Indrajit Bhattacharyya, Chief Financial Officer, Gandhar Oil Refinery (India) Limited

20 Nov 2023 , 11:24 AM

Run us through the business model of the company. 

We are the largest manufacturers of white oils in India and one of the top 5 players globally. We cater to Indian and multinational FMCG and Pharmaceuticals companies. Today, some of our valued customers include Procter & Gamble, Unilever, Marico, Dabur India, Emami. The revenues of our company are divided into three categories, namely, personal care, health care and performance oil (PHPO), Lubricants (industrial & automotive sectors) and Process and insulating oils (PIO). For FY23, share of the PHPO segment in our revenues stood at 55% to our revenues. Lubricants and PIO segments contributed 25% and 10%, respectively. Exports contributed about 53% of our revenues during the year. We have 2 manufacturing facilities located in India and 1 is outside India. Our revenues have seen strong growth. In FY23, our revenue stood at Rs. 4,079 Crore and profit after tax (PAT) was Rs. 213 Crore. We have recorded consistent financial performance with revenue CAGR of more than 40% and EBITDA CAGR of 12%. Our PAT has grown at a CAGR of 15% over FY21-23. Our RoE (32%) and RoCE (41%) are among the highest in the industry. Net debt to EBITDA is as low as 0.39x. Our company has enjoyed strong growth on a consistent basis with a robust financial scorecard.

Who are the listed peers of the company? Why should retail investors consider investing in the IPO?

There is no direct listed peer and we are the market leaders in the white oils segment. Today, we have accredited relationships with our marquee customers Unilever and P&G where there is a huge entry barrier in terms of entering these customers because of the process involved in empaneling these customers. Our focus is on the PHPO business and a significant portion of our revenues come from exports. We would like to specifically focus on exports business. Our strategy is to grow on the PHPO segment. Our company has delivered consistent financial track record for the previous financial years. 

Help us understand factors influential in moving the EBITDA and margins of the company. How are you managing the input cost scenario both from a supply side and also while passing on the pressures to the customers?

For our specialty oil and lubricant products, a major component of our raw material is base oil, which is derived from vacuum gas oil, which is in turn a by-product of crude oil. We source a majority of our base oil from suppliers in South Korea and the Gulf Co-operation Council region, with whom we typically have annual contracts for the supply of certain minimum volumes of such raw materials. We source our remaining base oil and other raw material from Indian oil refining companies.

While we are entitled to receive certain assured volumes of raw materials from our suppliers under our annual contracts, the price of such raw materials is typically linked to Independent Commodity Intelligence Services (ICIS) oil price benchmarks, together with agreed-upon adjustments for market developments. Our pricing terms under our customer contracts are generally revised on a quarterly basis while our supplier pricing terms are revised on a monthly basis.

Part of the IPO proceeds will be used for repayment of debt. What is the debt on the company’s books currently and what will it be post this repayment?

We are planning to repay the term loan in our Dubai subsidiary of about Rs. 22 Crore. After repayment, we will only have working capital debt on our balance sheet.

What is the growth strategy of the company?

Our key strategic priorities are enlisted below.

• Enhanced focus on the consumer and healthcare end-industries
• Continue to increase overseas sales by strategically expanding product offerings
• Strengthen our customer base by growing existing customer business and acquiring new customers
• Strengthen our manufacturing and R&D capabilities

Help us understand the ESG strategy of the company.

We are committed to reduce the carbon footprint of our operations. We have adopted a health and safety policy for our employees at our manufacturing facilities and regularly train our operations and management personnel in safety procedures, including fire safety and first-aid. We also provide safety induction training prior to deployment of personnel at our manufacturing facilities, along with hazard-specific safety training at periodic intervals. Our manufacturing facilities have accident reporting in place. Safety audits are carried out at each manufacturing facility on a regular basis. 

We have installed solar panels with an aggregate capacity of 412 kW at our Taloja Plant and of 300 kW at our Silvassa Plant to provide the facility with an alternative source of electricity. These solar panels are able to generate 56,000 units of power wattage on a monthly basis.

Our Company is also a member of Green Gene Enviro Protection and Infrastructure for the use of an integrated common hazardous waste management facility. We also have a risk management framework and risk management team that implements the processes specified in the framework. We undertake regular inspection of our machineries and also undertake periodic preventive maintenance checks on other equipment in order to ensure they meet safety requirements. Our Silvassa Plant and Taloja Plant have zero liquid discharge facilities.

We undertake our corporate social responsibilities primarily through a member of our Promoter Group which operates as a charitable trust, the Kamlaben Babulal Charity Trust. Through our CSR activities, which are implemented through this trust, we seek to achieve greater social inclusion, and have deployed and supported a host of initiatives in various core areas, such as education, healthcare, eradicating poverty and social welfare.