Gandhar Oil Refinery: Navigating Global Headwinds While Building Long-Term Growth
By Neha Gupta, Research Analyst
New Delhi | Gandhar Oil Refinery (India) Limited delivered a resilient operational performance in FY 2024–25 despite one of the toughest years for global supply chains. Geopolitical tensions, Red Sea shipping disruptions, the Russia–Ukraine conflict and instability in the Middle East significantly increased freight costs and disrupted international trade. Yet, the company successfully adapted by shifting its focus towards the domestic market, helping manufacturing sales volumes rise to over 5 lakh kilolitres during the year.
Although profitability came under pressure, Gandhar Oil continued to invest in capacity expansion, premium product categories and operational efficiency, reinforcing its long-term growth strategy.
Fundamentals: Building a Value-Added Lubricant Business
Gandhar Oil is one of India’s leading manufacturers of white oils, lubricants, process oils, transformer oils and personal & healthcare performance oils (PHPO). Rather than competing solely on commodity products, the company is increasingly focusing on value-added specialty oils that offer better margins and stronger customer relationships.
Management believes that diversification across industrial, automotive and healthcare applications provides resilience against fluctuations in any single segment.
Industry Tailwinds Supporting Growth
The lubricants and specialty oils industry continues to benefit from several long-term structural drivers:
- Rising industrialisation across emerging economies
- Growing demand for specialty lubricants and transformer oils
- Increasing adoption of automation and digital manufacturing
- Expansion of automotive and industrial production
- Stable crude oil prices creating opportunities for better sourcing contracts
At the same time, global geopolitical disruptions continue to influence freight costs and raw material availability, making supply chain management a key competitive advantage.
Growth Strategy & Expansion Plans
Despite near-term challenges, Gandhar Oil continued executing its expansion roadmap.
Silvassa Plant Expansion
The company is expanding automotive oil manufacturing capacity at its Silvassa facility, utilizing IPO proceeds for the project.
Out of the allocated ₹277.29 million, approximately ₹233.11 million had already been deployed by March 2025, indicating that the project remains on schedule.
Premium Product Focus
Management continues to increase investments in Personal High Performance Oils (PHPO) and other specialty products, which are expected to generate higher margins over the long term.
The company is also exploring both organic expansion and strategic inorganic opportunities to strengthen its market position.
Execution: Walking the Talk
One of Gandhar Oil’s biggest achievements during FY25 was its ability to adapt quickly to changing global conditions.
Instead of relying heavily on exports affected by high freight costs, management successfully shifted its focus toward the domestic market.
Key execution highlights include:
- Manufacturing sales volumes increased to over 500,000 kL
- Domestic revenues recorded healthy growth
- IPO proceeds continued to be deployed as planned
- Capacity expansion projects remained on track despite global disruptions
These developments demonstrate management’s operational flexibility during a difficult business environment.
Governance & Management
The company maintains a balanced governance framework with an equal mix of Executive and Independent Directors, including two Independent Women Directors.
The statutory auditors issued an unmodified (clean) audit opinion, confirming that the financial statements present a true and fair view.
An encouraging governance signal was the reduction in promoter remuneration during FY25. The remuneration of the Chairman and Joint Managing Directors declined by approximately 11–12%, broadly reflecting the company’s lower profitability during the year.
There were no changes in the Key Managerial Personnel, indicating stability in senior leadership.
Risks Investors Should Monitor
While Gandhar Oil has demonstrated resilience, investors should keep an eye on several important risks.
Global Supply Chain Dependency
The company remains dependent on international refineries for key raw materials, making it vulnerable to geopolitical disruptions and freight volatility.
Contingent Liabilities
Standalone contingent liabilities stood at approximately ₹326 crore, including letters of credit, corporate guarantees and tax-related disputes.
Related Party Exposure
Although all related-party transactions were conducted on an arm’s-length basis, a significant proportion of loans and advances remain linked to related entities, warranting periodic monitoring.
Bank Reporting Observation
One point highlighted under the CARO report relates to differences between quarterly statements submitted to banks for working capital facilities and the company’s books of accounts. While this did not affect the clean audit opinion, investors may wish to monitor future disclosures regarding this observation.
Financial Discipline
The company continues to maintain disciplined cost management.
Miscellaneous expenses represented only 0.034% of standalone revenue, indicating tight control over administrative expenses.
Financial reporting remains fully compliant with Indian Accounting Standards (Ind AS), and the auditors did not identify any aggressive accounting practices or material qualifications.
Conclusion
Gandhar Oil Refinery demonstrated strong operational resilience during FY25 by successfully navigating one of the most challenging global business environments in recent years. While geopolitical disruptions significantly impacted profitability, the company’s ability to shift towards domestic markets, continue executing expansion projects and maintain financial discipline reflects strong management execution.
Looking ahead, the successful completion of the Silvassa expansion, continued investment in premium specialty oils and recovery in global trade conditions could support future growth. However, investors should continue monitoring freight costs, global supply chain risks, contingent liabilities and the CARO observation relating to bank reporting as the company executes its next phase of expansion.
Disclaimer: This article is for educational purposes only and does not constitute investment advice. Investors should conduct their own research before making financial decisions.