Castrol India has announced a strategic partnership with Hindustan Petroleum Corporation Limited (HPCL) to explore the development of a re-refined base oil system. This collaboration marks a significant initiative in the lubricants industry towards sustainable manufacturing practices.

Partnership Objectives

The agreement between Castrol India and HPCL focuses on investigating the feasibility and implementation of a comprehensive re-refined base oil system. The partnership aims to establish a robust framework for processing used lubricating oils into high-quality base oils that can be reused in lubricant manufacturing.

Circular Economy Model

The companies are working together to create a circular model that encompasses the entire lifecycle of lubricating oils. This model involves:

• Systematic gathering of used lubricating oil from various sources
• Advanced re-refining processes to restore oil quality
• Integration of re-refined base oils into new lubricant products
• Establishment of sustainable supply chain practices

Environmental Impact

This initiative represents a commitment to environmental sustainability in the lubricants sector. By developing systems to collect and re-refine used lubricating oil, the partnership aims to reduce waste generation and minimize the environmental footprint of lubricant manufacturing. The circular approach helps conserve natural resources while maintaining product quality standards.

Industry Significance

The collaboration between Castrol India and HPCL demonstrates the industry's shift towards more sustainable practices. Re-refined base oils offer an environmentally responsible alternative to virgin base oils, supporting the circular economy principles while meeting the growing demand for eco-friendly industrial solutions.

Stonepeak and Canada Pension Plan Investment Board (CPPIB) have launched an open offer to acquire a 26% stake in Castrol India Ltd., marking a significant development in the Indian lubricants market. The consortium's strategic move follows BP's agreement to sell its majority stake in the global Castrol business and triggers mandatory regulatory requirements under SEBI's takeover regulations.

Open Offer Structure and Pricing

The consortium has structured their acquisition offer with specific parameters designed to provide shareholders with a premium exit opportunity:

The offer price represents a premium to recent trading levels, with Castrol India shares trading at ₹191.40 on the BSE following the announcement.

Parent Company Divestment Transaction

The open offer follows BP's strategic divestment announced on December 24, where the British energy giant agreed to sell a 65% stake in its Castrol lubricants business to Stonepeak for approximately $6 billion. The transaction values the iconic Castrol unit at about $10.10 billion including debt, with CPPIB investing up to $1.05 billion for an indirect stake.

BP retained a 35% stake in Castrol, providing continued exposure to the lubricant maker's growth plan while maintaining optionality for future value realization.

Regulatory Compliance and Future Ownership

Under SEBI's takeover regulations, acquisition of 25% or more in a listed company triggers a mandatory open offer to purchase at least an additional 26% from public shareholders. Castrol Ltd currently holds 51% of the equity share capital of Castrol India. If the open offer succeeds completely, the new owners will control 77% of Castrol India.

Strategic Context and BP's Asset Sale Program

The divestment forms part of BP's targeted $20 billion asset sale program through 2027, aimed at bolstering financial resilience amid underperformance in some segments and activist investor pressure. BP stated that the transaction "accelerates delivery of BP's reset strategy, will significantly strengthen its balance sheet, and advances strategy to focus on the downstream."

Current Market Position

Castrol India operates in the chemicals sector with a market capitalization of ₹18,966.40 crore, positioning it in the mid-cap category. The company's diverse shareholding structure includes institutional investors like LIC and Singapore Government, alongside significant retail participation from over 5 lakh small shareholders who collectively hold substantial stakes in the company.