Gulf Oil Lubricants India Limited (GULFOILLUB) Earnings Call Transcript & Summary

Hello, everybody, and welcome to the call for the quarter 4 results for Gulf Oil Lubricants. First of all, let me wish all of you that you are all safe and of course, you, your teams and your families. And of course, that's been the priority for all of us in these unprecedented times. And of course, when we look at quarter 4, we were tracking extremely strong in the first 2 months of the quarter until March 15. Obviously, we have seen an unprecedented happening, which is obviously 1 of the biggest crisis, and that impacted our quarter 4. And definitely, as you know, in lubricants, we have the year-end closing a lot of the trade incentives, a lot of the plans that we drop for our channel partners. That is definitely an area which happens in the last 2 weeks of March. And also, given that we have the year-end, we do have our billing which happens -- a major billing which happens in the last 2 days of the month. This was absolutely unexpected, and that's why you see a shortfall in terms of the overall revenue. But still, I can share with you that you have the figures in December where we were doing quite well ahead of the market as we have always done, the growth-wise. In fact, our volumes were -- revenues were positive. All our segments were growing close to double digit, except factory fill. And actually, we were doing quite well when this happened. So I would say that it's a bit of a setback. But what I can surely assure you is that all these segments that we're growing and obviously, with the shoots of demand coming in, we would -- we are obviously expecting to continue our journey and look at things differently. But before that, I would like to spend some time to share with you what actually happened in the company in this period. So March, obviously, we did see that happening. And we saw that immediately our attention went to definitely the employees safety and following all the guidelines, so obviously we have plants, offices, and that was a prime focus in that period. And we also, in our company, we're very conscious about CSR. So we looked at this. And we were the first company in the industry to help the mechanics who are very big important players in our growth journey. And we immediately through digital medium, transferred some small tokens to them, which would help them as they were stuck without their daily earnings, which they were doing. So that was the first time in the industry we, as a lube player did it. Of course, other companies followed. We are very proud of that. We also have put in many other things, including with our trade partners to do activations around CSR. We have helped -- in our plants, we have done a lot of work to help along with associations and government. And recently, we have now launched a campaign called Gulf Suraksha where we are sanitizing all our distributors and our retailers across India to help them get back in a safe manner, providing them with support. We've also distributed a lot of masks to our OEM partners, ourselves and we've been conscious of that. I would also like to state here that when we saw in the recent -- what we have looked at, we have done many things. But before that, I would like to just recap that we have been gaining market share right through with all our strategies across segments. We have been adding OEM. Most of our segments, we were close to double-digit growth, as we mentioned, and we were gaining market share as we are consistently over the last many, many years. And that journey continues. And definitely, in the times that we see today, we will have to adapt, we will have to look at more cost control. But I would like to state here that right from April, we have started opening as we -- as some of our products are being supplied to essential services like agriculture, government, some industries were involved, steel. We started taking special permissions for our depots under all the safety norms, we opened the depots. And one by one, these depots have started opening and now we have all of them operational, of course. But even in April, we did some business with the agriculture segment. We have major tie-ups with the tractor companies, as you know, Mahindra and Swaraj. Now definitely, that was a need. And as you all know, agriculture has done brilliantly in these last few months. In fact, the figures have been ahead of last year. So we opened up depots and we supplied to the franchisee workshops. And in fact, we have got a lot of appreciation for that. So that has been a good thing that has been happening. We also obviously looked at wherever the demand was going to come, we have done demand estimation based on green, orange and red zones. Now of course, as we unlock, you see all that happening. And we would like to also share with you that we have seen very good shoots in the agri segment right across from May onwards. And in June, we have seen that 80% to 85% of our distributor markets are operating now. Of course, some of them operate partially, but they are all open now, 80%, 85%. And close to 95% of our distributors are opened up their operations, and including infrastructure customers, industries, agri, motorcycles, even diesel engine oils and of course, the agri segment, we have seen shoots of demand now that are emerging and have emerged in May also. But definitely, the challenge has been there as the market was locked down. And internally, we are looking at a number of measures, both in cost. Obviously, A&P, we are looking at what are the best things to do. Here, I may also like to add that as a brand, we have taken social media and tried to communicate the health and safety measures that people should focus on. Even our brand ambassador Mahendra Singh Dhoni, we had animated video, which is #newwayforward, which talks about the new 2020 and also talks about the T20 match which was expected, but turned out to be different. And how we want to promote both social distancing, health, safety and also caring for each other. So this was an animated video which did very well with his voiceover. And as a company, we are focusing and we are trying to see how we can obviously get back. We are still gaining market share, and we have also been tracking that in the market. And it looks like we will have to wait a bit before the full demand comes, but the green shoots are there, and that is a positive thing. I would also like to add here that we do a brand track once in 3 years. And the recent brand track results came in April. We have been doing the study for a few months. And I'm happy to share with all of you that our brand has now become a clear #2. Earlier it was the third level. This is across all brands, both private and public sector. And on the brand metrics of consideration, trial and awareness and top of mind, which is immediately talking about Gulf as the first brand, we have reached the #2 spot and this augurs very well for us. In distribution, we ended the year at close to 78,000 outlets, and that's a very positive thing that has happened. And we have done a number of programs in our bazaar market, in our channel market and also gaining a number of new customers. In fact, during this last 2, 3 months, we are seeing a number of new customers who will get added soon, both in the B2B and the OEM space. And of course, as you all recall, we had a tie-up with Piaggio, which we are hoping the volumes should pick up in these few months. But yes, April, we have seen that there was obviously the market closure. But as we look at that, the 3-wheeler commercial vehicle, which Piaggio has is going to be an important element. And we're also looking at many other things like people wanting to use their motorcycles more, we're definitely looking at more personal vehicles where a lot of our oil change happen and Gulf is used. So all these things are there. We also are tying up with many e-commerce providers who are now providing service of oil change and such initiatives you will see in the press. I hope all of you have read the press release because that also details a lot of things that I would like to share with you. Of course, for paucity of time, it would be good if you could read that. That gives you a little more granular look at what we are doing. Thank you so much. I would like to now hand over to Manish to cover a few of the financials. Manish?

Yes. Thank you, Ravi. Good evening, everybody on the call, and thanks for joining. So the quarter, as Ravi mentioned, was challenging towards the end of March from a top line perspective, and we lost some of the volumes which we have tied up with the year-end and usually March is a big month for us, and this sudden lockdown really pushed us to this 13% degrowth, which we are seeing in the quarter for volumes. But in spite of this, we have ended the full year on a very, I would say, a positive note, considering the overall environment, which was in place last year throughout and especially the auto slowdown and the overall GDP slowing down. We ended the year -- full year also with almost flat revenues, and we expect the market would have degrown during this last year, maybe anything between 6% to 7%. There are no published figures, but our estimate is at least 6% to 7% degrowth would have happened in the market and ending the year on a flat note. Considering that we had an institutional order a year before, so if we knock off that, we -- our revenues were just almost flat. So that was encouraging. And from the profit side, of course, the gross margin improved during the year. And till December, we have already highlighted that, March continued on the similar lines, more or less, with gross margins taking near about 49%, 50%. And profit after tax crossed INR 200 crores for the first time, that's very heartening for the company that we have reached a milestone of INR 200 crores PAT in this tough environment. And of course, held by the corporate tax cut also there. And considering all this, the Board has also paid the final dividend -- declared the final dividend yesterday of INR 7 per share. So with the interim dividend, which was declared in the month of April for FY '19-'20, both put together, the dividend for the year is INR 14 per share. So that's considering that the profit growth is there for the full year at 14%. And from the working capital perspective, I would like to share and I'm sure all of you have gone through the results, the cash flow generation from operating activities has improved significantly. And actually, we have generated close to INR 237 crores for the full financial year as net cash flow from operating activities, which is very, very positive for us and augurs well in these tough times when cash preservation has become a buzzword. So we have started the year with a very, very good note in terms of cash surplus. And we -- when we started the year at '19 -- for FY '19-'20, we were at close to INR 9 crores net cash positive. We were always debt-free. But we ended the year at -- I'm happy to say that we have ended the year at INR 197 crores of net cash positive for the year at the -- as at -- at the end of March. So that's, again, a very, very comforting factor in these tough times. Working capital, that means was well managed throughout the year. Of course, after the lockdown, there is some increase in the working capital gains in terms of receivables, in terms of inventory which could not be sold out, but we are still tracking quite well. And another recent development has been that April, of course, the collections were slow. But in May, the collections picked up. And we could really collect 70% of our normal monthly collections. So that also is auguring well for us and positive for the business going forward because the rotation of cash is very important. So with this, I would like to leave the floor open for question and answers, please.

[Operator Instructions] The first question is from the line of Manish Dhariwal from Fiducia Capital Advisors.

Congratulations on the good results. You have shared a good idea about what happened in March. But if you could maybe help us understand in a little more detail because we noticed that the turnover for the quarter compared to the last year was down by about INR 70-plus crores. So this closure happened only in the last 10 days of the quarter. So if you could maybe help us that how the first 2 months, you mentioned that they were like progressing very well. So if some numbers could be shared so that we can understand how much turnover by just 10 months certain days of kind of stoppage can impact?

Manish, you want to?

Yes. So you see, as Ravi mentioned in his opening remarks, the March is a very crucial month for the industry itself and for every player. And while the actual lockdown was declared on 24th of March, but the impact of this fear and -- was even there before at least 5, 7, 10 days before, and in fact, cities like Mumbai started closing even before that. So overall, the sentiment was not very conducive in the last 15 days of March. And March is a big month as a lot of schemes and incentives for trade and -- are tied up with that. So overall, for this impact of last 15 days, we would have tracked a decent numbers again in this quarter, but because of this impact. There was -- till Jan, Feb, we were locking similar to what we have declared in December.

So there is anyway a skew in loop sales towards the last 10 days because all our distributors, they collect money and then when the money is collected from the trade, they would give it to the company to make their purchases. So anyway, there is a skew in this industry. It is...

No. That I understand. See, like month end, we understand. But then if you, see, if we, just to maybe take it a little deeper. See, December '19 quarter, we were anyways about 9% short as compared to the last -- the same quarter last year. So December -- December '18 was 462 and December '19 was 422. So there was anyways like a debt. So if maybe the numbers to be sure that how the improvement was like Jan-Feb, that maybe help.

No. So December, we had explained that in the previous year, we had an institutional order and that was the onetime order. So that is why the December quarter was looking 8%, 9% negative. Otherwise other than...

Yes. We'll take it offline. If you want to get into that, we can take it. But overall, as we mentioned, Jan-Feb was doing very well. And obviously, March year-end does -- has an impact both ways, but this was quite unfortunate what happened.

For the benefit of every participant here, Ravi, I would like to just add here that as we mentioned till December, other than factory fill business, we were growing 10% in our other businesses other than factory fill, of course, excluding the effect of this onetime order. So we were still growing double digit in this tough time till December, and the trend continued until Jan-Feb. Of course, when the March came, there was a sudden shutdown and then it impacted the quarter. But overall, for the full year, we have ended the year at 6% positive growth in terms of volume, excluding the effect of factory fill business, which was down by 50%, 60%. So that's very, very encouraging for us.

The next question is from the line of V. P. Rajesh from Banyan Capital.

Just a couple of questions. What is the percentage of revenue from the OE side versus the other channels that you were talking about?

Usually around 8% to 10% of our volumes are directly to the factory fill OEMs, which is for the first fill. The rest is all...

Okay. And what percentage of our revenue typically comes from the agri side?

So agri is a part of diesel engine oil, which is roughly 40% of our total portfolio and for the industry also, 37% to 40%. Agri is a part of that. Of course, agri would be 15% of that roughly.

So 15% of 40% or 15% of total.

Yes. 15% of that 40%. No, no. 15% of that 40%.

The next question is from the line of Sabri Hazarika from Emkay Global.

Yes. Just to recap. Last year, you had major institutional orders which was around, for example, for Group 1, it was around 0.5 million liter. Is that the right amount? Because I remember mentioned -- remember you mentioning around 0.5 in the last call.

Roughly, 0 6. Because March quarter also, there was something, some small quantities. So 0.6 -- on a full year basis, it was roughly 0.6.

Okay. So -- and you reported volumes of around 30 million liters in Q4 FY '19. So if I remove this 0.6, then it comes somewhere around like 29.6 million, 29.7 million. So that basically gives me a Y-o-Y decline of around 16%, 17%. So I'm just trying to reconcile that you mentioned 13%. Is it Q-o-Q decline you are talking about or Y-o-Y decline?

No. Y-o-Y decline we are talking about. 29,500 was the figure for December '19, excluding the institutional orders. And this quarter was 25,000 KL. So around 13.5%.

Okay. Around 13.5%.

Yes.

Okay. Okay, fair enough. And second question is on -- so how do we see -- I mean, just like the first 2, 3 months now that we have passed it, so in April, I mean any guidance or any indication of how the Q1 has fared so far? I mean I know it's like a very big volume drop. But what would be the ballpark rate of decline for the market for yourself in the first 2 months and the recoveries, what was seen so far in June?

Sorry. My correction, 29,000 KL without the institutional order last year. It's not 29,500, 29,000. 3,500 KL was the institutional order last year. With that, it was -- the total volume was coming to that. So overall, 13.5% decline. Ravi, if you would like to add on the current situation.

Yes. So I think, Sabri, the question is, obviously, we know the market what has happened. The shutdown has happened in the lockdown. And we had -- in April, we have been supplying to the essential areas for the business, which were agriculture. And as I mentioned, even marine ships and some of the other industries, wherever we were allowed to operate. As we said, safety is the top priority. So we did not want to take any risk. But we did have to supply because we are covered by the safety -- essential services mandates where we had to open partially and do that. May, we have seen a very good pickup. I will not be able to share any guidance or figures at this stage. But as I mentioned to you, in the month of June, we have seen that 80% to 85% of our markets have opened up. The cities obviously are closed, as you know. They are operating now with unlock 1. So I think the shoots of demand are coming. Agriculture, in fact, has done even better than last year quarter. So that's 1 -- I can give you 1 signal on so far. And that's been very good. You have seen the tractor company figures. A lot of them are up actually, positive growth. Agriculture has done very well. And we have also seen industry picking up. We have seen the infrastructure segment, which is about 6% to 7% of our volumes, actually, there, the demand continues in projects, especially starting April was a lockdown. You are aware of that. But then maybe we have seen that coming back. And June, we are expecting that we should be able to see all the positive shoots coming except for a bit of diesel engine oil, in fact, even now diesel engine oil for commercial vehicles, the showrooms have opened. So a lot of our sales is into showrooms and the bazaar. And as you know, the transportation is also quite free now in, I would say, starting in May. And these are the positives that are happening. And we have also done a lot of business development in this last 2, 3 months. You will see the benefits of these but market has to still go towards the normalcy end. One more thing I'd like to add here is lubricants like a semi essential product. So you would require the lubricant. Maybe you can delay a bit. But now when the vehicles are coming back, people have going to use more of the personal bikes. And you will see some pent-up demand which we are seeing shoots of as we look at the current month also. So I think these are the positives. We'll have to wait and see, obviously, because this quarter, you -- everybody here is aware that there was a lockdown. So definitely, that is going to have an impact on all business who are impacted by any market or any operational consumption of any sort of a lubricant.

Ravi, I would just like to add here for the benefit of, again, and as a rider that to reach to anything around pre-COVID level, it is still going to take some time. It's not -- yes, while the green shoots are there, there is good pickup. April was an almost complete shutdown, May was better than April, June looks better than May. But to reach anywhere near to the pre-COVID levels will be still some time away.

Right. And how is the pricing and margin environment right now with respect to realization and competitive scenario as well as based on cost and gross margin and EBITDA per liter outlook, EBITDA margin outlook?

So in these times, EBITDA margins and all are irrelevant, contributing that there's a fixed cost, which will sit in every company. And once the top lines are significantly down, the EBITDA margins doesn't make any meaningful implications? Having said that, yes, crude had fallen in between. Now it's again going up above $40, but it had gone down to $20 levels. And base oil had also fallen in the -- not in the same percentage, but in various degrees and percentages across different categories of base oil, different grades. As we all know, there are various grades Group I, Group II, Group III and where demand-supply situations are different in each geography. And there was a rupee depreciation, which happened in February onwards. That partially offsets the base oil fall also. But in these times, we have seen that whenever there has been a fall like this in the crude and base oil, there is some pass on which happens to the consumers for the benefit of customers and consumers. So that will obviously happen. And we have also seen that over the last many [Technical Difficulty] that in these times, typically, when things stabilize, there is some margin retention, which happens. So we are all going forward with these assumptions that with the -- once the market comes back to normalcy, and crude remains in this range, typically, there will be some margin retention in spite of passing on some benefit to the customers and consumers.

[Operator Instructions] The next question is from the line of Vaibhav Badjatya from HNI Investment.

So we -- I think somewhere in 2009, we launched a new brand content. And then from 2011 to '13, '14, I think we also kind of reduced our price discount as compared to some of the leaders of the market. Is my assessment correct that, that was the time where our brand really took off and you were able to capitalize on the brand that was built?

So you see, for us, the brand is -- we've been investing in the brand for over a decade now, right, from our association with the brand ambassadors, IPL actually started on 2010. So investment in the brand has continued. IPL also we went because the young people go to IPL when it started, you'll agree with me, a lot of young people got attracted. In fact, in the recent brand track we have had, we have seen our brand going to close to #2. We find that people who are very young, have started trying more of Gulf. So brand strengthening both ATL/BTL has been a consistent part of our -- we're investing close to 6% of our revenues quite consistently. Yes, the brand strength in terms of translating in the market pricing you're right that probably the last 3, 4 years, we have seen that we've been able to take that on a more positive foot, I would say, ahead. In fact, sometimes once or twice we have done a small market price increase before others have done. So that gives us little strength. I'm not saying we did majorly. So you're right in what you're saying that the pricing has translated in some benefit for us in terms of our price positioning in the market.

And going forward, do you think that you want to retain the current brand level or imagine or going forward you want to match -- you want to reduce your pricing discount more as compared to the competitor? Or you want to retain it at the current level?

Well, I think it's -- obviously, the brand investments go above-the-line, below-the-line. Pricing is a different thing. We will have to look at what we want to do. The brand is strong. At the current moment, obviously, we have held back on a number of the investments which we do for the above the line. But social media, digital, we will continue. And obviously, there will be some -- the impact of what we are seeing today will have some impact, I would say, for some time. And we'll have to measure it because as we know, costs have to be controlled, travel costs obviously have come down. All other costs having seriously looked at in this period so that we can optimize.

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

So a couple of them. Sir, were there any inventory losses booked on the raw material stock given there was a sharp correction in crude? So was there an impact on the base oil prices in the impact? Was there any inventory loss booked with respect to that?

No. No, Nitin. Thank you for the question. There is no inventory loss booked in -- on the inventory held as on March 31 in this business. Because as per the accounting standard, as long as your end price, selling price, is above your raw material costs or the inventory which you are holding carrying value, you don't have to do mark-to-market. So our inventory, there is a gap of almost 50% in whatever the material margins are there versus the end selling price. So there is a lot of gap. So there's never a requirement for mark-to-market on inventories.

Okay, sir. And sir, as you mentioned some time back that like EBITDA margins won't hold much significance, at least in the first quarter this year because of fixed nature of the cost -- of the operating cost. So what proportion of the operating costs can roughly be attributed as fixed? A broad percentage would do so.

No. Every item has an element of things and variable, which can be variabilized also. And as we move forward, we are looking at how to variabilize many of the fixed costs in negotiating, renegotiating with all the vendors and all. Typically, our other expenses, which you see on the P&L are around 25%-odd range, plus there is an employee cost, which is around 6%, 7% of the top line. So these 2 are the components. But within that other expenses, there is a component of OEM royalties, which we give when we sell OEM products. So that is variable to what we sell of OEM in these markets. If the sale is there, they will be paid. And if there is no sale of their products, then it will be reduced. So that's a large component, which is variable, I would say. And as Ravi mentioned, other expenses also include that 6% to 7% of A&P, a part of which is variable. A large part of it can be variabilized because in these times, there are BTL activities are less, ATL activities are almost 0, except the social and digital campaigns, which are happening. So all these things are a variable component, which obviously will come in.

We will move to the next question, that is from the line of Manikantha Garre from Axis Capital.

Sir, given the situation, can we say that our earlier guidance that used to be that will be growing at 2 to 3x of the industry growth stands canceled at least for this year, and we'll have a relook at that kind of guidance? Or we are still confident of that guidance after COVID?

So we are, in fact, very confident of the guidance because as the figures you will see, and we are tracking it against competition and the industry growth. As we mentioned to you when the industry last year was down 6%, 7%, we were actually growing double digit in all segments except factory fill, so that was factory fill, so that was -- factory fill is about 10% of our base. So actually, we have maintained this 2 to 3x right through cycles of growth and degrowth. If you take the last 12 years, there have been markets -- there have been years where actually the industry degrew by 4 -- minus 4%, minus 5%, but we were doing 1%, 2% growth. So I think we continue to be very confident that, in fact, we're looking at a lot of opportunities now where like in recent months, we could supply to even our competitors' customers because we had a better supply chain. Supply chain rhythm is very important in these times and also being adaptable and flexible. So actually, this 2 to 3x, we are very confident that this will continue for us. In fact, in some of the sectors we do more than 2 to 3x. So this is a general guideline we give because we would like to keep it to a level which we can surely deliver. And so this we are confident of the guidance.

Understood. So can I take it that even during the lockdown times also, we were able to continue that? I guess you were doing that...

See, it is very difficult to track in the lockdown, because -- but we can only tell you what we did. We are tracking it. But I think we have been doing -- it depends on the sector. Now there's a very difficult situation out there. But overall, we continue to track 2 to 3x market growth. We are quite sure about that.

Understood. If I can squeeze in 1 more question here. You mentioned that you're continuing with 6% to 7% of advertising spend. So is it the same...

No, no. 6% to 7% is a normal what we do in a year. As Manish mentioned to you, a lot of that is variable. So at these times, obviously, we have to conserve, right. We have to conserve and we have to cut back on things. There's -- you will not see any advertisement for lubricant now in the last 3 months, on TV, except social media. So we definitely have to look at a different calibrated level given the situation. But long term, we will continue to invest in our brand as things pick up.

Okay, sir. Just related to that, with other qualitative question here. So are you satisfied at the brand being at #2 or you would like to achieve #1 ranking?

Well, at this moment, we have to build our strength. There is a gap between us and the #1. So I think we will have to be pragmatic how we approach this. But definitely, we are trying our best to see how our brand metrics can go up, which they are. And we are quite innovative. You will see the things we do. People do pick up after us. So just we will keep doing that what we are good at.

Can you please elaborate on the parameters part of this? What all -- parameters are looked at to come to this brand number?

Yes. So it's a brand track, I can take it off-line later, you can contact us. But basically, it is around awareness level, top of mind, brand consideration and also brand trial.

The next question is from the line of V.P. Rajesh from Banyan Capital.

I was just wondering, earlier you mentioned that you are gaining market share. So if you can just elaborate a little bit from where are you gaining that? Is it primarily coming from the PSU guys or from the other private players also?

Yes. So each segment, we have a different set of our own objectives. So if you look at the bazaar segment, which is a large part of the sale, we are adding our distribution numbers, as I mentioned to you because obviously, we do a lot more activations and approach, our brand is gaining strength. So we would be gaining from people who come to buy lubricants. So people who buy value and I would say, brand-related purchases, that is a segment which we believe we should position ourselves and we are doing that. We will not go at the low-price segment because that is not something which we can offer. So we, for example, markets like very low 3-wheeler oils used in autorickshaws or pump set oil, these are all low -- very low price oriented. We would more look at the personal mobility, the diesel engine oils, which offer value, the agri products, which are used in the tractors, the newer equipment. So obviously, these are our segments. And similarly, in all the B2B segments, we would position our brand based and our positioning of price based on a value plus, people looking for value and willing to pay for a better product, a better thing. But at the same time, there would be people who have been using a price product who want to try a Gulf, who want to put a better oil in their motorcycle or pursue better oil or they find the availability is there. So we are open to all the lubricant users who would come in and B2B customers also would decide on various parameters, yes, commercial cost, servicing, technical backup services. So each segment itself will offer, but we are certainly not positioning ourselves as the lowest price and the person who's only looking for lubricants at a -- just at a price point. There is more value add, which we believe can do. And also distribution increase is important because as our brand awareness and our brand consideration is going up, there are 200,000 shops in retail India and more in rural. So we want to be in more touch points, so more people can have the option of looking at Gulf when they're considering it.

Sure. That's helpful. And secondly, on the percentage from auto, what would that be? And within that, what would be coming from the 2-wheelers?

Manish?

So this has -- this we have been highlighting in the earlier calls also that roughly around 37% to 40% of our product mix is diesel engine oil and around 24%, 25% is personal mobility, which includes car and 2-wheelers.

Right. And 2-wheelers will be what percentage? Would it be 50% of this 24% or less?

So it will be more. It is more of this -- we are very strong in 2-wheelers, and we have invested the last 10 years in our Pride brand, which has become a very powerful brand. So -- but we have to do a lot more in the passenger car where our market shares are low there.

Yes. I think we can move to the next question, please. Prayesh, can we connect to the next question?

I think we have...

Prayesh? Aman, can we connect to the next question, please, Aman? Aman?

I think there is a disturbance in the line at Chorus. We'll wait.

Yes. He has dropped. He has dropped the call. He's just saying just hold on for a second. Ladies and gentlemen, just hold. I think there is a technical issue. He is just connecting. That's come on the chat.

Hello?

Yes. Are you back, Aman, Prayesh?

Yes, sir. I am back here. I'm sorry for that.

Yes. No problem. You can connect to the next question. I think Rajesh has finished his question from Banyan Capital. I think next in line is Mr. Saket Kapoor from Kapoor Company.

Sure.

And sir, firstly, a very good gesture from your side from the interim dividend part. Definitely, it's a good way of rewarding your shareholders in the correct time.

Thank you.

Sir, the point which we want to understand that as COVID -- as the pandemic has created its waves and the ripples are felt all over the world, do you think that the electric part of the story will be delayed or may get a backseat now because the funding into something new would definitely be will not be getting the same traction, which was earlier being promoted by the different industries at the cost of these carbon fuels?

I think the experts are echoing what you are seeing now. And we believe that obviously the benefit of what is happening today and the investments required in electric, that equation, you will get slightly delayed with what is happening around us now. And I think you are right that we would be seeing -- watching the space more closely, but definitely, there will be a pushback on that in terms of investments to develop, which may be slightly slower now given the challenges.

Right, sir. And sir, if you could give the price trend for the base oil prices. The way that crude prices have behaved, how have the base oil prices been? And on the supply side also, sir, are we seeing any disruption for that? Or is it normal business altogether for base oil?

We have answered this in one of the earlier questions, Saket, that base oil prices have come down but not in the same percentage as crude usually falls and there is a time lag effect, which happens. And there is always a lag of sometimes 1 to 2 months, 2 to 3 months in the base oil fall to reflect. Having said that, yes, the base oil has come off of the highs and partly offset by the rupee depreciation. Supply side, there were some challenges in the month of actually February, March because a large part of it comes from South Korea and all in terms of base oil. But now things have streamlined. So there is no challenge as far as the supply side is concerned for base oils.

Early trend, sir, can you give just for the reference point? What were the -- in the dollar bracket?

No. It's very difficult to say because as I mentioned, there are various grades of base oil and each grade has different price points. Group I, Group II, Group III would have a different price points. So it's very difficult to say.

Not for us, sir. Blended trend, sir, you can give just to understand, how have the market behaved just for the reference point of how the base oil market has...

No. It's difficult to share a particular grade of base oil and its pricing because there are various supply points also. So various refiners are selling at different price points in different market. The same price of base oil here would be different from price in Middle East and in Dubai and in Singapore. So it's very difficult to comment on the pricing from a particular grade point of view. Overall, the trajectory was down, but now the crude has gone up back to $40 from the lows of $20. So we have to see going forward how base oil behaves.

And we are sourcing it domestically from the Indian refiners or importing?

No. A large part of it comes for the industry and for us also from as import.

And specific reason, sir, the quality standards are there or what?

No. It's, again, that there are various grades and Indian refiners are not producing all the grades, plus the Indian refiners have their own consumption also. Everybody has their own lubricant brand. So they prioritize the base oil for their own production first.

Right. And sir, do you think that this Atmanirbhar part of...

But having said that we do buy some local quantities.

Okay. So since now the Atmanirbhar part of story is just getting some traction from the Honorable Prime Minister, so do you think any duty structure changes or something on that front may be disturbing our dependence on imports? What is your thought process behind it?

We cannot comment on them. India is -- from petroleum product side, India is -- India imports a large part of it, 95%, 98% of India's petroleum products are imported. So we -- if there is something happening to the crude, obviously, India is importing a large part of crude also. So we can't comment on that.

[Operator Instructions] The next question is from the line of Shradha Sheth from Edelweiss.

Just 2 questions. As you indicated that last year, we had a market decline of 6%, 7%. So just wanted to get your sense of how are we looking at the market this year with obviously such huge disruption because of COVID? So do we -- because of our B2C nature and along with all the channels opening up now, but obviously, it might be, as Manish indicated, much below the recovered level. But what is the sense we are getting for the full year? What could be the kind of decline? Could it be much higher than the 6%, 7% of FY '20?

So in 1 of the reports which comes out as soon as COVID happened in April, we are predicting a double-digit consumption would have fallen in the lockdown. But we'll have to wait and see because how this situation pans out. And we have been -- actually, I have been hearing in the last 10, 12 years, even when market naturally degrew sometimes by 6%, 7%, we have managed to do better than [Technical Difficulty]. And if you would take the last few years, '18, '19, we actually grew 17% to 18% and we will definitely look at [Technical Difficulty] as of this year. But we will continue to look at [Technical Difficulty] as of this year. We are also looking for the opportunities to [Technical Difficulty]

Ravi, sorry, your voice is breaking a lot.

Okay. Sorry. So I think the -- did you hear the first point where I told you that Kline who's the does the surveys is looking at a lower growth rate obviously minus 6%...

Yes.

So we would continue looking at opportunities where we can do 2 to 3x of the market, whatever is the position.

And this would be, again, this year based on which segment that we believe we can grow at this 2x the market?

Yes, yes. So we are demand -- yes. So we are sensing demand in various segments, the segments we play and possibly we'll have to look at some other areas within these segments. And also, we are adding a lot of B2B customers and also working with a lot of OEMs. So we see how we can gain in this. Obviously, we'll have to wait for normalcy overall.

Okay. And just to reconfirm, you said Kline is looking at a double-digit sort of a decline, right?

That's right. That's right. That was immediately announced by them when the COVID happened. So you can refer to that. It will be available on the web.

Sure. And just lastly, just wanted to understand, will it be possible to give some color because you said May was substantially good, so I mean what level of -- I mean pre-COVID was it percentage-wise? A lot of companies or industries are giving that, that we are 60%, 70% to pre-COVID levels versus last year of May. So if any color you can give.

No. Shradha, Manish this side. It is very difficult to comment on the monthly number. But overall, as we mentioned, April was almost a complete shutdown kind of a situation across India. Of course, we did some essential services supplies with the permission of the government and agri sector. And May was better than April and June looks better than May. So that's what, at this moment, we can say without giving any specific numbers here.

The next question is from the line of Manish Dhariwal from Fiducia Capital Advisors.

What percentage of our business is factory fill?

Yes. Around 8% to 10%.

The next question is from the line of [indiscernible] from HDFC Mutual Fund.

Hello?

Yes. [ Mr. Batra ], we can hear you.

So just wanted to understand more on the working capital side. So I think you have managed pretty well. But part of our process that we implemented is led by a reduction in -- is led by increase in payables and while inventory remains largely same, debtors days have actually increased meaningfully. So obviously, a part of it would be as you have mentioned at end of April, suddenly in March because of lockdown, some payments could have been delayed. But so the idea is to understand how consistent this kind of improvement can remain in terms of payables?

So you're absolutely right. The payables have gone up also because of the factor of lockdown towards the end. But there is a renegotiation with almost every vendor about increasing the payment terms with them. So that's an ongoing exercise. It started from March. So that has given some benefit. But of course, in spite of this increase in trade payables, overall, the inventories and receivables have been, I would say, well controlled. Considering that overall the cash generation from operating activity, again, I would like to highlight against the PAT of INR 202 crores for the year, the net cash flow is INR 237 crores nearly. So that's a meaningful conversion to cash irrespective of slight increase in the trade payables.

Right. Just as my second, just wanted to get your thoughts on where we are on the battery project? Where was the [indiscernible] now in terms of CapEx and growth, et cetera?

Yes. So battery -- Ravi, you would like to take that?

No. You take it. I'll join.

Yes. So basically, we are looking at options of localizing the production. You know that we import and sell batteries. And of course, there was a complete shutdown in the month of April, but it is quite again, giving us a comfort that in the month of May, we had a very good sale in -- which has come back because many of the, again, pent-up demand was there, 2-wheelers have not operated for more than a month or 2. So that when they start the battery is sometimes replaced. So that gave us a very good month in terms of batteries for May -- in the month of May. And sourcing is an ongoing effort. We are looking at either buying locally from someone as a toll blending or having our own plant in a way. So we are looking at both the options. No firm decision yet has been taken. We are exploring options.

Next question is from the line of Sabri Hazarika has a follow-up question from Emkay Global.

I just have a few bookkeeping questions. So what has been the total volume for FY '20 versus FY '19?

Total volume for the year?

For the year?

Yes. It's 110,500.

110,500. And what was the reported volume, including institutional order for FY '19?

I think it was 119.

119. And the institutional order was around 3.5?

No. Around 6.

Around 6. Okay.

Yes.

And secondly, you said that the growth in FY '20, bearing OEM sectors, it was around -- it was double digit for all of the segments, is that right?

Till December and till February also.

Till February. So notwithstanding. But on an average, if I were to like divide it between...

For the full year, it is 6% growth excluding factory fill.

For the full year, it is 6% excluding factory fill. And how the difference between -- so this is factory fill -- how was the industrial lubricant demand growth during this period?

We don't give separate breakup of that. But the percentage more or less remains the same in terms of our product mix.

Okay. And versus FY '19 and in FY '20 and -- what would be your market share?

As Ravi mentioned, the market has grown -- degrown at least 6% to 7%, if not more, some of the competition is talking of even more decline. But -- and considering that we have almost excluding the institutional order being only minus 2% on an overall basis, including the factory fill, the market share must have gone up across categories, I would say.

It was around 7.5%, I think from what I remember...

For the bazaar segment only.

For the bazaar segment.

Yes. That also must have improved too.

So Sabri, you should track it segment-wise, you know some of the figures. But on an overall, well, you can do the math, it's 0.2, 0.3 or something. But the market is many, many cuts we look at it. If you look at our market, we have gained all across segments. Of course, we'll have to do the math, but we are gaining, so -- wherever we are playing. So obviously, that growth figure also, you are talking general growth. Overall, we keep gaining. And of course, this is -- March has been tough, Otherwise, we'd be clearly adding market share right across.

Right, sir. And just 2 bookkeeping questions. One is, what would be the automotive versus non-automotive share? For Q4 FY '20, generally, it is 62%,36% something which you mentioned. So how was it in Q4?

So B2C was 2% lower than that. Actually, in the December quarter, it was 64%, 36% if I remember correctly, now it is 62% 38%.

Okay. 62%, 38% in this quarter. And what was the ForEx impact on interest for the quarter?

For the quarter, the ForEx finance cost includes around INR 6 crore of ForEx loss, including mark-to-market. So it all was not realized one. It was -- the large part of it was unrealized.

So how much has put in the P&L? Around...

INR 6 crores, around INR 6 crores.

INR 6 crores. Okay.

Aman, we have 1 more question. I think we will then sum up after that.

Next question is from the line of Vaibhav Badjatya from HNI Investment.

Was there any pricing action in the March quarter on the [indiscernible] side because some of the competitors indicated that there was some [indiscernible]. We have also reduced our pricing.

So pricing is an ongoing process. And as I mentioned earlier, the MRP level pricing doesn't change. Of course, some schemes keep going up and down and back to in particular segments. Suppose in some quarters, there will be a scheme on motorcycle oil; another quarter, there will be a scheme on diesel engine oil. Sometimes it is across the board. So it's more about adjusting the schemes and -- in the trade rather than an MRP level action. MRP level, I don't think there is any reduction.

No. There is no action. To answer your question, there is no action in March.

Yes.

Thank you so much. Aman, I think we can do a summary, if you're okay, Aman?

That was the last question for the day.

Thank you so much to everybody who's joined us on this call. We have tried our best to answer the question. It's been a very tough period for us. But just to assure you, our teams are working from home, most of them. The people who are in the front are obviously trying to get the supply chain with them. The -- we have also started in some markets to visit customers, talk to them over various -- the computers, the mobile phones. A lot of work is happening there, and we are seeing good shoots of demand as mentioned to you on this call. Agri has been 1 of the highlights this quarter. There is a few months. And of course, March, we ended on a positive note in spite of the challenges. And we assure you that as a company and as a team, we are using this period to further strengthen our -- we are doing a lot of training. We are also approaching the market, sensing what the customers want and a lot of good business development is happening. So hopefully, we will be able to -- this period is going to be tough. But as we said, there are lots of opportunities in times of difficulty. Thank you so much for all your time. Be safe, and I hope to see you and talk to you soon. Thank you.

Thank you.

Thank you very much.