Castrol India Limited (500870) Earnings Call Transcript & Summary

Welcome to the FY 2021 Q3 Earnings Conference Call of Castrol India Limited. [Operator Instructions] We have with us Mr. Sandeep Sangwan, Managing Director, Castrol India Limited; and Mr. Deepesh Baxi, CFO and Wholetime Director, Castrol India Limited. I now hand the conference over to Mr. Sandeep Sangwan. Thank you, and over to you, sir.

Hi. Good afternoon, everyone. Hope you can hear me. Can someone please confirm?

Sir, it's audible.

Okay. Thank you. Hi. Good afternoon, everyone, and thank you for joining the call. I hope you and your family are doing well and are safe and healthy. Amidst the ongoing pandemic situation, the safety and health of our teams remains our topmost priority. And with the vaccination rate going up, we've initiated a gradual return to office and our sales force is back on the field engaging with customers. Supporting our communities is another strategic priority for us, and we are conducting a COVID-19 vaccination drive for 75,000-plus truck drivers and mechanics in key transport hubs across India, and this activity will continue well beyond the third quarter. Coming to our financial performance. I'd like to invite Deepesh to take you through the numbers. Deepesh, over to you. Thanks.

Thanks, Sandeep. Good afternoon to all. Let me share key highlights from our 3Q and 9 months 2021 results for Castrol India, which we announced last Friday on 29th October. We reported strong financial performance in third quarter and 9 months, continuing the momentum from the previous quarter. For third quarter, our revenue from operations were INR 1,073 crores and this was up 21% compared to second quarter of 2021 and sequential 22% from 2021 last year. Profit before tax was INR 250 crores, up 31% from 2Q 2021 and down 10% from 3Q 2020. For 9 months, our revenues were INR 3,102 crores, which was up 50% compared to the 9 months 2020 and profit before tax was INR 772 crores and this was up 44% from 2020. In 3Q 2021, the cost of goods sold environment continued to be very challenging due to a sharp rise in input costs. We responded through timely pricing interventions and continued investments in our brands, advertising and marketing spend to support value delivery to our customers and reinforce brand salience. This helped us navigate the dynamic market situation well. Sandeep, I'd like to hand over to you now for sharing developments around the business front. Over to you, Sandeep.

Yes. Thanks, Deepesh. Let me start with the portfolio front, the product portfolio. We recently launched Castrol MAGNATEC with BS VI readiness for passenger car segment, and 4 BS VI-ready variants for Castrol CRB Turbo Max and CRB Mini Truck in the commercial vehicle segment. As electric mobility take center stage, we're exploring options with 2-wheeler electric manufacturers for development of EV fluids. We're already supplying EV fluids to two of the largest OEMs in India, those who manufacture EV cars. We will continue to offer Castrol, the express oil chain service at the newly launched Jio-BP fuel stations, and this will go a long way in providing a convenient and reliable service and brand experience for our customers. We also launched the fourth edition of Castrol Super Mechanic contest, which is also endorsed by the Automotive Skills Development Council of India. Nearly 100,000 mechanics will get to enroll themselves and showcase their talent on a national platform and win the coveted title of Castrol Super Mechanic. Third quarter saw us receive external recognition for various quarters. These awards are a testament to the value we create for our customers, employees and the industry we operate in. I would like to highlight two of these awards. Tata Motors awarded Castrol India Limited with the Ramp up Agility award at its 2021 annual supplier awards. This is a great recognition from a leading OEM, recognizing our contribution towards helping them maintain supply continuity. The Indian Chamber of Commerce conferred the silver award to our Paharpur plant at its prestigious National Occupational Health and Safety Awards, recognizing our safety excellence. As the external situation improves with greater vaccination coverage across India, we remain positive on our future outlook. The management team at Castrol India Limited will continue to observe the external situation closely and respond with timely and appropriate actions as needed. We're confident of our strong business fundamentals and long-term profitable growth. Lastly, with the festive season around the corner, I urge you to continue following all COVID safety protocols to ensure your and your families wellbeing. On behalf of Castrol India, I also like to take this opportunity to wish you and your families a very happy and safe Diwali in advance. On that note, I would like to open the session for your questions. And between, Deepesh and I will try and answer your questions to the best of our abilities. Thank you.

[Operator Instructions] The first question is from the line Ashwin Agarwal from Akash Ganga Investments.

Hello, am I audible?

Yes, sir, you are. You may go ahead with your question.

So happy Diwali in advance for like to all the management and team. So first question of mine is to get into traction about EV fluid. So any upcoming OEMs have been demanding -- can you just give us a traction about the EV fluids? And could you state as the margins in the front of gross you can state if -- on a ballpark number?

So let me try and answer that question. So I think, first of all, we work with a lot of OEMs as sort of EV fluids is concern, especially in the 4-wheeler space. I think globally, we work with 50%, almost half of the OEMs and manufactured cars and EV-fluid is a supplied and transmission fluids leases coolants. And as I said in my kind of earlier conversations that we supply to all the biggest OEMs in India. I think EV fluids are still an evolving space. It's a very, very small part of our portfolio. And I think it will continue to be -- it will be small continuing for the next, I guess, 5 to 10 years because while there's a lot of conversation on EVs and EV's are definitely coming, if I look at the car part and the 2-wheeler part in India, the internal combustion engines will continue to be a substantial part of the car part, especially for 4-wheelers going well into 2035, 2040. And for 2-wheelers, maybe the electrification comes earlier towards 2030. And based on various numbers that you've been spoken about, the estimate is like -- even by 2030, only about 25% to 30% of the 2-wheeler sales could be electric. As far as margins are concerned, I wouldn't like to comment on the margins because that's something that we don't want to comment on. But from a contribution perspective, I think if I look at the next 5, 10 years main play is going to be lubricants, and while we are kind of completely prepared for an electric future and working to future-proof our business.

Okay. Okay. Got your point. My second question is about the price hike. So as we sells the lubricant, and you said the costs have gone up like -- due to the -- all the supply chain issues and all those things. So do we have taken up the rise -- hike in the MRP or like we are planning to do that?

So Ashwin, thanks, I think great question. The input material costs have gone up substantially. In fact, if I look at the base oil, which is a key component of our input costs, it's almost doubled between the same quarter last year. In August, September, the base oil was about INR 550, INR 580 kind of level, and it's almost doubled in the last quarter. We have taken 3 price increases. All that information is in the public domain. We took a price increase in January. We took a second price increase in April, and we took a third price increase in June. And that's why you see the impact on margins as been -- derisked to quite an extent. There is a large effect of pricing, which come into effect, which will also help our margins as we go forward I know, Deepesh, if you want to add anything.

Okay. So in that front, do we see any volume decline on the -- from the supplier side, like any volume decline or any decline from the customer side, volume?

So I think the demand has been strong. Our volume has been up in quarter 3. I think as I said, volumes have been up in quarter 3 versus quarter 3 of last year. And if I look at sequential quarter versus the previous quarter, our volumes have been up again. Revenue is up like 20-odd percent. And I think on volume side, we are up by about 6-odd percent in this quarter. So we haven't seen any -- because everybody has had to take price increasing. While we have intervened on pricing based on our pricing strategy, we've also seen price increases coming from competition because the environment is hitting everyone.

Okay. So as you said that the last hike was in June about the price hike. So any near-term price hike are you expecting? Or it will be stabilizing in the near term?

So I think we have a pricing strategy on which we operate, keeping the competitor situation, keeping up the pricing premium in mind and we look at the environment. So I cannot say anything on what will be the pricing position of our situation going forward. We will intervene as necessary.

[Operator Instructions] The next question is from the line of Vidyadhar Ginde from ICICI Securities.

My first question is on -- in case of an EV, the lube which is used in a sense or an OEM, the quantity and the value of lube, how does it compare with a similar combustion engine vehicle?

So I think it's still an evolving space as far as the consumption is concerned. Obviously, electric vehicles don't use engine oils. They use primarily more transmission fluids, greases and coolants. But I think as the technology evolves, we continue working with them because for example, they might need specialized coolants for thermal management of batteries, which is a key area where fluids maybe needed. So I think too early to say on reflect on margins and how much on fluid in consumption, but they definitely don't use engine oil.

So -- but can you give us some color in terms of, is the volume of lubes 50%, lower -- the difference is less than 50%, something of that sort, if you could give us some color?

So I think, as I said, they don't use engine oil. They use transmission fluids, greases and coolants. Now depending on which way the technology evolves, we'll return in the volume of the coolants that are required for, for example, a liquid cool battery may require a lot more coolants than a dry air cool battery. So I think it's still in evolving space. It will be very difficult for me to kind of give you a number at the moment.

Okay. In terms of -- my second question is on your raw material costs. So how are lube prices behaving right now in a sense, how do they compare with whatever earlier in the year? Are we at peak sort of? Or -- and has the entire rise in logs prices largely will pass down? Or you would ideally like to pass on some more?

Let me hand over to -- that question to Deepesh. Deepesh, if you want to comment?

Yes. Sure, Sandeep. So I think in terms of our raw material prices, Sandeep explained earlier that base oil, which is a key component of our raw material, that was almost $500 and $600, in that range, in third quarter, and that's gone up to $1,100 this year in this quarter, right? So we have taken price increases, see price increases in the market. January, April and June. As far as your question around have we recovered everything, there is some lag effect of the pricing because the pricing are slightly easier to recover in the retail market compared to the other segments. So we will see some of the impact of pricing flowing through in quarter 4.

The next question is from the line of Deepan from Trustline PMS.

So firstly, wanted to understand in terms of threat for 2-wheelers. So do we see higher threat for scooter segment and lesser impact on the motorcycle segment in terms of our lubricants?

So if I look at it, let me try and kind of answer that question. I think all we -- what we know is after speaking to 2-wheeler manufacturers and stuff, I think the electrification is going to come on -- possibly on scooters first than -- scooters and 3-wheelers first and then motorcycle. I think that's how the space is going to evolve, okay? In terms of projections, the various kinds of projections kind of being quoted in the market, and I think there's no single source of truth. I think as the space evolves over the next few years, we'll see where it goes. But we are fully prepared to kind of face that future and keep our business growth continuing.

Okay. Just adding to that, so if we -- are we having more higher contribution from scooters or motorcycles? How will be our impact?

So we have more contribution from our motorcycles.

Motorcycles, okay. And lastly, what is the kind of volumes you have done for the current quarter?

Deepesh, do you want to talk to that?

Yes. So current quarter, volumes have been in the range of 50 million liters.

Sorry?

5-0, 50 million liters.

The next question is from the line of Kunal from Banyan Tree Advisors.

Just wanted to understand two things. One on in the 5 million -- 50 million volume that you just mentioned, if you can give us around what contributed what? Are we [indiscernible]? CV volumes because what we remember in the past years and that we have learnt from better pricing strategy within the CV, 3 to 4 quarters back. Are we seeing incremental volumes coming from CV, That is question number one. I think as you know -- how can you look at in terms of margins going ahead? Because one, as you said, the raw material pressure is very high. And with CV's expected to do well in the next 6 to 8 months like -- and what you understand is that the CV margins will be, say lower than your 2 wheeler margin, right? So how should that affect the margins because of the product change going ahead?

So let me try and take the first question. So I think our commercial vehicles portfolios are doing pretty well. And I think as you rightly said, we take -- made some interventions about 3 or 4 quarters ago and basically it is playing out because we've gained share in the commercial vehicle segment. And now I think we are the leaders also in the Ci4, which is the latest specification segment are growing, so which is a good news. I think as far as margins are concerned, I'll hand over to Deepesh. But basically, what I would say is we keep continuing watching the situation. We have a pricing strategy, this is which we take pricing calls. So it's a combination of how do we kind of position ourselves versus the competition. And the second is dependent on the input cost because the environment is going to stay very inflationary in the coming few quarters, more dependent on shortages, et cetera. So we'll keep monitoring the environment and making calls on making sure that we protect our margins also, and it's just not a volume game. We are very conscious of growing, but we want to grow the business profitably. Deepesh, feel free to add, if you want to add anything?

Yes. Thanks, Sandeep. So I think Sandeep's covered it. The only bit I will add on to that is we also look at end-to-end margin, which is going right up to the EBITDA, right? So -- and we operate within that range as well. So when we make our decision on strategic pricing, we keep in mind, of course, the volumes and the pricing for -- from a gross margin point of view as Sandeep mention, but also a line of sight on how is our EBITDA and operating margin doing.

Got it. Sure. And one follow-up, if I can just present is on -- our advertisement and branding activity, like what we remember is you've been aggressively putting behind advertisement -- in the last 3 quarters because of demand environment was subdued. Now we are looking at the things, how they're opening up? And the intensity in terms of ad trends have come down or it continues to be at that level?

So I think we are a firm believer in supporting our brand because we are a premium brand and ours is a branded business, and a lot of value that we drive comes from that equity the brand has with consumers and customers. So we continue investing behind our brands. We were on air between August and September with our 2-wheeler advertising, and it's a new campaign. And as you would have seen, we've just launched another digital campaign on 2-wheelers with Tiger Shroff as the brand ambassador, which is on the synthetic portfolio. So that's a campaign that's been recently launched. We went to these new products in both cars and in commercial vehicle segments. So we'll continue to investing behind our brands. It's got -- it's a part of our strategy rather than reacting to the environment.

[Operator Instructions] The next question is from the line of Abhijeet Bora from Sharekhan.

Sir, my question is pertaining to the margins. So if I see the gross margins have largely been stable despite the steep rise in the cost. So like I just wanted to understand that what drove this, whether it's a better volume mix or like what? And if we don't take a price hike from here on, do we expect the margin impact of the cost -- impact of the high raw material costs to be seen in Q3?

Deepesh, do you want to take that?

Yes, sure, Sandeep. So I think the actions that we have taken in the market in third quarter, and Sandeep articulated several of them, whether it is new product launch, whether it is taking pricing actions, all of that, of course, has helped us grow volumes. We've obviously kept an eye on the mix as well, right? So it's a combination. We continue to invest in our brands to support as well. As far as your question is concerned on whether the margins are under pressure going forward and what happens to input costs, I think very difficult to say how this will move. But apart from base oil, there is crude and products that also plays in the portfolio of the costs or COGS as we call it, right? And we have taken three price increases, right? That covers a significant amount of the cost increases that we've had so far. And there is a lag effect, which will flow through in quarter 4. So overall, I think that quarter 4 looks fine. We'll see how the costs behave in terms of the input cost. And if required, we take a price increase. But always, as we've been saying in multiple calls, it's always a strategic decision on pricing and not tactical. Hope that answers your question?

Yes. Just one clarification that there's a 2x increase in the base oil prices, in the price x which we have taken until June. So that covers this 2x increase? Or like how we should read this thing?

Yes. So I mean, if you see the difference in the base oil between second quarter and third quarter, that's about 10%, right? And again, coming back to the strategy, strategic price increase means keeping an eye on next 6, 8 months, right? So we have taken price increases in June quarter covering right up to the end of September. Some price increases will flow through in our B2B customers towards the end of 4Q or in the 4Q that we're already in.

[Operator Instructions] The next question is from the line of Vipul Shah from Sumangal Investments.

Sir, can you give the volume figures for last quarter and same quarter corresponding of last year?

Deepesh, do you want to take that?

Can you hear me?

Yes, yes.

Yes. Okay. Great. So the volume in this quarter was 50 million liters.

No, I want last quarter.

Last quarter, meaning 2Q 2021. Is that what you mean?

Yes.

2Q 2021, yes. So 2Q 2021, the volume was 46 million liters.

And third quarter '20, what was the volume, sir?

In the range -- the same range. Around the same range?

Around this one, 2020?

Yes. So in summary, we have -- so in summary -- so maybe let me just help you out. In summary, we have grown volumes compared to the second quarter of 2021. We have also grown volume compared to the third quarter of 2020. If you take 9 months, 9 months also, we have grown volumes in September 2021, 9 months versus September 2020, 9 months.

Yes. And sir, lastly, your comment about margins that some margin -- some price increases will follow in this quarter also. So should we interpret that this quarter, gross margins will be a little higher as compared to just completed quarter?

Sorry, can I just come in one in between? So that we get it absolutely right. I think nowhere have we said we will take a price increase in the next quarter. What we've said is we will monitor the situation. We have a pricing strategy. And if we need to intervene, we will intervene based on the pricing strategy. I think what the Deepesh was saying, is some of the price increases that we've taken in June, okay? They will normally have a lag effect by the time they start reflecting in our sales to customers because there's old price stocks and old inventory sitting with customers. I think that's what he was intending to communicate. I just want to clarify that. Deepesh, over to you.

Thanks. Any other questions?

[Operator Instructions] The next question is from the line of Mohit Kadam from Entrust Family Office.

Congrats on a good set of numbers. A couple of questions from my side. If you could comment on what is the global share of EV sales for Castrol, at a global level?

Again -- sorry?

Any qualitative kind of number there because globally, of course the number...

It's still a very small number. It's still a very small number. I think it's not anything to talk about because most of the EV fluids are now going into first installment stuffs.

Sure. Sure. Sure. And what would be the current 2-wheeler sort of sales mix for us? And within that, if you could also comment on scooters -- the spread between scooters and motorcycles, please?

So I think 2-wheelers is about, if I'm not mistaken, the range of 45% or so -- of our volume is from our businesses from 2-wheelers. It could be slightly higher on the margin side because the margins are pretty good on 2-wheelers. And scooters out of 2-wheelers is not significant. I think in the range of 5%, 10%, if I'm not mistaken. I don't know, Deepesh, if you have numbers for scooters specifically, but I think there'll be more in that ballpark.

Yes, it's that instance of ballpark, same.

Sure. So this is 5% to 10% of the total company sales?

No, of total 2-wheelers.

Total 2 wheelers. Okay, got it.

5% to 10% is total 2-wheelers and...

Low single digit.

Yes, yes.

Sure. Sure. So one last question, if I may slip in. We had a tie-up with 3M, which we had announced a couple of quarters back. Any sort of comment you could give on how can this kind of shape up over the next 2, 3 years? Because I think bulk of the products sold through this partnership would be probably non-lube kind, right? So how was this sort of shape up? And what would be the entire economics of this tie-up?

So you're very right, so these products would be non-lube kind of products, and that was our interest as well because 3M is a quality brand. So just to tell you what the status on that is because of pandemic, we had to stop the pilot, okay? Because -- and that stopped somewhere in the second half of last year. And we said till the time the pandemic situation doesn't get better, we will not restart the pilot. So we just restarted the pilot last month across 10 cities in India now with the range of I think they're about a range of 5, 6 products, which are more in the vehicle care category, both for 2-wheelers and 4-wheelers. So the pilot has kicked off very well. We've seen good demand signals. And I think once we're more comfortable, then we'll start kind of expanding that into bigger geographies. So that's where we are with the 3M pilot.

Sure, sure. And sir, do you have these kind of tie-ups with companies like 3M globally? And if you could comment on how much share of sales they kind of take? Just a ballpark kind of understanding.

So 3M is a global kind of a partnership. And we said we will test the model in some key markets and then we said, see where it goes. So most of the markets where we're trying this are in similar stages in India. So it's not a product category or a line -- a product line, which has become a part of regular sales. I think we're still in the testing and the learning phase across the globe.

[Operator Instructions] The next question is from the line of [ Himal ], individual investor.

Very quickly, two questions. Compared to this quarter in 2019, that you still got 50 million liters of volume. What would be the quarter 3, 2019 volume numbers? Would it be very similar? Or did we see growth year-over-year in -- 2 year CAGR on that?

I can take that, Sandeep.

Yes.

So let me just rephrase your question is how much was the volume in third quarter 2019. Is that correct?

Correct. Correct.

Right. So we have grown volumes in this quarter versus '19 as well, and we've grown about 15% compared to what we were in '19.

Excellent. And finally, because multiple times you mentioned in the call that the pricing is part of your strategy. So -- and you also mentioned that you look at your EBITDA margin. Also, you monitor them. So is it my correct understanding that we will not -- given the market condition or competitive share, market share strategy, we have -- we do not go below 25% to 27% range in EBITDA margin? Is that how you think that -- in cash flow, is there a range that you want to be placed while you're pricing your products and looking at the market share. But you'd rather let the market share go, but still your pricing -- EBITDA margins?

I'll take that, Sandeep?

Yes, yes. Please go ahead.

So I think -- I mean, as you know, business, it's never an either this or that, right, conversation. So let me just try and answer that question. As far as the EBITDA margin is concerned, we do look at range, right? And it's broadly that range of 24%, 27% that we want to be in. I mean, that's a frame that we operate in. Now I think good businesses and companies are the ones that also respond to environment in time. And clearly, you would have seen in terms of our track record, over the last 12, 15 months, we've had a good increase in the volume as well as market share, right? So I don't think it's an either/or conversation that if we have an operating margin going lower, then therefore, we will lose market share. No. I mean, this -- in fact, this quarter is a very good example where operating margins are slightly lower end of the frame. We've grown market share. We've grown volumes. And we've grown volume not only compared to last year third quarter, but on a YTD basis as well as 9 months, as I just explained, which was a normal quarter, right? Business as usual quarter without any COVID impact, yes? So I think it's strategic to that extent. But obviously, we need to keep an eye on our tactical intervention that we need to make at times. I hope that clarifies.

[Operator Instructions] The next question is from the line of Nitin Tiwari from Yes Securities.

Just a clarification question from my -- you just mentioned that 2-wheeler is about 45% of your total volumes. So can you give us a similar number for CVs and 4-wheelers as well?

So can I take that? I'll give you broad numbers, and it's volume margin kind of play differently across different segments. So 2-wheeler is about 45%. CV would be in the range of 20%, 25%. Similar for cars, 20%, 25% range and then the balance is industrial.

Right. So correct me if I'm wrong, your CV volume used to be in about 35%. So is there a moderation over there? Just kind of towards personal mobility and more volumes that shifted towards personal mobility?

Yes. I think as a part of our strategy, we've been focused on driving personal mobility growth because margins are better in personal mobility as compared to commercial vehicles. But at the same time, commercial vehicles is a significant part of the portfolio that we also want to grow. I think there was a big reduction that happened like 4, 5 years ago because at that time, Tata came up with a genuine oil, I think that disrupted the market to some extent. But as part of our strategy, we've been pretty much focused on making sure that we keep driving personal mobility growth, and we've been sort of very successful in that, while ensuring that we have a robust and healthy commercial vehicle portfolio also.

Right. So I just wanted this understanding because I suppose a couple of quarters back also, I got the figures right, personal mobility and CVs are more or less equally distributed in terms of volume distribution, but now that you mentioned that it's over 20%, 25%. So that's why, I wanted to understand that, if there's a shift...

Yes, I think that shift has not happened in the last few -- last 3, 4 quarters. That shift happened, I think, 3, 4 years ago instead so that's the only correction I would make.

The's next question is from the line of Shalabh Agarwal from Snowball Capital.

So the first question is, the volume growth of around 6%, 7% that you have reported, are we seeing any insights that you can share how different segments are coming along, any segment which is not -- which has not come back as per your expectation or is doing better than probably what you might have expected?

So I think if you look at the volume growth, personal mobility has been growing pretty well. I think commercial vehicles have been a bit softer than what we anticipated. And also, we include agri in our kind of book when we share commercial vehicle. And what has happened is agri season was shifted by a few weeks because rains continued well into September -- first few weeks of September time frame. And that shift also kind of impacted some of the volume growth that we saw in the agri sector. But between 2-wheelers, cars, I think it's been a pretty balanced growth.

The line for the participant dropped. The next question is from the line of [ Sharath Sharma ], individual investor.

Two quick questions. Congrats on maintaining margins. Sir, any better use of the INR [ 12,000 ] crores sitting on the balance sheet possibly by the next for your consideration? And two, are you -- between OEMs and third-party service centers, what's the split? And the reason I'm saying this is, what do you see your impact of the chip shortage on Q4 volumes.

Okay. Deepesh, do you want to take these questions? And if I have anything to add on, I'll add on.

Yes, sure. So great question. I think we do have cash sitting on our balance sheet. And I think we are very thoughtful about how we want to deploy that cash. Of course, for reasons of confidentiality, I can't share what are those uses. But to assure you, we are exploring various options. And we continuously are looking what's the best way to invest back into the business as well as looking at avenues where we can grow. Sorry, what was your second question, if you can repeat?

OEM versus third-party sales and impact of chip shortage, the automotive industry certain chip shortages and volumes, I think -- that space.

Right. So I think in terms of the impact on chip shortage, I mean, when Sandeep spoke about the growth in various subsegments, I mean, there has been some impact. But despite that, I think our industrial business, where this gets impacted, that's also grown to -- compared to the last quarter and the previous quarter. So I wouldn't say the impact has been significant on our business yet.

Got it, sir. So my question, which has been part of this is OEM versus the third-party service center, for instance.

Yes, I'll take it. I think our business is primarily aftermarket right now. We do OEM business, okay? But from a margin perspective, I think the aftermarket businesses is far more important to us. I think franchise is, I think, in the more or less in the range of 10-odd percent of our contribution, 10%, 15% in that ballpark.

Thanks for your transparency. Just a feedback, maybe the cash -- I really think you guys need be more aggressive on that, right?

Yes, I know that. We get that all the time, but we also kind of keep looking at what's the right opportunity to kind of...

Well, that's going at 30% and you can get much better, right? when you do a pipeline. Anyway, I leave that to you.

Ladies and gentlemen, we'll take that as the last question. I will now hand the conference over to Mr. Sandeep Sangwan for closing comments.

Yes. Thank you. Thanks, everyone, for your participation and your very insightful questions. Hope we've been able to answer them. And I think -- let me just reiterate that we've had a good -- what we believe is a good performance given the input cost challenges. I think the top line growth is robust. It's pretty well balanced. We've seen an impact on margins, but that's fine, and we will intervene where we need to based on our pricing strategy. I think we continue to work with the community supporting truckers, mechanics, and vaccination rise. So -- and looking forward to engaging again at the end of the next quarter. So until then, festive season, let's make sure that we all take precautions. I think the pandemic is not behind us as yet, and I do genuine request everyone to get vaccinated and take all the -- in case you've not, and take all the precautions and wishing you and your family a very happy Diwali. Thank you.

Thank you very much. On behalf of Castrol India Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.