HPCL will split out its lubricants division into a distinct entity in order to maximize value

9 Nov 2023 , 10:40 AM

According to news reports, Hindustan Petroleum Corporation (HPCL) intends to split off its lubricants division in FY24 in order to maximize value in a market category where growth has been robust due to robust domestic demand, unaffected by inflationary pressures.

‘Our goal is to divide this business into distinct divisions. On a conference call with analysts following the business’s earnings, Rajneesh Narang, director of finance, stated, ‘We have a number of options that we can pursue. We can list this company, develop an IPO, or bring in a strategic partner.’ He continued, ‘A decision will be made in this fiscal year.’

With more than 350 grades of greases, specialty products, and lubricants, the nearly 50-year-old company is one of the major participants in the domestic market. Earlier this year, state-owned HPCL made the decision to split off the lubricants division.

When questioned why the delay, Narang stated, ‘The formation of a new company for a PSU requires a certain regulatory approval from the government of India.’ ‘We are awaiting the new company’s final approval from the relevant regulatory authorities.’

According to Kline’s Global Lubricants 2022 market analysis report, the Indian lubricants market is anticipated to grow at a compound annual growth rate (CAGR) of 3%. The demand for lubricants is expected to persist despite the emergence of electric vehicles.

The US energy giant Chevron and the oil refining and marketing corporation partnered last month to provide Caltex goods to the Indian market. HPCL is authorized to license, sell, produce, and distribute lubricants bearing the Caltex trademark throughout the nation thanks to a long-term deal with Chevron.

On their website, HP Lubricants states that they hold the largest market share in the industrial oils category.

On November 6, HPCL announced that for the second quarter of FY24, its consolidated net profit was Rs 5,826.96 crore. Due to record-high crude oil prices, HPCL reported a loss the previous year. But with supply constraints and geopolitical tensions driving up crude oil prices since July, profit in Q2 fell short of the prior quarter.

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