Indian Oil Corp. Ltd. and Nepal’s Golchha Group signed a joint venture agreement to manufacture lubricants in the Himilayan country to cater to the domestic market.
“This joint venture is a broader agreement between Golchha Group and Indian Oil,” Golchha Chairman and Managing Director Shekhar Golchha told Lube Report in an interview. The companies will jointly set up a lubricant blending plant in Nepal with an investment of around 70 crore Indian rupees (Rs 700 million or U.S. $ 8.5 million), he added.
Golchha said the investment outlay has been finalized, but they are still working out a few details to settle the plant’s production capacity. The lubricants that it makes will be marketed under Indian Oil’s Servo brand.
He noted the land for the plant has been identified, and Golchha Group’s board will meet next month to take the final call.
“The plant should be ready in a year’s time,” Golchha said, adding that the maximum time for completion could be 18 months. He said Indian Oil is already the market leader in Nepal, claiming 18%-20% of domestic sales. Officials said local manufacturing will yield cost advantages and that they will aim to double market share.
“Initially, we are just looking at the Nepal market, but we would want to explore the possibilities of looking at the neighboring market as well,” Golchha said.
He noted that the joint venture will explore opportunities in other sectors, including converting waste to energy and bitumen production in Nepal.
Talking about the rationale behind the joint venture, Golchha said the group is looking to do as much value addition as possible in Nepal and develop resources in terms of labor and electricity. Exploring the possibilities of international sourcing is also on the table, he added.
Golchha Group is a century old and employs more than 1,700 people across more than 100 companies in Nepal. Those businesses include auto manufacturing, electronics, finance, insurance and bioscience.