Gulf Oil Lubricants India Ltd

NSE:GULFOILLUB

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Ladies and gentlemen, welcome to the Gulf Oil Lubricants India Limited Q2 FY '24 Earnings Conference Call hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded.

I would now like to hand over to Mr. Sabri Hazarika from Emkay Global Financial Services. Thank you, and over to you, Mr. Hazarika.

[Sabri Hazarika, analyst]

Yes. Thanks, Malcolm. Good afternoon, ladies and gentlemen. On behalf of Emkay Global, I welcome you all to this conference call of Gulf Oil Limited for Q2 FY '24 earnings. We are pleased to have the senior management of Gulf Oil led by Mr. Ravi Chawla, CEO; and Mr. Manish Gangwal, CFO. So today's session would be a brief on the results by the management, and that will be followed by the question-and-answer round.

So now I request Mr. Chawla for the opening remarks. Over to you, sir.

[Ravi Chawla, executive]

Good afternoon, good day to everybody, and welcome to the quarter 2 call for Gulf Oil Lubricants India Limited. Yes, it's my pleasure to share with all of you that this quarter is indeed a milestone quarter for us where we have crossed INR 100 crores in terms of our EBITDA for the first time in the history of the company. And we also have seen this quarter, which is usually July to September quarter is a seasonally impacted quarter for the industry due to the rains across India. And we do see a slowdown in the consumption of lubricants due to the vehicle movements, due to the monsoons to lower infrastructure projects.

However, we have seen that for us, the team has done a very good all-round performance, and the performance in terms of volumes growth, the revenue, the margins and the profitability have enabled us to achieve this milestone, INR 100 crores EBITDA in a single quarter for the first time.

Also happy to share that, obviously, the profit EBITDA is up 25% year-on-year, and we have seen also quarter-on-quarter sequential increase. It has also been a quarter where...

We're seeing some disturbance.

[Manish Gangwal, executive]

There is some background voice coming, Sabri, can you be on mute?

[Ravi Chawla, executive]

Yes. Sorry about that. We've also seen the core lubricants volume for the quarter come in at 34,000 kl with a growth of 6.3% over last year, which indicates to us, obviously, the market is growing positively, which is in the region of the 2x to the market growth, industry growth. For us, the double-digit growth, we have seen across many segments that we cater to. The OEM franchisee workshop business is one where we have seen this double-digit volume growth in the quarter.

There has also been a similar growth in the B2B and infrastructure segments. And as I mentioned earlier that despite this being a seasonally subdued quarter, we have achieved this growth. Our retail channel volumes also showed improved growth, especially in the agri and motorcycle products coming back much stronger compared to the earlier quarter. And personal mobility, which has contributed 23% in this quarter versus the last quarter of 21%.

I would also like to add here that we have continued to invest in our brands in terms of our various IPs Raksha Bandhan, both above the line, below the line, and this has been also an additional investment that we are making for the last 2 quarters and in the periods before that. So that is investment in spite of that, the profits that have been delivered.

Our volumes in terms of AdBlue also remained very strong in this quarter. So in addition to the 34,000 kl we achieved in the Core Lubricants, we have achieved an AdBlue volume of 30,000 kl. And this has also helped us because obviously, the distribution and the strength of our product and our OEM tie-ups are helping us here also. And this is really, again, a good growth that has happened. And our capacity increase in the satellite plants have again helped us along with the ground level activations for AdBlue. So all in all, a very good expansion of this product, which is getting consumed.

The advertising cost, obviously, we have invested in quarter 2. We'll continue to monitor our share of voice and look at our future brand investments. Also happy to share that we had a very good strategic partnership beginning with Kia for the franchisee workshops. So through our relationship with S-Oil whose 7 range we are making in the country since a few years and distributing it for them. We got an added sort of tie-up through the S-Oil partnership that they have globally to get into the Kia workshop where again, we have made a very good start. So happy to share these developments.

And clearly, for us, we have seen all-round performance. And there has been also very good. The margin management, as Manish will talk a little more about those details. Distribution also has been a very good growth area for us, and we have seen a double-digit increase in our distribution, both in urban and rural. So all in all, a very good quarter, taking forward our strategies and our marketplace activations. And overall as an organization, we have been able to deliver the INR 100 crores once again, which is essentially, as we have a lot of associations with cricket. So it is indeed a proud moment for us to have this.

I'll now hand over to Manish to take you through the other things and, of course, many more business highlights, both the financial and other key aspects. Over to you, Manish.

[Manish Gangwal, executive]

Thanks, Ravi. Good afternoon, everyone. So as Ravi mentioned, a very good quarter for us. Margins also tracked very well. We delivered 12.5% EBITDA margins as against 11.5% in the previous quarter. So there is an EBITDA margin improvement by 100 basis points. At the same time, the gross margins, you must have noticed, also improved by nearly 1.8% during Q2 over Q1. And over last year, it was more than 400 basis point improvement in the gross margins as the input cost is stabilized, and we have been talking about it in our earlier calls that these are the periods as and when the input cost is stabilizes after a certain spike in globally. These are the opportunities for improvement of margins as we tend to retain some of the margins during the process.

At the same time, all these resulted in the highest, I would say, packed ever in a quarter, which is INR 73.6 crores, a growth or a surge of 41% over last year same quarter. So again, a very good performance there. At the same time, all this has also resulted in significant increase and the continuous increase in cash flow generation. And you must have noticed from the cash flow that during H1, we have generated INR 140 crores from operating cash during the period. And our cash on the balance sheet stands at nearly INR 720 crores, gross cash as on 30th September. So all these are a very, very positive sign for the business and a strong business performance and financial performance.

We would now like to hand over for Q&A, please. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Pritesh Chheda from Lucky Investment Managers.

[Pritesh Chheda, analyst]

Apologies, but I missed your comment on volumes. So if you could give you a comment on the volume on quarter 2 and H1, both.

[Manish Gangwal, executive]

So for Core Lubricants, the volume for quarter 2 has been 34,000 kl and 30,000 kl of AdBlue. So overall, a 64,000 kl of volume during September quarter.

[Pritesh Chheda, analyst]

And what's the volume growth?

[Manish Gangwal, executive]

It is -- Core Lubricants have grown by nearly 6.3%. And obviously, AdBlue has grown significantly higher nearly 40% -- 113%, sorry, Y-o-Y basis.

[Pritesh Chheda, analyst]

Okay. So which means the 64,000 kl total volume is up?

[Manish Gangwal, executive]

Sorry?

[Pritesh Chheda, analyst]

So what's your total aggregate volume growth, sir?

[Manish Gangwal, executive]

64,000 kl of total volume. And -- versus 46,500 kl of volume in the previous September quarter -- previous year September quarter.

[Ravi Chawla, executive]

Yes, the Core Lubricant has grown from 34,000 kl to -- it has gone to 34,000 kl from the last quarter, 32,000 kl. So 6.3% growth in the core lubricants.

[Pritesh Chheda, analyst]

Okay. And your H1 total volume growth will be now standing at?

[Manish Gangwal, executive]

This is nearly around 4.6%, lubricants -- in Core Lubricants.

[Pritesh Chheda, analyst]

Okay. My other question is, sir, we were at a certain GM about 4, 5 years back. And the GM number is completely different now. And I was listening to your past 2 calls, we were calling out that the margin in the business should be looked at about 13%, 14%. So which of the -- why is the GP number still on the lower side?

[Manish Gangwal, executive]

I think we have explained it in the previous calls also that there was a significant increase in the input costs over the last 24 months period. Barring the September quarter, I would say partly June quarter, up to 31st March '23, there have been significant increase in input cost. And there have been continuous price increases we had to take. We have taken almost 5 to 6 price increases in retail segment alone. And that resulted in the increasing top line significantly.

We grew our top line by 37% last year. And that has resulted in the -- on a plain calculation, it will look lower as a GP because while we have been able to pass on per liter cost of input to the end customer/consumers or as a percentage, it will look lower because if your denominator and nominator goes up by the same amount, your -- obviously, the percentage will look lower. That's the reason primarily. On rupee terms per liter basis, we have been able to recover the entire increase in the input cost during those price increases.

[Operator]

The next question is from the line of [ Anik Mitra from Senomyx ].

[Unknown Analyst]

Sir, my first question is, what is the current trade of new base oil and crude? And is there -- like what sort of impact we may see due to the current rise in the crude prices? Because last quarter, you told like $75 to $85 is the comfort zone for the product. So currently, it is hovering above $85 for quite some time. So what sort of impact we may see going forward?

[Manish Gangwal, executive]

See, the base oil, which is our key raw material for lubricants is linked to crude over a period of time. Of course, the short-term movements do not reflect in the base oil immediately. There is a lag effect of usually 1 to 2 months depending on various categories of base oil and demand supply situation in each category. So there are many permutation combinations here. It's not a very straightforward thing. But overall, on a longer period, if the crude sustains above a certain level, obviously, the base oil will have a movement. And then the pricing action and the margin management action figures in at our end.

[Unknown Analyst]

Okay, sir. Sir, what is the old new market share for Gulf Oil?

[Ravi Chawla, executive]

Yes. So overall, we are in the automotive industrial segments. We are not within the white oil and transformer oils. So we have got a 7% plus market share overall. And in the private sector, we believe we are in the second position. And in certain segments like motorcycle and the diesel engine oils, we have 9% plus market share. And the others, we are around 4% to 5% market share in the segments we are in. So that's our market share in terms of various segments.

[Unknown Analyst]

Okay. Sir, is there any addition in market share in last, let's say, 1 year?

[Manish Gangwal, executive]

Yes, yes. So we have been growing 2 to 3x the market consistently for over a decade now, in fact, more than 12, 13 years. So if you look at our market share is growing. And last year, in fact, our financial year, we grew 15% in our volumes, in lubricants. So definitely increase in market shares there across our segments, and we continue doing that.

[Unknown Analyst]

Okay. Sir, last 4 or 3 folds 6% plus market share in the old new segment.

[Manish Gangwal, executive]

We said 6% to 7% because it's an estimate, but it is towards that. In certain segments, as I told you, it is 9% plus. As per our data, it is around 6% to 7%, right? I said 7% because some segments, we are going -- increasing our market share also.

[Unknown Analyst]

Got it. Got it, sir. And sir, what is the OEM and retail contribution in your top line?

[Manish Gangwal, executive]

If we talk of OEMs, there are actually various facets of OEM we deal with. We are dealing with factory fill for few OEMs where the vehicle -- the first fill happens, then there is a franchisee workshop of OEMs or dealerships where we supply and then there is an aftermarket relationships with many OEMs. So it's very difficult to give you an exact number. But the factory fill business, which is a first fill business for us is less than 10% of our total volumes.

[Ravi Chawla, executive]

Yes. So just to add, you see, we have very strong partnerships with OEMs. We have more than 35, 40 OEMs actively. We have -- in fact, we have OEM partnerships, which have been with us since we started more than 10, 12 years ago, we started adding OEM spend it [indiscernible] on. So our OEM market share differs based on OEM and as Manish said, different segments. So clearly, for us, factory fill is, as you said, in that 10% kind of -- that is there. And we have also OEM business and franchisee workshops, and we do for the aftermarket and also exports. So these associations obviously mean that we sell the products in all these areas. And it is a very good, important segment for us, and that continues to grow.

[Unknown Analyst]

Fair enough, sir. Sir, one more, please.

[Operator]

Sorry to interrupt you, [ Mr. Anik Mitra ]. We have a few more participants.

The next question is from the line of [ Aman Sony ] who's an individual investor.

[Unknown Attendee]

Okay. So I just have slightly one question which is quite of topic. So there's -- since today morning, there was just a rumor going on about the company entering into the defense business. So just wanted to know your comments on that. So is there anything on that?

[Manish Gangwal, executive]

No, I think that, it's the announcement by our other company, GOCL Corporation Limited. It is not with us, connected to us. That's a separate listed entity, GOCL Corporation. I think you are mixing it between the two.

[Operator]

The next question is from the line of S. Ramesh from Nerbal Bank Equities.

[S. Ramesh, analyst]

Congratulations on the good results. So if you're looking at your mix of vehicles and the trajectory for growth, if you look at the next 2 years, obviously, there is traction in motorcycles, perhaps in diesel vehicles. And if you see the launch of SUV, that would also be a good growth momentum. So in terms of the next 2 years, if you see the growth in the automobile sector, how do you see that increasing your growth rate compared to what you have done this year so far?

But the broader question is on the kind of growth expectation, what happens to your business, say, as -- say, in a market like Delhi progressively converting to EVs for the aggregator market, which has been a bit of a concern. So from '26 to '30, the aggregator market is going to switch to EVs between 50% by '26 and 100% by '30. So how would that impact your volume growth in markets like Delhi? Did that get to happen in other states, how would you address that challenge in terms of your own growth strategy in the coming years?

[Ravi Chawla, executive]

You see recently in May, we -- there is an organization called Kline which does a market study of India. And in July -- sorry, in July, July 26 -- whenever we had the Kline study was done. And this actually looked at the factors that you are mentioning on the EV penetration and various categories. So based on that, the Kline has kind of shared their analysis, which is a very detailed analysis. We can send you a copy of the report if you contact us later. The lubricant market will continue to grow 3% in volume for the next 8 to 9 years, 10 years, they have predicted, even after the penetration across EV as they have estimated, which is -- and now also that is 3% in volume, CAGR, plus value growth of 6%.

So you see with that, without getting into too many details, you're right, things are happening. The buses are getting EV and 3-wheelers are getting into EV. Some 2-wheelers and car penetration is happening. We are very focused that given our brand, our distribution, our segment-wise approach and our strengths, we will continue looking at 2 to 3x the market growth rate in terms of our volumes. Of course, there are some segments where our market share is below 5%, where we think we can grow better. Plus there are certain segments where certainly, we are building strengths like industrial, B2B, and we have strong OEM partnerships.

Automotive and what we call the retail growth, we have a very strong brand. We amongst the top 2 brands, we believe in our service even if you take us as a top 3 brand. We want to build our distribution touch points, which will again go into segments, both urban and rural.

So we are pretty focused on that, and we see that our growth trajectory will continue as 2 to 3x the market growth rate with a very strong model. It would continue for the next decade. But definitely, the next 3 to 4 years, we want to increase our distribution very rapidly. In fact, we want to increase distribution much faster than what we think the volume will because more touch points means better availability. And that is our focus.

So a lot of the brand investments go into continuing building our brand and also actively doing brand building with at the grassroot level, both in terms of the influencers, the retailers and of course, making sure the reach to our distributor network is optimal. And segment-wise, we look at a lot of the gaps that are there in various regions because every region has a different stand for us. So there is ample scope for growth, and we are focused on doing that.

[S. Ramesh, analyst]

So the next question is, you have announced a JV for high-power EV charging stations. So can you give us some color in terms of what is the investment, what is the revenue you can expect for changing unit or station? And how do you see that being scaled up? And over a period of time, what is the kind of share of revenue and profits you can expect to earn from that business?

[Ravi Chawla, executive]

Yes, Manish will take that.

[Manish Gangwal, executive]

So you see this is a company called Tirex Transmission. And on 27th August, the Board announced the acquisition of 51% shareholding in Tirex Transmission. They are a DC fast charger manufacturing company. And the total consideration is INR 103 crores approximately. We expect to complete this transaction within October itself. So in the next 1 week, all the condition precedents are being complied with as we speak.

So their company is, as you rightly said, it is into DC fast charging primarily. And they currently have more than 500 installations of such DC fast charges across India. And that is something which is nearly there at 8% to 10% market share today. And it's a very interesting opportunity because as the EV's numbers and the population grows over a period of time, especially in certain segments like buses and all, they all will require fast charges.

And it is expected that the opportunity of fast chargers in India will be nearly $1 billion to $1.4 billion by 2030. So if the company Tirex continues to maintain even their market share, you can do the math in terms of the top line and the expectation from this initiative for us. Together with this, I think we have earlier mentioned also that we have also have a product range through our investment in Indra Technology U.K. on AC slow charges as well as a software company called ElectreeFi for the Software as a Service for electric chargers. So overall, we have a gamut of now complete charger related slower and fast chargers all in our portfolio. And definitely, it should be a significant revenue contributor when the sufficient number of EVs are there on the ground, but it's an initiative which is to play the EV value chain.

[Operator]

[Operator Instructions] The next question is from the line of [ Hamal ] who is an Individual Investor.

[Unknown Attendee]

Congratulations on very good numbers. Just has two different set of questions. First is the basic. So if you can just give the advertising, battery and the working capital cycle would appreciate it.

[Manish Gangwal, executive]

So I think we have continued our advertisement in this quarter to maintain the share of wallet. And the expenditure is similar to the previous quarters in terms of percentage, what we mentioned earlier. So -- this has been, again, a good investment into the brand building this quarter as well. As far as...

[Unknown Attendee]

Sri, sorry. How much is the amount? I mean, last -- I don't have it. What is the percentage?

[Manish Gangwal, executive]

So roughly, it is around 3.5% is what we spend -- we have spent this quarter. And coming to your second question, working capital, I think last -- in the last call, we were at around 105 days of gross working capital. That has gone up slightly to around 110 to 112 days. And we have also obviously released the balance sheet being the half-year ended. So there is some increase in the working capital because of the liquidity situation in the market and some buildup in the inventory of base oil and finished goods. So overall, these are the 2 questions. Sorry, what was the third question?

[Unknown Attendee]

Battery revenue.

[Manish Gangwal, executive]

Yes. So the battery revenue was roughly around INR 20 crores for the quarter.

[Unknown Attendee]

Okay. Sir, my next question was like now since you explained partially of invested into AC, DC batteries and we have a software. I have one suggestion and one clarification. One suggestion is would you be sharing what are your plans in the next 1 to 2 years? We got that 2030, this is the expectation. But since you have bought something substantial now and it's part of the subsidiary, what are the current sales? What do you expect for this year? What are the plans for next year? Is there anything that you could share with us that we are aware of what's happening in these businesses? And how it's going to be used in the next 1 year or 2 years with Gulf Oil supporting distribution touch points or wherever it is. Do you have anything that you can share with us?

[Ravi Chawla, executive]

So see, while this is a very nascent industry as of now, what we have tried to do is that we have tried to complete the portfolio around EV chargers. So it is not about battery. We are mostly into manufacturing of chargers, both AC and DC charges. The company tariffs, which we are talking about and we are going to acquire, they had a turnover of around INR 13 crores, INR 14 crores last year. And they have, as I mentioned, more than 500 installations successfully running at various places and various locations across India. It's a very promising segment as -- because there is a lot of push from government also to create a charging infrastructure across India because that's one of the trigger point for EVs to have a meaningful number on the road.

So overall, this is a very exciting segment. The company has a pipeline of discussions with many OEMs, bus OEMs. The target segments are primarily for bus OEMs, PSUs. Retail segment where shopping malls or offices can may install fast chargers. So these are some of the prime target areas for our company, and they are in touch with all the stakeholders in terms of so and we at Gulf Oil will help them because of our relationship with OEMs as well as our retail distribution channel and B2B customer and OEM links. So we will be supporting them in their growth journey. And obviously, currently, the founders are having balance 49%, and they will be pushing it to take it to the next level with the support of Gulf Oil.

[Unknown Attendee]

So this product, generally, the EBITDA margins are in the range of 20-plus percent plus or they're lower than that? Or how does that work?

[Ravi Chawla, executive]

You see, on a decent number of charges, but we can say at this stage is that it will be EBITDA margins accretive to Gulf's current business or current EBITDA margin. It will not be margin dilutive.

[Unknown Attendee]

Okay. And when you say growth, you -- generally, this is like 3x, like it's large growth, 3, 3x, 4x, 5x is yearly growth? Is that how you're imagining it? Or does it go a little bit more slower than that? Like when does it meaningfully -- like do you see '26 -- FY '26 or FY '25 where you see meaningful contribution to your revenue?

[Ravi Chawla, executive]

I think we have already highlighted in one of the interactions that in 5 years' time, this company -- Tirex can have a INR 500 crores plus business.

[Unknown Attendee]

But -- yes, I did know that, on CNBC that you did mention that.

[Ravi Chawla, executive]

It's a growing market with 4 segments. So that's the kind of potential with that 7%, 8%, 10% market share, what we mentioned. But we have to see how it evolves also in the market.

[Manish Gangwal, executive]

Plus, in addition, there is an export potential, which this company can have. And there, the market is once the company can apply for all the certifications for Europe and U.S., then the potential is even bigger.

[Operator]

I'm so sorry to interrupt you. We have other participants.

The next question is from the line of Arpit Shah from Stallion Asset.

[Arpit Shah, analyst]

I just wanted to understand a little bit on add new volumes. So what's our current market share in this market? And what percentage of our sales conflated products in this -- in AdBlue volumes?

[Ravi Chawla, executive]

As you see now, Mr. Shah, this is a product which, obviously, we are manufacturing and getting manufactured in our own plants and satellite plants. There is a number of manufacturers of this. We believe that the kind of product that we have put in the market would take us definitely in the top 5 kind of -- top 3, top 5 kind of organized players, but data again is getting organized in this sector. And definitely, for us, we are looking at the quality product, and we want to use our distribution and customer base.

So it's a product which is used for the BS-VI vehicles and some BS-IV vehicles based on the diesel consumption. And whatever diesel consumption is happening in these vehicles, roughly about 4% is the consumption if everybody is using AdBlue that will happen. So it's a very good growth market. It's -- I would say, for us, it's an add-on supplementary product, and we can leverage our brand distribution. And we are amongst the top players in terms of this product in India today.

[Arpit Shah, analyst]

Okay. So is it by any time cannibalize the core lub volumes?

[Ravi Chawla, executive]

No, no, it's a different product company. This is an add-on product for the diesel engines.

[Arpit Shah, analyst]

Got it. And what kind of margins do you make on this product?

[Ravi Chawla, executive]

We mentioned to you, it's a single-digit market.

[Arpit Shah, analyst]

Single-digit EBITDA margin, right?

[Ravi Chawla, executive]

Yes.

[Arpit Shah, analyst]

And on the core lub volume, what kind of volume to [indiscernible] let's say in the next 2 or 3 years -- around 6% volume...

[Ravi Chawla, executive]

In Core Lubricants?

[Arpit Shah, analyst]

Yes, yes.

[Ravi Chawla, executive]

So we have said as the market is growing at 3%, we would definitely look at a 2 to 3x of that in terms of our volumes.

[Arpit Shah, analyst]

And any plans to bring margins of AdBlue product to the core lub products, the margins back to that kind of...

[Ravi Chawla, executive]

It is -- we have to be competitive, right? So you have to maintain competitiveness in this product. And it's also a consumable product. It gets consumed. It needs to have very, very strong distribution. It's like -- it's a very high grade of water with automotive urea. And of course, have certain quality parameters. So it is like it has to be available at the spot at a convenient location and transportation needs to be minimized. Otherwise, you'll be paying a lot of freight cost.

[Arpit Shah, analyst]

And any way that you can expand margin in the spread out?

[Ravi Chawla, executive]

We have to be competitive. So it's obvious that it's definitely a supplementary product as I keep saying.

[Operator]

The next question is from the line of Aditya Sen from RoboCapital.

[Aditya Sen, analyst]

Congratulations on good set of numbers. Can you speak about the per liter realization of both AdBlue and Core Lub in this quarter?

[Manish Gangwal, executive]

So usually, we don't share per liter realization. You have the revenue on a total basis and volumes we have shared already.

[Aditya Sen, analyst]

Okay, we have that. Okay. And also if you can share the capacity utilization at company level that we have?

[Manish Gangwal, executive]

So I think in this quarter, again, we are close to 95% to 100% utilization in our -- both the plants. And in fact, Chennai plant is also touching near 100% capacity utilization. But this is on 2 shift basis. So we can always run a third shift and increase the production.

[Operator]

The next question is from the line of [ Anik Mitra from Senomyx ].

[Unknown Analyst]

Sir, my question is, what is the 2-wheelers and 4-wheelers ratio in your top line?

[Ravi Chawla, executive]

So the product mix as it goes, 23% is personal mobility, that is motorcycle and car put together, in this quarter. It varies between 21% to 23% depending on the quarter and the demand in other segments. So overall, this quarter has been 23%.

[Unknown Analyst]

So 23% is 2-wheelers and passenger vehicles together?

[Ravi Chawla, executive]

Yes.

[Unknown Analyst]

Okay. Okay. And what is the share of commercial vehicles?

[Ravi Chawla, executive]

That's in this quarter is again 38%, but yearly -- it is again between 38% to 41% or 42% depending on quarter-to-quarter. And depending on whether there is a seasonal rain or because in the monsoon quarter, usually, the diesel engine oil consumption will go down like it has happened in this quarter also in September quarter. So again, roughly 38% to 42% is the range there and personal mobility, as I mentioned, between 20% to 23%.

[Unknown Analyst]

Fair enough. Like base oil that is the Kia India dealer what we referred about. So will -- we can see some revenue addition from this particular segment or let's say, this particular collaboration, yes?

[Ravi Chawla, executive]

You see with the OEMs, you have to do a lot of work on the product technology, and you have to make sure your product is accepted in the vehicle. So these are years and years of efforts which happens. And then the franchisee workshops, which actually happens, we are now one of the suppliers there. And we have already started selling this in the last 3 months. So already, there is a volume that we are getting from this. We would, at this day, not like to reveal because it's a business building process. But what we can assure you is that we have been very successful with all OEMs, as I mentioned, 35, 40 OEMs, and we have a good share with them. So we will continue working in that direction. The sales have already started coming in.

[Unknown Analyst]

Okay. Sir, like, is it for Kia India or like...

[Ravi Chawla, executive]

Yes. It is for Kia India, in their service workshops, what we call franchisee workshops, where the vehicle goes for servicing after you buy the vehicle from the OEM.

[Operator]

The next question is from the line of [ Isha Mulchandani ] who's Individual Investor.

[Unknown Attendee]

Sir, I would like to know what has been a major component for the other expenses increases in this current -- in this quarter?

[Manish Gangwal, executive]

See, one of the primary reason is freight because the AdBlue volumes -- as we increase the AdBlue volumes, the freight goes up. So that's one of the reasons, key reason I would say. And we have mentioned in one of the earlier sessions that advertisement cost has been also higher in this quarter, like quarter 1. So these two are primary reasons. Plus if you do more OEM sales, there is OEM royalty linked. So there's, I would say, 3 components, primarily.

[Unknown Attendee]

Okay. And how has been the export as an overall percentage of the turnover in this quarter, has it changed, what is the range?

[Ravi Chawla, executive]

So typically, this is in the range of 5%, 7% for us. So it is in that range only.

[Unknown Attendee]

Okay. Okay. And sir, last thing on the -- specifically which I think you mentioned something that the margins have been improved on account of the better product mix. So can you please elaborate a bit more on that? What has been a mix that has driven these margins in specific segments or something?

[Ravi Chawla, executive]

Yes, yes. So it's across segments. So what we do is in each of the segments, whether it is retail or others, there are products where [ rain ] selling comes in, synthetic rates come in. And definitely, we see that -- if you look at even the segments, Personal Mobility, as Manish mentioned, that has gone up to 23%. So within the category mix and within each segment, we have various products, which are giving us better margin. So it's a complete exercise, which is our focus, and that's one way to manage the margin. So clearly, for us, that's the focus.

[Operator]

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

[Unknown Attendee]

Sorry, I was -- I just had one clarification. So let me ask you reverse like when you say that you're [ activating ] the subsidy JV that we have done, is there an expectation that when you reach INR 100 crore revenue in that subsidiary like in next year or 2 years? Is there a viewpoint that you have on it?

[Manish Gangwal, executive]

You see, Hamal, this is too early days in an industry which is also an [ ethic ] industry. We have to really see how is the penetration, how is the government spending on this sector. But as we mentioned, the target is eventually to take -- retain or grow the 8% to 10% market share in this industry. It's very difficult to give milestones at this moment as to when we can achieve INR 100 crore and then again INR 200 crores.

[Unknown Attendee]

Okay. So then -- and do we do -- do we see ourselves doing more such acquisitions in the future as part of our EV strategy?

[Ravi Chawla, executive]

So we keep evaluating the space in the EV segment for sure. And we have already done 3 investments in this segment. And obviously, we keep looking at investments into -- as we -- we see that there will be a point when the vehicle park of EVs will be reasonable enough to cater to that segment because of our 3 strengths, as we mentioned, brand, our distribution and relationship with OEMs and B2B customers. So we are definitely looking at -- continue to look at many opportunities in this space. As soon as we have something concrete, we will definitely share.

[Unknown Attendee]

You don't think we have overpaid for this acquisition, have we? Because it's INR 14 crores sales and INR 200 crores. I mean, I'm doing some math here, some 14, 15x sales. So is that expensive? Is that like not expensive relative to what we're seeing in the market otherwise?

[Manish Gangwal, executive]

So this is a combination of primary and secondary. I think we have mentioned that also earlier in our calls that there is a large primary component out of this consideration. And the valuation to that extent is what you're talking is force money, whereas the pre-money valuation is lower. And we would not like to comment specifically on whether it was expensive or not because we have done our due diligence, and we believe that it is a good fit to our future plans.

[Operator]

The next question is from S. Ramesh from Nirmal Bang Equities.

[S. Ramesh, analyst]

So if you look at the auto sector, there is some inventory buildup, particularly with Maruti, because they have been ramping up production. So is there a possibility of a slowdown, say, in the next couple of quarters as the automobile industry adjusts itself to selling out the inventory. So how do you see that going forward? And secondly, in terms of sustainability and progress towards Scope 1, Scope 2 emissions, how are you seeing the progress over the next 1 or 2 years?

[Manish Gangwal, executive]

See, the for a lubricant industry player like us, factory fill business, which is directly linked to the new vehicle sale, whether it is car or trucks or 2-wheelers. We -- as I mentioned in one of the previous questions like our factory fill exposure is less than 10% of our total volume and that too primarily with 1 or 2 OEMs. And hence, it is not a direct impact of inventory corrections by the vehicle OEMs, et cetera, on our business. Our business is more linked to the vehicle running on the ground, the activity happening, the GDP moving up. And if there is more running of the vehicle, there was more cement and steel being carried, manufacturing activity happening, infrastructure activity happening, that's where lubricant is consumed on a replacement basis. So we are not impacted on a monthly sale of vehicles, et cetera, on a direct basis to that extent.

[Ravi Chawla, executive]

Yes. Just to add, there maybe a percentage, 2% kind of impact if one of the OEMs or some of the OEMs cut down. And most of it, as Manish rightly said, is to do with activity, use of vehicles, even movement of people. The more people move on bikes on cars, more tractors are used the activity, both in terms of the industry activity, the transportation activity, even transportation of people or the trucks of goods, all this is where a large part of the replacement lubricants come to play. And of course, industry would be supply.

[Manish Gangwal, executive]

And in fact, the quarter 3 and quarter 4 are usually a better quarter for the industry because after the monsoon season, festival season starts and there is a lot of movement linked to those also. So usually the December quarter and the March quarter being the year-end quarter are the good quarter for the company.

[S. Ramesh, analyst]

And on your efforts in the area of sustainability and Scope 1, Scope 2 emission, so anything you can share?

[Manish Gangwal, executive]

Yes, yes. So we are working on that in terms of solar energy, all our plants. We're working on reducing those. So obviously, we will come out with -- we are part of listed companies. We are reporting globally also we are active in this area. So surely, these are areas of focus for us.

[Ravi Chawla, executive]

And you can refer to our BRFR report, which we have published as a part of annual report, where you will get a lot of insight into what we have done and what we are pursuing further.

[S. Ramesh, analyst]

So is there any additional costs involved, which will impact your margins as you go along in terms of your efforts and sustainability?

[Ravi Chawla, executive]

We do not foresee as of now any such things.

[Operator]

[Operator Instructions] The next question is from the line of [ Nitin ] from PhillipCapital.

[Unknown Analyst]

Sir, my question is related to the acquisition of Tirex. So I just wanted to understand that how does the business of Tirex compare with the business of Indra Renewable and ElectreeFi. If you can help us understand the 3 business models and also the kind of basically similarity of synergy, if there is any significance between 3 businesses? That is the first question. And secondly, if you can just, as a reminder, summarize for us that what we have sort of paid for Indra Renewable and ElectreeFi in the past? And what the revenues are on an annual basis and similarly for Tirex as well?

[Ravi Chawla, executive]

Yes. So Nitin, I'll try to explain. So Indra Renewable is making car charges, which are slow charges. They make smart chargers. They make in Europe, they are supplying. And they are into slow car charges. And definitely, they are doing well. They are -- we've also tested the charger in India to see how we can bring it in. So that's the slow car chargers in which we are working on based on their inputs.

ElectreeFi, as you know, is a Software as a Service company. They connect -- they make software for all kinds of connectivities on EVs. They work with car OEMs, with charging infrastructure. So they are a Software as a Service company, all kinds of software involved in EV, they are progressing on that. And Tirex is a DC charger manufacturer, which is now specialized in DC chargers will go in too fast charging. So these are 3 of the businesses which are there.

I think Manish explained on the segments for Tirex, et cetera. So these are the 3, and there is interconnectivity. There's also Gulf having it there, our brand distribution and our customer bases. So we always want to bring this play together. But importantly, what their strengths are we want to develop and grow with that and those segments. So work is on there. And I think Manish explained that we have invested 51% in Tirex, which is at INR 103 crores, if I remember the figure.

And in the case of Indra, both our parent company, Gulf Oil International, and we have invested. So Manish can probably share the figures. And we also, I think, consolidated -- we have not consolidated, but we have given some figures on that. And we've also made an investment of 26% stake in ElectreeFi. Manish can probably add if anything that should be added.

[Manish Gangwal, executive]

Yes. So basically, for Indra, we invested roughly around INR 30 crores. And you will recall in December '22, they had raised further rounds, and that's where we had an OCI based on the next round of valuation of around INR 35 crores, INR 37 crores. So that's the investment of around INR 30 crores in Indra on original basis. Another INR 15 crore and odd we invested in ElectreeFi, which is a TechPerspect. The name of the company is TechPerspect with ElectreeFi brand. So in this INR 103 crores. So roughly INR 150 crores so far, we have invested in EV, EV-related areas from India balance sheet. As far as stakes are concerned, I think 51% in Tirex, roughly 7.5% on a diluted basis in Indra technology and 26% in ElectreeFi is our current stake. So that's where we are.

[Unknown Analyst]

Manish, that's very helpful. So in revenue terms, like you mentioned the revenue per Tirex at about INR 13 crores, INR 14 crores that's annually, right? So can we have similar figure for Indra and ElectreeFi as well?

[Manish Gangwal, executive]

So Indra being a minority stake, we will not be able to give you the revenue numbers. We can say that they are doing very well in terms of the U.K. market growth. They have more than 20,000 installations of chargers already across U.K. and Europe market. And ElectreeFi, we consolidate the numbers. So you can -- so INR 5 crores was roughly there last year's gross turnover was last year [ 5-year ] FY '23. And current year 6 months is around INR 2 crores or INR 2.5 crores. So that's where they are. Usually for ElectreeFi, that H2 is better than H1 because of a lot of orders certifying in that period.

[Unknown Analyst]

Understood. That's very helpful. So sir, is it like -- I mean, can we conclude that given that we have now invested in the slow charger business as well as faster charger, and also the sort of software service provider this in a way sort of complete the spectrum of investments in the EV charging technology or we would be looking at more investments going ahead?

[Manish Gangwal, executive]

So as far as the charger manufacturing is concerned, I think we have the full slate now, and we have to start putting our efforts on localizing some of the things and also bringing Indra charges to India for Indian market, which we had earlier spoken about. So these are going to be our efforts. And -- but beyond harges, there are many opportunities in EV, including like battery swapping, et cetera, which we keep evaluating. But if there is something concrete, definitely we will come back and share.

[Operator]

The next question is from the line of Nirav Savai from Abakkus.

[Nirav Savai, analyst]

So just wanted some more understanding on this Tirex Transmission now. We said that we are starting to reach a revenue of almost about INR 500 crores potentially in next 4 to 5 years. So what's the revenue model? And how do we see this scaling up? And what is the government subsidy part in this part of the business?

[Ravi Chawla, executive]

This is an outright sale of chargers. So this is not a CPO sort of a business where it is going to utilization, et cetera. What they do is they supply to these government PSUs or to bus OEMs or to retail and other customers. So they are in to make and sale type of a model. So it's not actually a sort of linked to utilization or anything. So it's a more buy and sell or rather make and sell.

[Nirav Savai, analyst]

Okay. So we are saying we have about 500 charging stations as of now in India. So that's what we have sold it or we operate those charging stations?

[Manish Gangwal, executive]

No, it's all sold. All sold.

[Ravi Chawla, executive]

Tirex makes the charger and sells it and obviously provides some maintenance and all for the quality and all. And this is outright sales. So there is no -- plus the budgets that we are seeing allocated across various -- if we take the petrol stations and, of course, other things are there. So as it develops, obviously, this will help to position products more in the growing segments. And as we mentioned India, and we have also potential overseas once we get the certifications.

[Nirav Savai, analyst]

So it's largely dependent on government plans in terms of expansion of EV and all?

[Ravi Chawla, executive]

It depends on how the infrastructure for charging network is going to develop. There are 4 segments. One is the PSUs, as Manish mentioned, electricity boards, petrol stations, then there is the retail. If you take fast charging that is happening, the buses that are selling in the depots that requires charges. And then you have even infrastructure where you require fast charging, whether it is residential or it is in other locations. So that is the 4 segments clearly identified.

[Manish Gangwal, executive]

And just to give you a further idea, for example, if we take the bus segment, electric bus segment, every 3 to 4 buses will require one such fast charge. If you want -- if they want to operate during a certain number of hours during the day, this is -- and government recently came out with some 15,000 new e-buses to be awarded as a contract through various STUs and all. So the potential is going to be significant in certain categories in terms of demand for such fast charges.

[Nirav Savai, analyst]

Is it currently -- are there competition from India or its charges which are imported to India?

[Ravi Chawla, executive]

No, there are few players in India as well.

[Nirav Savai, analyst]

Okay. So these are all government tenders and we'll doing...

[Ravi Chawla, executive]

Yes, as we said, Tirex is targeting 8% to 10% market share, which we already have in terms of the current business, close to that.

[Manish Gangwal, executive]

Plus also many of the government PSU national oil companies also are trying to put charges at their fuel stations. So government has mandated that also. So in addition to these bulk OEMs, there will be public charging through these fuel stations, et cetera. So there is a lot of activity going around that as well.

[Operator]

As there are no further questions from the participants, I now hand the conference over to the management for the closing comments.

[Ravi Chawla, executive]

Thank you. Well, quarter 2 has been a good quarter for us, and we have grown 2x the industry growth at 6.3%. And also H1, we have seen positive growth well in line with what our plans were. And we've also seen quarter 2 where there's been good stability in cost and pricing. That has also helped. And mix has helped for sequential improvement in gross margins. And definitely, we are working towards a guided brand as we continue to make investments in our brand.

We are confident that we'll continue this market-leading growth and of course, gaining market share with continuous focus on margin management in view of the recent and ongoing I would say a lot of developments, but definitely geopolitical developments. So while we invest in the brand, we want to continue to be in this 12% to 14% margin level. And definitely, the brand investment will help us in our retail segment to grow where we are focusing a lot on our distribution, both in urban and rural, also in the car stops and bike stops, which are garages independent workshops.

OEM, where we have been doing very well. We continue to having a strength and growing with the OEM in various assets as we know there is a lot of vehicle, new vehicles, which go into the warranty period, the extended warranty period. So right across segments. And we are present in a lot of OEMs right across the automotive, whether they are 2-wheeler OEMs, 3-wheeler OEMs, tractor, commercial vehicle, car OEMs.

AdBlue will continue to be an area which is giving us supplementary benefits. And we will focus on continuing our market growth in the stronger product segments that we are there and also where we see potential where we have less than 5% market share like industrial passenger cars.

Also, I would like to add here in the outlook that there are a series of new products, which both deliver value and high quality and moving towards premium products. So both these are there, and we have introduced some of these and some of them are going to be introduced in the quarter that is coming ahead. So the focus is to obviously grow market share with the help of these also. So I think all in all, we are as a team focused on that, and we look forward to having you with us on the next call, and thank you for your support. Good evening.

[Operator]

Thank you very much. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.