We Expect To Grow By About 8-9 Per Cent This Year

Updated: May 24 2003, 05:30am hrs
The worlds fifth largest oil company, TotalFinaElf, has so far made two futile attempts to increase its presence in the Indian oil and gas industry. The first, was its $550 million LNG project with the Tata group and Gail and the second, was its bid for state-owned oil major IBP, which was subsequently sold to Indian Oil Corporation. The international oil majors presence has been predominantly restricted to the lubricants industry, with two significant brands Elf and Total, under its fold. In an interview with Papiya De of The Financial Express, Mr Nicholas J Wellman, Chairman and CEO, TotalFinaElf India and Total Petroleum India, talks at length about the companys lubricants business. He also assured that despite initial setbacks, TotalFina has big plans for the Indian market and would be interested in large projects. Excerpts:

Other than lubricants, do you have any presence in the Indian oil and gas industry
TotalFinaElf is a merger of Total and Elf lubricants and that is really the core of our activities in India. Other than this, we have a bottled gas business in Bangalore with an import facility and LPG bottling plant in Mangalore. This business has been expanded last year by the acquisition of Mobil. This acquisition has made us a bigger player in the LPG business. The third is the joint venture between Total Gas and Power, a subsidiary of TotalFina, and HPCL to set up a 60,000 tonne underground storage cover for LPG at Vizag. We have chemical importing business as well as a peroxides plant in Chennai and a resins plant in Navi Mumbai under AtoFina. Last but not the least, we have started a special fluids business, under the lubricants arm, a couple of years back and this business is doing remarkably well.

Do you see Total playing a much greater role in the Indian oil and gas industry
Total had signed an in-principle agreement to set up an LNG terminal at an estimated cost of $550 million along with the Tata group and Gail. Though this project did not come to fruition, it indicates that Total had large plans for India.

We are being looked at by our parent company as companies that are very solid, well structured, operating well and achieving solid results. This forms a good base to expand from. Total would be interested in large projects and when the right project comes along it will surely consider greater exposure. Total, as a company, tends to proceed consciously along solid steps and good foundations.

The Indian lubricant industry seems be witnessing a negative growth in terms of volume on account of superior engine technology. How have you coped
We have actually grown in volumes. There are two opposing forces at work. On one hand we have better quality engines and lubricants that last longer, which effectively means lesser draining periods. On the other hand and thankfully so, the market for commercial vehicles, passenger cars and motorcycles are growing at a healthy pace. So the offset caused by the first factor is adequately compensated for by the second. The overall market in India is about a million tonne which is roughly 10 per cent of the Asian markets.

At TotalFinaElf, we expect to grow by about 8 to 9 per cent this year, compared to a marginal growth of 3 to 4 per cent last year and a static growth the year previous to that.

What have you done to attack costs and improve operational efficiencies
We have taken several small measures to improve efficiencies at every level. We believe that cost savings is not about doing one thing that is big but doing many things that are small and go a long way to add drops to the ocean.

We have tried to ensure that the yield per employee continues to go up, not only restricted to the sales staff but applicable to the entire company. Yield per employee is a good yardstick of a companys performance.

On the raw materials front, we have become more responsive to the changes in price which is decided on an international basis. This means that we have to plan our production at plants in a most cost effective manner and production cost is kept at an optimum level.

We have also reworked our logistics and opted to use railways as a preferred mode of transportation instead of road, whenever we can. This initiative was started last year.

We have also installed high speed filling machines at our manufacturing unit in Mhape, in Maharashtra. This means increased finished products for storage which allows us to become more responsive. Being a QS 9000 company, one of our focus is to achieve continuous improvements and it is the responsibility of cross-functional teams to ensure that. Through all these measures we have been able to enhance our cost performance by Rs 1 crore per year.

What was the rationale behind continuing with both the Total and the Elf brands
The Total and the Elf brands are not positioned at the same segment, so the decision to continue with both the brands were simple. Elf is positioned at the premium end of the market, while Total targeted at the mid-segment. Both the brands together help us cover a wider range of the market.

In automotive lubes, where does your focus lie
Trucks is the biggest market for the lubricating oil industry and your ability to survive depends largely on successfully penetrating this segment. Naturally, 70 per cent of our total sales is accounted for by this segment.

However, towards the end of last year we have introduced a new product, Elf Moto4Gold, for the four stroke motorcycles segment which has helped us double our sales from the motorcycle segment. We believe that India is a nation where wealth is increasing gradually and the natural tendency of human beings is to buy a vehicle for himself when he has a little more disposable income. We see a great potential for ourselves in the motorcycle segment as the level of involvement of consumers at the point of purchase is greater.

In the passenger car segment we have a close association with General Motors, but on the whole this is a more crowded market and a difficult one to penetrate. Passenger car and motorcycles each contribute about 5 per cent to the overall sales. Transmission oil, brake fluids etc contribute another 10 per cent and the rest is contributed by the industrial segment.

How wide is your distribution reach
Since we do not have access to the petrol stations, it is absolutely crucial to have a very wide distribution network. Since 1992, the proportion of the petrol stations as distributors have fallen and the bazaar has increased its share manifold. We have about 8 per cent share of the bazaar trade today. We have about 61 depos and 350 distributors of the Elf brand and another 200 distributors of the Total brand. We are pretty well spread out across the country except for maybe small pockets.

What is your total capacity Do you outsource manufacturing
We have a total capacity of close to 40,000 tonne, spread across three units. Out of this three plants, we own the one at Mhape in Maharashtra which has a capacity of 30,000 tonne. Currently we outsource another 7000 tonne from these other two plants.