Welcome to the 102nd edition of The Chatter — a newsletter where we dig through what India’s biggest companies are saying and bring you the most interesting bits of insight, whether about the business, its sector, or the wider economy. We read every major Indian earnings call and listen to the interviews so you don’t have to.
We’re always eager to improve—please share your ideas on how else we can innovate “The Chatter” format to better serve your needs.
In this edition, we have covered 5 companies across 4 industries & a regulator’s speech.
Regulators
Securities and Exchange Board of India
Building Materials
Asian Paints Limited
Welspun Corp Limited
Financial Services
Motilal Oswal Financial Services Limited
Engineering & Capital Goods
Gulf Oil Lubricants India Limited
Consumer Durables
Blue Star Limited
Regulators
SEBI | IPO Reforms, Investor Safety & India’s Market Future
SEBI is the primary regulator for the securities and commodities markets in India, responsible for protecting investor interests and ensuring market integrity. It oversees exchanges, intermediaries, and corporate disclosures while managing the framework for both domestic and foreign capital inflows.
[Speech]
Recent data highlights a major gap where only a small fraction of Indian households actually participate in the markets despite general awareness. This suggests that future market growth is heavily dependent on improving investor education and risk understanding rather than just technical access.
“A SEBI investor survey revealed that while 63% of surveyed households were aware of at least one securities market product, only 9.5% actively participated. Even among participating investors, only 36% possessed moderate to high market knowledge. Investing must be an informed choice made with eyes wide open, with full clarity on asset characteristics, associated transaction costs, and underlying risk profiles.”
— Tuhin Kanta Pandey, Chairman
Regulatory improvements have shortened IPO listing times to just three days and simplified the issuance of corporate bonds and alternative investment funds. This increased speed reduces capital lock-up periods and allows businesses to deploy growth capital much faster than in the past.
“Regarding access to capital, fundraising cycles have been significantly accelerated. Companies can now list within three working days of an IPO closing. Electronic Book Provider platforms have streamlined corporate bond issuances, while regulated online bond platforms have widened retail participation. Under the Garuda framework for AIFs, more than 140 schemes were cleared within just three months.”
— Tuhin Kanta Pandey, Chairman
The regulator is moving to drastically reduce the time it takes for foreign institutional investors to start trading in India. By cutting onboarding from months to days, the market becomes significantly more competitive for global capital allocations.
“Alongside SWAGAT-FI, SEBI has digitised onboarding workflows, enabled live application tracking, accepted digitally signed powers of attorney, and permitted fund netting to lower transaction costs. Through integrated systems and digitised processes, the objective is to reduce FPI onboarding timelines from several months down to as little as five business days.”
— Tuhin Kanta Pandey, Chairman
SEBI is using its internal AI engine to aggressively scrub social media of fraudulent financial advice and misleading ‘finfluencer’ content. For investors, this signals a much tougher regulatory environment for unregistered advisors and a focus on reclaiming lost capital.
“Awareness is matched by decisive enforcement: SEBI has escalated more than 2.22 lakh instances of misleading financial content to social media platforms for takedowns, with our in-house AI engine, Sudarshan, driving over 40% of these actions. In cases involving unauthorised investment advisory and unregistered collective schemes, orders have directed entities to refund all capital collected from investors.”
— Tuhin Kanta Pandey, Chairman
The regulator is prioritising the technical stability of exchanges and clearing houses to prevent systemic shocks from cyber attacks or software glitches. This places the burden of accountability on financial institutions to ensure their automated systems do not compromise market integrity.
“Market resilience remains the third pillar of regulatory architecture. Operational disruptions, technical glitches, and cyber attacks can compromise investor confidence across market infrastructure institutions. Robust governance, business continuity planning, disaster recovery infrastructure, and stringent cybersecurity protocols across exchanges, clearing houses, and depositories are vital. While automated supervisory algorithms detect irregular trading anomalies, human judgment must govern regulatory enforcement. As artificial intelligence transforms financial workflows, institutions deploying algorithms must remain strictly accountable for operational outcomes and data privacy.”
— Tuhin Kanta Pandey, Chairman
A comprehensive review is underway to simplify IPO rules, align REIT timelines, and reduce the paperwork burden for foreign fund managers. These changes are designed to lower the cost of compliance and make the listing process more flexible for various asset classes.
“First, simplifying regulations and easing market entry. We are reviewing listing and disclosure obligations, revisiting the framework governing main board IPOs and follow-on public offers, exploring fund netting for mutual fund settlement, and aligning REIT and InvIT listing timelines with equity standards. For foreign investors, SEBI is coordinating with the Reserve Bank of India to harmonise SWIFT-based KYC document certifications and exploring extended KYC review cycles for eligible FPIs to eliminate redundant paperwork. In addition, ESG rating regulations are transitioning from rigid prescriptive rules to a principle-based framework that preserves transparency while providing operational flexibility.”
— Tuhin Kanta Pandey, Chairman
Efforts are being made to revitalise the SME and startup listing platforms to help younger companies reach public markets earlier. Simultaneously, the regulator is looking to expand bond markets into smaller cities to tap into a wider pool of retail savings.
“Second, deepening market depth and broadening financing choices across business life cycles. This includes reviewing the SME IPO platform and the Innovators Growth Platform to expand growth capital for new-age startups, alongside consulting on fixed-income channel partners to broaden retail corporate bond distribution through online platforms beyond Tier-1 cities.”
— Tuhin Kanta Pandey, Chairman
The regulator plans to monitor IPO and bond proceeds more closely to ensure companies use the money exactly as they promised in their prospectuses. This move is aimed at preventing the diversion of capital and improving the transparency of how corporate funds are used.
“Third, strengthening corporate governance and capital stewardship. Public capital entails public accountability, and SEBI has proposed tighter monitoring of issue proceeds to ensure funds are deployed strictly as stated in offer documents, alongside a comprehensive review of debenture trustee oversight.”
— Tuhin Kanta Pandey, Chairman
Starting in November, direct mutual fund plans will be the default digital choice, and investors must be warned about the higher costs of regular plans. This structural shift will likely accelerate the move toward lower-cost investing and put pressure on traditional distribution models.
“On mutual fund disclosures, beginning November 1, direct plans will become the default option across AMC digital platforms, with platforms required to explicitly inform investors opting for regular plans about higher distributor expense ratios.”
— Tuhin Kanta Pandey, Chairman
SEBI is scaling its AI-powered ‘RADAR’ tool to monitor the entire financial ecosystem for compliance and early signs of corporate debt trouble. For investors, this provides an additional layer of protection by identifying potential defaults or stresses well before they hit the headlines.
“Fourth, leveraging technological innovation for proactive supervisory oversight. SEBI’s RADAR tool, which actively audits mutual fund and distributor promotional material, is being expanded across other intermediary categories. We are deploying in-house AI platforms to analyse compliance submissions from portfolio managers and asset managers, while piloting an AI monitoring tool across debenture trustee disclosures, exchanges, depositories, and credit rating agencies to detect early warning indicators of corporate debt stress.”
— Tuhin Kanta Pandey, Chairman
The regulator is exploring the creation of a sovereign AI model built specifically for the Indian financial markets. This would serve as a critical piece of digital public infrastructure, potentially standardising data usage and market monitoring nationwide.
“Finally, SEBI is assessing the feasibility, governance structure, and data protocols required to establish a domestically governed AI model designed specifically for the Indian securities market as digital public infrastructure.”
— Tuhin Kanta Pandey, Chairman
Building Materials
Asian Paints Limited | Large Cap
Asian Paints is India’s leading paint manufacturer and one of the largest globally, specialising in decorative and industrial coatings. The company has an extensive distribution network and is increasingly diversifying into home decor services and professional painting solutions.
Volume growth reached 7% while value growth significantly outpaced it despite a seasonal shift in premium product sales. Investors should note that a delayed festive season pushed high-margin sales into the next quarter, affecting current period profitability.
“Overall, the quarter has been fairly resilient. Volume growth stood at close to 7%, while consolidated value growth reached 16.5%. We have maintained double-digit growth over the last two quarters, successfully balancing strong top-line focus with consumer demand. This quarter was distinctly seasonal, and the product mix is not strictly comparable to others. Because of a delayed Diwali, a significant portion of our premium product mix shifted into October, which impacted this quarter’s margins alongside broader inflationary pressures and certain duty implementations.”
— Amit Syngle, Managing Director and Chief Executive Officer
The company is using price hikes and a new cost engineering initiative called VAE to protect its target margin range. These efficiency measures are crucial for maintaining profitability as the company enters the high-demand wedding and festive season.
“For the first half of the year, we maintained consolidated PBT margins at approximately 18.2%, with standalone PBT margins at 19.6%. Moving forward, we anticipate a strong festive and wedding season. We have already implemented calibrated price increases of about 3.5%. Furthermore, we have launched robust cost excellence measures across sourcing and formulations, including a new Value Analysis and Value Engineering (VAE) initiative kicked off on September 15th to drive cost advantages and premiumization in the second half of the year. Collectively, these measures should help us remain within our guided margin band.”
— Amit Syngle, Managing Director and Chief Executive Officer
Management is prioritising top-line growth even if it means settling at the lower end of their guided margin range. This indicates a strategic choice to protect market share in a competitive environment rather than maximising short-term margins.
“While we might settle on the slightly lower side of that band, our primary endeavour is to balance consumer demand and protect margins while maintaining a relentless focus on top-line growth.”
— Amit Syngle, Managing Director and Chief Executive Officer
Volatility in crude oil prices remains the biggest challenge for predicting whether input cost inflation has peaked. To counter this, the company is shifting its focus toward high-end premium products and internal cost-cutting to protect earnings.
“It is very difficult to view costs in isolation right now because we are highly susceptible to crude prices, and a large portion of our raw materials are direct crude derivatives. We cannot easily isolate the data and declare that overall inflation has peaked. We will have to monitor the situation critically. My estimate is that some of these challenges will persist. Our strategy is to navigate this by driving premiumization, optimising our product mix, and accelerating our internal cost-saving initiatives so we can sustain both healthy margins and robust demand.”
— Amit Syngle, Managing Director and Chief Executive Officer
Rural demand is currently outperforming urban markets, though management is carefully monitoring monsoon impacts. This shift suggests that rural recovery is a key driver for volume growth even as urban discretionary spending faces pressure.
“It requires constant balancing. In a discretionary category like home repainting and renovation, you have to closely monitor demand elasticity to see what the consumer is willing to absorb. We are taking it step-by-step; we have already taken an additional increase of about 3.5% in November. Currently, rural markets are growing at a faster pace than urban markets, though we remain mindful of a slight monsoon deficit that could impact later quarters.”
— Amit Syngle, Managing Director and Chief Executive Officer
Despite taking multiple price increases, management believes the brand still has the power to raise prices further if inflation persists. This pricing power is a critical moat for investors, allowing the company to pass on costs without losing significant volume.
“It is very difficult to quantify the remaining headroom as a specific percentage, but given our strong brand stature, we have the pricing power to take further increases if the inflationary environment demands it.”
— Amit Syngle, Managing Director and Chief Executive Officer
The company intentionally reduced its cash reserves to build a larger inventory buffer against supply chain shocks and price volatility. Investors can expect cash levels to normalise once the global raw material environment becomes more predictable.
“The external environment regarding raw material availability and overall inflation has been highly uncertain. To shield our operations from these supply chain and inflationary shocks, we calibrated our backend and strategically deployed that capital into building higher inventory levels across both raw materials and finished goods. As external pressures ease and the macro environment stabilises, we will recalibrate our working capital, and those cash equivalent balances should return to their historical ranges.”
— Amit Syngle, Managing Director and Chief Executive Officer
The company’s response to new competitors centres on branding, product innovation, and expanding into B2B and painting services. This multi-pronged approach aims to sustain market leadership by offering more than just the paint product itself.
“We are very clear on how Asian Paints will navigate this environment. We continue to rely on our core strengths. First, our 360-degree brand building remains exceptionally strong, keeping the brand highly aspirational and emotionally connected to consumers, which provides significant market leverage. Second, we are aggressively driving product innovation to ensure clear differentiation. Third, we have placed a massive impetus on our differentiated painting services. Finally, our B2B focus remains sharp, and our industrial segment has grown very well, which we are accelerating further. By executing on these specific strategic pointers, we are confident we will continue to outpace the market, just as we did in the first half of the year.”
— Amit Syngle, Managing Director and Chief Executive Officer
Welspun Corp Limited | Mid Cap
Welspun Corp is a leading global manufacturer of large-diameter pipes with a manufacturing presence across India, the United States, and Saudi Arabia. The company serves the oil, gas, and water transportation industries while diversifying into building materials and ductile iron pipes.
Management has decided to maintain its current full-year profit guidance despite a strong first half, citing severe global logistical challenges. This conservative approach suggests that while the business is performing well, shipping and geopolitical risks remain significant variables for the rest of the year.
“While it is tempting to revise guidance upward, we must recognise that the prevailing geopolitical landscape is shifting on a daily basis with variables entirely outside our operational control. The level of global supply chain disruption currently unfolding is mammoth and, in certain corridors, catastrophic. Shipments that companies plan and factor into execution schedules are running into acute logistical hurdles. Under such abnormal operating conditions, our philosophy is to promise what we can reliably deliver rather than overcommit. If conditions were entirely normal, an upward revision would be an easy call. However, given the broader global volatility, we believe it is prudent to maintain a conservative stance, stand by our committed guidance of 2,850 crore, and deliver on that baseline.”
— Vipul Mathur, Managing Director and CEO
The US operations are achieving much higher profit per ton than historical averages due to a better mix of high-value products. This high level of profitability is expected to stay consistent in the near term because the upcoming order schedule remains strong.
“Historically, our formal guidance for the US business has been anchored near $250 per ton in EBITDA, though our realised performance typically hovers around $300 per ton. In this past quarter, our EBITDA per ton expanded further because of a highly favourable high-margin product mix. Unit profitability in any given period is heavily dictated by the specific pipe grades and product mix running through the mills. The product mix scheduled for subsequent quarters remains strong, which gives us confidence that the US business will continue delivering robust profitability in line with recent elevated trends.”
— Vipul Mathur, Managing Director and CEO
Pipeline demand within India is currently weak, particularly in the water infrastructure segment, which has slowed down significantly. The company is relying on international export orders to offset this domestic weakness and keep its Indian factories running.
“Domestic execution in India is moving at an extremely slow pace, well below our expectations. The water sector in particular is struggling right now. While we are beginning to observe preliminary traction in domestic oil and gas pipelines, overall domestic execution remains an area of concern. What is keeping our Indian manufacturing base resilient is strong export traction, which continues to provide healthy volume visibility.”
— Vipul Mathur, Managing Director and CEO
Geopolitical tensions in the Middle East are causing logistical problems for the company’s major operations in Saudi Arabia. While management remains committed to the region’s long-term potential, these freight issues are currently acting as a drag on performance.
“Outside of India, we are heavily invested in Saudi Arabia, where we have deployed major capital expenditure. While we remain deeply convinced of the long-term fundamentals and opportunities in the Saudi market, the massive supply chain disruptions and freight bottlenecks caused by Middle East geopolitics are a temporary headwind that we are monitoring closely.”
— Vipul Mathur, Managing Director and CEO
The company has already secured most of its major work for the US market and is now moving into a phase of steady execution. This shift from massive individual contracts to smaller, frequent orders is expected to improve factory efficiency and delivery reliability.
“A very large portion of the order book has already been locked in. We maintain a clear, robust bidding pipeline with good visibility, but individual order sizes will naturally be more measured compared to the massive contracts awarded earlier. That gradual phasing is actually our preferred operating dynamic. When an entire order cycle converts simultaneously, it strains manufacturing capacity and can compromise delivery schedules. Having incremental orders trickle in across subsequent quarters allows for a much more balanced and efficient production schedule.”
— Vipul Mathur, Managing Director and CEO
The main risk for the company’s growth right now is the difficulty of moving materials into and out of Saudi Arabia due to shipping corridor closures. Rising freight costs and transit delays could slow down the planned increase in production from these new facilities.
“Fortunately, we do not carry heavy direct exposure on ocean logistics, which insulates us from the worst shipping liabilities. The primary operational risk lies in the production ramp-up of our Saudi facilities. Shipping raw materials into the Kingdom and exporting finished pipes out of the region have both become severely curtailed due to transit bottlenecks. Compounding that disruption is the exponential spike in global freight rates. Until regional shipping corridors stabilise, these inbound and outbound transit constraints represent a tangible operational hurdle.”
— Vipul Mathur, Managing Director and CEO
Welspun is finishing several major new factories in the US and Saudi Arabia, with most set to be fully operational by the end of the current quarter. These new plants will provide the capacity needed for the company’s next phase of volume growth.
“Our expansion projects remain completely on track. In Saudi Arabia, both manufacturing facilities will be fully commissioned and operational within the third quarter. In the United States, our High-Frequency Induction Welding (HFIW) plant is already commissioned, fully operational, and executing active orders. Our second US facility, the Longitudinal Submerged Arc Welded (LSAW) pipe plant, is scheduled to come online between the end of the third quarter and early fourth quarter.”
— Vipul Mathur, Managing Director and CEO
A large portion of the company’s cash is derived from upfront customer payments for future projects. Even while spending heavily on new factories, the company is maintaining a very strong balance sheet with more cash than debt.
“Approximately 2,000 crore of our reported cash balance represents advance payments received against large customer contracts. In addition to these advances, our underlying operations continue to generate healthy operating cash flows. Despite funding substantial ongoing capital expenditure across the US, Saudi Arabia, and India, our balance sheet remains comfortably net-cash positive.”
— Vipul Mathur, Managing Director and CEO
Welspun is expanding into Jordan to position itself for future reconstruction projects in the Middle East. This new venture is expected to add significant production capacity and annual volume within the next year and a half.
“Our entry into Jordan is a proactive strategic decision driven by deep regional conviction. We foresee substantial long-term reconstruction activity emerging across that broader geography once geopolitical stability returns. Establishing an early manufacturing and coating footprint provides a decisive first-mover advantage. We anticipate this venture will generate between 200,000 and 250,000 tons of incremental annual business once fully commercialised, with the facility targeted to be fully operational within an 18-month execution window.”
— Vipul Mathur, Managing Director and CEO
Management believes that the demand for energy infrastructure in the US is safe from political changes, regardless of election results. This suggests that the company’s most profitable segment has high long-term stability due to national energy security needs.
“We do not foresee significant policy disruptions to our underlying US demand. There is strong, bipartisan consensus across Washington that steel, oil and gas, automotive, and technology serve as the four foundational growth engines of the American economy. While minor regulatory nuances may shift at the margin, the strategic imperative for domestic energy security and midstream pipeline infrastructure enjoys broad institutional backing regardless of electoral outcomes.”
— Vipul Mathur, Managing Director and CEO
Financial Services
Motilal Oswal Financial Services Limited | Mid Cap
Motilal Oswal Financial Services is a diversified Indian financial firm specialising in wealth management, institutional brokerage, and asset management. The firm has successfully pivoted from a transaction-heavy brokerage model to a recurring fee-based structure driven by its large mutual fund and private equity portfolios.
Management reports that the business has undergone a structural pivot where two-thirds of profits now come from recurring asset and wealth management fees. This shift away from traditional brokerage is intended to create a higher-quality, more predictable earnings profile for shareholders.
“We delivered an exceptional second quarter, which honestly surprised even me. Operating profit grew 29% year-on-year to a record ₹718 to ₹720 crore, expanding roughly 15% to 17% sequentially. More importantly, Motilal Oswal Financial Services has undergone a fundamental structural transformation: two-thirds of our earnings now originate from asset management and wealth management, with traditional brokerage accounting for only one-third. That shift fundamentally enhances the recurring nature and quality of our earnings profile. The momentum across both our public mutual fund and private equity businesses has been strong. AMC profit alone rose nearly 69% to ₹304 crore, supported by year-on-year AUM growth exceeding 23% to 24%. In private equity, we executed profitable exits from Fund II and Fund III, while capital deployment for Fund V is progressing well. That 69% profit expansion in asset management provided the primary lift to our consolidated 29% operating profit growth, and we expect that momentum to carry through the second half.”
— Raamdeo Agrawal, Chairman
The company is benefiting from a strong IPO market which allows for lucrative exits and valuation mark-ups within its $2.5 billion private equity portfolio. Management anticipates a massive 14,000 to 15,000 crore rupee carried interest from a single fund over its lifecycle, representing a significant future cash flow catalyst.
“Across our five private equity funds, we manage approximately $2.5 billion. Value realisation is naturally linked to exit windows. During the quarter, we completed three successful exits—Molbio Diagnostics, Symbiotec, and Glass Wall—capitalising on the buoyancy of the domestic IPO market. When an unlisted company completes a public listing, it resets and marks up the carrying valuation across the entire fund. For perspective, our fifth fund was roughly ₹9,000 crore in size. Over an investment horizon of seven to nine years, we anticipate exiting that fund at approximately ₹25,000 crore, generating carried interest of ₹14,000 to ₹15,000 crore from that single fund alone. While realized multiples vary by vintage, our blended internal rate of return across the private equity platform has consistently tracked around 20%.”
— Raamdeo Agrawal, Chairman
Following a strong first-half performance, the company has officially raised its full-year operating profit guidance by over 16%. This upward revision signals management’s confidence that their operational momentum can withstand potential volatility in the secondary markets.
“Given the operating leverage inherent to capital markets, our stated earnings target was to compound around 20%. Based on our first-half performance of over ₹1,325 crore and underlying operational momentum, I see no structural reason why we cannot replicate or modestly improve upon that run rate in the second half. Even if secondary market activity turns somewhat subdued over the coming months, we comfortably expect full-year operating profit to cross ₹2,800 crore, running well ahead of our original ₹2,400 crore guidance.”
— Raamdeo Agrawal, Chairman
The firm currently holds its largest-ever pipeline of investment banking deals, with several IPOs slated for the immediate 30-day window. If conversion remains steady, this segment is expected to perform even better in the second half of the year than the first.
“The investment banking pipeline is exceptionally large; it could not be bigger. The primary variable is conversion timing and issue closings. While Q1 was quiet, Q2 delivered record deal activity. Q3 has started on a slightly more measured note, but deal flow remains warm, with three to four IPOs scheduled to close over the next 30 days. Barring severe external shocks, we expect our investment banking performance in the second half to match or exceed the first half.”
— Raamdeo Agrawal, Chairman
Management clarified that their rising debt levels are strictly used to fund high-margin client lending rather than to finance corporate overhead or risky bets. Because the firm holds a massive 11,500 crore rupee liquid treasury book, the external debt is viewed as low-risk operational leverage.
“That debt is entirely deployed into client financing—specifically our Margin Trading Facility (MTF) book and loans against shares (LAS). It is not corporate leverage used to fund balance sheet risks. At a proprietary level, our equity treasury book stands at over ₹11,500 crore, meaning all our own capital remains invested in liquid treasury assets. External debt is an operational necessity required to run a high-volume client financing business. As long as trading and underwriting activity remains buoyant, that credit book will continue to generate steady, predictable spreads through the second half.”
— Raamdeo Agrawal, Chairman
Despite recent selling by foreign investors, management points to 25% corporate earnings growth as a sign of underlying domestic strength. They believe current market valuations are at a historical floor, suggesting a favourable entry point for long-term investors before a likely cycle reversal.
“I focus strictly on earnings, and aggregate corporate earnings across declared results are growing at an impressive 25% year-on-year. You cannot ask for better fundamental support from the domestic economy. FII selling is not a verdict on Indian earnings quality; it is driven by geopolitical friction and currency risk surrounding the rupee. Global institutions will remain cautious until currency volatility stabilises. In terms of valuation, benchmark indices have corrected to around 18 to 18.5 times trailing earnings, which historically represents the lower boundary of the valuation corridor. While no one can predict the precise timing of the reversal, buying equities when multiples are scraping the bottom typically produces substantial upside surprises once the cycle turns.”
— Raamdeo Agrawal, Chairman
Potential changes to foreign investor taxation in the upcoming Union Budget could improve India’s appeal to global capital markets. However, the firm notes that broader factors like currency stability and US market performance remain the primary drivers of foreign fund flows.
“Policymakers have indicated that they are actively reviewing industry representations regarding FPI taxation, and the Finance Minister has noted it will be examined ahead of the Union Budget. Rationalising taxation will certainly enhance India’s long-term competitiveness as a foreign capital destination, but it is not the sole determinant. FII flows are dictated predominantly by currency stability and the sheer momentum of their home markets, particularly the US.”
— Raamdeo Agrawal, Chairman
The firm is closely watching a structural shift in the global technology sector where emerging AI models are threatening the dominance of established tech giants. This disruption could lead to a significant reallocation of international investment capital, potentially benefiting emerging markets like India.
“Interestingly, we are beginning to see cracks in US mega-cap technology leadership. The rapid rise of frontier AI models—such as ChatGPT, Claude, and Grok—is directly challenging legacy search monopolies like Google. The incumbent hyperscalers generate massive revenues and profits but now face severe technological headwinds, whereas emerging AI players command massive capital expenditure and top-line expansion without underlying net profits. That structural tension in global technology will play a major role in how international capital reallocates over the coming quarters.”
— Raamdeo Agrawal, Chairman
Engineering & Capital Goods
Gulf Oil Lubricants India Ltd. | Small Cap
Gulf Oil Lubricants India Ltd. is a leading manufacturer of automotive and industrial lubricants and is part of the global Hinduja Group. The company is actively expanding its footprint in the electric vehicle ecosystem through its EV charging infrastructure brand, Tyrex.
[Concall]
The company delivered 16% volume growth during the monsoon quarter, significantly outperforming the industry average despite global cost pressures. This broad-based growth across all segments highlights the company’s competitive resilience and ability to capture market share.
“Q2, again, is a testimony to our strong business model, which is very robust and consistent. We expected the monsoon, being a low-season quarter, to play its role, but we are delighted to share that the team has delivered these results, which are again industry-leading, with 16% growth. Despite a tough situation internally in terms of cost challenges and also the West Asia crisis, we are seeing costs remaining at the levels they were at. I think it has been a very good all-round performance by all segments. Each and every segment of ours has been able to grow. Even the B2C segment has shown that we are able to generate primary and secondary sales.”
— Ravi Chawla, Managing Director & CEO
Significant growth in OEM partnerships and industrial segments acted as primary drivers for the quarter’s strong performance. Investors should note that new industrial customers are now contributing a substantial portion of the company’s incremental growth.
“The two segments that performed very well, as we have given in our press release, were the OEM franchise workshop segment and OEM factory fill. OEM factory fill picked up for us in double digits; in fact, OEM franchise workshops grew in the high double digits. The B2B industrial segment was also a very good segment for us in this quarter, again growing in the high double digits. We continued our focus on looking at new customers, and some of the B2B industrial customers that came in contributed nearly one-third of the incremental growth.”
— Ravi Chawla, Managing Director & CEO
While the EBITDA margin landed slightly below the target range at 11.8%, the company successfully protected its absolute profit per litre. This indicates that management has been effective at passing through rising raw material costs to customers.
“At the same time, it is important to note that we have been able to maintain our margins more or less near the guided band of 12% to 14%. The margins for the quarter are 11.8%, which is very close to our guided band. On a per-litre basis, which we have highlighted in our previous calls as well, in an inflationary environment it is better to look at the per-litre metric. We have been able to protect our per-litre margins, which means that the cost increases have been passed on to customers and consumers on a per-litre basis.”
— Manish Gangwal, Whole-time Director & CFO
Working capital requirements have peaked due to higher inventory values and the need to support distributor liquidity during an inflationary period. Management expects improved cash flow generation in the second half of the year as these working capital levels stabilise.
“We have to be pragmatic about that, but in terms of the overall number of days, we would say that the level we have reached should be close to a peak. From here, if prices do not escalate significantly further, we should see some moderation. ... We have already factored the current cost dynamics into the H1 cash flows. From here on, in H2, if prices remain at these levels or trend within this range, incremental cash generation should be added to cash flows rather than going into working capital. We are quite close to the peak of working capital if things remain at current levels.”
— Manish Gangwal, Whole-time Director & CFO
Management is targeting double-digit volume growth for the second half of the fiscal year, maintaining its trajectory of growing 2-3 times faster than the market. This optimistic outlook is supported by expected seasonal strength and robust performance across diversified business segments.
“Normally, when the festive season arrives in October, November, and December, followed by January, February, and March, H2 generally has good conditions. We expect H2 to be good. However, because H1 also benefited to some extent from the supply issue, we expect H2 to have the normal 3-4% growth of the lubricant industry. The lubricant industry generally delivers 3-4% average growth, and we will deliver 2-3 times that. That is how we look at H2. We hope that the situation will be better for us because we have been able to push some other segments. ... we will obviously try to push and achieve 2-3 times the market growth, which will take us close to double-digit growth in H2 in volume terms.”
— Management, Executive Leadership
The company remains committed to expanding its EBITDA margins to a 14-16% range over the medium term. This expansion is expected to materialise as pricing stabilises and the company continues its focus on high-margin synthetic products.
“Our medium- to long-term trajectory is to move to the 14% to 16% band, which we have highlighted earlier as well. We also have to factor in that what has happened in the last 6 months is a significantly inflationary situation. Our top line has gone up significantly, whereas our endeavour is to protect our per-litre margin. That is why we have been guiding investors to focus more on the per-litre metric. ... This time also, we are at 11.8%, although on a per-litre basis we may be slightly higher than in previous years. Our endeavour is to protect the per-litre metric, and whenever there is an opportunity and prices stabilise, we will start our journey towards 14% to 16%. However, this is a medium-term journey. It is not going to happen in one or two quarters.”
— Manish Gangwal, Whole-time Director & CFO
Gulf Oil is maintaining a 1,200 crore cash reserve specifically for strategic acquisitions in the industrial and electric vehicle sectors. This suggests a shift toward inorganic growth to diversify the business beyond traditional automotive lubricants.
“We are cognizant of the fact that we carry 1,200 crore of cash on the balance sheet. The plan is clearly to have a war chest for mergers and acquisitions within the lubricant space, within our current business, and in adjacencies around it. We are focusing very clearly on the industrial segment as a major driver of growth for the Indian economy as well as for the lubricant sector in the coming years and decade. We are also looking at mobility as a major driver of Gulf Oil’s next growth phase. We continue to evaluate opportunities. We have made some investments, as you all know, and we are exploring opportunities in and around those EV businesses and the value chain. We also remain open to looking at merger and acquisition opportunities.”
— Manish Gangwal, Whole-time Director & CFO
The Tyrex EV charging division is scaling up capacity to meet rising demand from commercial bus operators and construction firms. Expansion into the DC charger market provides the company with a strategic foothold in the fast-growing EV infrastructure space.
“For us, Tyrex is an area where, as we have announced, we are going to increase capacity to 3,000 chargers, and that will happen sometime toward the end of this year. For us, Tyrex has a good portfolio in the DC market. We are now also looking at expanding the product portfolio for buses. It was a good quarter, showing that EV requirements in terms of chargers are increasing. ... We are also glad to share that many private buses and construction equipment companies are now looking at these options. It was a good Q2 for Tyrex, and we will also have expanded capacity coming in, with new products in the pipeline.”
— Ravi Chawla, Managing Director & CEO
The company has expanded its retail reach by 16%, targeting a distribution network that supports its goal of growing B2C sales at twice the market rate. This expansion of physical touchpoints is critical for competing in the premium motorcycle and car lubricant categories.
“Our distribution growth is going well. We used to talk about 90,000 outlets, but that is growing by approximately 10% to 15%. Every quarter, we try to increase it over the previous year. We have seen 16% growth in the number of outlets. Given that our brand is number two, we obviously need to create more touchpoints. We are investing again with mechanics and others, and we expect our B2C growth to be at least close to the requirement of 2 times the market growth rate. In fact, we want to exceed that, but given that there were some challenges last quarter, we will focus on achieving at least 2 times market growth in the B2C segment.”
— Ravi Chawla, Managing Director & CEO
Management expects AdBlue volume growth to settle into a steady double-digit range of 10-15% as the BS-VI vehicle fleet matures. This segment continues to be a reliable volume driver as older vehicle fleets are gradually replaced.
“AdBlue is applicable only to BS-VI vehicles. As the population of BS-VI vehicles increases, we see demand increasing. However, growth will no longer be exponential as it was during the last 5 years. It will now be calibrated in line with market growth and the BS-VI vehicle population. We estimate that we should grow our AdBlue volumes in double digits. Our guidance has been 10% to 15% in the past, and we are maintaining that going forward.”
— Manish Gangwal, Whole-time Director & CFO
The company is nearing completion of its capacity expansions in Chennai and Silvassa with a total capital outlay of approximately 62 crores. Although Silvassa faces a minor delay, these expansions are vital for meeting the company’s aggressive future volume targets.
“The expansion at Chennai is on track, and we should be able to have the increased capacity by the end of this quarter. The Silvassa capacity expansion is progressing well, but we see that there could be a delay of one or two months. The spillover may occur into Q1 of next year in terms of readiness, compared with our earlier target of March 2023. We should perhaps be ready by Q1 of next year. ... We were estimating 55 crore earlier, as announced. We now see an incremental requirement of 5-7 crore, which the board has sanctioned recently. The total capex for the expansion is now approximately 60-62 crore.”
— Manish Gangwal, Whole-time Director & CFO
Management argues that superior volume growth in both B2C and B2B segments will naturally improve margins through operating leverage. This reinforces the strategy of prioritising market share gains as a pathway to higher overall profitability.
“Our endeavour is threefold. Even if the mix remains the same, the bases are slightly different. If B2C grows at a certain percentage, say 2 times the market, and B2B grows at 3 times the market, the margin profiles are different. The 2 times growth in B2C will contribute much more in terms of margin than the balance. Therefore, even if we protect the 55-45 range and grow volumes faster in both categories—one at 2 times and the other at even 3 times—our margin profile should improve. With the incremental volumes, operating leverage, which we keep discussing, will always take effect. That should add to the percentage margins at the EBITDA level.”
— Manish Gangwal, Whole-time Director & CFO
Consumer Durables
Blue Star Limited | Small Cap
Blue Star is India’s leading air conditioning and commercial refrigeration company, catering to residential, commercial, and industrial segments. The company also maintains a significant presence in electromechanical projects, particularly within the rapidly growing data centre infrastructure sector.
Management is raising prices by 5% to offset a 15% spike in raw material costs that hurt margins earlier this year. This proactive pricing and cost-cutting suggest profitability will recover significantly in the second half of the year.
“Second-quarter performance showed marked improvement over the first quarter, delivering volume and revenue growth largely in line with broader market trends. However, operating margins continue to face headwinds across Segment 1 and Segment 2, predominantly within our cooling products portfolio. From January through September, cumulative input costs rose by roughly 15%, against which we were able to pass through only 7% to 8% in price increases to end-consumers, resulting in EBIT margin compression. The contraction was considerably sharper in Q1 and narrowed in Q2, though it remains below our target thresholds. To restore margin health, we implemented an additional 5% price increase effective October 1st, alongside aggressive cost-takeout and engineering value programs that will begin delivering tangible operational savings in the third and fourth quarters.”
— Vir S. Advani, Chairman and Managing Director
The company needs second-half margins to exceed 8% to meet its full-year profitability targets after a weak start. This high bar relies on the successful absorption of recent price hikes and better internal operational efficiencies.
“With the additional 5% price hike on October 1st, our cumulative price realisation stands at roughly 12% against a 15% increase in raw material input costs. The remaining 3% deficit will be closed entirely through internal operational efficiencies, value engineering, supply chain optimisation, and the selective outsourcing of certain value-segment products. We do not believe the consumer market can absorb further price increases beyond the October revision. For the full fiscal year, we project Segment 1—our commercial B2B projects division—to sustain EBIT margins of 7% to 7.5%, supported by rapid expansion in data centre electromechanical projects. For Segment 2, our room air conditioner and consumer products business, we are guiding for a full-year EBIT margin of around 6.5%. Because the first half was compressed, achieving that full-year target requires H2 margins to expand past 8%, with Q3 witnessing sequential margin recovery and Q4 returning to normalised historical levels.”
— Vir S. Advani, Chairman and Managing Director
Strong demand in October and a robust festive season are driving 25% annual growth expectations for the air conditioning industry. This indicates healthy consumer sentiment and strong momentum for the company’s core cooling products.
“Our room air conditioner revenues expanded by nearly 40% in the second quarter, matching overall market expansion. That growth was supported by an extended summer season as well as a favourable base effect from the previous year, when customers deferred purchases ahead of anticipated GST rate rationalisations. October has been exceptionally strong, festive demand leading into Diwali remains robust, and full-year industry volumes are projected to grow by approximately 25%, with Blue Star tracking closely in line with the broader market.”
— Vir S. Advani, Chairman and Managing Director
Blue Star is prioritising profit recovery over gaining more market share, aiming to hold its current 14.25% position. This disciplined approach suggests the company will avoid destructive price wars that could erode earnings quality.
“While we trailed overall market growth in the first quarter, our second-quarter performance caught up with the industry. For the second half, our objective is to match market growth and defend our existing footprint rather than aggressively buy incremental market share. Navigating elevated input costs requires a disciplined balance between pricing realisations and volumes. Blue Star’s market share currently stands at approximately 14.25%, and our strategic priority is to maintain that share through the end of the fiscal year while rebuilding operating profitability.”
— Vir S. Advani, Chairman and Managing Director
Reported profits for the quarter were bolstered by one-time gains from selling the medtech business and a warranty write-back. Investors should focus on core operational performance to gauge the business’s true underlying health.
“During the period, we completed the divestment of our medtech business within Segment 3 for a total consideration of ‹35.5 crore, recognising an exceptional gain of ‹23 crore. Separately, within our reported segment operating profit of ‹23 crore, approximately ‹12.5 crore was attributable to a one-time warranty provision write-back executed as part of the asset transfer agreements.”
— Vir S. Advani, Chairman and Managing Director
The company is seeing massive demand for data centre projects with an annual order target of up to 3,500 crore. This shift toward specialised B2B projects provides a strong growth runway outside of traditional retail cooling products.
“In our electromechanical data centre projects business, we booked approximately ‹1,500 crore of new orders during the first half, representing substantial expansion over the previous year. Order inflows remain on track to achieve another ‹2,000 crore in the second half, making our full-year intake target of ‹3,000 to ‹3,500 crore readily achievable. Securing project orders is not our operational constraint; we remain highly selective regarding client counterparty risk, payment structures, and site readiness. The primary bottleneck is execution bandwidth, spanning internal engineering and project management capacity alongside tight component allocations from core electrical and HVAC equipment vendors whose factories are operating at peak utilisation.”
— Vir S. Advani, Chairman and Managing Director
Growth in the high-margin data centre segment is being limited by supply chain shortages and internal management capacity rather than a lack of orders. A predicted acceleration in billing during the second half could lead to a significant revenue jump.
“The primary bottleneck is execution bandwidth, spanning internal engineering and project management capacity alongside tight component allocations from core electrical and HVAC equipment vendors whose factories are operating at peak utilisation. While supply constraints kept first-half billing relatively flat despite elevated order inflows, we anticipate a meaningful acceleration in billing and revenue conversion during the second half.”
— Vir S. Advani, Chairman and Managing Director
Management expects the crowded air conditioning market to consolidate as smaller brands struggle with poor profitability. Blue Star’s established service network and brand trust are viewed as critical defensive moats for long-term survival.
“While contract manufacturing makes entry frictionless for asset-light brands, long-term survival ultimately depends on return on capital and sustainable unit economics. Over the next two to three years, the industry is far more likely to undergo consolidation rather than witness the brand count expand toward 100 players. Establishing a top-three or top-four market position provides an indispensable competitive moat across distribution, after-sales service infrastructure, and brand trust. While Blue Star historically prioritises operating profitability over aggressive market share chases, protecting our scale and volume relevance in room air conditioners remains essential to our long-term positioning.”
— Vir S. Advani, Chairman and Managing Director
That’s it for now! Your feedback will really help shape how The Chatter evolves. Drop it down in the comments below!
Quotes in this newsletter were curated by Shahid Barmare.
Join us on WhatsApp, where we share interesting soundbites from concalls, articles, and everything else we come across throughout the day. You’ll also get notified the moment a new video or article drops, so you can read or watch it right away.
Disclaimer: We’ve used AI tools in filtering and cleaning up these quotes, so there may be some mistakes. Now, if you are thinking why we are using AI, please remember that we are just a small team of 5 people running everything you see on Zerodha Markets 😬 So, all the good stuff is human, and mistakes are AI.