Castrol India Limited (500870) Earnings Call Transcript & Summary

I hope you and your families are safe and healthy during these difficult times. We can clearly see that the pandemic is far from over. And I do hope you and your families and everyone continues to take all the social distancing and masking and stepping out, take all the precautions and also follow the hygiene norms. Thank you for joining us on the third quarter 2020 results call. Going to our results, which we announced yesterday, I'm happy to announce a strong set of numbers in third quarter for Castrol India. Partial revival of pent-up demand; robust supply chain and distribution network; investment in our brands, along with judicious working capital management contributed to this delivery. We have shown growth across all spaces in the automotive segment with an overall volume growth over last year. Judicious working capital management, along with cost and efficiency programs saw net cash from operations in 9 months 2020 to be more than 150% of profit after tax as well as third quarter profit before tax increasing by 17% and revenue from operations increased by 4%. We have continued our investment in our brands, with all our power brands across 2-wheeler, 4-wheeler and CVO as in across TV and digital media. We have doubled our advertising and sales promotion spending compared to the same period last year. We launched 2 new synthetic products, Castrol GTX SUV meant for SUVs and Castrol Activ CRUISE for 2-wheelers, [ EPL-9 ], the growing demand for thinner higher performance engine oils. The initial feedback and uptake in the market, both products has been very positive. Talking about our team. I'm really, really proud of the Castrol India team. Their performance and commitment has been outstanding in such a difficult situation. Our plant teams have been working through this pandemic and have ensured that all 3 plants are operational throughout this quarter, meeting customer demands. Our teams who are working from home are ensuring our customers are engaged as they service their requirements in the best way possible online. They're also winning us new customers virtually. We have been recognized at several forums and awards recently, especially in the areas of safety, quality and for our creative, purpose-driven marketing campaigns. OEMs like Ford and Schaeffler have also complemented our hard work and seamless delivery despite the difficult environment. Our Silvassa plant was recertified with the coveted Ford Q1 quality certification, while Schaeffler gave us the top most supplier rating. The Board has recommended an interim dividend of INR 2.50 per share in this quarter. All this gives us the confidence that we are on the right track with a strategic, sustained, profitable business growth when economic activities return to normal. I'd like to hand over to Rashmi now for our opening comments, and then we can move to Q&A.

Good afternoon, everyone. Thanks for joining the call. And Sandeep just spoke about the strong set of numbers, really pleased with that. In addition to the continued investment in brands that Sandeep mentioned, we have also continued to invest in our distribution setup in terms of digitizing and modernizing the sale to create a premium customer experience. We believe this will help us in driving growth in future. We are also reviewing our capital expenditure spends in the market. And as the markets are opening up, we will be spending that as usual. Sandeep touched upon the working capital management, a lot of discipline and rigor goes into that. And I'm happy to share that we have an all-time low of overdue. In fact, it's better than non-COVID time. So a lot of focus on that, which has led to strong cash flows and has enabled us -- declared interim dividend as usual despite the COVID situation. So that's all I have to share with you. Thank you. And I would like to hand it over to the operator for questions.

[Operator Instructions] The first question is from the line of Mohammed Ahmad from FGP.

Congratulations on very strong results. Just 2 quick questions on data. One, could you give us your Q2 volume number? And what would have your CapEx been in Q3 as well, or sorry, 9 months year-to-date?

Yes. So volume number was 47 million liters. Just give me a moment, I'll come back to you with the CapEx number, yes.

While we wait for that, maybe a quick aside. I mean, in our institutional landscape, ESG, obviously, is a very high focus. I was just wondering, do you guys plan to sort of update or release an updated ESG targets for your company, just your subsidiary, not -- I understand your part of the overall BP part, but just for you?

Sandeep, would you like to address that?

Sorry, if I understood the question, any future guidance, is that what you're asking, Mohammed?

yes. More with regards to maybe some specific disclosures either on greenhouse gas emissions or setting targets, specifically for Castrol India there that you would be sort of going with?

So I think as far as sustainability is concerned, and we align to the net 0 ambitions that BP has announced globally. But I think as sort of target setting is concerned, we're not going to be setting out any Castrol India specific targets, but play in the overall agenda that BP's already outlined. And sustainability will continue to be a key focus area as we go forward, where you'll see activities happening in that space from Castrol India as well.

And on the Capex, we spent INR 34 crores during this year.

INR 34 crores. Sorry, I didn't take that volume number, was it 37 million?

47 million.

[Operator Instructions] The next question is from the line of Viraj Kacharia from Security Investment Managers.

Congratulations for good set of numbers. Just have 3 questions, to be specific. So first one, in the past, we have kind of made -- yes. So in the past, we have maintained us looking at achieving annual volume growth of 5% to 6% on a more long-term basis, say, 5, 7 years. Now given COVID, do we still hold this guidance? And added to that, is the large part of this dependent on CV volume recovery? So how -- internally, how are we looking at this portfolio construct to help us achieve this growth? So that is one. Second question is on the adjacent business models. Now if you can share experience or key learnings for us, in terms of tie-up with 3M. And the similar approach which the parent has taken in the U.S. and China, so what has been the key learning and experience? And what is the current scale contribution, if you can share any? And how is the road map looking like? So do we have any more partners in the pipeline, which we will be looking to add? And so any color you can provide on this side of business? And third is how are we seeing the raw material price environment, especially given the shutdown of local base oil facility by HPCL? So -- have we taken any price increase to offset that? And how should we look at the RM side? So these are 3 questions.

Yes. Thanks, Viraj. Maybe I think I can start with the answers, and then Rashmi can chip in. I think as far as volume growth for future is concerned, we won't like to give any guidance. The only thing I would say is we are focused on making sure that we can drive top line growth. And top line growth for us is both volume and turnover growth, and that will be a key focus area. I think we're still in the recovery mode as far as COVID is concerned. Let's see over the next couple of months go under the shape 2021 for most of the businesses. In terms of volume recovery, I think, as I said in the beginning, we've seen volume recover in almost all the automotive spaces in quarter 3. We've seen growth in CVO. We have seen growth in motorcycles or 2-wheelers, and we've seen a bit slower growth in the car space, okay, primarily it's been driven by 2-wheelers and commercial vehicles. As activity returns, especially on commercial vehicles, activity is beginning to return to off-road and building and construction, which is helpful. I think industrial is a bit -- still a bit soft, and -- but we're seeing good momentum. IFE in August was minus 8%, but much better than the previous months. Your second question around adjacencies, you spoke about 3M specifically. I think early days, we had to stop the 3M pilot because of the COVID situation, and we're going to restart that taking learnings from first phase in pilot and then going into how can we make that bigger and much more customer-centric and from a value proposition perspective. So it is still in pilot stage. I think so -- from that perspective, materiality of that, there is still yet to be determined, and we'll be refocusing on that pilot. I think there are some other tie-ups happening. The 1 that I guess speak about is the Jio-BP tie-up. As you know, BP stand up with Reliance on the fuel court side, where there are about 1,400 fuel courts or petrol pumps, as we know, in India in the Jio-BP network, which are likely to -- which will expand to 5,500 over the next 5 years. And Castrol is the exclusive supplier -- lubricant supplier on these fuel courts. So that gives us 10 additional channel of distribution, where there's a lot of consumer footfall. And it also helps in our brand visibility. At a global level, there are 2 programs running in China and the U.S. So this is a collaboration with Bosch in terms of branded workshop space. Those are progressing well, okay? And hopefully, if everything goes well, that will be another area of opportunity for many of the other markets. Coming to your third question, which is raw material environment. I think quarter 3 was possibly 1 of the lowest in terms of cost inputs because the base oil prices were low, crude was low. But we're already beginning to see a tightness in the base oil market, which will have an impact on cost of materials, cost of goods. But I think as far as relating back to pricing, we take a review on pricing, I think it's more strategic in nature. And how do we deliver value to our consumers and customers. So and we keep reviewing our pricing, but pricing is based on a strategic review that we take of the business. Rashmi, over to you if you want to add anything?

No, that is -- that is fine, certainly.

Mr. Kacharia, may we request that you return to the question queue for follow-up questions. We'll take the next question from the line of Yogesh Patil from Reliance Securities.

I have 2 questions. First one, can you give us total advertisement and sales promotion expenses for the quarter? So as you mentioned, it has doubled compared to the last year, that is the first one. Second question is related to CapEx. Any guidance for 2021 and '22? And along with these, if you could throw some light on the Silvassa plant expansion?

Rashmi, do you want to take these questions?

Yes, sure. For the quarter, we spent INR 26 crores of advertising spend on that. In terms of CapEx for '21 and '22, I think we should go back to our usual way of spending CapEx between INR 80 crore to INR 100 crore that used to be our spend. So I think we will go back to that if the market recovery continues. In terms of Silvassa expansion, I think we had mentioned last time also, we will, at the moment, it's on hold. We will review how the volume recovery is coming along. And if we still see the same trajectory as we expected earlier, post-COVID, and we will again look at that investment. But it is meant to support the growth. So as and when we need it to support the growth, we will invest.

The next question is from the line of Ramesh from Nirmal Bang.

My first question is on your Y-o-Y growth and revenue. How much of that is based on the growth we have in the OEM sales of auto companies? And how much is the secondary sale?

Okay. So I can take that question. If you look at our business is primarily centered around the Bazaar channel, okay, which is mostly dependent on the aftermarket performance and not so much on new car sales. Yes, so I think a majority of that is driven by the aftermarket.

So that means that trend, if the recovery continues, that is very sustainable, okay. The second is some mentioned of an expansion underway in your December annual report, so -- and you have [ spend ] some CapEx. So what are the kinds of incremental volumes you can expect from current operating CapEx?

So I think that answer was just to answer -- that question was just answered by Rashmi. I think that was -- talking about the Silvassa expansion plan, which she already answered.

Okay. And if you go to the next -- the -- you see the [indiscernible],

Mr. Ramesh, I'm sorry to interrupt you, this is the operator. Sir, the audio is breaking, sir, from your line, please check.

Yes, probably the line is not -- So I just try to speak a louder. So [indiscernible] do you have any plans to introduce synthetic lubricants in the business over the next 3 years?

Sure. If I understand the question, do we have any plans to introduce synthetic lubricants in our business, is that the question?

Yes.

We already have -- we have been synthetic lubricants.

Yes, so we already have synthetic lubricants. And we keep introducing new products, which help us upgrade also. So we already have a full -- portfolio of synthetic products.

The next question is from the line of Jeetendra Khatri from Quantum Advisors.

Sir, my question is that as we move to more [indiscernible] systems in BS VI, and maybe the share of mechanics role in replacing the oil and everything goes down. So do you think it will affect replacement demand? Because I think OEMs will take over more of the servicing now. And we don't know what is the OEM's view on having cash for less shared oil, so any view on that?

So if I understand your assumption being that the BS VI coming, OEMs will take control of the lubricants market? Yes. I think that may not be a true assumption because I think basically, what we see is, once the warranty period is over, almost about 70% to 80% of the vehicles move on to the aftermarket. And that doesn't change. I think the BS VI is primarily saying the oil quality is better. So the viscosity are thinner, okay? But it won't be a fundamental shift in how the car is service. So we continue to see a role for mechanic as a very strong influencer in the category, and we continue working with mechanics. I think BS VI equivalent things came into Europe 4, 5 years ago and things haven't changed substantially. So aftermarket will continue to play an important role in our business.

The next question is from the line of Dhiral Shah from PhillipCapital.

Sir, what is the volume growth we had [indiscernible] in Q3?

Rashmi, do you want to take that?

Yes. We had a high single-digit volume growth in Q3.

Okay. And, ma'am, if you can segregate this among OEMs and let's say aftermarket then?

The large part of our growth comes from aftermarket, yes.

The next question is from the line of Nitin Tiwari from Antique Stockbroking.

So my questions are on the volume mix. So what was the volume mix in this quarter in terms of automotive and nonautomotive and respective growth in each segment, if you can highlight that, that's good.

So the growth came from automotive segment and the total automotive is around 90% of our volume.

Right. And if we look at the volume growth, that has been higher than the revenue growth. So could you please at all like throw some light on the pricing environment that has prevailed over 1Q and 2Q? And how is it going to be going forward from here?

So we actually took certain pricing actions on some products at the end of last year. In the first quarter, we also took price increases on selected brands. In second quarter, we had a scheme of [ Dus Ka Dum ], which was [ 1 3 on 10 ], and that impacted our realization. So in the third quarter, we saw that realization coming back to almost normal with a strong mix also. So in terms of going forward, we aim to hold on to a good mix and good realization. But if there are some actions required on certain brands, depending on the pricing premiums, we will continue to do those as usual.

If I may push in 1 more. So if I have to break up the -- I wouldn't want to use the word guidance, but if I have to break up my understanding in terms of how volumes would move like in the near-term and perhaps in a longer-term period of say, 5 to 10 years, then what's your sense around like the tower actually, the volumes going to evolve? And in this case, we are taking everything into perspective. I think in the near term, we have to take COVID and like related impact in perspective and in the longer term, perhaps the entire narrative around EV has to be taken into perspective. So how do you guys see it like evolving in near-term as well as in slightly longer term?

So I'll try and answer and Sandeep, you can please help.

Sure. Sure. Sure.

Yes. So in the short term, while currently, we are seeing good demand coming through. Because, as I said, because of COVID and the various things that are happening in the world because of COVID and otherwise, difficult to predict how the volumes will grow. In the longer term, so we have a strategy, which is articulated for 5 years, and that takes into account the trends on easy shared mobility, except digitization and all those things. And considering that, we have set out the strategy of growth of about 5% to 6% volume growth. Now we will look at that again, considering the COVID impact, et cetera. But that are the ballpark numbers in the longer-term that we were looking at for the next 5 years or so. What happens after the next 5 years? Again, it's something which currently it's a conjecture, but we keep evaluating the environment and looking at how we need to change our strategy to address the changes that are happening. And I think EV is 1 of those. We currently have EV products in our portfolio, which are applying a first to the Indian OEMs. So we are already ready with the portfolio of products in the EV sector as well. And there'll be a lot of opportunities in general mobility space, which we will keep looking at and building it into our strategy if we see an opportunity for Castrol to play into any of those. So, Sandeep, do you want to add something here?

No, I think you've covered most of it. And I think based on what we're seeing in our global forecast and everything is, I think from a lubricants perspective, India will continue to be a growth category over the next, I would say, about 20, 30 years. So it's not as easy as it's going to come next year and everything is going to change. So I think Rashmi spoke about the volume growth aspirations we have.

Right. I mean that [indiscernible] area showing that you'd like put the figure of about 2 decades for us to grow. And I do understand that, like that our strategy could be more driven by a 5-year period. But it's really assuring to understand that like that we'll have at least 2 decades of growth going ahead in front of us.

The next question is from the line of Bharat Sheth from Quest Investments.

Sir, now with this BS VI coming in, how do we add some addition in our OEM space that we have seen? And how we are, I mean, place vis-à-vis from the earlier scenario?

Sorry?

The BS VI coming in. So with the new norms of the lube coming, I mean, is there any change in the norms of the lubes that is being used in the BS VI vehicle vis-à-vis earlier as well as have we added any new OEM in our -- with this BS VI?

So BS VI is primarily an engine specification, and we have a portfolio which is ready for those BS VI engines, okay, which are better performing oils, thinner oils, and Castrol was the first one to introduce that portfolio, bring that to India. The -- sorry, I missed the second question, can you please repeat that?

So have we added any new OEM in that with...?

Okay. Yes, yes, yes. So I think in 2019 beginning, we added Renault partnership to our OEM portfolio. And we've been doing business with Renault since the starting of this year. This is a new opportunity for us.

Okay. And no 2 -- any 2-wheeler or whatever were there or new to any 2-wheeler people?

So we have -- I have with Honda on 2-wheeler, which continues, okay? And we keep exploring any new potential partnerships, and we'll continue to bring that as we go forward.

Sir, second thing now with this drain period in this BS VI lubes is longer than the -- I mean what was earlier? Or it's the same drain period or which say earlier, I mean, with the same period increasing our replacement cycle impacted our volume growth. So is this kind of an impact can we see with the BS VI?

So I think what generally happens in the market is, as newer technologies come and newer engines come, they have an impact on drain into us. But the other side of the story is because of better engine technology, they use more premium oils where we can get better pricing in the market, okay? So that's the other thing that happens. So like -- for example. The other thing that happens is because of the better infrastructure, we also get more miles driven by vehicles. So it's a combination of everything. That's how the market operates.

Mr. Sheth, may we request that you return to the question queue for follow-up question. We'll take the next question from the line of Shradha Sheth from Edelweiss.

Team, congrats on a very good set of numbers. 2 questions from my side. You guys have highlighted [indiscernible] partial revival of the pent-up demand. Segment-wise also you highlighted that PVs were softer. So how are you [ copping ] with the brand because we have actually seen PV and [indiscernible] So where is the variation between the 2 data points?

Sorry, can you repeat your question. I didn't get that very clearly?

Yes. I was saying that you guys did highlight that there's only been a partial revival of pent-up demand. And segment-wise, also, you said CVs and 2-wheelers did better while PVs were softer. So however, the data point that we see month-on-month, we clearly see 2-wheeler and PV doing better. So why is it that PVs was softer? And how do we see the balanced pent-up demand going forward?

Go on, Rashmi.

Can I try? Yes. Shradha, I think you are referring to the sale of PV, right, motorcycles and cars, right? But this is about lubricants. And it may not exactly go hand-in-hand, yes? The new sales of cars requires lubricants, yes, but there's a replacement demand that comes in the aftermarket, right? So because the economy opened up and people started going out and traveling, so there are certain demand that was sent up and then that came up. We didn't see a lot of that -- we didn't see that coming up as strongly in cars as in motorcycle, it's how I would put it. And commercial, sorry.

Yes.

The agri demand was strong because that was agri season, and that was also 1 region like commercial demand was higher. And if you have seen the tractor sales have done quite well. It is showing that the agri demand is good. I'm not saying that all those tractors were using lubricants, but agri demand was good.

Sure. So as you guys have highlighted, it's only partial revival of pent-up demand. So the trend continues to be positive in terms of more opening up, right?

As of now, yes.

Yes.

Sorry, Sandeep. You can...

Don't -- in the sense, partial pent-up demand, I think, what we were seeing is there was a pent-up demand. And the general kind of positive sentiment in the market, I think that's the combination. So it's a combination of positive sentiment, plus a pent-up demand. But let's see how the next couple of months ago in terms of festive season and that will give us better indication of this is sustainable.

Ms. Sheth, may we request that you return to the question queue for follow-up questions. The next question is from the line of Sabri Hazarika from Emkay Global.

Congratulations on good set of numbers. Just 1 question. So the growth that we saw during the quarter. So this was like similar for both primary as well as secondary sales or was there any deviation between the 2?

Rashmi, do you want to take that?

Yes, yes. See, we -- secondary follows primary in our case, okay? We usually make sure that, that happens.

Right. So overall, I mean, was there any like significant inventory depletion in the channel during Q1 -- Q2 because of COVID?

Yes, sorry, Sandeep, do you want to go?

Yes. I think in Q2, because basically, mid-March, the lockdown started and April, May were very slow months. But in a sense, there was a depletion in quarter 2. But that inventory almost kind of came back in June when things started opening up. So if your question is, is there is inventory buildup in Q2 reflecting in primary, is no.

Okay. Okay. Fair enough. And overall, the growth has been like across the 3 months, say, July, August, September, it has been similar, right? Or was it kind of an improvement in this Y-o-Y growth between July to September?

Yes. I think it's the latter. We've seen improvement month-on-month between July and September.

The next question is from the line of Pratik Jain from Abu Dhabi Investment Authority.

So we have been reading that the demand for personal mobility will increase due to the fears that people have using public transport. So how are you reading the situation on the ground in terms of or from your feedback from your Bazaar channel, like are people resorting to more usage of personal mobility? And do you see this as a sustainable trend adding to the overall demand for lubricants?

So 2 things happening, Pratik, in the market from what we see or observe. First of all, because of the lockdown, I think a lot of public transport systems have been shut down, if you look at metros and daily start going about a months ago locals in Mumbai haven't started as yet, except for the [indiscernible] equivalent or metro equivalent. So as a result, people were forced to use their personal mobility vehicles to commute. Because we -- some of the offices have started opening up. That's one thing. I think the second is there is still a thing and people, they don't want to take public transport, okay, because it's not safe. And the people -- those who have the flexibility to use their own personal vehicles, they continue doing that. Now is this sustainable? I don't know. Let's see how the pandemic situation evolves over the next few months, that will determine outcome of things.

Okay. And just an extension to this, whether are we seeing higher demand from the OEM segment, like say, Y-o-Y or something like that, which can provide us better visibility?

So our understanding is that in August and September, I think all the automotive manufacturers have, as you see in new car sales number, August and September have been good. But a lot of that is also in anticipation of a good festive season. And that's why I keep saying, let's see how the next month or 2 months behave. And then we'll have a better view on the market, okay? So -- but in the last 2 months, OEM demand has been good.

The next question is from the line of Abhishek Maheshwari from Wallfort Financial Services.

Sir, the only question I have is with regards to your current capacity utilization, may I know at what levels are you operating right now?

Okay. I can talk to that. So we're operating at about 80% level right now in terms of capacity utilization. And all 3 plants are operating as the normal operations, which is typically have 2 shifts in 2 plants, in 1 of the plants we've done 1 general shift, and the operations are as per that.

Okay. And sir, this 80% is your optimum utilization level? Or can we take it upwards to 90%, 95% also, if we -- if there are enough volumes?

Yes. Normally, we operate at around 80%, 85% level, but we have place in case we need to take all the production [indiscernible] -- we have that place.

The next question is from the line of Sonaal Kohli from Bowhead Investment Advisors.

Congratulations on a great set of numbers. Sir, my question was, if I see your volume growth over the last 10 years, it's flat from December '19 -- since December '09. So you're not considering that the technology will continue to improve like it has done in 10 years. How do you see 10 years -- future 10 years being different than the last 10? And why was the volume flat? I mean, did we grow in autos and did we had a contraction in some other segments of the market, even that perspective will be very helpful? And secondly, what was your volume number last year in the same quarter?

Yes, I'll first give you the volume number as last year same quarter, it was 43 million liters.

So ma'am, was that on a very -- I mean, if I see your other quarters in previous year, last year same quarter seemed to be a very low base. So was there any one-off or any disturbance during that particular quarter, why the base was lower as compared to the other quarters?

I think the overall demand was low last third quarter than previous year. That's what I remember. I don't remember anything specific at the moment. Your other question was on the volume trajectory for 10 years, right? And you alluded to technological changes leading to lower volumes because of longer drain intervals. So in lubricants, technology will lead to lower and lower usage of lubricants. And overall market -- I don't know what is the market growth in these 10 years, but probably it's not -- it's going to be a very low single-digit kind of a thing. Okay, it's not going to be some 10% growth as you see in FMCGs. So it's not a category where you'll see huge volume growth. If you are able to get 4%, 5%, that will be excellent. And at pricing point that Castrol has and the kind of margins Castrol makes. Within the volumes that we have, commercial vehicle volumes declined because of the technological changes faster than the personal mobility side. And on the personal mobility side, we have grown volumes over the last 10 years significantly. So our personal mobility contribution to total volumes was around 20% 10 years ago, now it's 45%. So the volume has certainly grown over 10 years. And that's a more profitable volume. And that is the volume that is strategically important to Castrol. While commercial volumes in the longer-term would flatten out, there's huge headroom for growth in personal mobility in India, still, and hence, the focus on personal mobility. Does that help?

Sure, ma'am, but if I understand correctly, this 45% of your business will continue to grow and its higher-margin business. The remaining 55% may not grow, is that what you're...

It will probably remain flattish is what is our long-term estimate. We do not know what will happen in next 1 year or 2 years. A lot of infrastructure is being built in India. If the economy starts growing again and then the focus on infrastructure continues, then we -- and the Make in India thing happens, well, then we will see volume growth on the CV side as well for some time. When I say long term, we're looking at 10 years. So in 10 years' time, you might see flattish growth in commercial vehicles category. That is what our estimates say. So hence, the focus is on personal mobility. But there's a significant portion of commercial vehicle also in our portfolio, and we do come up with new products in that category as well as the specifications change. And because of BS VI, which is impacting commercial vehicles first, it will -- we will also have variants that are compliant with BS VI, which are thinner oil, which are better oil and obviously, leading to better margins. So a good mix of margins and volumes is what we have to look at if you're talking of longer term. So focusing on turnover might be a good way going forward.

So ma'am, these technological changes historically and going forward, am I correct in understanding like they may not lead to a volume growth. They do contribute to a revenue growth, assuming crude prices stagnant. Are you able to grow at more than inflation rate with this technology? Can it so net-net? Are they positive for you? Are they negative for you? Are these broadly similar for you?

Sorry, I didn't get the question.

Considering, ma'am, there's a volume decline bit of technological changes, but there's a price increase because of better products, net-net, if you have to see the impact, are these technological changes which have been happening and will continue to happen, positive for you? Assuming there were no changes, would you have been better off? Are you better off because these changes are happening?

Yes. So the technological change -- sorry, Sandeep, you want to go?

Yes. Can I comment on that? So I think 1 of the things that you need to remember about our categories, Sonaal, is we are a derived demand category. So we don't determine the engine specification. So OEMs determined engine specification. But in general, when you have better performance engine that also creates opportunities for better performing oils and more premium oils, okay? So any technological advancement is an opportunity for us to upgrade our portfolio, and upgrading gives us better realizations on a per liter basis. Okay. So a lot of technological development is determined by others, and we service that demand in the market. So that's how we need to see it.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Sandeep Sangwan for closing comments.

Yes. So thank you very much for taking the time and showing your keen interest in Castrol results and the way we look at our business for the future. And I think -- and close, what I'd like to say is we are a premium branded lubricants business. We will continue investing in our brands and making sure we're delivering value to our customers and consumers. I think the pandemic is far from over. There are so many variables playing out. So I also want to kind of have a sense of caution saying let's see how the next span of couple of months go in terms of business performance. We see some tightness in raw material inputs also especially base oil availability that will impact potentially our cost of inputs and to an extent, may have an impact on our margins, but we'll kind of keep a watch on that. And I'd like to say thank you to everyone, and wish you a very happy and safe festive season. And again, I'd like to reiterate the request, please do take care of yourselves and your families because we need to continue to take all the precautions as the [ business and then ] gets concerned. Thank you very much.

Thank you. Ladies and gentlemen [Audio Gap]