Castrol India surprised the Street with a strong 21.9% spurt in net profit in the July-September period despite the rupee and oil price volatility during the quarter. However, the company faces challenges with volume and revenue growth remaining stagnant. Operating profit rose 23.4%, thanks to margins widening by a dramatic 3.9 percentage points. The company’s fortunes have traditionally been tied to that of the commercial vehicles segment which, in turn, has been doing poorly because of the economic slump. Nearly 75% of Castrol’s 200-million litre volume is accounted for by commercial vehicles. On the other hand, in the personal mobility segment – two-wheelers and passenger cars – volume is growing at 10%. The wider margin is ascribed to this segment share shifting. “The stagnation in turnover is not abig concern, since it is not due to Castrol losing market share or its customer base,” managing director Ravi Kirpalani told ET. “We are improving our market share in passenger vehicles. Our rural initiative has added 9,000 new customers and 3 million litres of volumes of incremental sales in the last one year.” The company cut costs in areas such as advertising and promotion during the quarter, which also helped expand its margins. Castrol introduced RX Super Max Fuel Saver during the quarter, promoting it as the world’s first diesel engine oil recommended for fuel efficiency by a vehicle maker -- Tata Motors. “This engine oil is designed to increase fuel efficiency of Tata trucks by 1.5%. This means for a truck running 100,000 km per annum, it will save 375 litres of diesel, or 20,000 in running expenses,” Kirpalani said. The market’s reaction to the earnings was muted, given the likelihood of margin pressure on December quarter numbers as rupee and oil price fluctuations in August are likely to have a delayed impact on results.
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