Lubes Power Castrol

The positive impact of the 1.8 lakh kilo litre new blending unit enabled Castrol to improve sales by 11.7 per cent to Rs 993.04 crore. The Rs 60-crore addition to the gross block hiked its depreciation by 51 per cent to Rs 6.80 crore. Despite intensified competition and promotional charges, Castrol has managed to improve operating profit margin from 17 per cent in 1996 to 20.2 per cent.

Industry analysts attribute this partly due to better performance of high-value added new products like Castrol Formula SLX .At the net profit level, a drastic reduction in interest outflow by 64.1 per cent to Rs 6.09 crore contributed to healthy growth. The low capital intensive nature of the business has kept its funds requirement low which in turn has kept debt to equity ratio relatively low at 0.2 times.

A lower tax liability too contributed to profit growth. While tax outflow came down in absolute terms by 10.5 per cent to Rs 47.50 crore, the effective tax rate came down from 35.9 per cent in 1996 to 23 per cent in 1997. This is due to the slash in corporate tax rates and tax exemption on income from its new Silvassa unit.