Rationale

The reaffirmation of the ratings factors in the position of Gulf Oil Lubricants India Limited (GOLIL) as one of the leading players in the lubricant industry, backed by its strong brand presence, a well-entrenched distribution network and a wide product portfolio. The ratings also factor in the company’s comfortable financial profile, characterised by a strong capital structure, the healthy debt protection metrics and return indicators and an adequate liquidity position. The marketing initiatives and stable demand prospects for lubricants in India in the near to medium term are likely to keep the volume growth steady, going forward. In FY2025, the company witnessed steady revenue growth, driven by a mix of growth in sales volume and realisations. The operating profit also increased in FY2025, backed by growth in volumes and higher realisations. The trend has continued in H1 FY2026 with the company witnessing healthy growth in volumes and operating profits. The ratings continue to consider the company’s ability to maintain healthy profitability on the back of timely price revisions to partly mitigate the impact of the base oil price movements. The company also benefits from the operational and strategic advantages of being a part of the Hinduja Group. The ratings are, however, constrained by the exposure of the company’s profitability to the movements in base oil prices. Its profitability is also exposed to forex movements (to the extent of the unhedged exposure). The company’s operations will continue to be exposed to the demand indicators from the automotive sector. The ratings also consider the high level of competitive intensity in the domestic market, which is largely dominated by Government-owned oil marketing companies (OMCs), apart from other established players in the private sector. The increased penetration of electric vehicles (EV) can result in some moderation in demand for lubricants in the long term. However, the EV industry in India is still at a nascent stage. The impact of electrification on the commercial vehicle and tractor industries, where Gulf Oil has an established presence, is likely to be limited. Nevertheless, the company remains focused on enhancing the revenue contribution from other sectors to diversify its revenue mix. ICRA has also taken note of the continued sizeable dividend payouts by the company which moderate the net cash accruals, though this is partly offset by the absence of major capex or other growth plans. The Stable outlook on GOLIL’s long-term rating reflects ICRA’s expectation that the credit profile will continue to be healthy, supported by the company’s leadership position in the lubricant industry, and its strong brand and distribution network.