GP Petroleums Ltd Management Discussions.

1) Listed Entitys Competitive Position of the Company

GP Petroleums Ltd., India, is an ISO 9001:2008, EMS 14001:2004 & OHSAS 18001 certified company, specializes in formulating, manufacturing and marketing of industrial & automotive lubricants, process oils, transformer oils, greases and other specialties under the brand name of IPOL in India and internationally for more than four decades.

The IPOL brand of GP Petroleums has established itself as one of the well accepted industrial and automotive lubricants in India with a wide network of Distributors and Dealers in the country. The company has well equipped manufacturing facilities, with automated filling & packaging stations. GP has invested in high precision quality-control and product development labs to meet the growing needs of premium lubricants.

GP Petroleums plants in India has an annual production capacity of 80,000 KL. We have in-house Base Oil Storage facility of 15,000 KL is one of the largest in the Indian industry, which ensures consistency of quality and supply security.

The company has upgraded and refurbished the plant and lab to meet its ambitious growth plans and to meet global standards and OEM expectations

IPOL has one of the widest ranges of products carefully designed to suit various applications and deliver high performances. These are available in a variety of pack sizes as per market needs. The products have several latest national and international performance specifications and approvals to their credit such as API, JASO, ACEA etc. other than OEM credentials.

To increase the contribution of auto division and significantly increase its presence in the premium Automotive market, the company has formed a strategic tie-up with Spanish oil major Repsol, to exclusively manufacture and market Repsol branded, premium quality lubricants across India.

Headquartered in Madrid, Repsol is a global and integrated company, present along the entire value chain. With 27,000 employees across more than 40 countries, it operates in areas with the most energy potential around the world and has one of the most efficient refining systems in Europe.

Repsol branded products came with added benefits and special features that catered to the newly emerging premium and top-end segment across markets in the country.

REPSOL lubricants are developed in the state of the art global R&D center in Spain, which caters to the newly emerging premium and top end segments. These premium products are produced by GP Petroleums Ltd in its own manufacturing plants Vasai (Mumbai) & Daman, in India, with modern testing facilities, in accordance to the stringent quality standards, certified by Repsol SA, Spain.

GPPL look forward to exciting activity in the Indian Automotive lube space together with Repsol and support the Make in india initiative by manufacturing Repsol lubricants in our plants in India.

2) Industry Structure and developments:

India is amongst top five countries for the demand of the lubricants. The lubricants market is broadly classified as Automotive and Industrial. The Industrial Lubricants consists of General Industrial Lubricants, Metalworking, Industrial Engine oils and Greases. The leading demand is in the Automotive followed by Industrial, Transformer Oils, White Oils and process oils. For any manufacturing concern keeping its equipment running efficiently is key to its profitability and industrial lubricants play key role in providing this. The increased activity in the personal mobility vehicles with some recovery in the commercial vehicle market are the drivers for the demand of Industrial as well as Automotive Lubricants. The Industrial Lubricants market is very competitive and cost driven. There are some limited niche segments in the Metal working market where premium pricing, based on the performance and OEM approvals, can be obtained.

3) Opportunities and threats:

Specialized Industrials Oils like Cutting Oils, Chain Oils, Cleaners, Rust Preventives and heat treatment oils are the segments which can provide better pricing. With the focus on infrastructure development, mining and road construction industry are reviving. The launch of initiatives like Make in India and Smart Cities will strengthen the Industrial activity in turn spur higher lubricant demand. The Industrial segment is highly competitive and price sensitive. Tender based procurement in areas such as coal, Railways and Defence have sizeable share of business but since the finalization is based on lowest bidder the margins are very thin and the business is generally bagged by large companies with base oil production facilities.

4) Segment Wise performance:

The growth in automotive sector with record sale of the vehicles has increased the manufacturing activity in the automotive manufacturing and ancillary industries. The resultant effect is the increase in demand of the Metal Working Fluids, Hydraulic Fluids, Gear Oils and Industrial Greases. These segment performed much better than the previous year. Similarly with good monsoon in the previous year and forecast for this year, the manufacturing in the Tractor Segment has been steadily increasing with growth in demand for Transmission Fluids, Engine Oils and Greases. Overall there has been increase in the business of the Metal Working Fluids.

5) Risk and concerns:

The Global Crude prices has increased since last year along with the depreciation of the Indian Rupee against the US Dollar. Due to this the cost of raw materials like base oil and additives has increased significantly. As the industrial lubricants market is highly price sensitive and competitive this immediately impacts the bottom line as the margins are compressed.

6) Outlook

We expect the overall lubricant industry to surmount the average yearly growth and set new records. It is expected that growth in automobile industry will continue and the demand in the medium term from each vehicle segment is catching up with global trends. Additionally, fuel economy is expected to be a key driver in determining future lubricant specifications. Indias economy, currently is placed at an interesting cusp of rising disposable income, the Governments thrust on infrastructure development, implementation of GST, declining interest rates & inflation, strong rural demand, etc. woulddemand boost overall lubricant demand

IIn the Today, businesses are operating in a dynamic environment. It is important for business houses to build a mechanism for proactively assessing and mitigating risk involving change in government policies, legislation, information technology, customer preferences, competitors, initiatives, financial markets.

7) Internal Financial Control and Their Adequacy

The Companys internal Control System has been designed to provide for accurate recording of transactions with internal checks and prompt reporting, adherence to applicable Accounting Standards and Policies, compliance with applicable statutes, policies and procedures, guidelines, and authorisations. Consequent to the implementation of Companies Act 2013 (the Act), the Company has complied with the specific requirements in terms of Section 134 (5)(e) of the Act calling for the establishment and implementation of Internal Financial Control Framework that supports compliance with requirements of the Act in relation to Directors Responsibility Statement.

8) Discussion on financial performance with respect to operational performance

Operational Highlights

Your Company is committed to increase the footprints in India and bring the advanced and best technological products to the end customers and accordingly:

• The Overall Manufacturing Sales Volume of 2017-18 increased by 6 % as compared to 2016-17 from 64,294 KL to 68,020 KL.

• There was a Plant up-gradation activity which was done in the year 2017-18 with the Laboratory being upgraded. Tank Farm modification completed.

• 24 new products were developed by the R& D Team and in the pipeline for introduction to market.

Financial Performance

• Revenue during the year 2017-18 increased by 7.3% to Rs. 57,342 Lakhs as against Rs. 53,438 Lakhs over the previous financial year.

• Net Profit during the year 2017-18 increased by 6.6% as compared to net profit in the year 2016 -17 post exclusion of amount of profit on sale of assets net of tax ofRs. 447.27 Lakhs.

• Dividend of Rs. 0.75 per equity share recommended for the year 2017- 18.

Finance Costs:

• During the year 2017-18 finance cost decreased byRs. 153 Lakhs (FY 2017-18 : Rs. 653 Lakhs vs FY 2016-17 : Rs. 806 Lakhs) which is a combination of better fund management/ limit utilization and reduced forex exposure.

9) Material developments in Human Resources / Industrial Relations front, including number of people employed

Your Company adopts human capital strategy to develop and maintain required manpower.

Salient features of ‘human capital strategy are

• Attract Talent

• In still Leadership

• Develop a Culture

• Drive the Organisation Ahead

The Company places highest importance in implementation of contemporary HR practices to enhance the overall employee effectiveness. With a strong governance mechanism at its core, the code of conduct has been communicated to and implemented for all the employees. Being an equal opportunity employer, your company strives to implement the programs to promote various initiatives including awareness of ‘The Prevention of Sexual Harassment at Work Place Policy. There has been no complaint of the sexual harassment at workplace since its inception. It takes pride to have complied with all the legal requirements. The continuous process of audits & gap analysis helps the Company to have better compliance.

The Company has maintained cordial industrial relationship and solved maximum labour issues amicably. Your Company also provided opportunity to semi-skilled workers to make them skilled workers.

The Company has 261 permanent employees.