Castrol India MD explains why data centres are a big opportunity

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Lubricant manufacturer Castrol India sees data centres as a big opportunity.

“Globally, Castrol has called out data centre thermal management as one of the places where we want to participate,” said Sandeep Sangwan, MD, Castrol India in an interview with CNBC-TV18.

Recognising the need for advanced cooling solutions in rapidly expanding data centres, Castrol is leveraging its expertise in fluid technology to innovate in this new domain.

Sangwan believes data centres will become huge consumers of energy in the future and they will need that efficiency for processes to operate at much higher speeds and capacities.

Castrol has set up a research and development (R&D) centre at its global headquarters in the UK, where Castrol BP is investing about 15 million pounds.

This facility is part of a strategic expansion to explore and enhance thermal management technologies that can improve efficiency and reduce environmental impacts.

“We have proof of concepts and we are working with some of the data centres now in terms of bringing that technology to commercial use,” he said.

The company has also launched Castrol EV fluids.

“Electric vehicles (EVs) sales on the passenger vehicles (PVs) are growing at a good clip but the volumes are still very small. But we supply to two of the biggest original equipment manufacturers (OEMs) in the car segment. So we will see that business scale up but it will take another 5-6 years before it becomes of any material scale,” Sangwan said.

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While the competitive intensity will increase, as technology improves, consumer vehicle (CV) demand gets better and better.

“We have seen a lot of competitive intensity. It will increase but in the end, it will be good for customers and consumers to get better quality products at the right value,” he said.

On April 30, the company reported a 6.8% year-on-year (YoY) increase in net profit at ₹216.2 crore for the first quarter that ended March 31, 2024, as the company follows the January to December financial year.

The volume growth was 6% in the first quarter of the calendar year 2024. For the full year, he expects volumes to grow a few points higher than the industry average of 5%.

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The company was able to hold the margins at 22%. “We will operate in the range of 22-25%,” he said.

The current market share of the company is about 21%.

Last quarter, the company announced its brand ambassadorship with Shah Rukh Khan and its tie-ups with Mumbai Indians.

“We have been doing a lot of activity on Pragati Ki Paathshaala and we continue extending our reach into rural India. We reached about 33,500 outlets now and also in multi-brand workshops,” he said.

“I am confident of the growth coming through. We saw volume growth coming in Q1 and we are also investing in our brand so all to play for,” he added.

The category is growing and Castrol wants to be ahead of category growth by a few points.

The company saw some slowdown in the agriculture sector. However, two-wheelers and passenger vehicles (PVs) are doing well.

The current market capitalisation of the company is ₹20,717 crore.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow