Industry Structure and Developments
The Indian lubricant market has witnessed a slightly positive growth
during the year 2022-23 albeit on a low base. However, the overall economic activity
remained subdued because of volatile operating environment resulting from various market
uncertainties and inflation. During the past two years, the world economy had bear the
brunt of the Covid-19 pandemic. Nevertheless, post to he second t and third wave of the
pandemic, the market showed signs of recovery and there was a steady expansion in the
manufacturing and services sectors. In spite of several challenges and disruptions, the
lubricant industry has been able to partially revive its momentum. The major factors
driving the growth of the market are the increasing vehicular population along with the
growing industrial sector. Although mineral oils still hold a considerable share among all
the automotive lubricants used in the country, demand for synthetic and semi-synthetic
lubricants is slowly gaining ground. Demand drivers for industrial lubricants are in place
and the same is expected to grow further. New initiatives are also expected to boost the
demand.
The Indian lubricant market continues to remain one of the significant
lubricant markets in the world with potential for volume growth.
The domestic lubricants industry continued to witness stiff competition
among players leading to an overall shift in perception of lubricants market from volume
driven to value driven. Further the advent of various international lubricant players and
new technological advancement in automotive hardware design are leading to dema nd for
more efficient and premium lubricants. Though the consumer automotive lubricant market
continues to remain largely dominated by two-wheeler oils, increase of passenger cars and
on-highway and off-highway fleets is also expected to contribute to the volume growth of
the lubricant industry in the coming future.
Though the economy remained more or less stable during the year, rise
in the input costs continued to depress the returns of the industry. Additionally,
depreciation of Rupee due to increase in rate of interest by Central Banks globally
coupled with FPI withdrawals from domestic markets also had its effect on the trade
dynamics. In spite of these constraints, your Company has been able to register growth in
revenues, due to its holistic approach towards dynamic pricing decisions, strong marketing
network, strategic sourcing, leveraging long-term contracts, value improvement
initiatives, extensive focus on service and quality. Further, the Company is also
leveraging upon capital intensive R&D programmes in view of modernization of vehicles
and increasingly stringent emission norms. With the advent of BS-VI vehicles new emission
standard for all new vehicles has been set and this has led to introduction of various
after treatment devices and catalysts to reduce harmful emission. Your Company with its
well diversified basket of products is expected to perform reliably in the coming years
and exploit envisaged opportunities. Further, acquisition of Veedol International Limited
and
Veedol UK Limited (formerly Price Thomas Holdings Limited) bestowed
competitive edge unfolding promising opportunities globally.
Opportunities and Threats
The lube industry is characterised by brand building, innovation and
premiumisation, which aids market share gains and pricing power. As new products are
launched based on largely homogenous specifications (like viscosity), branding helps to
boost customer preference. With increasing environmental concerns and need forigh quality
lubricants to improve fuel economy, the demand for premium lubricants is gaining momentum.
Further poor air qualitys forcing the Indian government to tighten emission standards and
improve fuel quality. This bodes well for lubricant quality improvement including use of
synthetic lubricants. Also acceleration in industrial activities can be further a notable
driver going forward. The bazaar trade has been the mainstay for the Company during the
last year in terms of margin and volume. Your Company is well positioned through BS-VI
compliant offerings across categories to leverage this opportunity. The Company continued
to focus on agricultural sector with supply of tractor oils and other lubricants as
required in that sector. Further your Company is focusing onthe commercial vehicle segment
with an improved portfolio and sustained brand building efforts. The strategy in the
lubricant industry has now been progressively shifting from sales push to brand pull.
Further your Company will also continue to focus on its bazaar trade which is lucrative in
terms of margin and volume. To cater to industry demand, the Company has a wide range of
excellent products in different segments under its umbrella brand ‘VEEDOL. The
Companys various other sub-brands such as Prima and Take Off have also been able to
create goodwill in the market for their quality. The support extended by an effective and
efficientnetwork of dedicated distributors, dealers and consignment depots across the
country and additionally various Loyalty Programmes with dealers and retailers have
strengthened the marketing and distributing network of the Company. The long-drawn impact
of the Covid-19 pandemic on the industry has created considerable slowdown in the
sustained growth momentum. The overall lubricant market grew during 2022-23 as compared to
earlier years but could not reach the pre-covid levels. Further, with the increasing
spread of new generation engine and constant technology upgradation, the volume growth in
the industry is expected to remain sluggish. An adverse foreign exchange situation and
high inflation could also put pressure on margins. The OEMs which are introducing
lubricants under their own brandname are further impacting the competitive landscape.
Segment-wise Performance
The Company is a single segment company as mentioned in Note 48 of the
Accounts.
Outlook
The Indian automotive industry is about to witness some major changes
which may have long drawn impact on the lubricants market as well. Electrification of
vehicles or electric mobility may result in a gradual paradigm shift in the outlook of
lubricant industry.
However, the industry is envisaged to brace for the change and continue
its grip especially in personal vehicle segment. Based on the current scenario your
Company will continue to focus on its core strategies and line of business besides
leveraging other opportunities to extend the distribution base and network for increasing
its market share. The two-wheeler and passenger car lubricants category is expected to
perform well as rising disposable incomes and soaring population of automobile users will
result in increased spending on lubricants. For commercial vehicle segment growth in
construction and off-highway sectors due to investment in infrastructure is likely to lead
to lubricants demand growth in this category. The industrial sector trended positively and
as activities build further momentum, the demand for industrial lubricants is expected to
grow with optimistic prospects for the long term. Given your Companys holistic
approach towards procurement policies, proactive pricing decisions, customer oriented
outlook and R&D initiatives, it is expected to continue to meet stakeholders
expectation of both short term and long term performance. Your Company is also focusing on
digitization and e-commerce which can prove to be immensely beneficial for your
Companys business with respect to better market coverage and improved customer
service.
Risks and Concerns
Your Company is exposed to usual risk as have emerged with the outbreak
of Covid-19 pandemic which carries an economic uncertainty with it that may have an
adverse impact on the overall performance of the Company for the forthcoming financial
year as well. Other than that, the Company faces usual industry risks, hich inter-alia
includes, market risk, product liability risk, product failure w risk, research and
development risk, technical obsolescence risk, credit risk, inventory risk, manpower risk,
cyber-attack risk, foreign ctuation risk, regulatory and compliance risk and capacit flu
exchange y utilization risk. Save and except the aforesaid the Company does not foresee
any other area of concern.
Further in connection with the above, the Company had undertaken Risk
Assessment of its various functions in connection with Enterprise Risk Management for all
supporting process covering areas like Financial Management, Manufacturing, Information
Technologies, Sales and Marketing, Human Resource and Research and Development for
Lubricants.
Internal Control System
The Company has proper and adequate system of internal control.
Financial Performance
The details of financial performance of the Company are appearing in
the Balance Sheet and the Statement of Profit and Loss Account for the year. During the
year, the Profit before Tax has decreased by 22.23%. This is line with operational
performance.
Human Resources
During the year, employer/employee relationships remained cordial.
There has been no material development in human resource / industrial relations front. As
on 31st March, 2023 the Company had 510 employees, including factory workmen.
COD had been successfully undertaken at Silvassa and Turbhe.
Changes in Key Financial Ratios
The changes in the key financial ratios for the financial year 2022-23
as compared to the immediately previous financial year. Pursuant to Schedule V (B) to the
Securities exchange or India (Listing obligation & discloser requirement regulation,
2015, are as under:
| Sl. No. Particulars |
2022-23 |
2021-22 |
% Variance |
| i Debtors Turnover |
10.37 |
10.09 |
2.73% |
| ii Inventory Turnover |
3.82 |
3.03 |
26.38% |
| iii Debt Service Coverage Ratio |
965.61 |
191.35 |
404.62% |
| iv Current Ratio |
2.93 |
3.18 |
(7.75%) |
| v Debt Equity Ratio |
0.01 |
0.00* |
3954.85% |
| vi OperatingProfit Margin (%) |
7.19 |
11.04 |
(34.87%) |
| vii NetProfit Margin (%) |
5.69 |
8.54 |
(33.42%) |
* the number is less than 0.01
Inventory Turnover Ratio has increased primarily due to increase in
purchases mainly on account of increase in raw material prices and increase in operations.
For the Company, Debt Service Coverage Ratio being more relevant has
been stated in place and stead of Interest Coverage Ratio. Debt Service Coverage Ratio has
increased primarily due to lower payment of Lease Liabilities.
Debt Equity Raio has increased primarily due to increase in borrowings.
Operating Profit Margin and Net Profit Margin have decreased
primarilydue to lower profits mainly attributable to increase in raw material prices.
The Return on Net Worth y. for 20.50%). the The year change2022-23y. is
wasin 15.
|
On behalf of the Board |
| Place: Kolkata |
Sanjoy Bhattacharya |
| Date: 26th May, 2023 |
Chairman |
+91-9892691696
