Ladies and gentlemen, good day, and welcome to BPCL 3Q FY 2022 Earnings Conference Call hosted by Antique Stock Broking. As a reminder, all participant lines will be in listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Varatharajan Sivasankaran from Antique Stock Broking. Thank you, and over to you, sir.
Thank you, Tanvi. Good morning, everyone. I would like to welcome all the participants this morning and the senior management team of Bharat Petroleum Corporation Limited for this Q3 FY 2022 Earnings Call. I'd like to hand over to Mr. Piyush Borania to introduce the senior management and take the call further. Piyush?
Thanks, Mr. Varatharajan. On behalf of the BPCL team, I welcome you one and all to this post Q3 result con call. Before we begin, I would like to mention that some of the statements that we would make during this con call are based on our assessments of the matter, and we believe that these statements are reasonable. However, their nature involves number of risks and uncertainties that may lead to different results. Since this is a quarterly result review, please restrict your questions to the Q3 results. I now request our Director of Finance, Mr. V.R.K. Gupta, who is leading the BPCL team for this call, to make his opening remarks. Thank you, and over to you, sir.
Good morning, everyone. Welcome to the Q3 post results con call. Hope you are able to go through our results for the quarter gone by. We'd like to highlight a few points relating to the past quarter performance. At the macro level, despite the risk of Omicron, the recent quarters have emerged as quite promising for economic recovery, though slower than expected. Due to rapid expansion of vaccination drive, both rural and urban, demand have also picked up. In MS, we have recorded the highest growth amongst OMCs for Q3. All regions have shown positive growth of over 3% in Q3, topped by North at 6.64%. In HSD, BPCL decline was the lowest among the OMCs. During Q3, our market share growth in MS is increased by 0.48%, which is highest in the last 10 years.
For HSD increased 0.33% in terms of market share. It is after 14, 15 that we have consistently crossing market share of 29% among PSUs in MS during quarter three. We have launched one of major digital initiative called UFill in retail segment. UFill is a touchless fueling solution which was rolled out previous quarter. We are already surpassing an average of INR 2.5 lakh transactions per day in the 65 cities covering about 4,000 retail outlets. We are further expanding UFill to more markets. World is preparing for a shift from fossil fuel to renewables across the world. India would be among the countries which will continue to grow in fossil fuel some more time, but we understand that we have to eventually move to clean energy.
BPCL is committed for net zero at scope one and scope two level emissions, and aims to be net zero by 2040. As a pilot project, we have already floated EOI for 20 MW electrolyzer at Bina Refinery to produce green hydrogen. Our investment in green hydrogen will further depend on the evaluation of technology, cost, and government policy on the same. BPCL has a target to create a RE portfolio of 1 GW over five years and estimated CapEx of around INR 5,000 crores for this purpose. In the long term, our renewable SBU has an aspiration to create a diversified portfolio of 10 GW by 2040, which includes solar and wind as our first priority, and also looking at hydrogen and biomass projects.
To begin with, we have identified some land parcels that are available and could be made available in close proximity to our refineries and major installations. We are also open to explore other locations based on project economics. We have a plan to solarize around 50% of outlets by 2024, which will reduce the energy consumption from grid by almost 50% and help in reducing Scope 2 GHG emissions. BPCL has always been at the forefront of providing all forms of energy solutions for personal and commercial mobility to our customers. We have made plans for setting up 1,200 EV stations across cities and national highways within this calendar year, and 7,000 over the course of next three to five years.
We are committed to being a major participant in the acceleration of EV adoption in the country and in the overall cost of eliminating range [audio distortion] for the EV consumers. Under gas business, we have emerged as a successful bidder in six GA in 19 districts in the recently held 11th bidding round of PNGRB. We, along with our JVs, hold 33% market share presently in terms of sales in the CGD sector of the country and would be investing around INR 22,000 crore for development of 23 GA, including INR 10,000 crore for that recent six GA on standalone basis, along with our only owned subsidiary of BGRL.
Construction of GS is in full swing, and we have completed around 4,667 inch- kilometer of steel pipeline, which will translate to around 380 km in our new geographical areas, which we got awarded in ninth and tenth round. We aim to commission 100 CNG outlets by fiscal year-end. Further, we currently dispense CNG in 794 retail outlets, and further by the financial year-end, we aim to add another 300 CNG facilities in our existing MS and HSD retail outlets. Under non-fuel consumer retailing, currently we have around 303 In & Out stores, branded In & Out stores. Our focus is to expand non-fuel retailing in urban and rural markets. This is going to be one of a kind omni-channel retailing of fuel and non-fuel products.
Our rollout plan is on schedule for additional 1,000 modern phygital format stores, walk-in model trade stores along with the digital platform at our fuel station this calendar year, 30 of which shall commence operations by this financial year-end by March 2022. BPCL leverages its vast network and reach to rural household to be one of the most significant retail chains in rural segment. Under petrochemicals, we have fully commissioned the third unit of PDPP, that is the acrylates unit in December 2021. With this, all the units of PDPP, the niche petrochemical project at Kochi are fully commissioned. BPCL is further studying the feasibility of having an ethylene cracker complex at Bina for production of bulk petrochemicals like LLDPE, HDPE and PP. Further, we have decided to discontinue the polyol projects at Kochi. Instead, we are evaluating the option of putting a polypropylene unit.
BPCL has been aggressive in adopting emerging technologies to leverage opportunities. In line with the current times and with the objective of making BPCL's customers interfacing unit technology relevance, Project Anubhav has been initiated earlier. Initiatives under Project Anubhav includes a customer engagement platform called Hello BPCL, Sales Buddy, Urja chatbot, etc. We have launched one-stop advanced loyalty program in the last quarter and are planning to roll out on pan- India basis in the current quarter. By embedding intelligence in BPCL's operation, our digital nerve center, IRIS, is helping BPCL to optimize its operational performance and efficiency, enhancing security and safety, and deliver the brand promise using latest technology. Currently, IRIS is integrated with 18,000 retail outlets, all the 87 retail terminals, all the 53 LPG plants, and 25,000 tank trucks.
In case of other products, LPG, we have a market share of 27% in Q3. In case of ATF, we grew by 33% as compared to Q3 of previous year. As we are primarily focused on the international sector, ATF sales is yet to pick up, as scheduled international flights are still not allowed to operate. With improved economic sentiments across the globe, increase in mobility coupled with the reduced refinery runs has led to improvement in MS crack to an average of $12.85 per barrel in Q3 from an average of $9.7 per barrel in Q2 of FY 2022.
In case of HSD, lower export from China, along with lower global inventory levels and winter heating demand, have led to elevated cracks in HSD at $12.61 per barrel in Q3 from $8.13 per barrel in Q2 of FY 2022. When we compare Q3 versus Q2 on sequential basis of current financial year, the Indian basket of crude oil has increased to $78.72 per barrel from $72 per barrel in the previous quarter, and the rupee is almost hovering around INR 74 per dollar. BPCL GRMs have improved to $9.69 per barrel in Q3 as compared to $6.04 dollars per barrel in Q2 of the current financial year.
The refinery throughput was at 160% of the nameplate capacity in Q3, means almost we have reached pre-COVID levels as compared to 104% for Q2 in the current year. The throughput for both the refineries was at 7.95 MMT for the quarter ended December 2024, as compared to 7.16 MMT in Q2 of current financial year. The distillate yield in Q3 at 84.30% as compared to 86.45% for Q2 of the current year. For Q3, the revenue from operations stood at INR 1,80,000 crore. Further, for the first time in history of BPCL, we crossed INR 3 lakh crore in revenue for a nine-month period ended 31st December 2024. The profit after tax stood at INR 2,462 crore.
As the CapEx target of INR 10,000 crore during the financial year, we have already spent over INR 9,346 crore during the nine months ended 24th December 2021. This also includes BORL investment of INR 2,472 crore. Our borrowings as on 24th December stood at INR 24,164 crore as compared to INR 21,000 crore as on 30th September 2021. These are excluding the lease obligations of around INR 8,000 crore. The debt equity ratio as on 24th December is at 0.5x as compared to 0.4x at the end of Q2. As on 24th December 2021, we have only around INR 196 crore outstanding receivable from Government of India. There is no under-recovery for PDS Kerosene during the quarter gone by.
On consolidated basis with respect to Q3 revenue from operations stood at INR 1,17,703 crore, while profit after tax stood at INR 2,805 crore. Consolidated basis, the refinery throughput was to the tune of 9.94 MMT. I now invite for questions and for any clarifications. Thank you.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Amit Rustagi from UBS. Please go ahead.
Yeah. Thank you. Thank you, sir, for giving me opportunity, and congratulations for posting a wonderful set of numbers. My first question relates to your CapEx program. When we are moving towards the green energy initiatives, what is the kind of IRR we are targeting on these projects? In the past two years, we have seen that we have refrained from, you know, announcing big projects because we were under privatization. Now suddenly we are seeing, you know, flurry of projects from BPCL. Do you think that the privatization process may not go through and, you know, so we have initiatives on the project side now, maybe?
Hello, let me answer the second question first. In terms of privatization, as earlier also we have clarified, we don't have any role in the entire process. Our role is submitting the information in the open for the open information for the due diligence. Coming to the second in terms of the projects, as a business on a going concern basis, we have to take up the projects and when we are transitioning is happening from fuel to non-fuel, we should not delay any of the projects. Second thing is that we have larger ambitions in terms of future growth and sustenance of the organization. That was the reason we are exploring various projects like petrochemical, non-fuel retailing, and including the renewables.
The first question when you are asking the renewables, the total project outlay, what we are expecting is that in next five years, we want to reach around 1,000 MW capacities with an estimated CapEx of around INR 5,000 crore. When it comes to IRR, yes, definitely, if it is not commercially viable in any of the project, generally, we don't take, because there is no obligation to take, any of the project if the IRR commercially not viable. Generally, we take around 12% or 15%, small projects. In case of larger projects, if there are some intangible benefits or any obligation, maybe on the lower level thresholds we'll take. Otherwise, if it is not commercially viable, we don't take up any projects.
Okay, sir, that was helpful. Sir, second question relates to the LPG subsidy. You mentioned that you have an outstanding of INR 198 crore from the government. Is this including the outstanding for the December quarter as well, or this is pertaining to only previous quarters?
This is as per the subsidy mechanism. This includes the December 2021 quarter, whatever subsidy as per the subsidy scheme, whatever we have to recover, that is outstanding.
Okay, we have accounted for some subsidy for the third quarter as well.
Whatever, as per subsidy mechanism, what is eligible for BPCL that we account on quarterly basis.
Okay, sir. Great. Thank you, sir. Thanks for answering my questions. Best of luck.
Thank you. The next question is from the line of Yogesh Patil from Reliance Securities. Please go ahead.
Thanks for an opportunity, sir. Sir, I will continue with the previous question. Sir, could you please tell us which category of LPG consumer is getting a subsidy through DBTL? Is it a BPL customer or PMUY or domestic? That is my first question.
It is for the domestic customers, and it depends on the area, the geographical location. Just to clarify the previous question also, that subsidy, as DF just told that, as per the mechanism, it is being followed, and the subsidy element is very less, like, it's not much, and it is including December. Depending on the geographical location for far-flung, for the distant areas or, you know, the location, the subsidy amount is decided.
Okay.
For all customers.
Okay. The second question related to revised estimate for FY 2022 in yesterday's budget. The revised estimate for FY 2022 for direct benefit transfer to LPG customers, this amount has been slashed by 73% compared to the budgetary estimate for the same period. We are not able to understand in the rising crude price scenario who will absorb the burden of LPG under recovery. Do you see increase in the receivables in the future due to these under recoveries on LPG? Can you throw some light on this topic?
We are yet to study the final print of Finance Bill. Maybe we can comment only after full study what is the impact on this particular area. We have to study fully.
For your information, I can provide you a number quickly. The budgetary provision for the FY 2022 was close to INR 12,400 crore for DBTL, and now it has revised downward to the level of INR 3,400 crore. Can you tell us who is going to absorb the burden of LPG under recovery?
No, I cannot comment because we have controlled product. What mechanism the Government of India will suggest later, that we are not clear. Once we get the final notification on this, how the burden will be shared or whether in the long term there will be any burden or not, because generally if you see the LPG prices in the peak summer, it will be on the downside, in peak winter it is on the upside. We're not sure on an overall basis what is the mechanism Government of India is going to build up. This is a controlled product, we cannot comment beyond.
My next question is related to again the blending into the auto fuel. What is the proportion or a ratio of a blending petrol versus unblended petrol? Can you give us some numbers?
I can give you a number on if you see April to December, it's around, it's near about 7.5%. That's on the weighted average basis.
Terrible.
There are various. It could be a 5% blend, 10% blend. Depending on that, but I have just given you the weighted average figure, that is to the tune of some 7.5%.
Sir, we are more interested in the blended petrol versus non-blended petrol.
So-
Unblended petrol.
Yeah. Some cases if ethanol is not available at some particular point of location, maybe unblended petrol also is going to the market. Right now, exact number we don't have, maybe we can calculate and provide that. April to December, how much unblended petrol has gone to the market?
Okay. Is this a right understanding, sir, that private oil retailers do not blend ethanol or biodiesel?
Yes. They don't blend.
They don't have any obligation, but we are not sure whether they have blended or not.
Okay. Thanks a lot, sir. That's really helpful.
Thank you. The next question is from the line of Sumeet Rohra from Smartsun Capital Pte Limited. Please go ahead.
Hi, sir. Very good morning to you and the entire team at BPCL. Sir, firstly, my many congratulations on posting very healthy set of results in a very challenging environment. Sir, you know, I've heard you saying that, you know, our total receivables from government is only INR 196 crore. You know, sir, the reason I touch upon this point is because, you know, yesterday after the Union Budget, you'll appreciate that all the oil marketing companies actually got slammed by nearly 6%-8% because there is obviously a fear, I mean, there was a perceived fear which, you know, categorically stated that, you know, the OMCs would bear this LPG burden.
Now, you sir, after clarifying this that the total receivable is only INR 196 crore and the Saudi cracks of LPG have actually come down after December in Jan. This clearly categorically states that oil marketing companies do not bear any LPG burden. I mean, can you categorically mention this, sir? Because, you know, obviously, our company is also being privatized, and the lower the price of the shares, the lower the value the government gets. You know, suppressing share prices, you know, is not the best alternative for the government to realize maximum value for itself and for its shareholders, you know. Can you please categorically state that oil marketing companies do not bear any LPG burden? Sir, secondly, my question is on the privatization front.
You know, I mean, this process has gone on well over two years. Can you please help us understand where we are in the stage of privatization? Because Vedanta has categorically mentioned that they have finished the due diligence. Now can we assume that financial bid stage is approaching and, you know, we are on that, you know, milestone right now, sir? Thank you, sir.
Two questions. One is on LPG. You know, this LPG is a controlled product and the pricing and everything is declared by Government of India only, decided by Government of India only. With respect to the budget allocation, lower budget allocation, and finally how it translates to the OMCs, I cannot comment anything, since it is a controlled product. The second thing is on bid investment. Bid investment, like yesterday also, they have indicated it may not happen before March 2022. It may push it to the next financial year. From company point of view, we don't have any major significant role in the entire process. Only DIPAM is handling.
Whatever due diligence data requirements are there, every quarter we update the data requirements in the portal and the bidders, they are continuously, they're accessing the data. For Q3, during Q3, there is no major event happened in terms of bidder visits to our company premises and other things. The status quo is same, but otherwise we are continuously updating. We are getting some queries, and we are replying. That process is on.
Okay, sir, I mean, just on the first question, you know, which you answered. Sir, I mean, it's also safe to assume that in our Q3 P&L, we have not accounted for any loss of LPG. Is my understanding correct on that?
No, there is no loss again. I'm saying this pricing is controlled by Government of India. What we said govern-
Okay.
Receivables from Government of India only as per the subsidy scheme, what oil companies are eligible. Only what is eligible only we have accounted. Other things in terms of pricing and underrecovery on LPG, since it is a controlled product, I cannot comment anything on this.
Okay. Okay. Fine, sir. Thanks.
Thank you. The next question is from the line of Manoj Bahety from Carnelian Capital. Please go ahead.
Hi, sir. Good morning. Thanks for taking my question. A couple of questions. First one is, like if I see over the last one, two months, despite of crude oil prices going up almost by $10-$15, the retail prices are constant. Just wanted to get a flavor that, how the marketing margins for especially MS and HSD are moving in the scenario when, like, the final retail prices are frozen, not moving in line with crude oil prices. Is there a underrecovery or is there a significant shrinkage in the marketing margins currently because the fuel level retail prices are not changing?
Earlier also we have clarified on this. When we have to study the marketing margins, we have to take a look at it in a longer term perspective. Maybe there may be certain periods where the marketing margins are lower than our standard. Certain periods, definitely the marketing margins are higher than what is the standard margin. Overall, what we look at it is on a overall, maybe on a yearly basis or in a multiple yearly basis, we generally keep comfortable margins what we are eligible and what we are supposed to get.
Okay. Sir, what are those normalized margins like on. [audio distortion] Okay. Okay. It is like, in a comfortable positive zone, right?
Right. Right.
Secondly, sir, just an extension to the question by previous participant, just wanted to get a color. If I understand that LPG is a controlled product, but vis-à-vis international prices, are we having a significant lower realization overall in LPG, considering the current recent high prices of LPG, especially in the subsidy scheme?
You know, we have not increased the RSP.
Mm-hmm.
It's a controlled product. Beyond that, I cannot comment any.
Sir, your realization is RSP plus subsidy from the government. RSP plus subsidy minus the international parity. [audio distortion]
Tell what is required from Government of India. What the oil companies are eligible as per the subsidy scheme we accounted. What is not eligible, we cannot account it, and beyond that we cannot comment.
Sure, sir. Thank you. Thank you so much for taking my question.
Thank you. The next question is from the line of Sabri Hazarika, Individual Investor. Please go ahead.
Yeah, hi, I'm from Emkay Global. I have two questions. The first is related to HPCL's marketing performance. HPCL has mentioned that it was inventory loss on excise duty cut which was responsible for like retail marketing performance during the quarter. Just wanted to understand, is it a normal phenomenon? Because in the past, we haven't actually seen this kind of an impact. Even when in Q1 when excise duty was sharply raised, it was not that the marketing inventory gains went up significantly. Is there any change or it is generally a usual formula that whenever there is an excise duty cut-
No, there is no change.
Yeah.
Can I repeat? Is that over?
Yeah, yeah. Please.
Anyway, there is no change of calculation because, across India, beyond refinery, once the product is moving from the refinery, it becomes a duty paid product. After that, if there is any duty increase or decreases, the values of the product automatically changes. When you say last year then when there is a duty increase, definitely the values of inventory will go up, but it may be partially offset with the actual crude price downfall. That may be the reason last year it may be reflected. At a constant prices, for example, if there is any excise duty increase or decrease, finally it will reflect on the positive side or negative side in terms of the inventory value, mainly on the trading gains during a particular period.
Okay. That was one time. Unless there is a further excise duty cut, it won't be there, right?
We don't know. We cannot comment on the government policy.
No, if there is no excise duty cut, then there won't be this thing.
Definitely. It's a normal product movement prices. Whatever international prices if they're going to move, only to the extent there may be some trading gains or losses during a period.
Right. Secondly, excise duty is something which is originally paid by refineries because excise duty is part of the manufacturing process.
Right.
Sir, is there any counter impact of the same on refining margins during that quarter?
No, there is no excise duty. If there is any change in the excise duty, it will not impact any refining sale margin.
Yeah, because your GRM suddenly like close to $10 in Q3. I was just trying to know if that has any-
No, that I have already explained because during this quarter, the MS and HSD cracks both have improved significantly because the product demand have increased whereas the suppliers of the refineries have not run up to the pre-COVID level capacities.
Okay. It was predominantly the core business only which drove the GRM.
Yeah.
Right?
Right.
Okay. Second, I've got two small questions. Firstly, what was the BORL profitability for Q3?
BORL profit for Q3 was INR 369 crore.
INR 369 crore. GRM should be?
Uh.
$9.8 per barrel.
$9.8. Okay. Lastly, on the LPG front only, I mean, we understand about the subsidized part, but was there any impact on the non-subsidized LPG margin during that quarter? Because there's a sharp rise in global prices, but the recent prices were not increased significantly. Even for the non-subsidized component, it didn't go up commensurately. Was there any, I mean, any impact on the non-subsidized marketing margin during the quarter?
I've already clarified on LPG. Beyond that, we cannot comment anything.
Okay, thank you so much, and all the best.
Thank you. The next question is from the line of S. Ramesh from Nirmal Bang. Please go ahead.
Good morning, and thank you very much. I trust all of you are keeping well. My first question is on the notes under emphasis of matter, where there is a comment made by the auditor on the capital gains and the goodwill treatment as a result of your transaction to take over BORL. How do we understand this?
To clarify that, we have acquired additional stake, and we have taken the controlling stake in BORL in Q2. As per the accounting standard, for example, if we are taking any controlling stake, we have to carry out the fair valuation of the assets. Within one year period, we have to complete the entire fair valuation of all type of assets, all categories. In Q2, actually, we have done a provisional valuation for certain category of assets. Wherever the fair valuation and what is the, our investments, earlier investments we have made, the differential we have to recognize as a goodwill in the books of accounts. Q3, we have not done anything, but this is a continuation of Q2 impact.
There is no implication in terms of any provision required in your accounts, right? Just a matter of approval.
No, nothing. Well, because as an accounting standard, once the final valuation, fair valuation complete, then we have to reallocate the entire value to various assets. If there is any surplus or a deficit, then either goodwill or capital reserve we have to create.
Okay. The next thought is, can you give us some indicator in terms of what is the potential revenue and EBITDA you can expect from the petrochemical business in Kochi once now that all the units are commissioned?
We cannot give any guidance in terms of the revenue from operation because it all depends on the pricing of petrochemical. When you see, you can witness in the last quarter actually the prices of petrochemicals have significantly it has come down. We cannot give any revenue guidance. Broadly what we can explain, today we can say all three units have been very well integrated and commissioned. In fact, the last week of January, some of the units we have reached operating capability of around 70% to 80%, whereas in the earlier quarter it was only 15%-20%. Now successfully around seven to 10 days, we have come out all the technical problems, and we ramped up the capacity and it is running the units around 70%-80% levels.
Definitely it should improve the refining capacity utilization as well as PDPP capacity utilization.
The petrochemical business is now in commercial operation from fourth quarter?
Yes. Yes.
Okay. One last thought, in terms of your outlook for BORL, what is the kind of expectation you have in terms of the capacity utilization and the profitability of BORL for next year?
Only present capacity utilization is 7.8 MMTPA. If the product demands continue at this level and the diesel growth comes to the positive side, definitely we will be in a position to take the capacity utilization more than 100% level. Except shutdowns. If there is any shutdowns planned in the next year, there may be small cut in the refinery throughput. Otherwise, we are at pre-COVID levels, and we can utilize the maximum capacity.
In Q3 it was over 100%.
Yes. BORL.
Okay, can you quickly give us the nine-month profits for BORL?
Nine months.
Nine months.
It's around INR 517 crore. INR 517 crore.
INR 517 crore. Okay, thank you very much. I'll join the queue.
Thank you. The next question is from the line of Kirtan Mehta from BOB Capital. Please go ahead.
Thank you, sir, for giving this opportunity. One question on in terms of the capacity please over next.
Sorry to interrupt, sir. Mr. Mehta, there's a lot of echo coming from your connection. Yes, now it is clear. Mr. Mehta, you can go ahead. We request you to join the queue back as there is no response. We'll move to the next question, which is from the line of Nitin from YES Securities. Please go ahead.
Good morning, sir. Thanks for the opportunity. My question is related to your CapEx plan. You mentioned that you have canceled polyol project and you will be focusing now on a polypropylene project. Why was the polyols project canceled and why now the focus on polypropylene? And secondly, what is the capacity that you are looking at in terms of polypropylene production? What is the estimated CapEx in that project? That's there. And related to that, sir, why are you not considering a phenol project? Currently phenol is in under supply in the country and it's largely, I mean, imported. And you have all the requisite raw materials in terms of benzene and propylene in your own as your own refinery product. Why a phenol production was not considered?
That's my first question.
Yeah. First question for polyol projects. This project was approved in 2018 by the board, at an estimated project cost of around INR 9,200 crore, with a basic estimation ±20%. At that point of time, there was no BDEP and licensor selection. We can come to a closure cost estimations only after selection of licensor and once we have the BDEP package. In the last couple of years actually this licensor selection have been completed and, this BDEP package completed. Now the revised cost has increased from INR 9,000 crore level to around INR 13,000 crore ±10% level. One is that reason the project costs have significantly improved. Based on that the project economics have significantly changed.
The second thing, this polyol definitely is a niche petrochemical. Based on our learning curve in PDPP, in fact technically, we have taken a longer period for stabilization and we have faced many technical problems when we have commissioned this PDPP project. Now we are okay with the PDPP project, but taking the niche petrochemical products with a high complexity, when the costs are very high, when definitely the project economics and IRRs are not lucrative based on the current trend, we decided not to go for complex projects under niche petrochemicals. Instead it is polypropylene is the better technology available and we are doing already in various other refineries we are exploring the similar project. We have decided with a lesser project cost and it gives some more operating efficiencies in terms of refining project running.
That was the reason we have selected polypropylene to explore further.
Understood, sir. Your estimates for this, the CapEx in polypropylene and what is the expected timeline capacity that you are planning?
No, we have to take a detailed feasibility study reports. Just now we have approved for carrying out this DFR and exploring. Maybe after some point of time we will get a clarity what capacities. Our objective is at the Kochi Refinery around 450 TMT per annum of propylene we have to utilize for value addition. With that background, what our capacity is suitable and economies of scale we will decide.
Sorry, sir, that was 400,000 tons you mentioned, propylene-
450 TMT propylene availability.
Understood, sir. Sir, the question around phenol. Why are you not considering phenol? Because that's in undersupply in the country and it's imported.
We have to study whether we can integrate phenol manufacturing facility with polypropylene availability. Today, why we are doing polypropylene is mainly availability of propylene and what is the value addition we can do. I'm not sure whether phenol can be taken up or not. We have not studied.
Understood, sir. Sir, my second question would be, so given that, like, you know, there's a privatization process on. If a new management comes in, what are the chances that these projects would continue as planned and it won't be like, you know, reconsidered by the new management which are coming in? How does that work out?
Our view, definitely these projects, it adds value to the organization. For the growth of the organization when commercially viable projects are taking up, I don't think any new management comes, they will take any second view on these projects. One, like, it is good for the refinery. Tomorrow, for example, any transition happens, if there's any shortfall of the demand of any products, there is at least some capacity we can take it for value integration. Commercially, these projects are viable. I don't think any new management will take a different call on these projects. Beyond that, we cannot comment what is the view and what is the business, thought process of the new management.
Understood, sir. Thank you so much for answering my questions. That would be all.
Thank you. The next question is from the line of Vishnu Kumar from Spark Capital. Please go ahead.
Good morning, sir. I wanted to understand the DPP profit or gain at an EBITDA level for the first nine months in this quarter, if you could give that number?
I mean, actually, there is no relevance for this number because this plant is operating at a 15%-20% level. The contribution is very insignificant. In case if you ask me, the contribution is negative, say, for Q3. It is not relevant for Q2 up to April to December. It is under the stabilization period. When plants are operating at a 20%, 15% level, whatever number I give, there is no relevance.
No, I understand.
Definitely Q4, we expect at least good operating capacities we will reach, then we can share.
No, the question is that, is it like running into hundreds of crores or it will be much lesser on an EBITDA level?
Much lesser. It will be around INR 50 crores-INR 100 crores, either this side or that side.
Got it, sir. Going forward, when you report this number, it will be part of your GRM. Is that right? Understand?
Yes, sir.
Yes.
Got it, sir. Second would be in terms of the Saudi crude discounts that you are getting versus last quarter, the number has steeply gone up to about. I mean, I think last quarter is about $0.5 or so for heavy crude. Now it is almost close to $2. Would this negatively impact the GRMs? Just wanted to understand on the crude sourcing side, how are you seeing things? I understand the cracks are improving, but on the sourcing side, if you could just give us some thoughts.
On the crude sourcing side, if you see Q3, actually it's a premium around $1. If you see from the countries which we are sourcing, around 25% Saudi Arabia, a similar percentage, 25% is from U.S., then we have from Iraq. These are the countries with significant sourcing of crude which we take.
Okay. Are you seeing some, I mean, the cost going up on this side? That is the question.
No. Generally, Saudi OSP, they declare on month-to-month basis.
Correct.
Most of the months they declare the OSP, say their premium or discount in line with the market trends. Whether Brent Dubai market trends basis they declare. Q3, they declare the OSP premiums much beyond the market trends, around $1-$1.5. In the later stage, they have corrected that.
Got it, sir. The last question would be that what was the closing inventory price of the stock that we are carrying our Brent. Would it be $79, $80 or what price levels?
Around $78.
Around $78 of crude inventory valuation.
Got it, sir. Sir, one final suggestion from me. Earlier, couple of years ago, you used to give the inventory gain separately and inventory loss. In between you guys had, I mean, across all OMCs, you had taken a call not to give that number. Honest suggestion is that, as analysts, it would always be easier for us to work with a core GRM and [audio distortion]
Frankly said, earlier also we have clarified because my average inventory carrying is only seven to 10 days. Okay. My monthly procurement is a monthly average basis. Logically, I should not calculate anything on account of inventory gains or losses in terms of refinery performance. Only in certain periods of time, for example, any old batches still it is there in the inventory, if the actual consumption is not happening on FIFO basis, yes, there may be some gains or losses. Otherwise, logically, if you see when our inventory holding is 10 to 11 days, when my monthly procurement cost is monthly average, one should not calculate any core GRM. That is our understanding. That was the reason we have stopped.
I'm sure that, this time around your GRM, at least $3-$4 should be inventory gain. That's from a computational point-
I'm saying we have stopped calculating because there is no scientific methodology of calculating. Logically in operations, when a physical movement should happen on FIFO basis, sometimes the physical movement may not happen on FIFO basis. Some old crude can continue in the inventory. Definitely in quarter-on-quarter basis, this way or that way it can happen. If you see logically, when inventory carrying days are only 11 days or 10 days, my monthly procurement cost is monthly average. I don't think we have to calculate core GRM separately. Because BPCL, we don't have any very large pipeline capacities. We have only coastal locations, and that is the reason our inventory carrying is only 10 to 11 days.
Got it, sir. Just a suggestion because other OMCs were giving this number earlier, hence I just thought to flag it off. Anyways, thanks a lot, sir.
Thank you. The next question is from the line of Saurabh Handa from Citigroup. Please go ahead.
Yeah, thank you for the opportunity. This was a question again on this additional excise on blended fuels. I wanted to understand it more from a diesel perspective because petrol we understand is blended in large parts of the country. On diesel, my understanding is there's not too much of blending happening right now. If that is the case over the next nine months, then in October, does this mean that in large parts of the country there'll be INR 2 excise on the price of diesel or is there any risk that you might have to absorb some of this?
We can give only the facts which are there. As you rightly said, yes, the blending of diesel with biodiesel is very minuscule. Going forward, so announcement has been made, we would have to see how things progress.
No, I mean, can you provide any further color, like how will this work if the situation were to be like this in October as well?
At this point of time, we don't have any what is the methodology, how do we implement. For example, if they say from first October there is a differential tariff of INR 2, we have to study and then only we can come to a conclusion, okay, this will be the impact. Today as of yet we have only the historicals, what is the blending and other things. After October, how it happens, we have to study and then only we can comment on this.
Okay. Is there a possibility that you have to bear this additional burden and is that a risk or would it be a pass-through?
No, no clarity on this. As of yet, no clarity how we talk.
Okay. Just factually, do we know how much of blending is happening in diesel right now or how much is not?
It is less than 1%.
It is less than 1% for diesel presently.
Okay. Basically it's hardly happening anywhere.
Yeah.
Okay. Okay. That is it from me, sir. Thank you.
Thank you. The next question is from the line of Pinakin from JP Morgan. Please go ahead.
Thank you, sir. Sir, you mentioned about setting up 1200 EV pumps, EV stations in this year. Sir, can you just walk us through the economics of this entire foray in terms of what is the CapEx for the 1200 stations or for one station? How is profitability going to be measured? What is the kind of payback that you expect? Because if you're going to roll it out this year, you would basically have those, you know, details already with you.
Yeah. We are planning 1,200 EV stations for the calendar year. Maybe limited number before 31st of March, but maximum EV conversion happens only after March. In terms of CapEx, at least the rough calculation we are expecting maybe INR 5 lakh-INR 12 lakh per our station. It depends on whether two-wheeler EV charging station or four-wheeler charging station and what type of capacity we have to take. Otherwise, if you talk about the overall CapEx, I don't think it'll be a very big CapEx. 1,200 into INR 10 lakh, if you see, it's only INR 120 crores in terms of CapEx investments. In terms of profitability and other things, we are not sure what level of charging happens at the retail outlet.
We are yet to study on the business model, what revenues and other things it comes. Otherwise, the CapEx side is around INR 120 crore for this 1,200 retail outlets.
Sure, sir. Just trying to dig more. Now as this picks up further, do you see this cannibalizing the gas charging that you're doing at your outlets, or do you see those two, you know, growing separately? Or will it cannibalize the petrol and diesel? Basically, how do you see this, you know, stations being rolled out in terms of, you know, which one do you think it eats up more?
We don't have any clear idea, but at least as per our aspiration, we want to convert maximum of our retail outlets into energy stations. These stations can provide all types of energy, either MS or HSD or CNG or electric vehicles. In the coming years, which one will impact which one? No clarity because once the vehicles would come into place, then only we can comment what percentage of EV-based vehicles will come into the market, then we can comment on what will be the impact on this.
Sure. Just to clarify, the profit and profitability will only be known later when you have, you know, the throughput in terms of the vehicles coming in-
Yeah.
-charging and then only we'll have a more clearer idea.
More clarity, right.
Understood. Thank you, sir.
Thank you. The next question is from the line of Mayank from Morgan Stanley. Please go ahead.
Yeah. Thank you for the call, sir. Just two questions. One was on the CapEx side. Can you just help us on the outlook for CapEx for this year and fiscal 2023 and fiscal 2024, and how much of that is going towards the new fuels as well as the petrochemical side going forward in terms of overall CapEx that you'll be spending for the next two years?
For fiscal 2023, the numbers for refinery are around INR 1,300 crores. For petchem, some INR 2,600 crores. Marketing side is some INR 2,300 crores. Equity investments in the JV subsidiaries, around INR 1,800 crores. The other projects are some INR 2,000 crores. Total CapEx coming to some INR 10,000 crores. Similar figure we are also seeing for financial year 2024.
Okay. In terms of the breakup, would you know how much is kind of going into the existing business and the new business that you are trying to develop across chemicals and other things, alternative fuels? Do you have a rough clue?
Roughly if you see for the next couple of years, our CapEx plan, the major chunk will go to petrochemicals, provided if the DFR is completed and if it is commercially viable project. Maybe, mid of 2022-2023 we'll come to know what is the size and what is the configuration. If the project, what we are saying it is commercially viable, definitely the project cost will be around INR 30,000 crore plus, at Bina Refinery. The second one is for the existing businesses, if you explore CGD, we are treating CGD a new business. So CGD will be around 20%-25% of our total CapEx, it will go for CGD. Petrochemicals, if this project comes, significant portion will go to the petrochemicals.
Normal continuation, our existing retail outlet network expansion and refinery and other inflation, it will be around 20%-25%. Roughly.
Got it, sir. I think the second question was more related to, I think, on the BORL side. Have you started putting in terms of your volume numbers including BORL now? Because I thought it's not including BORL in the overall throughput, I thought.
No, no. In consolidated, you will find BORL is included because it becomes a 100% subsidiary. But standalone basis, definitely since, you know, merger happened, standalone, we are not including BORL. Okay, handout it is not there. Maybe next time onwards we can include consolidated numbers. 2%.
I've got it. Okay, thanks for that clarification. The last question was more related to your, I think announcement around what you are doing with BARC. Can you just give us an idea of what the plan is and how are you kind of thinking around that, on electrolyzers?
We have entered into an MOU with BARC, and that is towards the development of technology for electrolyzer.
Correct. Like, are you going to manufacture it yourself and use it yourself, or are you looking to kind of even kind of once this technology is evolved, you want to kind of export it out or sell it outside via BPCL? What is the planning around any of it?
It's too premature to comment now. We just entered into the agreement, so we will see how it evolves.
Okay, fine. Thank you.
Thank you. The next question is from the line of Rajiv Agarwal from Sterling Capital. Please go ahead.
Sir, yeah, just, thanks for giving me the opportunity. One question I have is, this in consolidated statements you have share of profit and loss from equity accounted investments. It has swung from loss to profit in the last nine months. Can you give me the breakup from which joint ventures these profits are coming, roughly?
Yeah, last year, nine months period, BORL was a joint venture. That was the reason whatever losses of BORL, it had been accounted as share of profit from the equity-accounted equity. That is one reason. Second one, we have certain JVs in exploration side. There, whatever relinquishment or whatever losses happened last year, that was accounted in nine months period.
Okay.
This year, BORL becomes a subsidiary. It will be line-by-line consolidation.
The gas companies have performed well.
GA current year, GA all the gas companies, the performance is good, the JV companies.
Now BORL is not included in this.
For this period it is not there because it becomes subsidiary from second quarter of this year.
Okay. Got it. This is 1,187 entirely from gas.
1,187, yeah. Yeah.
Okay.
BPRL.
Thank you. Okay, thank you.
Thank you. The next question is from the line of Avadhoot Sabnis from InCred Capital. Please go ahead.
Am I audible?
Yeah.
Yes, sir.
Yeah. The first question was on the consolidated accounts on Mozambique. Our understanding is that because the project is in the development stage, you are capitalizing all costs relating to Mozambique. In that framework, can you just explain a bit as to why you needed to expense out this whatever you have done in the first quarter, even if it's taken as an exception?
Because this project has been declared under force majeure under a suspension period. As per the accounting standard under suspension period, some of the expenses we cannot take it as a capital item because it will not add any value to the asset. During suspension period, some of the expenses we cannot capitalize.
Okay. What is this interest then? Interest anyway you have been capitalizing, right? Whether it is suspended or not suspended a year prior to all these years you have been-
Other than suspension period. For example, any project under suspension period, generally some of the cost components we cannot capitalize.
The entire interest on loans on Mozambique during the suspension period is what you have written off, is it?
Right.
Okay. As soon as suspension period is over, you'll continue to now capitalize going forward.
Yeah. Now, for example, if the project is come back, so then, the normal accounting process will continue.
Which is true from fourth quarter, right?
That year we are expecting. Hopefully there are some good things happening that I hope.
If it remains under suspension, you have to charge it to P&L, is it, all the interest costs?
Yes. Yes.
Okay. Whereas project costs anyway, I presume there will be nothing more.
Nothing. As I update, there is no revised estimates on project.
Okay. Second question was on petchem. You mentioned that, you know, specialty petchems has been a challenge. If I recollect correctly, the earlier proposal on specialty chemicals was to do it in a JV with a specialized partner, and that got aborted at some stage. Is it not possible to revisit that at all? Find again, do it through JV partner?
No, as of date, two reasons why polyol we have discontinued. One is on the project cost, second one is on the technology change, rightly you said. Today PDPP, after a long struggle, three, four quarters almost we have struggled to come back to the stabilization. With this learning curve, we are expecting these type of complex projects cannot have 100% refining utilization or project utilization. When these type of projects, 100% utilization doesn't happen, definitely we need a strong technology partner, then only these projects can be viable. That is what our understanding in terms of niche petrochemicals. As of date, we don't have any JV partner. Maybe in future, for example, if anything comes, still we can explore.
By the time, in case if polypropylene project can utilize the entire whatever propylene availability at refinery, so that my refinery output also properly we can utilize.
Next question, sir. The standalone debt is INR 8,038 with, as I said, addition on to these liabilities. Could you share the corresponding number on a consolidated basis, if it's possible?
Exact number we don't know, but roughly more or less same only. Other group companies, they don't have any major leases.
No, no, the proper debt. I'm thinking BORL and BGRL will have debt, right?
No, debt is there. You want debt portion or lease liability portion?
I want just the debt. INR 8,038 is the figure, corresponding figure for consolidated.
I agree. INR 8,038 is only lease liability, lease obligations.
I'm sorry. Whatever is the debt number. Sorry, which is what
Debt number. On consolidated debt number?
INR 53,000 crore.
Sir, for the BORL again.
Consolidate.
INR 53,000 crores.
INR 53,000 crores. Consolidated basis, the debt levels are INR 53,000 crore.
Okay. On the blending portion, I realize you may not have gone through the fine print, but on the whole blending issue from October, I presume the government doesn't prescribe the blending level, right? So basically whether the blending level is 7% or 0.5%, even if it's 0.5%, the lower excise would apply, right?
As such, whatever actually they notified, it was not clear at what blending levels. Maybe we have to wait and see what is the fine print and what notification comes.
Okay. Lastly, sir, you know whatever, this is not a question, this is just an observation. I mean, I heard what you said, the inventory gains are not material because you hold very little inventory. But as per your own figures, out of 4.06 of GRM reported in FY 2021, 2.21 was inventory. Thank you so much.
Thank you. The next question is from the line of Kirtan Mehta from BOB Capital. Please go ahead.
Thank you, sir, for giving me this opportunity. In terms of the privatization, would you be able to elaborate on the steps those are remaining before government can invite financial bids? This is the first question.
No, other steps, definitely, government has to declare the reserve price and the transaction advisor has to calculate, and then SP has to be finalized. There are some milestones they have to achieve before calling for the financial bids. Entire process is being carried out by DIPAM only. From our side, only whatever data, quarterly basis we have to provide the data and we have to reply for the queries.
Just a sort of follow-up. When you say there are certain milestones to be achieved, what would that entail?
Of course. I tell you what, one second. I'm saying we are not involving in the process, so I don't have any milestones and dates. Whether the transaction advisor or DIPAM only can have the milestones for this.
Sure, sir. Thank you. In terms of sort of the PDPP project, once we reach the sort of the optimum utilization level of 75%-80% that we can sustain through Q4, would your earlier guidance of sort of it adds around $1 per barrel to the refining margin, does that still hold true or do you think that that would change depending on the environment?
We are hopeful. Actually, recent price trend, the crude prices have gone up whereas petrochemical prices have comes down. A longer term, this contraction should not happen. Overall, we are expecting, whatever guidance, whatever we expect, that should continue. Provided if our refinery project capacity utilization is at 70%-80% levels.
Right. One more question, if I may add. In terms of the LPG, you have declared the receivables number from government at INR 196 crore. Would you be able to sort of share the number of eligible subsidy for the Q3 quarter that you have calculated as of now?
I don't have exact number. Later we can submit how many number of people are eligible for the subsidy.
Sure, sir. Thank you.
Thank you. In the interest of time, this was the last question for today. I would now like to hand the conference over to management for closing comments.
On behalf of BPCL team, I thank all the investors for taking part in the conference call. Also, I thank Antique Stock Broking Limited for organizing this call. We look forward to meeting after the next quarterly results. Thank you, everyone.
Thank you. On behalf of Antique Stock Broking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.