share an example we've launched
Autocare range of products last year
which are now available in 45,000
Outlets uh we we trying to scale that
business uh we've got good response we
have a portfolio of five six products in
that autoare range now which will
continue building so there are
additional leevers of growth uh which
will come in as we uh as we uh look at
the future okay all right hi sandep you
briefly mentioned that you know Shan's
on board as well that would mean higher
uh advertising spend so as a percentage
of sales what was it and where does it
settle at for the coming year and you
know putting that into context what does
it do to margins 22 to 25% is what
you've been talking about will you be
closer to the lower or the higher end of
it so uh let me start with margins first
uh We've maintained our margins at about
23% in the second quarter also and what
we've said is uh in some quarters it's
been 22 in uh in 23 but we are able to
maintain those margins at uh 23 24%
levels okay that's one thing yes
advertisement expenses will be higher
and they've been Higher by about 16% in
the first half of this year uh but
that's a part of the strategy it's not
something uh uh that we want to give up
typically we invest about four to 5% of
our uh Revenue in our uh brand
Investments and that'll continue going
forward if anything we may continue
investing more uh but castol has been
built uh it's a brand which is loved by
Indian consumers and customers for more
than 115 years in the country and we
have all the intent to continue building
that brand supported with Innovation uh
by bringing new products for our
customers and consumers okay all right
you know s uh the street got very very
excited about the data center
opportunity we had the management of Gul
oil who said you know given the entire
Matrix and the entire pie it's not such
a big opportunity though the stock
market is quite bullish that castol has
a big opportunity out there could you
give us your reading of this how big is
the data center opportunity for a
company castol and how do you look at
scaling that up yeah so I think uh let
me touch on that first of all we've
called out globally uh data center
thermal management is a big play for
castol and globally we investing about
500 crores uh that was announced uh in
R&D facilities in our parent company uh
in UK to which we have access uh the way
we see it is Data C the market is going
to grow okay uh in India and globally
also it's a function of what cooling
Technologies data centers adopt okay
right now most of the data centers use
uh something called air cooling or HVAC
systems traditional systems but I think
as the Computing part demand grows and
uh we need faster processes cooling
requirements will grow and castol as R&D
we investing in Technologies like
immersion cooling which can give us
opportunities uh in that uh space so
that's where uh I I think it's still in
develop stages we have certain tests
running with customers we tied up with
global players in data centers who
design and develop data centers so we
see this as an opportunity area and
that's the perspective you're coming
from Mr sangan so uh you're saying that
the parent already has a product uh is
it yeah we have liquid cooling products
for data centers which are already
available yeah for imers this is already
this is already being used uh immersion
Cooling your your product is already in
use so we working with some of the Big
Data Center players in terms of testing
and piloting these I cannot say anything
more than that but we have a data center
cooling product which is
available because in India the market is
about only a th000 megawatt right I mean
it's expected to grow rapidly uh because
a lot of capacity Etc is coming lot big
players conglomerates Etc are coming in
very fast uh but this is a are you
saying this is in testing stage or this
is a settled technology now I mean it's
much more efficient than air cooling
yeah it is much more efficient because
the energy consumption is much lower and
uh and it's far more efficient in terms
of space utilization also uh but as I
said uh we doing uh testing with some of
the uh big customers and uh we want to
uh continue developing this
further but by when can we see the
technology B you said you have access to
this by when can you uh get that
technology here in Castrol I mean for
castol yeah yeah so I think as uh as we
kind of uh further proof of Concepts uh
uh get verified uh depending on customer
requirements and customer uh uh
businesses we will be able to bring it
in I think to say which time is very
difficult for me I think it's again
depends on how the test and various
programs that we have with customers
develop over the next few months and
years you know we had the gulf oil
management and they gave us the total I
mean in in terms of volumes right if you
project Data Center capacity say 2,000
megawatt I mean you say all of it is be
becomes this emerging technology even
then as a percentage of total uh total
volume sold it is minuscule but I don't
know if that is a right way to look at
it I just wanted your perspective could
it be a high margin product so it's in
terms of share of volume it could be low
but share of profit could be high I I
don't know what the internal thinking is
Mr sangan
so first of all I I think you keep
referring to Gulf it's their View and I
would like to comment on that it's for
them to uh to judge uh as far as we are
concerned uh We've called it out
globally as one of our plays for the
future and uh we believe in this and we
continue working on this as an
opportunity area Okay uh we we' love to
get more details as you're not ready to
sh share those with us for maybe next
time uh and we'll have more updates on
this one uh really appreciate it
answering and taking all those questions
thank you very much for joining us uh Mr
tangan and good luck for the underlying
business as well as you go through the
rest of the financial year we'll take a
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