Gulf Oil Corporation has restructured its business, demerging the lubricants vertical into a separate company, Gulf Oil Lubricants India, and retaining IDL, the explosives unit, as a 100 per cent subsidiary. Subhas Pramanik , MD of the Hinduja Group company, tells Business Line the demerger reflects the company’s core business interests and also adds value to its shareholders. Edited excerpts:

What is the rationale for the demerger of Gulf Oil?

IDL was formed in 1961 to make detonators after the private sector was encouraged to get into this business.

It gradually emerged as one of the largest detonator makers with a capacity of 192 million units a year. When the Hinduja group decided to develop a chemical hub, Gulf Oil was merged in 2001. From a ₹300 crore company, it grew to ₹1,100 crore in 2014.

With lubricants contributing more than 80 per cent of the total revenues, there was pressure from shareholders to demerge the vertical, as they felt it would reflect the vertical’s right valuation. The poor show by some of the divisions such as explosives, due to slowdown in economy, was a drag on the company.

What will be the focus of the new company?

Gulf Oil will now have three verticals—energetics, mining and infrastructure and real estate. IDL Explosives has become a 100 per cent subsidiary. It has a large manufacturing unit at Rourkela.

How do you see the business of these two companies?

While Gulf Oil Lubricants will have a revenue of over ₹1,000 crore, we expect a revenue of ₹400 crore for Gulf Oil Corp. However, the bottom line for both is likely to be same as the property division will contribute to profits.

Any plan for expansion? What is the company’s capex?

We have decided to expand Gulf Oil’s lubricant plant at Silvassa from 75,000 kilo litres a year to 90,000 kilo litres with an investment of ₹40 crore. The company board has also approved setting up of a new plant in Tamil Nadu with an investment of ₹125 crore. Of this, ₹35 crore has been invested for land. This project will be developed over the next two years. The ₹54 crore, which we raised from divestment, has gone to repay term loans. Now, we do not have any term loans but just working capital loans.

Ho do you look at the realty division?

We have no investments in this venture except sharing the land bank with Hinduja Ventures, which will make all investments. We will gain once these projects get implemented. Even the changes coming up in Special Economic Zone norms will have a positive impact on the company.

While the phase one of the Bangalore project will be ready later this year and contribute to revenues, the Hyderabad property is at design stage.

Has Gulf Oil’s association with Indian Premier League teams paid off?

Our association with the Punjab team provided us great visibility in North India and we added significantly to our business.

Likewise, we have partnered with the Chennai team and this has also contributed significantly to the visibility.

As a company, we invest up to 7-8 per cent (of revenue) in marketing.

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