Castrol India Limited (CASTROLIND) Q4 FY23 Earnings Concall Transcript

Castrol India Limited (NSE:CASTROLIND) Q4 FY23 Earnings Concall dated May. 10, 2023.

Corporate Participants:

Sandeep Sangwan — Managing Director

Deepesh Baxi — Chief Financial Officer and Wholetime Director

Analysts:

Bhagyesh Kagalkar — HDFC Mutual Fund — Analyst

Nalin Shah — NVS Brokerage — Analyst

Pranay Gandhi — Green Portfolio — Analyst

Mohit Mehra — Guardian Capital — Analyst

Abhijeet Bora — Sharekhan by BNP Paribas — Analyst

Pratik Banthia — Girik Capital — Analyst

Bharat Sheth — Quest Investment Advisor — Analyst

Shalabh Agarwal — Snowball Capital Investment Advisors — Analyst

Harsh Maru — Emkay Global Financial Services — Analyst

Presentation:

Operator

Ladies and gentlemen, welcome to our Analyst Call for Castrol India Limited 1Q 2023 Financial Results. [Operator Instructions] We have with us Mr. Sandeep Sangwan, Managing Director, Castrol India Limited; and Mr. Deepesh Baxi, CFO and Whole Time Director of Castrol India Limited.

I now hand over the conference to Mr. Sangwan. Thank you, and over to you, sir.

Sandeep Sangwan — Managing Director

Thank you very much. Good afternoon, everyone, and thank you for attending Castrol India’s first quarter 2023 earnings call. I hope you and your family are doing well. And just to remind you that we have our financial year from Jan to December and that’s why we call this our quarter one earnings call. And I’m very pleased to share that Castrol India Limited delivered resilient performance in the first quarter of 2023 and through our kind of session today, we’ll talk more in detail.

We built good growth momentum from fourth quarter 2022 and registered quarter-on-quarter growth in first quarter of 2202 — 2023. Our performance versus the first quarter of last year was impacted due to inflationary pressures, high input costs, and fluctuating forex. But I’m very positive as we go through the rest of the year and with the momentum that we see.

And to begin, I’ll invite Deepesh, our CFO, to talk you through our first quarter numbers and our financial performance in detail.

Deepesh Baxi — Chief Financial Officer and Wholetime Director

Thanks Sandeep and good afternoon to all of you. We announced our first quarter 2023 results last evening, and here are some of the key financial highlights. In 1Q 2023, we reported a strong financial performance. Our revenue from operations was INR1,294 crores, and this is up by 10% compared to INR1,176 crores in 4Q of 2022. That number is also when we compare to 1Q 2022, last year’s first quarter is up by 5% from INR1,236 crores. Profit before tax was INR288 crores, which is higher by 16% compared to the sequential quarter of 4Q 2022 and lower by 7%, INR311 crores versus 1Q 2022. Overall, we remain confident of our strong business fundamentals and long-term profitable growth in India.

I would now like to hand over back to Sandeep.

Sandeep Sangwan — Managing Director

Yes. Thanks, Deepesh. Apart from the financial performance, I’d like to draw your attention to some key business developments at Castrol India. First, we expanded our presence in service and maintenance space, increasing our Castrol Auto Service outlets to over 300 across about 100 cities in India. And we have 5,000 Castrol Bike Points across India. We will continue to drive consistent growth in the subsequent quarters and enhance our industry partnerships to ramp up our service and maintenance offerings and new strategic segments such as automotive after care.

On 28th of February, Castrol also unveiled its refreshed brand identity globally including an updated look and feel. The brand refresh with this Onward, Upward, and Forward is aimed at better reflecting its unique positioning in the market and the opportunities it sees in meeting the changing needs of customers. Castrol India also collaborated with JioCinema for streaming the 2023 Tata Indian Premier IPL as an associate sponsor. The partnership aimed to engage with Cricket fans across India and leverage the platform to showcase Castrol’s refreshed brand identity. With this association, Castrol Super Mechanic contest won the best branded content category award at the prestigious Asia Pacific Festival of Media Awards. Please note, Castrol India Limited will hold its 45th Annual General Meeting for shareholders on 11th May of 2023.

We’ve also taken actions on sustainability especially around plastic waste reduction. So for example, by March of this year, we’ve collected 100% of our plastic that goes into the market which is ahead of the regulatory requirements, and we’re very seriously looking at other opportunities to reduce plastic in our packaging using renewable energy in our plants. So a lot of initiatives around sustainability as well to make sure that we stake in line with our overall objective of reducing waste, improving energy efficiency and reducing plus.

With that, I’d like to thank you for your attention and would like to open the session for your questions, feedback and views, please. Faizaan [Phonetic] over to you for — we can start the questions.

Questions and Answers:

Operator

Thank you, Mr. Sangwan and Mr. Baxi. We will now begin the question. [Operator Instructions] The first question is from the line of Bhagyesh Kagalkar from HDFC Mutual Fund. Please go ahead.

Bhagyesh Kagalkar — HDFC Mutual Fund — Analyst

Hi, sir. This Bhagyesh. Sir, a couple of queries on the new initiative area. First of all, the annual report have come out. And the good thing is there is substantial backing crores from BP Group, which is also far ahead in the charging or even another areas, and we should benefit from this thing logically. But the whole issue is a company needs to layer road map for the next three to five years, basically. — there are the revenue potential as well as the profitability potential for the future areas. I’ll just gave an example of charging. Most of the charging facilities in India are very underutilized hardly 3% in the EV space. So one needs to be slightly cautious and yet layer road map for the future, for next three to five years?

Sandeep Sangwan — Managing Director

So Bhagyesh, thanks. Excellent question, very insightful. We have a very clear road map for the next three to five years. And the first point I’d like to say is our core business, which is built around lubricants will continue to stay very robust for the next three to five years. We’re beginning — we’re seeing more than 20% growth in the car strategy given the low penetration in India of passenger cars. I’m talking interconversion into nice cars here.

Two-wheelers still continue to grow, although the electrification will come much faster in two-wheelers and commercial vehicle and agricultural sector continue to grow. So the underlying lubricants business and related flows, it will continue to stay very robust for the next — in fact, going well into the 2040, okay? So that’s one thing I have to say. And Castrol always tries to grow ahead — slightly ahead of the market in this space. That’s point number one.

The second is, as I said, the second building block is our service and maintenance for the workshop business, okay, where we’re making headway room in growth with our own network, which is 300-plus from of our Castrol Auto Service registered these cars and 5,000 bike points of giving a trusted quality service to consumers, okay? Last year, we had announced our investment in key mobility solutions, which is a unique digital business model, again playing in the aftermarket. So that’s the second leg of our growth.

And the third leg of our growth is, we are entering into adjacencies. For example, we’ve — over the last two years we’ve piloted Auto Care range, and this year, within this quarter, in fact, we’ll be making that as a national launch going forward. So I think our next three to five years road map as you’re requesting, is very clear in terms of where we want to grow and how we want to grow.

EV charging, you rightly said, it’s still a very massive area. And BP’s partner company, which is GOBP, is looking at that opportunity. And if we can add any value, we will add value to that with our large network of 100,000 outlets that we have across the country. So that’s the broad shape of where we are headed.

Bhagyesh Kagalkar — HDFC Mutual Fund — Analyst

Okay. Thanks for the answer and all the best.

Sandeep Sangwan — Managing Director

Thanks.

Deepesh Baxi — Chief Financial Officer and Wholetime Director

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Nalin Shah from NVS Brokerage. Please go ahead.

Nalin Shah — NVS Brokerage — Analyst

Thank you for the opportunity. At the outlets, let me just say this kind of confidence Sir, you have expressed in the future of Castrol is very, very, I think, welcome, and we really feel very confident about the performance of the company. My question is also more or less similar that where do we see the company from here on for the next three to five years in terms of whatever we can say, top line or like kind of a growth, which is expected in terms of volume, in terms of value, etc. And where do we see the company from here in terms of this kind of growth, which you out to five years, because we need to have some kind of an understanding in terms of the investment point of view.

Sandeep Sangwan — Managing Director

Okay. So thank you, Mr. Shah for your question. I think at the outset, let me say, we typically don’t give any guidance in terms of growth numbers and etc., but I’ll give you a broad shape, and then I’ll request Deepesh to join it, okay?

Deepesh Baxi — Chief Financial Officer and Wholetime Director

Yes.

Sandeep Sangwan — Managing Director

On category, if you look at the total lubricants category, that growth is about 3% to 5%, and that’s broad range. And we don’t see that changing significantly in the next five years or even longer at least, okay? [Indecipherable] to grow our volumes and top line ahead of the category by a few points, okay?

Nalin Shah — NVS Brokerage — Analyst

Right.

Sandeep Sangwan — Managing Director

The second is — we will continue investing in our brand, okay? One of the strengths is our brand because we are a premium brand, and we will continue to be a premium brand. So investments behind our brands, and you would have seen in the numbers, will continue at a level that we’ve historically invested in, okay? And we have capital investments that also go to support some of our initiatives, whether it is service and maintenance, independent workshops, etc.

And then through cost efficiencies, if we can add another percentage or so, if you look at our — this quarter’s EBITDA, which is, again, back to 23%, which was 21% in quarter four last year. And I think we’ve said we’ll operate in a band of 23% to 26%. So EBITDA margins will also continue to be operating in that frame. So hopefully, that gives you a view of how we’re looking at the next three to five years.

Nalin Shah — NVS Brokerage — Analyst

Yes, perfectly okay. But since the new initiatives are there, can we have some guidance as you mentioned about the 3% to 5% growth in the lubricant business. So similarly, just can we have some idea about what kind of considering the other new initiatives what kind of top line growth we can sort of projects?

Sandeep Sangwan — Managing Director

So I think on the new initiatives, to be honest, Mr. Shah, it’s still early days, okay? We have certain projections that I don’t want to share on a call. But hopefully, once we have six to 12 months of kind of performance under our belt, we’ll be able to have a better view on how much that can add to the top line. But as you said, we are committed to kind of Auto Care category, okay, as one area. And the second is expanding our presence in independent workshops to begin with.

Operator

Thank you. Mr. Shah, may we request that you return to the question queue, for follow-up questions. Thank you. We’ll take the next question from the line of Pranay Gandhi from Green Portfolio. Please go ahead.

Pranay Gandhi — Green Portfolio — Analyst

Hi, sir. Good afternoon. Yes, I have a question regarding your after sales service that we got into post that commendably initiated taking but I would like to know what proportion of our sales come through these tie up in comparison to our conventional business?

Sandeep Sangwan — Managing Director

So Pranay, thanks for asking that question. I think what I would say is almost about 80% of our revenue comes from automotive okay, state and primarily, we are an aftermarket company. Our OEM business component is smaller compared to the overall business. And we play in the aftermarket because that’s the strength of the brand where we can get the premiums and the pricing that we can demand.

Now from the tie-ups, I think key mobility is just getting into execution phase, okay? But they have a good coverage of garages, retailers, and I think we’ll start seeing the momentum on that area.

Independent workshops is another big component in our mobility space, okay, which accounts for a good percentage of our sales in two-wheelers and four-wheelers category. So overall, I would say just keep the frame of automotive, about 80% of our business and primarily coming from the aftermarket. That’s how we kind of — more than that, I don’t want to be very granular and Deepesh, if you want to have anything, please comment, sir.

Pranay Gandhi — Green Portfolio — Analyst

Thank you, for answering that. My only concern here is that since we are tying up with independent workshops and training them, so does it add on to the margin or probably our sales volume exponentially? We are still somewhat in a similar range as we were previously then taking these initiatives?

Sandeep Sangwan — Managing Director

No. So I think possibly will be in the similar range plus/minus. But I think what is happening is as vehicles get more sophisticated, okay? And the engines get more sophisticated, both in four-wheelers and two-wheelers, that gives us an opportunity to up trade the portfolio, okay? So from viscosities like 20W,10W, the market is moving to more 5W and 0W, okay, which is better products, thinner oils and where Castrol has a good advantage in terms of technology because we can leverage our European R&D centers. So, there will be an upgrading opportunity as the category shapes. But overall, the trends would be pretty similar because workshops, the only shift we are seeing is the demand in passenger cars seems to be shifting from retail to workshops now. I think that’s one trend that we are observing.

Pranay Gandhi — Green Portfolio — Analyst

Okay. Thank you, sir. And what about the margins? Do we command higher margins with our own tie-ups. For example, Ki Mobility as well, since we would have access to their spare parts, which we could supply to our own tie-ups, workshops. Apart from that, even the lubricants, do we earn a higher margin in our own workshop or the workshop with which we have tie-up in comparison to the market in general?

Sandeep Sangwan — Managing Director

So Pranay, our margins are pretty similar, whether we work with partners such as Ki Mobility or whether we work in our workshops. The advantage we get with partners such as Ki Mobility is they operate under the brand of myTVS, and they are a much more digitally-focused business. So, we get synergies on a brand level. Plus, we get additional access opportunity for incremental volume and incremental business. But the margin structures are pretty similar, and we want to protect our margins, whether we work with partners or whether we work in our own workshops.

Operator

Thank you. Mr. Gandhi may we request that you return to the question queue for follow-up questions, as there are several participants waiting for the attempt. Thank you. We’ll take the next question from the line of Mohit Mehra from Guardian Capital. Please go ahead.

Mohit Mehra — Guardian Capital — Analyst

Sir, first one is a bookkeeping question.

Operator

Mr. Mehra, sorry to interrupt you. The audio is unclear from your line. Please use the handset mode.

Mohit Mehra — Guardian Capital — Analyst

Can you hear me now?

Sandeep Sangwan — Managing Director

Yes, we can.

Mohit Mehra — Guardian Capital — Analyst

Okay. So the first question is a bookkeeping question. What were the volumes during the quarter?

Sandeep Sangwan — Managing Director

Sorry, we couldn’t hear you. What volumes?

Mohit Mehra — Guardian Capital — Analyst

What is the volume number?

Sandeep Sangwan — Managing Director

Okay. Sorry. I thought that was a following question. Volume was about 55 million liters.

Mohit Mehra — Guardian Capital — Analyst

Okay. And secondly, how much inventory of logs and additives do you maintain because if I look on a Y-o-Y basis, crude price has actually declined. And even in your opening comments as well as in the press release had said that because of inflationary pressures, the margin has declined on a year-on-year basis.

Sandeep Sangwan — Managing Director

Yeah. So let me just explain this in a little bit more detail. So direct linkage with crude oil is probably not a fair assumption reason being that crude oil to base oil and then from base oil to additives when the manufacturers do, there is a lag, right? And then from the time base oil comes into our tanks to the time it gets manufactured also and then sits in the inventory, there is a lag. But having said that, typically, we would have inventory which range between about 25 days to 40 days, depending on the raw material or finished goods. That’s one.

Second is one ability that we have, which we do pretty well is managing this working capital cycle and doing shifts local — between local-buy and international-buy to both leverage the costs as well as manage inventory.

So to give you an example, currently, while crude oil is going down and the base oil is also softening, our inventory at March is on the higher side from the range that I’ve given, to make sure, that we — sorry, it’s on a lower side, because we have made sure that when we buy, we do a bit of a buy later on so that the inventory is lower, and therefore, we don’t get blocked into the working capital. So that’s the process we are on. Coming back to your question directly, it’s in the range of 40 to 45 days.

Mohit Mehra — Guardian Capital — Analyst

Got it. And there is no inventory revaluation that happens, right? So everything is recorded on a price paid, right? So because of once see for instance, they have inventory revaluation that caused a lot of fluctuation in earnings?

Sandeep Sangwan — Managing Director

No, no. We don’t.

Mohit Mehra — Guardian Capital — Analyst

Thanks.

Sandeep Sangwan — Managing Director

Our accounting system — I mean, if you look at our policy in the accounts, it is a weighted average cost, — so I don’t know if you’re asking, whether there is a mark-to-market No, we don’t have no to market.

Mohit Mehra — Guardian Capital — Analyst

Okay. Yeah. That’s all I had. Thank you, sir.

Sandeep Sangwan — Managing Director

Okay. Thank you.

Operator

Thank you. The next question is from the line of Abhijeet Bora from Sharekhan by BNP Paribas. Please go ahead.

Abhijeet Bora — Sharekhan by BNP Paribas — Analyst

Sir, can you give the base oil prices currently and like what was in the previous quarter?

Sandeep Sangwan — Managing Director

Yeah, I think that the base oil range was about INR1,000 to 1,100 in the previous quarter. And towards the end of the quarter, it went towards 1,000, and I’m giving you the external benchmarking that is there an available. And in this quarter, it’s gone down by about $100.

Abhijeet Bora — Sharekhan by BNP Paribas — Analyst

Okay. So it is close to around INR900 currently?

Sandeep Sangwan — Managing Director

Around INR900, INR950, yeah.

Abhijeet Bora — Sharekhan by BNP Paribas — Analyst

Okay. And when we expect this benefit to flow in to our numbers given the like inventory buildup we have?

Sandeep Sangwan — Managing Director

So the way we look at the benefit coming through is, it’s a combination of benefit coming through to us from a P&L perspective or — can we pass on some of that benefit to consumers and customers, because we have a pricing strategy, we have a framework that we operate in. So it’s a combination of kind of that benefit being passed through to the market, but also kind of helping our P&L. That’s how we kind of manage the fluctuations in the price.

Abhijeet Bora — Sharekhan by BNP Paribas — Analyst

Okay. Okay. Thank you, sir. That’s all from my side.

Sandeep Sangwan — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Pratik Banthia from Girik Capital. Please go ahead.

Pratik Banthia — Girik Capital — Analyst

Hello?

Sandeep Sangwan — Managing Director

Yes, yes, Pratik.

Operator

The line for the current participant has got disconnected. We’ll move on to the next question from the line of Bharat Sheth from Quest Investment Advisor. Please go ahead.

Bharat Sheth — Quest Investment Advisor — Analyst

Hi Sir. Thanks for the opportunity. Sir if we bifurcate a ballpark figure that, how much of our current I mean sales is generated through the synthetic oil where these base oil has a minimal use whereas — and how much is from the product which are purely a base oil base?

Sandeep Sangwan — Managing Director

So first of all, let me kind of just correct one statement. Synthetics also use base oil, but they use a higher quality base oil, okay? There are different grades of base oils. So synthetic products also use a higher quality base oil first of all. So it’s not that they don’t use any base oil.

Bharat Sheth — Quest Investment Advisor — Analyst

But is it fair understanding that content is comparatively lower?

Sandeep Sangwan — Managing Director

Not really. Okay. I don’t want to get into specific technology, but they also use similar level of content, but over much higher quality versus non-synthetic or mono-grade products. Yes. And if you look at about 10% to 11% of our sales comes from synthetic products.

Bharat Sheth — Quest Investment Advisor — Analyst

So how are we seeing the traction of that business? Because that’s having a long drain?

Sandeep Sangwan — Managing Director

Yes. So Long drain definitely kind of impacts the frequency of oil changes, but that gets compensated through better quality of products where we can charge a treatment. So it almost kind of plays out. And that’s why the category itself continues to grow at about between 3% to 5% on a per annum basis.

Bharat Sheth — Quest Investment Advisor — Analyst

And last question, sir, our base oil how is the oil ability domestic vis-a-vis global because what we understand our Indian refiners largely are remaining away from, I mean, producing base oil — so if you can give some industry perspective on that?

Sandeep Sangwan — Managing Director

Yes, sure. So I think if I give you the present scenario, I don’t think there is a problem frankly, on the availability locally or internationally. And that obviously is translating into the softening of the base oil. I think what we do is while we have — which is an advantage to us, while we have global contracts, right, negotiated globally, we do get price advantage. And the certain component of our purchases is true global and therefore, imports.

Of course, we get exposed to some ForEx risk. But the trade-off is pretty good in that sense. And then we — as I was mentioning earlier, we used tactically to buy locally in terms of making sure, depending on the price of these are going up or down to manage our inventory and work that through. In case there is a supply constraint, then also, we can — we have that lever available to import versus domestic bank. But if I were to generalize the response, the availability is not a problem right now.

Bharat Sheth — Quest Investment Advisor — Analyst

Clear. Air. And also, this decline is bulk shipping rate has helped us in any way reducing our cost?

Sandeep Sangwan — Managing Director

Let me understand your question. Your question is…

Bharat Sheth — Quest Investment Advisor — Analyst

During post-COVID immediately, the freight rate has gone up. Of course, largely, it was container, but — but it has also moved up significantly than what was the remaining average?

Sandeep Sangwan — Managing Director

Yes. So look there is softening on that as well. So there is benefit we can see there as well. That’s what you’re asking.

Bharat Sheth — Quest Investment Advisor — Analyst

Yes. Thank you very much, sir, and all the best.

Sandeep Sangwan — Managing Director

Thank you very much.

Operator

The next question is from the line of Shalabh Agarwal from Snowball Capital Investment Advisors. Please go ahead. Mr. Agarwal, your line is in talk mode,

Shalabh Agarwal — Snowball Capital Investment Advisors — Analyst

Hello, Am I audible?

Sandeep Sangwan — Managing Director

Yes. Yes. We can hear you sir?

Shalabh Agarwal — Snowball Capital Investment Advisors — Analyst

Good afternoon, sir. And thank you for giving this opportunity. Sir, the first question is on the overall volume growth that we registered for the last year. I think it was very flattish from the previous year. See if you can give us some understanding of how the market moved last calendar year and how we performed across different categories where we were ahead, if in personal mobility, we were ahead, if you can give some color around that?

Sandeep Sangwan — Managing Director

Yes. So, I think you’re right. The last year volume was flattish. And I think last year was a story of two halves. We had very good volume momentum in the first quarter and then because of the inflationary pressures, kind of it started softening a bit. And second half, from a volume perspective was soft, whereas because of pricing, the turnover was pretty fine. Now in terms of share position, I wouldn’t like to kind of give specific numbers, but we’ve grown our share over the last few months in passenger car.

I think the shares have been a bit soft on two-wheelers, okay. And we more or less held our shares in commercial vehicles and in agricultural sector. And I think looking forward to this year, we see the category still at about 3% to 5% growth rate, okay. And I shared some numbers earlier in terms of the spaces might be slightly different. So, that’s the broad kind of a position where we are.

Shalabh Agarwal — Snowball Capital Investment Advisors — Analyst

But sir, would it be correct to say that probably personal mobility, which is both cars and two-wheelers grew in high single digits or close to double digits for us last calendar year in volume?

Sandeep Sangwan — Managing Director

Yes. You’re right. Passenger cars grew in high double digits — in mid to high double digits. I think two-wheelers was high single digits, okay, that’s what. And then we had some pressures on commercial vehicles and agricultural sector second half, okay? And industrial volumes were also a bit kind of softer.

Shalabh Agarwal — Snowball Capital Investment Advisors — Analyst

Okay. That is helpful, sir. Sir, second question is because there have been repeated concerns given the uptick in the EV space in India, I would like to ask, in case you can share some insights from your Chinese market given Castrol is also a big player over there, and the EV penetration is much higher, both in two-wheelers and four-wheelers? How is the Indian oil volume growth been in China, given Castrol is a much bigger player? If you can share some insights, that will be helpful.

Sandeep Sangwan — Managing Director

Yes. So I think, first of all, we are very active in the electrification of EV fluids, both globally and in China. And almost 50% of the global OEMs use Castrol EV fluids in one way or the other. And in India also, we supply to two of the largest EV players in the passenger car market, which is Tata and MG Motor and we have supply positions with them.

The second is, I think in India, the electrification is not going to be as fast as in China. We expect the pace of electrification, it will happen in India, but I think the lubricants market will continue growing well into the 2040s, where in China, the pace of electrification is much faster.

And I think what our learning has been in China that we engage with the OEMs early in the process in terms of making sure that we are also helping them with the development of EV fluids and their vehicles. So for example, we work with many of the Chinese OEMs like BYD, Shanghai Automotive, and we work with them on EV side as well. So that’s the broad learning. I think China, the two-wheeler market electrified many, many years ago, okay? So two-wheeler comparison is not relevant as far as China is concerned because there, it was more like more kind of users of two-wheelers rather than motorcycles or scooters as we see in India.

Operator

Mr. Agarwal, may we request that you return to the question you follow questions. Ladies and gentlemen, this is Brent you notice that the call will conclude in the next 15 minutes. Thank you. The next question is from the line of Pratik Banthia from Girik Capital. Please go ahead.

Pratik Banthia — Girik Capital — Analyst

Hello.

Sandeep Sangwan — Managing Director

Yes, Mr. Banthia.

Pratik Banthia — Girik Capital — Analyst

Sir, my question is on the service business, which we are planning to expand. Sir, how do you see this as an opportunity given there are not many organized service centers and given the cash flow with brand name, how do you plan to leverage this given there’s a lot of money in this business. So what is the way forward for us?

Sandeep Sangwan — Managing Director

So I think the way found for us is Mr. Banthia, first of all, is to create a network where consumers or customers can get consistent quality service because one of the issues we have — consumers have is they don’t trust the independent auto aftermarket in terms of getting a reliable service. And having that network helps us, first of all, making sure that the consumers are getting in genuine products, genuine Castrol lubricants for their engines with the right for their vehicles.

The second is we train these workshops. We have — we certify them through standard operating procedures. We have a tie-up with the certification agency. So right now, the intent is to create that ecosystem in India, as you rightly said, with myTV app and Castrol, possibly, we will be able to create one of the largest aftermarket ecosystems around service and maintenance.

Pratik Banthia — Girik Capital — Analyst

Got it, sir. Yes. So this will be kind of the customers will be coming to Castrol service outlets after that, their three-year warranty is over, so here, we would also need parts, auto parts, there’s a replacement or something like that. So then how would — how would we take care of the availability of parts. We’ll be doing some sort of tie-up with the OEMs for the genuine parts? Or how would that work?

Sandeep Sangwan — Managing Director

So excellent question. And I think that was one of the key reasons why we made the investment in key mobility solutions, which is part of the TVS Group, because key mobility has a legacy or existing very strong spare part business. And right now, we are integrating that spare parts availability or respecting competition law. We make — we’re going to make that spare parts availability for our cash flow auto services and bike points. So that’s why we invested in that company because that gave us something that we were missing.

Operator

Thank you, Mr. Banthia. May we request that you return to the question queue for follow-up questions? We’ll take the next question from the line of Harsh Maru from Emkay Global Financial Services. Please go ahead.

Harsh Maru — Emkay Global Financial Services — Analyst

Hi. Thank you for the opportunity, sir. So my first question is around the volumes. So if you look at the last three years, which is first quarter of ’21, ’22 and ’23 there was a surge in terms of volume. So Q1 saw about 60.5 million liters, Q1 ’22 was again about 59 million liters and one of 23 is also about 55 million meters. So sequentially, do we see some seasonality in the business over here? So if you could throw some color on that

Sandeep Sangwan — Managing Director

Yes. I think it’s not a question of seasonality. I think if you remember ’21 we were coming out of the COVID first wave. First wave kind of it started and the country was shut down. And I think when you opened up in the beginning of ’21, so there was a surge of demand in all services. And I think all the companies had very good first quarter in ’21. Similarly, last year, again, the second wave hit around ’21 and then first quarter of ’22, we were coming out of that the software second half, second wave impact of COVID. I won’t call it seasonality. I think the whole environment situation has been very unique over the last two, three years. And what I’d like to say is, I think for these years, you should look at the performance on a total year basis. And as a company, we are very satisfied the way we manage.

So even if you look at our bottom line progress when the patient can talk exact numbers, we had a profit — PBT of about INR700-plus crores in 2020, we increase at INR2,020 crores. And despite huge inflationary challenges last year, we delivered a profit of INR1,090 crores approximately. So I think don’t read too much into that from a seasonality perspective. I think — now the situation becoming normal and inflationary pressures easing, like last year — last quarter, our volume was in the range of 48, 49. And this quarter, we’ve delivered 55 million liters, so we are quite positive on the momentum. By quarter, we see some seasonality, which is — which comes from the agricultural business.

Harsh Maru — Emkay Global Financial Services — Analyst

All right. And just one more question. So if I were — like if you were to look at the additive costs over the last, say, three to four years, and if you were to put a base of about 100, could you say that how the prices have moved, say, in 2020, say, the prices like 30% or 130 days. So if you could give us some ballpark numbers around the trend in additive costs?

Sandeep Sangwan — Managing Director

Yes, thanks. This is something we are closely monitoring. So I would say the additive cost, if you say 2020 and ’21 beginning 100 today, it is almost 150, 160. That’s the amount of unprecedented rise that we have seen in additives.

Operator

Thank you. Mr. Marabito the question for follow-up questions. Ladies and gentlemen, this just bring to your notice that the call will conclude in the next fiive minutes. Thank you. We’ll take the next question from the line of Mohit Mehra from Guardian Capital. Please go ahead.

Mohit Mehra — Guardian Capital — Analyst

I wanted to know how you guys think about margin because in this quarter, if you look at the RM cost per liter, that has come off significantly, but the gross contribution per liter, that is more or less flat. In fact, it is very slightly lower. So should we just take by that EBITDA margin guidance in terms of percentage that you do you look at this four liter contribution?

Sandeep Sangwan — Managing Director

So I think the — we do look at per liter contribution. We look at all the lines of P&L. But I think as far as overall is our frame is that we want to be in that range of EBITDA guidance. So that’s how we manage our P&L. I wouldn’t like to get into per liter contribution, etc. And we’ve shared our volume numbers, we can estimate what it is. But our intent is to manage the EBITDA margin within a bank.

Mohit Mehra — Guardian Capital — Analyst

Got it. But then, let’s say, crude were to decline to $60 per barrel on an absolute basis, our EBITDA in rupess even that could decline, right?

Deepesh Baxi — Chief Financial Officer and Wholetime Director

No, crude if declined, then we get the benefit because the input costs will decline — will decline, the per cost of goods decline. But remember we also want to focus on giving the right value to our customers, and we want to make sure that we are contributing and investing in our bank. So, obviously, it is not a straight flow through. The corresponding is also true, which is every time crude keeps going up, you just can’t make price increases in the market in every part of the segment. For example, in retail it might be easier than doing it in the B2B setup. Does that help?

Yeah. But as Sandeep said, I think the way we look at our P&L is definitely at a gross profit level, clearly, an endeavor is to maintain margin. Really, we don’t want to grow and have a disproportionate increase. But having said that, because of costs are increasing, inflation in India is high. So what we are saying is we need a bit of a flex on the EBITDA margin. Some help will go to. And the reason that we try to operate is something between 23% to 25%.

So you will see some quarters where it will go to 25%, some ports you will see go into ’23, ’22. That range and band is what we want to work for because then that helps do the right decisions for the business rather than just being reacting in a tactical manner to the increased decrease in the input cost. Therefore, pricing also, we are very strategic. We don’t take tactical rising.

Mohit Mehra — Guardian Capital — Analyst

Okay, got it. Thank you.

Operator

Thank you. The next question is from the line of Shalabh Agarwal from Snowball Capital Investment Advisors. Please go ahead.

Shalabh Agarwal — Snowball Capital Investment Advisors — Analyst

Sir, thank you for giving this opportunity again. So circling back on the earlier question on the Chinese market, I was more interested in knowing about the ICE engine oil demand, how has it been in China last couple of years, given the EV penetration?

Deepesh Baxi — Chief Financial Officer and Wholetime Director

Yeah. So Shalabh, I think it will be wrong for me to comment on China because I’m not very close to that business. My focus is making sure that we continue winning with cash flow in India, okay? Maybe we can connect offline and we can share something with you. So…

Shalabh Agarwal — Snowball Capital Investment Advisors — Analyst

Sure. Sure, sir. And sir, just lastly, for this quarter, again, in the personal mobility would we have grown by in mid-single digits? Would that be a correct assessment?

Sandeep Sangwan — Managing Director

So I think for the quarter, I wouldn’t share, but we’ve grown in cars, while our two-wheelers has been flattish, let’s say

Shalabh Agarwal — Snowball Capital Investment Advisors — Analyst

Okay.Thank you sir, and all the very best

Sandeep Sangwan — Managing Director

Thank you.

Operator

Thank you, The next question is from the line of Pratik Banthia from Girik Capital. Please go ahead.

Pratik Banthia — Girik Capital — Analyst

Thank you sir for the follow-up question. So the other question I had was that are we targeting the cars in the mass market segment or it will also be getting to the premium segment as well?

Sandeep Sangwan — Managing Director

So we operate across segments, okay? And thankfully, cars is not a category where a local unorganized sector play can happen. So most are very reputed companies and organizations, which OEMs which get into the car space. And that gives us an opportunity to play across segments in the cars space. So for example, we have a brand called MAGNATEC, which plays on the premium end, and we have a brand called GTA, which plays on the lower end of the market. But — the endeavor is to service all needs of the car market at different price points or different engine specifications, different viscosity specifications.

Pratik Banthia — Girik Capital — Analyst

Got it, sir. And sir, last question. again on the service side, given you’re expanding. So the setup cost of a service center is different for a city like Mumbai, versus rest of India because of the real estate cost and the rent associated with that. So it will be our franchisee agreement or the company owned company operated, how would that be?

Sandeep Sangwan — Managing Director

Sure. Sure, very good question. We don’t have any company-owned company-operated sites. We — and that is not the intent. We provide branding support because our brand draws consumers into the workshop given the trust that consumers have on Castrol as a brand. And then we provide them training support and other support, but it’s not an owned asset by the company.

Operator

Thank you. Ladies and gentlemen, that was the last question for today.

[Operator Closing Remarks]

Sandeep Sangwan — Managing Director

Thank you, everyone. Thank you.

Deepesh Baxi — Chief Financial Officer and Wholetime Director

Thank you.