Interview with Nitin Prasad, Managing Director, Shell Lubricants India

Company Description: Shell Lubricants India is a 100pc subsidiary of Shell. With corporate office in Gurgaon and 6 regional offices Shell Lubricants India employs around 400 people across the board. The Indian arm of the multinational firm sells its lubes through a network of 250 distributors across the country in high-street, franchisee workshops, independent workshops etc. Shell Lubricants has set up a Customer Service Centre (CSC) in Chennai in 2008 for an effective lubricants supply chain. Since 1997, Shell India has been manufacturing its lubricants at its blending plant at Taloja, near Mumbai. In India, Shell Lubricants has entered marketing alliances with companies like Maruti Suzuki, Hyundai, Mahindra & Mahindra, Skoda, Ford, Wartsila, Same and Thermax. Shell is also the largest and most diversified international investor in India’s energy sector, with nearly US$1 billion already invested.

You have held several positions of responsibility within Shell. How exciting and challenging is it for you to head the India operations?

All my positions were actually very rewarding. At Shell, we strongly believe in people and more importantly about leadership development. So one of the big things that we do, as an organisation, is that we ensure that people have roles and responsibilities that are stretched. We also develop individuals in areas with leadership attributes. For example: one of the big things that is really important in an organisation is managing operations. That was what my last role was all about. We were moving 5 or 6 billion tonnes of product all across Asia Pacific and Middle East. I was also responsible for the operational startup of a multi-billion dollar facility in Jurong Island and Bukom Island in Singapore. It was a very exciting stint to be involved in building such a massive facility there and it has its own set of unique challenges. I enjoyed all my roles in Shell and this is (heading Indian operations) the next step to take up another challenging role and an exciting opportunity.

How important is the Indian market among BRIC nations for Shell when it comes to contributions to global operations?

The answer is that the Indian market is very important. Shell is investing quite heavily in India. It is clearly one of our key focus markets, specifically for lubricant even though other sectors are equally important. If you look at our operations here, we have a manpower strength of 2,500-3,000 on the ground across the range of various opportunities. We have invested over US$ 1 billion in this country and we are investing even beyond that across different options. I think we are already the most diversified firm in the oil and gas industry in India. Specifically for lubricants, the BRIC nations are very important. If you look at China as an example, we are considered one of the leading players here for lubricants. In India also, we have a similar aspiration to reach that level.

Shell is renowned globally to make 3,000 different lubricants to meet customer needs across a wide range of applications. Do you have plans to gradually bring all your products here? Or would you consider churning out India-specific products?

The answer is yes to both. But you must understand that across the range of 3,000 lubes that we are selling globally, there are some products which are country-specific. There may be some lubes which are OEM-specific for the country to operate in. So we won’t bring in those products unless there is a particular materiality of scale of business over here. So what we do is that we have a constant evaluation on an annual or six-monthly basis to take a look at our portfolio and decide on what lubricants we want to bring in. Today, we feel that we are covering around 90pc of the market. We will be introducing more grades this year and we will cover about 95pc of the domestic lubricant market. There are some grades that are too specialised and too low-volume that we will evaluate on a strategic basis. In terms of India-specific products, we always have specific grades. For example: we work very closely with our OEMs like Maruti Suzuki and Tata Motors. For Tata Motors, we are working on a co-engineering basis to evaluate new lubricants for them. So those are the kind of opportunities that may exist. There are also vehicles that are unique to India and for them we have introduced lubricants that are only available in our portfolio.

What about exporting lubricants from India? 

We are actually looking at exporting some lubricants out of the country. We move into a few countries in terms of their local or regional needs. We have a network of blending units across all the Asia-Pacific nations and Europe. So some of our lubricants come in from Canada, Europe, etc to India. What we like to do is take a look at what the optimal point is to manufacture a specific lubricant based on scale and capacity. It may be possible that it (the lubes) is not available in that country itself but is centralised in one spot. It’s more economical for us to then ship it across the globe (from that spot) but manufacture in that specific location. From India, we generally consider shipping out our products to SAARC nations, Middle East et al. There are of course constraints in terms of shipping out lubricants from India. We do have a tax structure in terms of manufacturing in India itself. The excise duty levied here does make us a bit less competitive as compared to other nations in terms of providing a regional export hub.

So do you support free trade agreements with other countries?

As I mentioned earlier, we have a network of plants and have products that are imported directly. We import base oil to create our finished lubricants. We also bring in finished lubricants. So from our perspective, it’s advantageous if there is a free trade agreement that is available across various countries. If we have well-defined FTAs with various countries, it would be an easier basis for us to export from here. Honestly, the answer is that the government knows the best in these cases. We look forward to seeing more from them.

Globally, Shell Lubricants has five lubricants research and development centres in the UK, Germany, France, the US and Japan.  How crucial will be your upcoming Indian centre at Bangalore?  Will it be contributing to your global operations too?

Absolutely! It will contribute to our global operations. I think the important point to understand is that being part of the Fortune 500 Group, technology is in our DNA. It’s one of the biggest things that we are focusing on. Infact, as a Shell Group,  it is touted  to be the most innovative and competitive company in this (lubricants) industry. We have invested quite a handsome amount for the R&D centre in Bangalore. We have just announced that we are going to expand that facility and have acquired a new land for the same. Bangalore will be one of the three central hubs for the group level technology development.  The exact investment amount is confidential. But what I can tell you is that we invest over US$1 billion in R&D globally every year and Bangalore will be one of the central locations for the same. The very same amount has been invested by Shell India across its operations, including R&D. We are having about 800 people in that facility which will be growing substantially for the next five years. Specifically, what we are looking at is how the Bangalore unit supports not only the rest of the globe but also in areas where it can help the domestic market. We have some options that we are exploring. We will make an announcement on that front later on.

Shell’s worldwide portfolio of lubricant brands includes Shell Helix, Shell Advance, Shell Rimula etc. It also owns a portfolio of car care products and Jiffy Lube services. But in India you have earmarked only a handful of them? Is there any specific reason?

This is the same question in terms of 3,000 products in our global portfolio. We used to have ‘Pennzoil’ portfolio in the country. We are continuing to have that. However, we would like to transition to the ‘Shell’ portfolio that we have today. As far as rolling ‘Jiffy Lube’ as a service is concerned, it depends on the maturity in the country. If you look at the car industry here, it’s largely centrailsed around the franchised workshops. So we need the car parc to reach a certain age wherein the consumers would be moving beyond the franchised workshops and are looking for top quality service before a ‘Jiffy Lube’ type service makes sense. We certainly have several competitors who are there in the marketplace and are looking at various options in terms of servicing. But you still find them to be more oriented towards full service workshops rather than a fast lube service. So this is the question of governmental maturity in the industry and when the industry is going to be ready for a service like that. There are a number of cars that are beyond the franchised workshops in the aftermarket. That is certainly a big focus for us. That’s why we continue to launch an increasing set of products that offer benefits to the consumer. We have a number of promotions, schemes and marketing programmes that communicate these benefits to the consumers. And we continue to drive that through our distribution channel. We will work on improving our distribution channel and will then ultimately work closely with the mechanics on the ground and retailers to position our products.

How important is the automotive aftermarket for Shell India? What strategies do you have to enhance your presence in that space?

It is very important. I think what is important for Shell India is to be involved with the car parc throughout the lifecycle of the car. So we work very closely with the OEMs when the car is at the production line. We work very closely with them at the franchised workshop space. One of the big areas that we focus at the workshops is to make sure that our lubricants are lowering the total cost of ownership for the OEMs and its customers. And we use technology specifically for that.

What are the benefits derived from your partnership with Ferrari in Formula One racing?

Our association with Ferrari is over 60 years old. And there are a number of benefits that we derive out of it. Formula One is all about raw speed, power, engine performance, etc. It is not only the question of heat and power, but also about gearshifts and engine life of the vehicle.  We partner incredibly closely with Ferrari to work on fuels and lubricants that can give them a performance edge on the track. Infact, we are the only company that has a track lab that is available right next to the Ferrari pit. We are constantly monitoring the fuels and lubricants that are being used at the race itself. We develop and formulate specific lubricants and fuels for them. The important part of this association is the level of understanding that we have gathered from developing these products under extreme performance conditions. It gives us the information and data to then be able to develop lubricants for our regular customers that are based on the knowledge that we develop there (for F1).  For example, our ‘Helix Ultra’ is based on the technology that we have developed along with Ferrari. But now we have made it available for our consumers. So that is one clear tangible benefit that we get out of this strong association. There are of course other intangible benefits too.  Ferrari is a well-known and well-recognised brand and we certainly benefit from having a co-branded  relationship with them. While the Shell brand is known very well in some countries, similar is the case with Ferrari in other countries. I think what works for us there is that both companies are well understood as the pioneers in their fields. And there is a lot of synergy between the Ferrari brand and the Shell brand.

Going forward, are you confident of bagging new clients in India?Unfortunately, I can’t share the details as they are very confidential and are under negotiations. But just take a look at some of the companies, in terms of servicing, that account for 55-65pc of the passenger car market. It tells you that we have a proposition that is attractive to the OEMs. Firstly, the technological benefits that we are bringing to them are outstanding. The second thing is lowering their total cost of ownership. We work very closely with the OEMs to improve the service level that they can deliver to their customers. Some have a very strong proposition for the market-leading OEMs which will appeal to others (new OEMs) too.

What is the size of the Indian lubricant market? How much does the automotive segment account for?

It is estimated at around 2-2.5 billion litres per annum. It is evenly split between automotive and industrial lubricants. Both sectors are equally important for us.

Lastly, do you foresee a lot of growth in India in the next few years in your line of business?

We of course foresee a lot of growth in our line of business. We have been in the Indian market since 1993 and have been operating as a wholly-owned entity since 2008. We have been growing very strongly on a year-on-year basis. We are proud to say that we have been growing at double digits every year for the last couple of years. We plan to continue that trend. We expect to see that level of growth coming through different areas. We do invest quite heavily in the country. And the expectation is that we want to see return on those investments. We would like to see ‘Shell’ as a brand that is not only widely known in the marketplace, but is also widely preferred amongst our buyers. And on the back of that, we want to widely establish ourselves as a technology leader in the marketplace. We are investing quite heavily for that at our Bangalore unit and also in some of our other areas of ours. We aim to be recognised by our partners and customers as a technology leader. We believe that if we get the brand and the technology right, our business and sales will grow on the back of that.