Gulf Oil is creating an ecosystem for electric vehicles: Manish Kumar Gangwalm, CFO

Manish Kumar Gangwal, Chief Financial Officer, Gulf Oil Lubricants India Ltd, talks about the rise in crude oil prices, geopolitical tensions, price rise plans, acquisition of 26% stake in TechPerspect Software and buyback of Rs 85 crore among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: Crude has reached these levels due to geopolitical tensions. What does it mean for you?

A: It is very difficult to predict where the ongoing volatility of crude will stop. But as far as our business is concerned, we use a derivative base oil of crude and there is a time lag of around one to two months in it for any impact to come on the base oil. In this time lag, we will have to see the band where the crude stays. Largely, we have seen that if crude behaves in a band then the base oil also remain in a base. But, something different has happened this time in which the base oil has already taken a preventive run and has progressed a lot. In the last one year, it has more than doubled from its lower levels. In such a situation, I don't think that base oil will be volatile a lot from here. But if the situation remains the same for a longer period and crude will cross a level then maybe it will have an impact but currently, it doesn't seem that it will have a big impact on the base oil as we as players also carry an inventory for the next two to two-and-a-half months.

Q: You do not expect more volatility from here but what is the threshold beyond which there will be discomfort?

A: I would like to provide a background for it, when the base oil was going up in the last one year then it rose by around 130% in a few grades, more than double. However, it has corrected a bit now and reached to 100% increase, so there is a correction of around 20-30% in the last one to one-and-a-half months. But the price increases we took in the market was taken considering that 130% as the benchmark for it. So, as long as, if there is a 10-20% increase in the base oil then the price increases of the past will be enough to take care of the per litre margins. But, if it goes beyond these levels then our industry and we have also taken price increases and through which we can pass on the pressure and we can maintain our long term strategy of margin maintenance. Right now, it is quite difficult to talk about the level where the base oil will impact us. As far as Russia is considered, dependency on base oil is not much globally on Russia and is very less in especially in India. Our 0% import is from Russia if I will talk about the base oil or any other raw material. So, I cannot see any immediate impact of the same on our business.

Q: The board of the company has approved the acquisition of a 26% stake in TechPerspect Software Private Limited. This is a strategy of the company for play in the e-mobility space. Tell us about this acquisition and what is the rationale about it and how big space is EV for you to grow?

A: ElectreeFi is a brand of TechPerspect that is a software as a service (SaaS) provider and offers its software and IoT-based solution for electric vehicle charging and battery swapping. I would like to say that of the 40% electric cars sold in India, ElectreeFi has a contribution in those in some or the other way. They are connected to ElectreeFi. I feel electric vehicles will come in certain segments in India, of course, its time frame will be long but whenever they are here we will use our distribution strength and brand strength along with our OEM relationships in the electric vehicles space. Taking these three factors together, we are trying to build an ecosystem in which we will bring car charges of Indra Charges, a UK-based company where we have invested; we have invested in the software of ElectreeFi, which will help us in creating charging and swapping infrastructure. So, we are building an ecosystem at present, so that whenever a sizeable population of electric vehicles is visible on the street, we can participate in that market of charging, swapping. So, this is a long term prospect and we are building an ecosystem for the same at present.

Q: The Company has announced a buyback of Rs 85 crore. How much cash will be left with the company after buyback and to what extent will promoters participate in this buyback?

A: As of September 30, 2021, the company has had cash of more than Rs 500 crore and the board has announced a buyback of Rs 85 crore. It is a buyback through tender route, which is the most transparent method and will be participated by every shareholder, including the promoters in the percentage of their holding. So, it is a transparent way through which we are returning the cash to the shareholders from the cash that we have in our balance sheet. It is a way through which the board wants to return cash to the shareholders.