Accumulate Gradually

Castrol India Ltd (CIL), a subsidiary of UK-based oil giant BP, is India’s second largest lubricant seller. To CIL goes the credit of transforming a commodity — lubricant — into a branded product. With imaginative advertising and research, it has been able to convince its customers that it has a differentiated product to offer. It currently commands around 20-22 per cent market share in the domestic lubricant market. By virtue of owning 71.3 per cent of Castrol’s outstanding shares, BP has controlling interest in the company. Industry outlook The lubricant industry in India is divided into three major markets: automotive, industrial, and marine and energy applications. The four biggest players — Indian Oil Corporation Ltd (IOCL), CIL, Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) — control 70 per cent market share. Of the three verticals, the automotive segment is the most competitive. Multiple distribution channels and the large variety of automobiles make it a complicated segment to cater to. Branding plays a big role in this segment, which is why CIL is able to command a high margin for its superior products. In 2010, robust automobile sales allowed the lubricant industry to clock 4-5 per cent revenue growth. According to the company’s management, CIL holds approximately 20 per cent market share by volume in the automotive segment. It is expected that auto sales will drive growth in this segment. In the industrial sector, India is expected to complete projects worth Rs 15 lakh crore over the next two years. The power sector will be the largest contributor to capacity addition. This capacity enhancement