August 2, 2021

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GP Petroleum defers plans to build a new plant in Gujarat

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Prashanth Achar, CEO, GP Petroleums Limited

New Delhi: GP Petroleums Ltd, owner of engine oil brands Ipol and Repsol, has deferred the capacity expansion planned by adding a new plant in Gujarat due to volatile market conditions and falling demand, Prashanth Achar, CEO, GP Petroleums Limited told ETAuto in an exclusive interview.

“Last year, we announced the setting up of a new plant. But in the latest board meeting held 15 days ago we decided to delay this because the present conditions don’t call for it,” Achar said.

The company acquired the land 10-15 years ago in the outskirts of Daman and created a blueprint for the plant and it would have been built by now if the situation was normal. The company was expecting to invest about INR 100 crore in this project. Currently, the company’s capacity utilization stands at 70% in a single shift.

“We decided to delay, but one fine day will require it, but for the next foreseeable feature, we can manage with our existing facility. We are planning to add new larger businesses like transformer oil and white oils. If we want to get into that segment we have to have a new setup and that was the idea. But now we will set our house in order to do that. The existing facilities are more than adequate to support our growth plan for the next five years,” Achar explained.

We are planning to add new larger businesses like transformer oil and white oils. If we want to get into that segment we have to have a new setup and that was the idea~

The company doesn’t want to diversify but focus on expanding in the same engine oil and lubes business for industrial and automotive application. For example, in the case of industry, it will be getting into all newer areas. Right now it is an automotive industry-focused lubricant supplier but now it is getting into plastic injection moulding, sugar mills, and then cement, power industry and all that.

“So, that will keep us busy for the next couple of years and will become the growth engine as well,” he added.

Talking about the previous year’s performance, Achar said that the first half was beneficial for the industry but the second half was a disaster and since then it has not taken a breather. It’s on the run as we speak.

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IPOL Automotive grew by 7 pc, and Repsol almost maintained its share at the same level as in the previous year.

Price of base oil, a primary raw material, has hit the roof, and alongside the steel price also has doubled impacting profitability.

In the Q3 of FY21, the net profit was INR 7.55 crore, which declined by 35% to 4.86 crore in the Q4 of FY21.

The company reported a total income of INR.611.09 crore during the 12 months to March 31, 2021, compared to INR 496.52 crore in the year ended March 31, 2020.

So what’s helping the company assuage the impact? “In fact, possibly we have been agile with some new initiatives that we had rolled out even before the pandemic and they have been helping us. For example, the HR strategies about the Tier 2 and Tier 3 towns,” he said.

The other was the segment like tractor and motorcycle oils where there was the potential to win. The company has clearly demarcated both the products. It claims that Repsol is positioned in the mid-premium and Ipol in the value for money segment.

The company has three verticals: Industrial, rubber process oils, and automotive which is the smallest of them. The B2C market dropped by about 18%. At the same time, IPOL Automotive grew by 7%, and Repsol almost maintained its share at the same level as in the previous year.

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