💰 Financial Performance

Revenue Growth by Segment

Total revenue for H1 FY26 reached INR 2,065.01 Cr, a 10.86% increase from INR 1,862.69 Cr in H1 FY25. The Petroleum Products segment grew 10.92% YoY to INR 2,045.19 Cr, while the Wind Power segment grew 10.79% YoY to INR 24.43 Cr. This growth was primarily driven by a 5% increase in volumes, although partially offset by lower realizations due to falling base oil prices.

Geographic Revenue Split

Exports currently contribute between 15% and 20% of total revenue (approximately INR 572 Cr to INR 763 Cr based on FY25 revenue). The company is strategically focusing on increasing this share to enhance geographical outreach and provide a natural hedge against foreign exchange fluctuations.

Profitability Margins

Net Profit Margin for H1 FY26 improved to 4.6% from 3.7% in H1 FY25. Profit After Tax (PAT) for H1 FY26 was INR 96.5 Cr, representing a 36.1% increase over INR 70.9 Cr in H1 FY25. However, operating margins remain susceptible to base oil price volatility, with a downward sensitivity trigger if margins fall below 7% on a sustained basis.

EBITDA Margin

EBITDA for H1 FY26 stood at INR 150.1 Cr, up 20.56% from INR 124.5 Cr in H1 FY25. The EBITDA margin improved by 50 basis points to 7.1% from 6.6% YoY. Core profitability per unit saw significant historical volatility, with EBITDA per KL dropping to INR 3,680 in FY25 from INR 6,319 in FY24 due to increased marketing spends and geopolitical issues.

Capital Expenditure

Annual maintenance capex is consistently between INR 35 Cr and INR 40 Cr. Planned expansionary capex for the medium term is projected between INR 65 Cr and INR 120 Cr, intended to be funded entirely through internal accruals without new debt.

Credit Rating & Borrowing

The company maintains a 'Negative' outlook from CRISIL as of 2025, primarily due to margin volatility. Despite this, the financial risk profile is strong with a TOLTNW ratio below 0.56 times and interest coverage exceeding 8-10 times. Borrowing costs are minimal as the company is virtually debt-free, with short-term debt consisting only of trade acceptances.

⚙️ Operational Drivers

Raw Materials

Base oil is the primary raw material, accounting for 85% to 90% of the total input cost. Additives are also used to derive specific characteristics for transformer and white oils.

Import Sources

Over 80% of base oil requirements are imported due to limited domestic availability in India. Specific import regions include the Middle East and other global markets, exposing the company to transit times of 4 to 6 weeks.

Key Suppliers

While specific supplier names like HPCL or Saudi Aramco are not explicitly listed in the provided text, the company relies on major global base oil refiners for its 80% import requirement.

Capacity Expansion

Current combined manufacturing capacity is approximately 550,000 KL per annum across facilities in Turbhe, Mahad, Kharadpada, and Silli. Wind power capacity is 53.80 MW, which generated INR 31 Cr in revenue in fiscal 2023.

Raw Material Costs

Raw material costs for H1 FY26 were INR 1,690.45 Cr, representing approximately 81.8% of total revenue. This is an increase of 7.07% from INR 1,578.76 Cr in H1 FY25. The company manages costs by passing on price increases to customers with a lag.

Manufacturing Efficiency

The company leverages technical approvals from key customers as an entry barrier, as these approvals are time-consuming for competitors to obtain, ensuring high utilization from sticky B2B clients.

Logistics & Distribution

Logistics costs are impacted by 'Red Sea' geopolitical issues, which have led to increased freight charges, contributing to the margin compression seen in the export segment.

📈 Strategic Growth

Expected Growth Rate

3-5%

Growth Strategy

Growth will be achieved through a 3-5% expected volume increase in transformer and lubricating oils. Key strategies include the aggressive marketing of the new 'Savsol Ester 5' brand to capture high-end lubricant market share, increasing export revenue to 20% of the total mix, and leveraging technical approvals to maintain leadership in the transformer oil segment.

Products & Services

Transformer oil (for power distribution), white oil (for cosmetics and healthcare), and automotive and industrial lubricants.

Brand Portfolio

Savsol, Savsol Ester 5.

New Products/Services

The company recently launched 'Savsol Ester 5', a high-performance lubricant technology. While specific revenue contribution % is not disclosed, it is the primary driver for the company's increased marketing spend and market share strategy.

Market Expansion

Expansion is focused on increasing the export footprint beyond the current 15-20% revenue contribution, targeting new geographical regions to stabilize the revenue profile.

Market Share & Ranking

SOTL is a market leader in the Indian transformer oil and white oil industries, though specific percentage market share is not provided.

Strategic Alliances

The company consolidates Savita Greentec Ltd (SGL) due to common management and financial interlinkages.

🌍 External Factors

Industry Trends

The industry is shifting toward specialty lubricants (Ester technology) and green energy. SOTL is positioning itself by launching high-tech brands and maintaining a 53.80 MW wind power portfolio to align with ESG trends.

Competitive Landscape

The industry has low entry barriers for basic processing, leading to intense competition and thin margins. SOTL competes by focusing on specialized, high-margin products like transformer oils where technical barriers are higher.

Competitive Moat

The moat is built on 'Technical Approvals' from major power and industrial utilities, which act as a high entry barrier because the approval process is lengthy. This is sustainable as long as SOTL maintains its quality standards and R&D edge.

Macro Economic Sensitivity

Highly sensitive to global crude oil prices and GDP growth, as demand for lubricants and transformer oils is linked to industrial activity and power infrastructure spending.

Consumer Behavior

Increased demand for high-performance automotive lubricants and growth in the FMCG/Healthcare sectors (driving white oil demand) are positive shifts for SOTL.

Geopolitical Risks

The Red Sea crisis is a major risk, causing increased freight costs and shipping delays for the export business, which contributed to a decline in EBITDA per KL in FY25.

⚖️ Regulatory & Governance

Industry Regulations

Operations are subject to environmental norms for chemical processing and technical standards for transformer oils set by power distribution SEBs.

Environmental Compliance

The company operates 53.80 MW of wind power, indicating a strong commitment to renewable energy compliance and carbon footprint reduction.

Taxation Policy Impact

The effective tax rate for H1 FY26 was approximately 24.5% (INR 31.3 Cr tax on INR 127.8 Cr PBT).

Legal Contingencies

The company has disclosed pending litigations in Note 27 of its financial statements. Auditors have reviewed these and confirmed that management has made adequate provisions for material foreseeable losses on long-term and derivative contracts.

⚠️ Risk Analysis

Key Uncertainties

Volatility in base oil prices (85-90% of cost) and forex fluctuations are the primary uncertainties, with a potential 300 bps margin impact as seen in previous cycles.

Geographic Concentration Risk

Domestic India accounts for 80-85% of revenue, indicating high concentration in the Indian power and automotive sectors.

Third Party Dependencies

High dependency on global base oil refiners for 80% of raw material supply, making the company vulnerable to global supply chain disruptions.

Technology Obsolescence Risk

The shift toward Electric Vehicles (EVs) could eventually reduce demand for traditional automotive lubricants, which SOTL is mitigating by focusing on industrial and transformer oils.

Credit & Counterparty Risk

Receivables are expected to increase as the company grows its export business, but current liquidity is strong with cash and equivalents of INR 408 Cr as of September 2025.