Acquiring US-based Houghton International, a specialty chemicals company, for $1.045 billion around 18 months ago was just the tip of the iceberg for the diversified Hinduja Group's lubricants subsidiary, Gulf Oil International. With the acquired company six times bigger in terms of EBITDA, and four times as big as Gulf Oil in revenues, the deal helped pitchfork the lubricants division of the Hinduja Group into an altogether different league.

Sanjay Hinduja, Chairman, Gulf Oil International, speaks about how the purchase initiated a new beginning for the company, and how the listing of the lubricants division on the bourses on Thursday, is part of the expansion plans envisaged by the company. Edited excerpts:

The Houghton buy was the largest overseas acquisition for the Hinduja Group. How has that worked for Gulf Oil?

The Houghton purchase was exciting. Houghton was done 18 months ago, and geographically speaking was an ideal fit, since they were strong in North America and Europe, and Gulf Oil is strong in the Middle East and Asia. We were successful bidders because of the internal synergies that we had with Houghton. A normal private equity player may not have had those synergy benefits. (Hinduja bought the company from the US-based PE firm AEA Investors). Investment bankers at that time even advised us to hike the bid to $1.5 billion. It made sense for them, not us. We have to be sure that we acquire the right companies at the right value.

In April this year, Houghton acquired the North American Steel Mill business of Henkel Corp (makers of plastics and synthetic resins). Does the Henkel buy show the company has started on an acquisition spree?

(Smiles) We closed the deal with Henkel on March 30 this year. The integration process is going on and everything is on track. With this acquisition, we get a stronger foothold in the steel business, where our competitors are stronger than us.

The Henkel buy has ensured that our focus is now on steel as well as aluminium, which was always Houghton's forte, and would help serve the North American industry customer base. The Houghton buy created the world’s ninth largest lubricant company at the time.

Give us some idea about your investment plans here?

We are setting up a 75,000 tonnes a year capacity plant in Chennai. The construction will start by this year-end, and the project will be financed through internal accruals. For this second plant, we are investing ₹120 crore. The existing plant at Silvassa has a capacity of 75,000 tonnes a year and the existing capex is around ₹40 crore.

We would be focussing more on tractors and are going to announce a major OEM deal in the next two weeks. We want to go rural in a big way. That will be a major focus area for us now. With double-digit top line growth, both this year and next, we are in a growth phase.

Give us an idea about your brand spend?

Our brand spend has been increasing. We started with 2-3 per cent spends in 2004-05, and now we would be touching 7 per cent. It will go higher. We have appointed Mahendra Singh Dhoni as the brand ambassador. It is the group's first ever association with a celebrity endorser in over six decades. Our association with Chennai Super Kings is also a step in that direction. The idea is to continue investing and building up.

Certain sectors that the Hinduja Group wanted to get into such as telecom and automobiles did not fructify…

Yes, initially we were looking at cars. As a group, we like to control 51 per cent plus, and carmakers with their technology always like to have control. So, as a policy, we could not go ahead.

One of our group's policies is (retention of) control. As the third generation, I fully agree with my father, his brothers and my grandfather. If you have a business, you have to control it. You control your own destiny.

Even if I have a joint venture, and we have a few now in Gulf Oil also, we are the majority. We have to be in the lead, that really helps us. Otherwise, you are bogged down in unnecessary arguments at the board, which hampers the growth of the company. There has to be one captain.

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