Gulf Oil Lubricants rises after ICRA upgrades ratings at 'AA+' with 'stable' outlook

Gulf Oil Lubricants India added 2.86% to Rs 1104.75 after the company announced that the credit rating agency ICRA has upgraded the company's long-term rating to '[ICRA]AA+' from '[ICRA] AA' with 'stable' outlook.

The agency has affirmed the companys short-term rating at [ICRA] A1+.

ICRA stated that the rating upgrade factors in the expectation of healthy improvement in the credit profile of the company over the next couple of years as the demand for its products is expected to remain healthy supported by increasing vehicle sales, wide distribution network and a strong brand recall for the companys products.

The ratings continue to factor in the companys strong financial profile, characterised by healthy profitability levels and return indicators and a comfortable capital structure.

In FY2024, the company witnessed healthy revenue growth driven by a mix of growth in the sales volume and realisations. The operating profit also increased in FY2024 driven by the growth in volumes and company passing on the increase in the raw material prices to consumers.

The trend has continued in H1 FY2025 with company witnessing healthy volume growth and associated growth in operating profits.

The ratings continue to consider the companys ability to maintain healthy profitability levels on the back of timely price revisions to partly mitigate the impact of base oil price movements.

The company has also been witnessing improvement in its market share in the domestic lubricants industry, driven by its strong marketing efforts, the well-recognised Gulf brand and a wide distribution network.

The company also benefits from being part of the Hinduja group as it derives operational and strategic benefits from being part of the group.

The ratings are, however, constrained by the exposure of the companys profitability to the movements in base oil prices. Its profitability is also exposed to forex movements (to the extent of the unhedged exposure).

The companys operations will continue to be exposed to the demand indicators from the automotive sector.

The ratings also consider the highly competitive pressures in the domestic market, which is largely dominated by Government-owned oil marketing companies (OMCs), apart from other established players in the private sector.

Gulf Oil Lubricants India (GOLIL) is part of the transnational conglomerate Hinduja Group. GOLIL sells its lubricants products under the Gulf brand with sales largely to the automotive sector along with industrial users.

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