Manan Mehta, Whole Time Director of Arabian Petroleum Ltd., shared insights into the company’s growth journey, expanding lubricant portfolio, and future plans across industrial, automotive, defence, and speciality chemicals. He also highlighted how the company is strengthening capacity, diversifying supply chains, and building a global presence through innovation and strategic expansion.
Mubina Kapasi: Hi everyone and welcome to SmallCap Spotlight. Arzol is a lubricant brand that you may have heard of and might be even using for your auto vehicle. But today I have with me the company that manufactures this brand, Arabian Petroleum, and its whole time director, Mr. Manan Mehta.
Hi Manan, thanks so much for joining us today. Thank you so much for inviting me here. So I think I gave our viewers a brief glimpse into what the company does, but love to hear it from your own words.
How would you describe Arabian Petroleum today?
Manan Mehta: So Arabian Petroleum Ltd basically were into manufacturing of lubricants and these lubricants are of variety of types. So the applications include automotive which you use in your vehicles, industrial which is used in the factories, defence applications, aviation applications. So the applications range plentiful and we produce almost I would say 90 percent of the application that is lubricants are used for.
And in terms of you know the product lines, there are different product lines that encompasses these lubricants. So for instance, hydraulic oils, gear oils, the engine oils, coolants, brake fluids and different type of industrial uses also. So we at Arabian Petroleum, we divide our business into six different verticals, industrial, automotive, government business, exports, private label and process oils.
So that’s how we have different vertical and different, I would say responsible leader for each segment and I mean we have our own growth and strategy for each of the vertical. We export to about 32 countries globally and in India we are present almost in 26 different states of India. We have about 10 warehouses span India to service because lubricants per se is something which is required sometimes for factories at that instant itself.
So for service, we have these 10 different warehouses where we cater to all of our customers from and yeah, that’s in just about what we do at Arabian Petroleum.
Mubina Kapasi: So I understand the company was established in the 80s. Could you give us a brief history into you know the genesis and the creation of Arabian Petroleum?
Manan Mehta: Yeah, sure. So it started, it was started by my father back in 1981. The first company that my father started was Eastern India Company and we started with trading of lubricants. So at that point of time, there were very few manufacturers who were present in India and trading was the only option.
Gradually as business grew, as the customer base grew, back in 2006, he conceptualised that we should really think of entering into manufacturing. So per se he was not a technical guy, so more of a commercial guy, so was a little bit of, little bit sceptical whether we should enter or not enter into this field. But then fortunately, I mean, I took up chemical engineering myself.
So at the back of his mind, he might have really thought that somebody would join me and let’s try to you know get into manufacturing. So in 2009, we started off with manufacturing in Taloja. That was our first setup and then gradually we moved to 2000, in 2015 to Amarnath and the further expansion, the second factory came up in 2019 onwards and from there we have been growing.
Mubina Kapasi: So I think that’s in brief about the history of the company. So the fact that you were doing chemical engineering and manufacturing was slowly coming up, it was probably a given that you’re going to be joining the business. What was your career trajectory?
Manan Mehta: Yeah, absolutely. It was more of it, it was thought that I would definitely would love to join my father as a business. So we being Gujaratis, definitely business is something that we are really fond of and our entire family is into business, different businesses all together. So I wanted to actually join my father and so that’s why I took up chemical engineering and right from the time that he started this business, that was at his home.
I think my mother was the first employee. So by the time we started, I think I used to contribute how much ever I can in terms of English vocabulary or any kind of you know, letter writing, whatever I could do within my capacity. So I was always fond of it and wanted to really contribute wherever I can and that’s when he also realised that you know, I have probably my wife and my son who’s going to join me and then let’s try doing this and that’s how I also joined.
So I completed my graduation and MBA also and then subsequently I joined the company in 2012. Now, I think this is a question that all of our viewers are going to want to ask considering the world that we are in as we speak. Right now, as on the date of recording this interview at least, there is a geopolitical crisis that’s brewing.
Now our questions are not short term, you know, what’s going to happen in the next three months. We always like to focus on the bigger picture and unfortunately the bigger picture is that this is not the first crisis and it is not going to be the last one either.
Mubina Kapasi: So considering that your raw material of lubricants is crude oil or the raw raw material is crude oil, how are you sort of not completely ring fencing but at least trying to ring fence yourself from all the geopolitics that happen that impact your operations?
Manan Mehta: True, I think at the moment when we speak of this, definitely the world is witnessing something which is very unique in its nature. Although we have seen wars, we have seen a lot of other times like COVID as well. But then this is something that is straining the entire supply chain of crude per se and crude definitely is a raw material for so many other by-products also and our raw material which is called as basal is also derivative of crude. So yes, India per se is impacted by the Middle East crisis.
The good part is the government, the way it has handled the crisis is I think very very appreciable. The diplomacy that has come in, you know, having relationships with Russia, with US, with Iran and all the countries who are at stake in this particular crisis is something which the government has really focused on and that’s why you see today Hindustan Petroleum, Bharat Petroleum, Indian Oil all operating probably at its full capacity. So there is no dearth of crude, there is no dearth of any other by-product per se.
We have ample supplies of basal which are coming from these refineries also, apart from the import sources which we are already tied up with. So to re-defence ourselves and to have the supply security, we definitely try to diversify our supplier base and we have imports from US, from Korea, from Middle East, from Turkey, from elsewhere across the world, from Singapore. So that’s where we have, you know, build a relationship with supplier and the relations are, you know, being tested at these trying times and I am happy to state that, you know, all our suppliers have really supported us and so far I think we have been able to secure a lot of supplies for our customers and no customer orders has been impacted and that’s the good part about it.
Mubina Kapasi: Yes, I mean moving forward, we don’t know how things will progress but I think we should be able to call some truce to this war. So let’s speak about the customers then. You mentioned automotive and industrial. Could you tell us a bit about the kind of products you’re supplying to them and, you know, what would be the split? Is there a margin difference and things like that?
Manan Mehta: Yeah, so per se, when we sell in our own brand, as I mentioned, we do a little bit of private labelling also but selling in our own brand is our focus and when we sell it in our own brand, industrial encompasses a wide variety of applications. So it ranges from industries like chemical, pharma, steel, metal, cement, I mean you name the industry per se or name a factory, they would require certain quantity of lubricants. So we supply to almost all industry verticals.
That’s how we, you know, cushion ourselves from any kind of industry impacts also or cyclical impacts that we have in the industry per se. The products that we are very, very, I would say, focussing on are the metalworking range of products which are required for automotive, engineering, steel, you know, production per se. So metalworking fluids is our strength and that’s how we have grown our business in metalworking fluids also.
We produce for ourselves. We have reverse engineered many products. At the same time, we have backward integrated also a lot of chemistries which we used to buy from suppliers.
So now we produce our own raw materials which are required for producing even these metalworking fluids. So these are called as certain additives which we in turn supply even to the lubricant industry. So that’s how we are building up strength in the industrial lubricant space.
There is a new development which obviously we have informed to all our investor fraternity also that our new company, I mean, it’s a subsidiary of Arabian Petroleum Limited which is Lavisa Technologies. So this company, we have done a business transfer agreement with this company and the business transfer is from a company called as Imal Sikkim Lubricants which was 60 years into speciality metalworking fluid production of speciality metalworking fluid. So these definitely are high value, high margin based products and where we are trying to sell these to OEMs.
So Lavisa is going to sell the product lines majorly to the OEMs and the industry at large where the speciality metalworking fluids are required. Arabian has always been strength in the distribution, has always had the strength in distribution and in the tier 1, tier 2 customers. So that’s how the market and the product fit is going to be.
That’s about industrial. Talking about automotive, yes, automotive brand building is something that we are constantly looking at and Arzol now is gaining popularity in a lot of markets and so the product range encompasses of you know different kinds of engine oils which are for cars, which are for motorbikes, which are for even heavy commercial vehicles. We do off-highway equipments also like your earth moving equipments, lubricants for them as well, greases, coolants, brake fluids, diesel exhaust fluids.
So wide variety of lubricants in the automotive space as well.
Mubina Kapasi: Okay, I understand there is a new nanotechnology as well that you are infusing in one of your products. I mean obviously it’s going to be a more premium product too. So could you tell us a bit about that?
Manan Mehta: Yeah, so we have a tie up with a company called as Hado where we use this technology which is a ceramic nanotechnology product is patented across four continents by the company and in India we are the principal company who they have partnered with. So we use these molecules in our formulation. The beauty of this product is that it guarantees your fuel saving.
So now a lot of our channel partners are using it to sell to the taxi fleet which are very popular in the metro cities where the, be it any fuel, be it petrol, be it CNG, be it diesel. So it helps you to save fuel for sure. At the same time it also restores your older engine.
It brings it back to its life. So it does this by increasing the compression of the engine. So this is something that once you use this product you will definitely become a fan of the product and that’s how we have seen business grow in this particular vertical as well.
Mubina Kapasi: So talk to me about your production capacity. I understand that you are in a phase of expansion. We will come to that.But currently how much of lubricants and different products can you produce?
Manan Mehta: So we are having a production capacity of about 48,000 kilolitres per annum. Right now we are producing somewhere about 35,000 kilolitres. Definitely there is not a manufacturing challenge but there becomes a filling challenge because the packs that we sell in, these are small retail packs like 1 litre, 5 litre, 500 ml.
So filling takes its fair bit of time and that cannot be compressed in a certain state. So filling becomes a bottleneck as you progress. Still we have the manufacturing capacity available.
The filling capacity becomes day by lesser when the volume improves. So that’s where we are, we want to really expand our filling capacities also with the upcoming project that is going to be commissioned in the next 6 months odd and that’s how we want to de-bottleneck the existing plant. Apart from that, yes, as we Literally de-bottleneck because you are literally trying to fill it in a bottle.
Exactly. So apart from that also this takes up a lot of packaging space. So that’s also something that we want to free up or take it elsewhere.
Right now we have our raw materials stocked at different ports. For example, we have high tanks at port to store raw materials because in this kind of critical juncture it is very important for us to hold the inventories as much as we can to service our customers. So we are also looking at setting up our own tanks, furthermore tanks for even raw material storage in the new upcoming expansion.
Mubina Kapasi: So basically you have the manufacturing capacity to take it to 48,000 but it’s kind of at that 35,000 level because of the packaging procedure, the bottling procedure as you mentioned. So tell us a bit about that expansion plan and how you particularly going to focus on this particular part of the operation.
Manan Mehta: Exactly. So from what we intend to do in this particular expansion is we are building up tanks for our raw material storages as I already mentioned to you. So a lot of outside storage we plan to move in-house. So that’s somewhere about a 2,500 KL roughly.
I would say currently we are having about 2,000 KL of in-house storage facility which we are further taking up to totally 4,500. So 2,000 plus 2,500 that will double up our internal storage capacity. At the same time whatever port storages that we may have that is going to be there.
So one is obviously cutting down costs on something that we use to store outside. So that’s going to impact our operations. Secondly as I mentioned to you we are going to move a lot of bulk filling and bulk storages to this particular plant where we intend to have big size of batches.
So currently if we are producing somewhere about 15 KL of batch for a one particular SKU. We may be producing the same SKU maybe every day if it’s a high selling SKU. So we want to increase it to 40 KL capacity and we want to restrict the production to maybe once in three days.
Okay. And that’s how we are going to increase the efficiency also of the batches. Subsequently with every batch the testing period comes down.
So with every reduction in batch the testing period comes down and subsequently the filling also comes down. So that’s how we plan to improve the efficiency also and de-bottleneck and move away all the bulk filling operations from this plant existing plant to the new plant. And we’ll free up a lot of capacity here to produce industrial specialities as well as do a lot of retail pack filling.
Mubina kapasi: So what will your I mean in apart from the you know taking care of the storage part of it, what will it increase your manufacturing capacity to?
Manan Mehta: So this will add up another 30,000 KL of capacity. So taking the total to about 78,000 kilolitres per annum. So this is an intermittent I would say expansion that we have planned and for sure in a couple of years we are planning to centralise a lot of manufacturing at one place because this is going to be a little bit away from the existing plant.
So you want to you know centralise all the manufacturing, expand the manufacturing from 78,000 to about 1 lakh and we plan to have this in three phases. So maybe 1 lakh to start with and then a couple of lakh more to add on in the next three phases. So that’s going to take about a couple of years from now but yeah that’s going to be a definitely a sizable expansion that is going to be that’s going to be there in the near future.
Mubina Kapasi: Automotives is obviously a big chunk of your customers. With this gradual shift slowly but gradual shift that is happening from your ICE engines which primarily are consumers of lubricants and greases to EVs, is there a change in consumption of your product in EVs?
Manan Mehta: Yes, we have to admit that with EVs the lubricant demand for a one particular vehicle will come down to about 20 to 25 percent based on the vehicle. So but still there will be usage of brake fluid, there will be usage of greases, there will be usage of certain coolants and transmission fluid which is going to be there in the EVs but yes naturally it is going to come down.
In India per se the penetration of vehicles is still very low as compared to US or China. For us we don’t really foresee a major slump in the demand that is going to be there in the coming few years. Definitely I mean with a company like Exxon Mobil which is probably number one lubricant in the world is setting up a greenfield project in India for manufacturing of lubricants.
So that reinforces our spirit and that reinforces the belief that the lubricant requirement is going to be there for sure in the future and is going to grow. Apart from that not just the automotive industries in India is also going to grow. So we see a lot of industrialisation still happening in India and lot of room for us to grow as a country.
So I think the demand for lubricants in industrial space is going to definitely grow from here. When we talk about expansion of electric vehicles into the earth moving equipments or the heavy commercial vehicles that is also going to take its own sweet time. And if you talk about the total consumption of lubricant in automotive 60% is still with the off highway equipments like the earth moving equipments and the heavy commercial equipments which is still far fetched in terms of impact or the electrification that is going to happen.
So still I think probably it is the 10th year for India where we are seeing electric vehicles which are coming in the market and we see about 4% penetration as of now. So still a long way to go and I think the vehicle park will increase whatever vehicles are being sold today are going to be there for next 15 years for sure. So I don’t see this you know a very big challenge for us in the coming few years.
Mubina Kapasi: How do you perceive competition from names like Exxon or Castrol etc?
Manan Mehta: Yeah so competition is there in every bit of you know the industry and we I would say focus on competition product wise. So for instance if I have to give you an example if I talk about metal working fluids as I told you it’s our strength and that’s what we focus on in terms of building. So we do a lot of customisation when it comes to application for our customers.
So we have a dedicated technical services team who goes to our customers, who studies their application, who sees what is going to suit them and we tailor make a product for them. Now that benefit the customer gets that he gets a very specific tailor-made product for his application which the larger players for example Castrol or Exxon or Hindustan Petroleum or Bharat Petroleum for instance would not be able to do it at their scale. That scale would not warrant them to also do that specifically but then yes that’s where we you know find our value and that’s how we’ve built on our customer base.
So these customers then stick with you for long and that’s how you try and the industry works on reference. So if a customer is using our product he would recommend it to a certain other customer using a specific application or making the specific application. So he would recommend those kind of products.
So that’s how we normally nurture the you know product and work on the product and get it across to all the applications that you know we have designed it for. So that’s how we have grown and there are various examples where I can you know probably talk about how we have you know beaten competition. So for us as I told you it’s a very product specific competition that we look at.
Sometimes yes in the automotive space definitely brand is something that that really impacts the customer. So if you go and want to buy an oil obviously the shopkeeper or the mechanic or the retailer would definitely ask you to buy a cast all or kind of a product. But then or you would be seeing those advertisements by yourself and you would ask for a shell or a cast all when you go on the shelf.
But we also influence our mechanics where we give them those kind of you know product, we do this product campaigns, we give them free product for trials. They get the confidence on the quality of the product and then they start recommending the customers also. So that’s how we channelise our resources to help influence mechanic decisions also which in turn you know they convince the customers.
So in automotive we try to do it that way. Definitely with the kind of credentials that we can get for automotive like for example we got the first Mercedes-Benz the Daimler trucks approval in India. So the credential is what we normally work on and we have Volvo approvals, we have Renault, we have Max.
So that’s something that we constantly keep on working on and you know add to our basket. That gives customer a lot of confidence that no the product that I’m talking about or the product that I want to purchase definitely carries certain value. Let’s say we were to talk five years down the line.
Mubina Kapasi: How would you describe Arabian Petroleum to me then? What would be different about the company? What are you aiming for?
Manan Mehta: Yeah so as a company I think moving forward we just are not going to concentrate specifically on lubricant business. Lubricant is something that is like bread and butter for us but we would also diversify into backward integration product lines. Something which is also related to lubricant industry also but it finds application elsewhere else as well.
For example esters per se. So esters find a lot of application in lubricant industry but at the same time they are not restrictive only to the lubricant industry and they find applications in the chemical industry, farm industry elsewhere also. So that’s something that we are aiming at and already work has started in that direction and a lot of products we have already started manufacturing now in-house with our own capabilities.
So as a company definitely we are poised to grow in the next five years and I think we are aiming to be amongst the top 20 lubricant players in India in the next five years. Per se when we talk about the product line as I mentioned to you that’s something that we are going to I would say focus on. At the same time there are different sectors that we would want the company to focus.
So for example one would be defence. Defence is something that we are constantly endeavouring to expand into and defence manufacturing and defence production is going to be very heavy in India in the coming few years. The kind of thrust that the government is putting in defence manufacturing.
So we would really want to focus on defence as a vertical and glad to share that we are we have already 13 products approved in Indian army about four more five more in the pipeline. We have supplies to Indian army also glad we were able to contribute some during the operations Hindu time as well and you know Indian navy also Indian air force also something that we are wanting to. So for instance we supply you know the smoke coils which goes into the Suryakiran acrobatics aircrafts.
So the smoke that you see the release of different colours you know the oil that burns we I’m glad to say that we are one of the suppliers of these oils and this is the kind of industry that we would really want to focus which definitely adds value to the to us as an organisation and to the nation as well. So that’s something we would like to really see Arabian petroleum you know be known for in the coming few years. Apart from that we are also focussing on a lot of government business apart from the defence like for example we were just the first private company to really enter ONGC as a lubricant supplier.
So NGC predominantly since its inception has always been buying Hindustan petroleum or Bharat petroleum or Indian oil for that matter. So we recently won about a 35 crore kind of a contract from ONGC which is a long-term supply agreement. So that’s that’s something that really adds and reinforces our faith on focussing on the government business.
We also just recently got our BIS approval for transformer oil. So yeah we just want to don’t want to be restricted onto one particular I would say line of business. 10 years down the line yes Arabian petroleum definitely would be known as a Indian multinational who is into lubricants as well as into speciality chemical and additives.
That’s the I think the tagline that we would want to be focussing on.
Mubina Kapasi: So that brings me to another question that I had Indian multinational why the name Arabian petroleum?
Manan Mehta: So that’s something that you know I would probably answer in every interview or every you know I would say discussion that we have with a customer. So when we when my father started this journey of lubricants his first company was Eastern India company.
So he always had this thought of having a universal appeal to a name and not probably naming it to a family name or something very very Indianised in that fashion. So when we went into manufacturing so they always again the idea was to have a universal appeal. So for example my two brothers who have joined me in the business one of them takes care of exports.
So when when probably we would want to export also our lubricants that we would want to manufacture. If I probably would talk to my customer that I am from methane company would you be interested in buying lubricants? So I’m sure the kind of thought that he would be having in his mind. But when I talk about from Arabian petroleum okay Arabian petroleum.
So that’s how the conversion starter the name becomes and that’s that’s where you know having this kind of so Hindustan petroleum was already taken, Indian oil was taken, Bharat petroleum was taken. So no names of India were left out and that’s you know one of our team members suggested why not Arabian petroleum. So that’s how the name came in.
Mubina Kapasi: So tell me a bit more about your team. You mentioned that you divided it into verticals because that’s the you know you have plans for each vertical. So who’s heading these verticals? Who’s heading your plans? Who’s working with the family to take that company to newer heights?
Manan Mehta: So let me start with my core team and I think apart from us as a family.
So my father, my mother both are active part of the businesses. They are the people who started the company. So my mother she takes care of the government side the tendering business and at the same time my two brothers so Dharman and Vandan.
So Dharman takes care of the export side of the business the private labelling business. So that’s he takes care of these two verticals in general. Vandan takes care of the automotive business and me and Vandan we both co-share the industrial side of the business because that’s the biggest business I think that we are into.
So that’s something that we normally do as a family. Apart from that we have people heading each and every vertical which we don’t directly oversee. So industrial sales we have you know people heading automotive sales, government sales you know people heading each of these verticals each having their own you know target set, goal set, expectation set.
At the same time when you talk about operations we have Mr. Kishan who’s adding our operations part of it. Mr. Sagar who is managing the entire day-to-day factory operations. We have every departmental heads who’s focussing on purchase, on HR, on finance.
So it’s a very structured team that we have now in place and it’s something that we’ve built on last for the last three odd years that we have always endeavoured to build a team where we can you know put things on autopilot mode and we as the core part of the management we would be really focussing on the long-term vision, the long-term projects. We have two new subsidiaries which are already up and running. So one in Dubai Arzal Petroleum which is 100% subsidiary of Arabian Petroleum.
So now our focus is also on establishing these subsidiaries and taking up to the next level where now later on they can also function on the autopilot mode. So once it becomes sizable so any new ventures, new projects, new things that we can probably add value in the company that is something that we focus on.
Mubina Kapasi: All right well great. Thank you so much Manan for introducing the company and also sharing your future plans with us.