However, the market is very competitive, making it impossible to achieve such rapid growth organically, Gokhale told the All India Base Oil, Lubricant and Wax Conference, which was jointly organized by Rex Fuels and PetrosilGroup in February. After an exhaustive management push, inorganic is the most appropriate strategy.

GP Petroleums Ltd. CEO Hari Prakash Moothedath echoed the sentiment. Organically, we can only grow as per the market or slightly more than the market rate, but if you want to look at exponential growth, you have to go for acquisitions, he said at the event.

Rising raw material costs are putting pressure on companies margins, Gokhale continued. Yet theres huge potential for growth as the countrys economy expands and lubricant demand shifts toward more high-performance products. Furthermore, the government is putting increased focus on the ease of doing business in India. All aspects mix together to form the perfect cocktail for thirsty suppliers.

Theres a growing appetite among Indian companies to acquire smaller firms or go for horizontal integration to boost their sales and market share, said Gokhale. A couple of companies from India and abroad are currently looking for opportunities in India. Joint ventures are likely more appropriate for the industrial segment, while the automotive lubricants segment could see more acquisitions, he added.

India is clearly a sweet spot, Gokhale continued, noting that Indias lubes industry has mostly remained recession-proof for the past 25 years, and that foreign companies are looking at India even more seriously now following an improvement in the countrys ease-of-doing-business ranking.

Anuj Kumar Singh, a project manager for United States-based consultancy Kline & Co.s energy practice,concurred, noting that a steadily growing Indian market provides a significant opportunity for international companies.

Gokhale acknowledged that Indias new Goods and Services tax regime is another factor that could help drive consolidation in the industry, as businesses that were not as prepared for the new system gradually seek better organization. Bigger, better-organized players may look at acquiring smaller, unorganized players in order to increase their market shares faster, he noted.

India implemented GST from July 1, 2017, partly to make goods and services taxation uniform across the country and to prevent goods from being taxed multiple times as they moved between states on their way to market.

Sanjay Kumar, chief general manager of business development at state-owned Hindustan Petroleum Corp. Ltd., concurred. He said that India has more than 35 well-organized, established players with large volumes right now, but there are more than 500 players that perform well in regional markets, served by good local brand reputation. Synergies with small regional players will give organized companies access to these local markets where they are not very active presently, Kumar added. This is one big opportunity, he noted.

Mergers, acquisitions and partnerships will certainly boost growth prospects, but such transactions are not a cakewalk, Gokhale continued. Therefore, it would be prudent if companies devise their strategies with an open mind so that they dont face obstacles in achieving their targets when sellers decline to part with their entire holdings in the company.

This is the challenge that organized Indian players or even multinational companies will face while going for mergers and acquisitions in India, HPCLs Kumar said. In such cases, the acquirers must look at developing a business model or an equal joint venture partnership instead of a 100-percent takeover, he suggested.