Arabian Petroleum Ltd

We're pleased to begin today's session with Arabian Petroleum Ltd from Ambarnath, Maharashtra.

India’s leading lubricants manufacturer, established in 2006 and headquartered in Mumbai. Under Arzol and APL brands, it produces engine oils, gear and transmission, tractor, hydraulic oils, and specialized industrial lubricants that boost performance, cut wear, prevent breakdowns, and save energy. Arabian targets global leadership in eco-friendly, standards-compliant innovation and superior customer value.

Before we proceed, please note that this call is being recorded. Some of the statements made during this call may be forward-looking and are based on current assumptions, which involve risks and uncertainties. Actual results may differ. The company assumes no obligation to update these statements unless required by law.

We encourage all participants to consider these factors and avoid placing undue reliance on forward-looking information.

From the company's side, joining us on the call today is Mr. Manan Mehta - Whole Time Director, along with other key speaker: Mr. Tejas Furia - General Manager (Accounts & Finance), Mr. Kishan Sata – COO and Vice President. I will now hand over the floor to the management team for their opening remarks. After the presentation, we will move on to the Q&A session. Participants who wish to ask a question may type them in the chat box from now onwards. Thank you, and over to you Manan sir.

Let me just share my screen and are you able to see the screen? Is it visible?

So, automotive, as the name suggests, the application is more into the automotive field, which is into all kinds of lubricants which are required for two-wheeler, four-wheeler, heavy commercial vehicles, off-highway, on-highway equipments, and any kind of, you know, movement which is required on the roads.

In industrial, we are also present in a wide variety of segments. I would say encompassing most of the applicational possibilities in terms of lubricants. And I will take you through different, you know, product segments also subsequently in the presentation. Just a brief snapshot of what we are. We are a 250-plus, strength, you know, employee, in, in… at APL. We have 300-plus distributors worldwide. We are present in about 30-plus countries, and about 22-plus states in India. We have also our in-house R&D and QC facility.

Again, this is an NABL-accredited lab, ISO 17025 certified, with about 30 different, sophisticated testing equipment, and apart from that, various other test facilities. Our infrastructure encompasses of 2,000 KL of in-house storage capacity, about another 2,000 KL of, I would say, leased storage capacity, which is at the ports and elsewhere. About 1,000 KL of finished storage capacity, which is in-house. Apart from that, we have a lot of warehouses across India.

And we have about 500 different products which we cater to. So, the total capacity that we are currently, having in our own plants is about 48,000 KL per annum. Some snapshots about our revenues from operations and the numbers in general so, this year, our revenue grew by about, this half year, I would say, it grew by about 24%. EBITDA grew at about 16-odd percent. Our PAT grew by about 33%, and that reflects, you know, the sales increase was about 24%, but the PAT absolute increase was about 33%. That reflects on the strong earnings that we are projecting in the years to come. The part margin also grew by about 8%, and the EPS grew by about 30%. Now, there are certain, I would say, incentives and, you know, team motivation factors that we normally do and there are different initiatives that we take in the market. So, talking about a few of them, yes, we do have our, you know, trips, anti-cognition trips. We sponsored about 15 distributors.

For… and then their performance in this, coming, in this last HY. And, we also have, rewarded them for, you know, consistent performance. About the organization's strengthening, yes, we invested about 1 crore in R&D in this half year, and this is to drive innovation and product development in the coming years to come. We appointed some few distributors in different key regions of Kanpur, Rajkot, Karnataka, Madurai, for the automotive. In the industrial, we expanded our reach in the south as well as in the east region as well. And in terms of the geographies which are abroad, we added 4 new countries across Middle East and Central America.

So, gradually, we are putting our strong hold in the different industries, in the different segments, and in the different areas, geographies elsewhere also. We have launched agricultural sector product lines in the last HY, and we are also in, you know, working with the industry and the academicia to develop specialized products for extreme temperature applications. At the same time, we did, you know, a transfer of technology from DRDO to us. We are focusing on the Indian defense supplies also a lot, and we are happy to share that we got recently an award from the Indian Army for certain supplies of lubricants, which is worth about 90 lakhs or so and, this is, I would say, focusing on the development that we're doing for the defense segment and, as I told you, we… the TOTs that we took for about different product lines, which are used in the Indian Army and the Navy also. These were for URFs, which is Universal Recoil Fluids, then these are also for low temperature coolants. And, these, these are going to be developed and supplied to the Indian Army and the Navy.

In terms of the, you know, what kind of initiatives that we have taken on the operational side, yes, we did.

Production and supply chain efficiency improved our first-in and first-out process. From 7 to 10 days to about

3 to 5 days, again, getting in that efficiency. We introduced our Bhiwandi mother warehouse for our improved supply chain for automotive lubricants, and gradually we'll also add industrial lubricants to this warehouse.

We are also working very tightly on inventory management controls, and Mr. Kishan, is, taking care of this particular, you know, improvements, on his… on his… keenly on his, particular level. There are certain cost reductions and automation initiatives that we have taken in the last HY, and some of them also include, you know, in-house weighing scale, which is reduced dependence on third party, so we do our in-house weighing for all the timecards, incoming raw materials that we are receiving at our end.

In terms of governance, yes, we are very stringent when it comes to compliance and government norms, and our team, led by Mr. Tejas Furia, is regularly reviewing these mechanisms and increasing the accountability to all of our investors and different government stakeholders. We also implemented a lot of credit control dashboards that reduced the debtor days from 62 to 48 as of October 2025. This is in brief about the timeline of Arabian Petrol Limited.

Back in 2006, as I mentioned, the company was formed, but I would say the operations actually began 2009 onwards. And 2011, we actually established the first plant at Taloja. Subsequently, we transitioned into a public limited company, although the public… the listing did not happen at that point of time. And then we moved to Ambarnath, in terms of our manufacturing. We established 3 factories here in Ambarnath, 3 buildings, both… all 3 are adjacent to each other. In terms of private labeling, yes, we are doing a private labeling for our different, you know, key customers, as well as, Tier 1 type of automotive measures also. And, yes, we were, you know, on the… we earned Star Export Recognition House in 2021 and, in 2025, we established our own wholly owned subsidiary in UAE, which is Arzol Petroleum Trading, FZE, which is headquartered in, Jebel Ali, Jebel Ali Free Zone in Dubai.

So, yes, this is split up into different segments, like industrial, consumer, which is retail, and commercial, which is the commercial of highway equipment, which is required.

We also develop additives which are required for the, you know, both for soluble neat cutting oil, which are required for the other lubricant industries. So, this is also a part of our backward integration projects that we are doing. And we are also manufacturing extremely low moisture refrigeration compressor oils, which are the need of they are for the refrigeration industry, for the new refrigerants that are going to come as the

climate change and the different, you know, refrigerants are being introduced in the market. Yeah, so a few of the products also, like synthetic channels, which are used in centers, and some synthetic engine oils some anti-corrosion coatings, PX-2, PX-6, which is against a different defense-grade coatings, which are used to apply on the arms and ammunitions that our army or any kind of, you know, navy, they would be possessing to avoid them getting rusted. In the industrial space, this is our product line, so we produce gear oils, hydraulic fluids, cutting oils, vacuum oils, and refrigeration oils. As the name suggests, you know, they have different applications for different product lines. Textile lubricants, rust preventives, so they have varied applications all across different industries.

In the automotive segment, we produce all the lubricants which are required for any kind of automotive usage, be it motorcycles, be it passenger cars, be it any commercial vehicles, three-wheelers, four-wheelers, heavy vehicles, the transmission fluids, coolants, brake fluids, and nanotechnology-based products.

So, we have a tie-up with a Ukrainian company called as Xado, where we are licensed to use the additives in our formulations, and these are nanotechnology-based products which give a lot of fuel saving to our customers. So we market a separate range of products under the Xado and Arzol co-branding product lines in the nanotechnology molecules. We do private labeling also, for companies like Shell, Varroc, Endurance, Mahindra First Choice now it has been acquired by the TVS Group. Then, Greaves Cotton, VST Tractors & Tillers, Topland, Hella, these are a few of the notable private label customers. I would be happy to state that we are one of the, you know, partners for Shell, exclusive partners for Shell when it comes to they have relaunched their metalworking fluids in the Indian market, where they had sold off this business about 12 years ago globally. So India is the first country where they have relaunched this metalworking fluid segment, and we are the exclusive partner for Shell for producing this metalworking lubricants. And notably, all the IP or the formulation that Shell supplies to the market belongs to us.

We do a lot of government-based business also, with our foothold strongly in the defense industry, like Army, Navy, Air Force. Then ISRO, Railways, ONGC, BASF. At BHEL, we hold a 2-year rate contract from BHEL.

Recently, we were awarded a rate contract from Moil as well and BML also. So, these are a few of our notable government clients. We just very… just day before yesterday, we secured an order from Border Road Organization in Bhutan, which is for the Project Dantak. This is our second order from Project Dantak, and these are used for all the developments of border roads, or the organization that develops, you know, borders, and the roads which are required in the… in the hilly terrains. We export to a lot of South Asia, Africa, Latin America, Central America, Australia, and the Gulf countries. Yeah, these are about a few of our clientele which are spread across different verticals, different geographies, and different sectors. Like, for example, you may be seeing steel, like JSW, automotive, like Ashok Leyland, Mahindra, BML, then, consumer appliances like Godrej, you know, core industrial, like KirloSkar, Linde, Gabriel India then, you know, food and pharma, and, like, ITC, Aarti, these kind of customers. So, just to highlight upon that we are spread across in different domains and different verticals across.

Yeah, so these are the different variety of applications that we cater to in terms of Crane, lifts, chemicals, engineering, plastic, mining, textile, pharma, pulp paper, and almost, I would say, all the verticals that are normally requiring any kind of lubricants. So the markets served include a lot of, Indian markets, where we are present almost everywhere, apart from the Northeast's Seven Sisters in general, excluding Assam. We also have recently opened our new warehouse in Bangalore, so that also marks our entry into the south, in terms of, you know, having our own setup and, you know, logistically facilitating our customers to get better service in terms of product availability. We export to more than 25, to about 30 countries now, at the moment, about 30 countries spanning across different, continents. We don't have any exports to the US or the Mexico as of now, so that really protects us from any kind of trade wars that are currently happening in the geopolitical scenarios.

A few of the approvals that are being posted here are… we have approvals from Volvo, from API, which is the American Petroleum Institute, from Daimler Trucks, which is Mercedes-Benz. Then as I told you about the technology TOTs from DRDO, the quality control certifications from IF, from NABL for our labs, and different ISOs. We do have a lot of testing instruments that are used for wide variety, and we do give these services to also our, you know, customers and competitors. If they want to test any particular product at our lab, we facilitate the same. This is our team, in terms of the top management. My father, my mother, they are also active members of the organization. My two brothers, Dharman and Vandan, who Dharman takes care of the export markets, and he's the whole-term director and CFO and Vandan takes care of the operations with… he's having a background in B-tech in chemical engineering and technology management. So, he oversees all the domestic sales operations, additive procurements, and new product developments as well. These are a few of the numbers that we have just extracted from our financials, which we have already published in the public domain, and you might be able to access them on different websites and on the NSA portal also. So yes, already has informed to you, we are posting strong growth, and the momentum continues in the coming years. A small idea about our balance sheet items also, and the total balance sheet side stands at about 121 crores.

So, before I thank everybody on the call, also I would like to highlight a few developments that were done in the recent past, which are probably not covered as a part of the presentation. This recent past includes just the developments in the last couple of months. So, as I already mentioned on the call, Lavisa Technologies is a firm where we have started operations. This is, again, majority shareholding of Arabian Petroleum Limited, and here we are focusing on only value-added products and specialty products in the metalworking side. So, here we have, partnered with Mr. Abhijit Bhosale, who has about rich 25 year experience. He was, earlier part of the team at Emulsichem Lubricants Private Limited, and we have taken the business transfer agreement from Emulsichem Lubricants to Lavisa Technologies, which is our new entity, and all the key customers' business has been transferred from this company to Lavisa Technologies. We are… these customers, I would say, include customers like Tata Motors, Kirloskar, Greaves Cotton, and a lot of, you know, top-tier OEMs with Arabian Petroleum did not have a stronghold in. So, this is a strategic tie-up that we have done. The product range also encompasses certain products which Arabian Petroleum is not manufacturing as of now, and so this will help us to expand our portfolio in terms of metalworking lubricants, and also help us in develop and achieving our goal of going backward integration… doing backward integration, and making our own esteries and products which are required for our own packages so that's about Lavisa Technologies.

The other developments also include, as I mentioned to you, about Bangalore. We developed the warehouses in Bangalore. Also, just yesterday, we received our formal approval from NSF which is US FDA for our food- grade range of product lines. So, which is encompassing all different white mineral oils, Mineral oils, LLP, HLPs…light liquid paraffins, as well as gear oils, hydraulic oils, and the food grade industry. So here, by having these kind of lubricants, or the food grade products, we will be able to enter the pharma space also, where they use these kind of lubricants for the maintenance, as well as raw material applications. So, yes, we are constantly participating in different exhibitions elsewhere. We recently did one in Dubai in Automechanika last month, and definitely we are seeing good traction when it comes to participation in these kind of, you know, exhibitions. So, that is it from my side, and I would be happy to take some questions, along with my team. So, yes, I would leave the floor open for any kind of question answers. Thank you so much. FinPortal team, are you there?

Mr. Ra… Siddharth oberoi asked some question, if you could just allow him to…

Yes, in India, primarily, we are more a cost-sensitive country, and we cannot deny that fact, that, yes, there is still a market requirement for these kind of lubricants, but in India, they are still at a very nascent stage. So, I would like to answer this in such a way that, yes, we are ready whenever there is a, you know, strong pull from the market which are required for this kind of, biodegradable lubricants. Their product range is available in terms of, you know, different… see, as I told you, metalworking, they require a lot of biodegradable lubricants, like, for example, biodegradable cutting oils, semi-synthetics then there are a lot of other biodegradable lubricants which are required for gear applications. So, the formulation and all has already been set, and we are just waiting for the market, really, to demand this kind of products.

It's prevalent more in the European and the Western regions, but in India, the stage is still to arrive.

Next question is, can you provide more insights into your long-term goals for Arzol and APL brands, and how you plan to drive their growth both in automotive and industrial segments?

The export markets is being directly handled by my brother, Dharman, and the private labeling is taken care of by our team, which is a back-end team, which does not require, I would say, customer interaction, quite often. So, when I talk about, you know, long-term goals and objectives, yes, as a company, we are slated to grow at about 20-25% CAGR. That's how we've been planning to grow in terms of top line. At the same time, we also intend to also, focus on develop… focus on improving on our margins also in the coming future.

So the top-line growth definitely will be bettered by the bottom-line growth in the coming future and in terms of, you know, how the development happens, is, One, obviously, is the infrastructure that we require in terms of manpower, or the availability of the products which we are constantly building on. And I gave you some examples of it already. Secondly is also having that kind of product lines, which we are not doing as of now.

So, as I mentioned to you, the Lavisa product line, which we have not been doing for now, this is being added to our basket. So this will also help us to drive, you know, sales in the industrial part of the vertical. When it comes to automotive, automotive, yes, it's a very big market in general, and we are really concentrated on mostly in the west and the north part of India. And primarily the… I would say the next leg of growth will definitely come from markets which we have not so far penetrated in, which are in south, in east of India and also, it will also come from the export, segments.

20% on an average. The products in the specialties operate at about 50% gross margin levels. So these kind of specialties will definitely drive the margins in the coming future, and that's where we would be, probably landing up in a couple of years' time, as compared to industry peers.

Yes, with the, with the expansion, which is, poised in, Ambarnath, we definitely see, you know, the utilization, currently we are about 70% utilization, but the bottleneck, as always, have reiterated on different calls. In terms of filling of the different SKUs in the small pack.

So, we are working out on deporting that capacities and, expanding them in the different Unit 3, which is in Ambarnath and now operational. And we definitely see, the improvements in terms of operational efficiencies, the addition of different product lines, which we'll be able to do in-house and there will be definitely a big size batch… batches which will be taken, which will definitely improve on our, you know, operating margins. So that's the idea with which we have exp… we have did this expansion in the Ambarnath facility.

And, yes, we need to keep a fighter range to really counter the cost-sensitive market that India is. So this is talking about the automotive. When you talk about the industrial, it's a very different ballgame altogether.

There is different competition for different product segments when it comes to industrial. For example, the hydraulic walls, primarily are more, you know, competition is with the PSUs because, you know, they have the basal power. When it comes to metalworking, it's more of specialities, companies that are, you know, doing this kind of product line. So, these are… this is a very fragmented industry in terms of metalworking. So I would say not the biggies are there in this, but the small players who are having regional, you know, strengths are more dominating in this industry. When it comes to, I would say, general conventional product lines, companies like Apar, Savita, again, Gandhar, and GP Petroleums are our competition when it comes to these kind of product lines. Yes, there are certain increases, the product segment, like Balmerol, Balmer Lawrie is more of the competition there. So, it's a very, very different and fragmented industry when it comes to industrial lubricants and everywhere, the competition is a little bit different, product-wise.

Now, the product chemistries, are made in such a way, or they have been doing this business for last more

than 50-odd years. And the product chemistries are made in such a way that they are the most cost- competitive products available in the industry. And still, when we are selling these products at, I would say, levels which are close to, you know, competition, still there's a good, I would say, gross margins, which are, you know, available in these, product lines. The core…The essence of the product is the chemistry that has been, you know, tailor-made in such a way, since past so many years, and now they have been, you know, so used to making that product in the most cost-competitive way possible, suiting the applicational demand that is required from the customer. So, there are a lot of components which are going… which goes in the metalworking fluid lines, and most of these components are imported. In the industry, and the industry typically uses these kind of components.

But when it comes to Lavisa, we are happy to state that, you know, most of these components are indigenously made by taking those chemical reactions and keeping the cost low, and at the same time, provide the same customer experience that a Castrol product may be giving to the market. So, typically, you know, the product lines also compete against the likes of Castrol Blaser Swiss Lube, which is, again, a Swiss- based company, which is into speciality metalworking fluids. They also compete… I mean, one of their product lines, which is for tapping applications. This is like a… more or so like a monopoly-based product, where this kind of product is not available with competition. So, people really queue up and, you know, demand these kind of products, which are required for… for these kind of applications which is, right at the cost .And best suited for the application. So, these more are required in the automotive, engineering, steel, and metal industry, and the target market for Lavisa was always, or earlier for MLC Chem, was always on, on the OEM side. So, OEMs as in OEMs of, Big, automotive, majors and where Arabian petroleum did not have that significant presence, barring a few of the OEMs. So that synergy will definitely help us to, you know, enter OEMs. Once we enter OEMs with the speciality products, Arabian Petroleum will also have a chance to sell their range of, you know, different product lines, like hydraulic oils, gear oils, and other ranges to the same OEMs, where Lavisa sells the speciality ones.

Secondly, with large customers, we have a quarterly price variation mechanism based on certain price indexation.

So, whatever the price index session is, it is normally averaged out in the entire year. So, we don't see any hits or losses when it comes to, you know, dollar being impacted, or the prices going up and down, because again, these are dollar-term pricing benchmark with the RBI exchange rate, and that's how the prices are derived at. So, more or less, I would say about 60-70% of our sales is moves in that particular fashion. And when it comes to user-based business, where we supply directly quite a few of them is, as I've told you, on quarterly pricing, and quite a few of them is on spot pricing. So, when it comes to spot pricing, whatever the price will be prevailing at that point of time, we will be quoting accordingly. And if Mr. Tejas wants to further add to the hedging part, he may be able to do that. Tejas Bhai?

also very recently. The bigger tenders, which definitely, which will come in the month of August, July, August or so, we are expecting to participate in them and take some orders in those bigger tenders also, where the quantum is too substantial. And, yes, these kind of technology are always available from the DRDO to be leased. It is how we are able to absorb this technology, the operational requirements of the technology which can be made at our plant, and how strong are you in terms of the defense positioning, and your inroads in different, different segments. So, we, we do business in even ordinance factories, Munitions India Limited, yantra India Limited, Machine Tool Prototype Factory very, very different segments and diverse, customer bases across in the government space also. So, we did a development very recently for Ordinance Factory in Warangal. We did a development for even for ISRO very, very recently, where we give them a water-soluble forming fluid. So these kind of projects keep ongoing, they come to us, and we love to, you know, participate in this kind of, mechanism, where we are able to contribute to these kind of, you know, initiators which the government wants us to do, or the government users wants us to do.

Just to give you an example, in the refrigeration compressor oils. The very high-end specialty products are all esters. Now, these are lubricants, but not made from mineral oil. These are primarily esters. So that also really opens up, and that's more of classified in the chemical space, which Lubrizol or these kind of companies really cater to. So, yes, the TAM, apart from the lubricants, will also definitely open up when it comes to the chemicals space.

And, we believe that, this year also, I mean, this coming, financial year, not even coming financial year, in the next first, last quarter of this financial year also, we would definitely break even.