Castrol India Stock Surges 9% on BP's $10.1B Stake Sale

Introduction

Shares of Castrol India Ltd. surged by approximately 9% on Wednesday following the announcement that its parent company, BP Plc, has agreed to sell a 65% stake in Castrol to the US-based alternative investment firm Stonepeak. The deal values the global lubricants business at an enterprise value of around $10.1 billion, marking a significant strategic move for the British energy giant. The market's positive reaction underscores investor confidence in the new ownership structure and the future growth prospects for the iconic lubricants brand.

The Landmark Transaction

The agreement involves Stonepeak acquiring a majority controlling interest in Castrol, while BP will retain a 35% minority stake in a newly formed joint venture. This structure allows BP to realize substantial value from the asset while maintaining exposure to Castrol's future performance. The transaction is expected to generate approximately $1 billion in net proceeds for BP. These funds include about $1.8 billion from the pre-payment of future dividend income on BP’s retained share. The deal is slated for completion by the end of 2026, pending customary regulatory approvals. Following the transaction's close, BP will be subject to a two-year lock-up period on its remaining stake, after which it will have the option to sell.

Market Reacts With Enthusiasm

News of the deal sent Castrol India's shares soaring. The stock jumped as much as 8.92% to an intraday high of ₹202.50 on the BSE and ₹202.40 on the NSE. This rally was accompanied by a massive spike in trading volumes. On the NSE, volumes surged by nearly 30 times the daily average, with 3.95 crore shares changing hands compared to the usual 13.28 lakh shares. The surge pushed the company's market capitalization to ₹18,936 crore, reflecting strong investor approval of the strategic shift.

BP's Strategic Pivot

The sale is a cornerstone of BP's broader strategy to streamline its operations and strengthen its financial position. The company has been under pressure to simplify its portfolio and reduce its significant debt load, which stood at $16.1 billion at the end of the third quarter of 2025. The proceeds from the Castrol sale will be allocated directly to reducing this net debt, bringing BP closer to its target range of $14–18 billion by the end of 2027. This divestment is part of a larger $10 billion asset sale program. Carol Howle, BP's interim CEO, stated that the transaction marks an important milestone in the company's 'reset strategy,' which focuses on reducing complexity and concentrating on its leading integrated businesses.

Stonepeak's Rationale for Investment

For Stonepeak, a firm specializing in infrastructure and real assets, the acquisition of Castrol represents a strategic investment in a globally recognized brand with a strong market position. Anthony Borreca, Senior Managing Director at Stonepeak, highlighted that lubricants are a "mission-critical product" essential for countless industrial processes. He emphasized Castrol's 126-year heritage and its portfolio of high-performance products as key attractions. The deal is further supported by a co-investment of up to $1.05 billion from the Canada Pension Plan Investment Board (CPP Investments), adding long-term capital and stability to the new venture.

Deal Breakdown and Valuation

The transaction's valuation reflects the underlying strength and growth potential of the Castrol business. The enterprise value of $10.1 billion corresponds to an EV/LTM EBITDA multiple of approximately 8.6x.

The Central Role of Castrol India

A significant portion of Castrol's global value is tied to its joint venture minority interests, particularly its publicly listed entity in India. The implied total equity value of $1.0 billion is calculated after deducting $1.8 billion for these minority interests. The transaction documents explicitly mention that a substantial part of these interests relates to the shareholding in Castrol India Limited. This highlights the Indian subsidiary's importance within the global Castrol portfolio and explains the sharp, positive reaction from the Indian stock market.

Leadership Commentary

Leaders from both BP and Stonepeak have expressed optimism about the deal. Carol Howle of BP described it as a "very good outcome for all stakeholders," allowing the company to generate significant proceeds while still benefiting from Castrol's growth momentum. Michelle Jou, Global CEO of Castrol, welcomed Stonepeak's partnership, noting their capital support and sector expertise would be immensely valuable for innovation and growth. Similarly, Anthony Borreca of Stonepeak expressed excitement about working with Castrol's team to support its continued expansion.

Future Outlook and Investor Takeaways

The new joint venture structure positions Castrol for its next phase of growth under the stewardship of a new majority owner. For investors in Castrol India, the deal signals confidence in the brand's long-term value. While BP's operational control will diminish, its continued 35% stake ensures strategic alignment and continuity. The immediate market reaction is positive, but the long-term impact will hinge on the new joint venture's ability to execute its growth strategy and navigate the evolving energy landscape.

Conclusion

BP's sale of a majority stake in Castrol to Stonepeak is a decisive move to deleverage and refocus its core business. The $10.1 billion valuation and the enthusiastic market response for Castrol India's shares validate the strength of the lubricants brand. As the transaction moves toward its expected completion in 2026, all eyes will be on how the new partnership between Stonepeak and BP steers Castrol toward future growth while delivering value to shareholders.