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Castrol: Tata BP effect

Jun 21, 2002

We had covered the annual results of Castrol India Ltd. (CIL), which were declared on February 1, 2002. However, results were excluding amalgamation effect of Tata BP Lubricants India Ltd. With the Bombay High Court approving the scheme of amalgamation, effective from January 1, 2001, the company has presented the amalgamated result for FY02.

(Rs m)FY01FY02Change
Net Sales 10,201 11,246 10.2%
Other Income 187 156 -16.7%
Expenditure 8,508 9,568 12.5%
Operating Profit (EBDIT) 1,693 1,678 -0.9%
Operating Profit Margin (%)16.6%14.9%
Interest 72 75 3.5%
Depreciation 114 132 15.7%
Profit before Tax1,6941,626-4.0%
Extraordinary items (55) (92)68.4%
Tax 295 450 52.6%
Profit after Tax/(Loss) 1,344 1,084 -19.3%
Net profit margin (%)13.2%9.6%
No. of Shares 123.6 123.6
Diluted Earnings per share10.98.8
P/E Ratio 21.6

View stand-alone result. Tata BP Lubricants India Ltd. had accumulated losses of Rs 87.7 m at the start of FY02, which have been adjusted against reserves of CIL. Income and expenditure for year-ended December '01 are reflected in the amalgamated income statement. Tata BP incurred losses of Rs 120.1 m in FY02, which was largely due to brand-building initiatives.

Tata BP India Lubricants Ltd., was a joint venture between Telco and BP Amoco (British Petroleum). With BP Amoco acquiring Burmah Castrol U.K, the lubricants operation of BP in India were in conflict. Consequently, BP Amoco is likely to have terminated the JV, which could have resulted in CIL acquiring the operations of Tata BP. As per latest reports, Telco is likely to be discussion with BPCL for launching a lubricant, which could be marketed through the latter's retail outlets.

At Rs 189 the scrip is trading on a multiple of 21.6x FY02 amalgamated earnings. Net profits, post amalgamation, is lower by 73 m while losses of Tata BP were Rs 120.1 bn. In our annual result report, we indicated that a pick-up in passenger vehicle sales could offer reprieve to the slow-moving lubricants market. Reports suggest that growth in lubricants has picked-up and is likely in double digits.

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