Ladies and gentlemen, good day, and welcome to Bharat Petroleum Corporation Limited Q2 FY 2027 earnings conference call hosted by Antique Stock Broking Limited. As a reminder, all participant lines will be in the listen-only mode, and 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, this conference is being recorded. I now hand the conference over to Mr. Varatharajan. Thank you, and over to you, sir.
Thank you, Nadine. Very good morning, ladies and gentlemen. It is my pleasure to welcome all the participants on the call and the BPCL management to the 2Q FY 2027 results call of BPCL. We have with us Mr. V. R. K. Gupta, Director Finance; Mr. Pankaj Kumar, ED Corporate Finance; Mr. Ashish Goyal, CGM Corporate Treasury; Ms. Anushiya Vatsal Thakker, DGM Finance; Mr. Balagirish, Senior Manager Finance, Bharat Petroleum Corporation. I would like to hand over to Mr. Balagirish for the disclaimer.
Thank you, Mr. Varatharajan. Good morning, and on behalf of the BPCL team, I welcome you all to this post Q2 results con call. Before we begin, I would like to mention that some of the statements that we will be making during this con call are based on our assessments of the matter, and we believe that these statements are reasonable. However, their nature involves a number of risks and uncertainties that may lead to different results. Since this is a quarterly result review, please restrict your questions to the Q2 results. I now request our Director of Finance, Mr. V. R. K. Gupta, who is heading the BPCL team for this call, to make his opening remarks. Thank you, and over to you, sir.
Good morning, everyone, and thank you for joining us today. As you are aware, our quarter two results were announced. Let me begin by putting the quarter in context, particularly how the operating environment evolved since we last spoke. When we met in July, the energy markets were under significant stress due to the escalation of the West Asia crisis, which had a considerable impact on our quarter one performance. As tensions showed some signs of easing at the time, we were hopeful that the opening environment would gradually stabilize. However, quarter two unfolded quite differently. The quarter began on a relatively calm note with Brent crude at around $70 per bbl from mid-July. However, geopolitical tension intensified, pushing crude prices above $90 per bbl by August.
The situation escalated further in September following attacks on Saudi export infrastructure and tankers, with Brent averaging around $116 per bbl during this month. Tensions around the Strait of Hormuz and the Red Sea also remained elevated. While we continued to secure supplies without disruption, the escalation kept crude premiums and freight costs at elevated levels. Against this challenging backdrop, strong diesel and ATF cracks supported refining economics, while lower LPG underrecoveries provided some relief to marketing margin during the quarter. At the same time, the rupee remained under pressure, averaging around 95.6 against U.S. dollar, adding to the cost of our dollar-denominated imports. Through all this volatility, our priorities remained clear. We stayed focused on our four things, securing supplies, serving our customers without disruption, protecting shareholder value, and maintaining momentum on our growth program. Let me start with sourcing.
Our spot crude share remained at around 67% in Q2, while Russian grades accounted for approximately 37% of our total crude procurement, both broadly in line with previous quarter. As flows from Middle East improved, we progressively restored sourcing from the region, while retaining the flexibility and diversification we had built during Q1. I am also pleased to share that our efforts to strengthen our international crude sourcing capabilities have begun to yield results. BPCL became the first in the industry to leverage sourcing opportunities from inside the Strait of Hormuz at a price advantage. This was achieved through our international crude desk in Singapore, which commenced the operations in September 2026. This marks an important step in strengthening our global sourcing capabilities and improving our ability to respond quickly to opportunities in an increasingly dynamic crude market.
As of 30 of September , we held around 22 days of crude inventory, and importantly, our crude sourcing requirements are tied up through December 2026. Moving to LPG. Despite disruption to traditional supply routes, we maintained domestic availability through a more diversified import portfolio. Supplies from the Arab Gulf improved during the quarter, while US origin cargoes accounted for around 48% of our total LPG imports in Q2. Currently, we are holding 32 days of LPG inventory, including in-transit.
On LNG, disruptions to our long-term supply contracts required us to actively diversify our sourcing. We secured alternate spot supplies from the U.S., Oman, and West Africa, supported by flexible logistics arrangement to bridge supply gaps despite elevated market prices. Coming to refining. Our refineries continued to deliver a superlative operational performance during the quarter. We achieved a throughput of 10.4 million metric ton in Q2 with overall capacity utilization at 117%.
Our gross refining margin stood at $32.53 per bbl, and after adjusting SAED, the GRM was around $14 per bbl. Distillate yield remained strong at 84.38%. Moving to marketing. Our domestic sales volume stood at 13.47 million metric ton in Q2 compared to 13.62 MMT in Q1. We continued to strengthen our retail network, taking the number of outlets to 25,592 compared with 25,485 at the end of Q1. At the same time, we continued to build our premium fuel and non-fuel portfolio. Speed 97 conversion stood at 5.21% during the quarter. Speed 100 is now available at 162 outlets, and our BKF network has expanded to 234 locations. On LPG, we commissioned our Matia LPG plant in Golaghat, Assam, our first LPG bottling plant in the state, with a capacity of 30 TMT per annum.
This is an important step towards strengthening our LPG infrastructure and product availability in that region. We are also pleased to share that our premium composite cylinder, Bharatgas Lite, is now available across India and can be conveniently booked through the Hello BPCL app. I am proud to share with you that BPCL has recently launched extreme weather-grade diesel, developed entirely in-house to keep military vehicles operating reliably in extreme winters and at high altitudes. The first rake was dispatched from Bina in August. For us, this is more than just a new product. It demonstrates what we can achieve when innovation and technological capability come together in support of national priorities. Our gas business maintained strong growth momentum. Bulk gas achieved a record H1 sales performance of 979 TMT, registering 53% year-on-year growth, while CGD sales reached 177 TMT, growing 65% year-on-year.
The recently announced GOBARdhan scheme has made CBG projects increasingly attractive, and we are actively pursuing this opportunity through both our own plants and joint ventures. Additionally, our CBG blending reached 6.5% in H1, more than double the mandated target of 3%. Coming to LPG compensation, the softening of Saudi CP prices during Q2 provided some relief on underrecoveries. Average underrecovery declined to around INR 290 per cylinder in Q2 compared to INR 507 per cylinder in Q1. As of September 30, the cumulative buffer stood at INR 17,334 crore, after adjusting for INR 3,796 crore of compensation received during the first half. For future, we remain hopeful of the government's continued support to OMC toward domestic LPG compensation. Let me now brief on our growth program. Our CapEx program remains on track, and since we last spoke, our key projects have continued to make steady progress.
As of September 26, our Bina petrochemical and refinery expansion project has reached 40.2% progress, while the polypropylene project at Kochi has reached 55%. The PRFCC project at Mumbai is also progressing. We have also taken an important step in our sustainable aviation fuel journey. In October, we signed India's first co-processing licensing agreement for our SAF project at Mumbai Refinery. Phase one involves revamping the existing kerosene hydrotreater unit and is targeted for commissioning by January 2027. This positions us well for India's SAF blending requirement for international flights, beginning at 1% in 2027 and progressively increasing to 5% by 2030. On the Andhra Pradesh refinery and petrochemical complex, I am pleased to share that on Friday, our board approved the incorporation of a wholly owned subsidiary as a dedicated project company, with an initial authorized share capital of up to INR 4,900 crore, subject to requisite approvals.
The dedicated project company will facilitate swift due diligence, lender engagement, and development of the financing and partnership structures. The detailed feasibility reports are in their final stages, following which the final investment decision will be taken shortly. Moving to our upstream portfolio, the Mozambique project continues to progress steadily, reaching 47% completion as of September 2026, with gas production expected by mid-2028. In Brazil, following the award of the FPSO tender in May 2026, the BM C-11 project is also progressing in line with planned timelines.
Overall, against our FY 2026/2027 CapEx target of INR 25,000 crore, we have incurred INR 13,749 crore during the first half, including INR 9,300 crore in Q2. Now, coming to our financial performance, revenue from operations for the quarter stood at INR 1.5 lakh crore, with a standalone profit after tax of INR 4,993 crore. For the first half, standalone profit after tax stood at INR 1,031 crore.
On a consolidated basis, profit after tax for Q2 stood at INR 4,863 crore, while profit for the first half was INR 2,990 crore. Despite the challenging operating environment, our Q2 performance demonstrates the resilience of our integrated business model. The quarter benefited from our agile sourcing strategy, robust refining performance, and a reduction in marketing and LPG underrecoveries. Our balance sheet also remains strong. Standalone gross borrowings reduced to INR 15,246 crore as of September 30, compared with INR 17,386 crore at the end of June.
The standalone debt-to-equity ratio improved to 0.16 from 0.19 in Q1. Our borrowings, net of short-term investments, stood at INR 7,106 crore, as against INR 4,800 crore in Q1. As we enter the second half of the year, the external environment continues to remain uncertain. However, our performance in Q2 demonstrates our ability to adapt quickly and operate with resilience through periods of significant turbulence.
We remain confident in BPCL's ability to navigate near-term volatility while building long-term value. With that, I will conclude my brief on our Q2 performance and will be happy to take your questions. Thank you.
Thank you very much. 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 remove 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 Probal Sen from ICICI Securities. Please go ahead.
Thank you for the opportunity, sir, and congratulations on a good set of numbers. A few questions for you. You talked about the crude sourcing mix for the second quarter, with spot crude at 67% and Russia at 37%. Just wanted to get a sense, given that Middle East crude flows have improved, as you mentioned, have we seen any material change in that mix in the month of October so far? And how are we looking at the mix till December, when you said you already have crude tied up till at least the end of December?
Let me give you in terms of the brief numbers. This Saudi side, Persian Gulf, compared to Q1, definitely it has improved in Q2. Even October, November also, we are expecting the similar lines of higher volume from Middle East. Mainly after Yanbu pipeline connection by Saudi, they have started increasing their volumes and certain cargoes are coming from ADNOC also. Only cargoes from Iraq and Kuwait still not coming in full-fledged, but otherwise, a good amount of volume is coming from Middle Eastern side. October, our requirement from Russia slightly come down, but in the month of November, the cargoes from Russia significantly has reduced due to the commercial viability of Russian cargoes, mainly the increase in the freight. We are not getting good offer from the Russia. Now, for December cargoes, slightly it has improved.
Whatever they were expecting a good amount of premium for Russian cargoes, now the premiums, slightly they have reduced. Maybe it is now comparable with other Persian Gulf grades, Russian Urals. Maybe for December, some couple of cargoes we can take Russian. November will be definitely low in terms of Russian availability. Not availability, Russian cargoes, what we have procured.
Right, sir. Just a follow-up on that. If I remember correctly, sir, I think you had mentioned at the Q1 briefing that blended crude cost was somewhere around Indian benchmark plus, minus about $12-$15. Has that number changed in terms of delivered crude price to us, in terms of actual cost of crude?
Still the freight rates are high. The insurance rates is slightly higher. Still benchmark plus $10-$12, it depends on which side you are taking the product. For example, if it is from Fujairah, definitely it will be lesser, but if it is from Yanbu, the freight rates will be higher. But from benchmark, we can take on an average, the landing level is $10-$12.
Right. The second question was with respect to the LPG. Now, sir, obviously, you mentioned, I think INR 290 odd a cylinder for [2 kg]. Now, we have seen Asia LPG prices spike quite a bit in October. If we can get a sense month-wise, what was the per cylinder under recovery in October, and what was it in September? What are you looking at in November at this point of time?
If you see the numbers, July it was INR 490, August INR 179, September INR 199. We are expecting October will be INR 245, and it is going up in the month of November. November expecting at INR 328 per cylinder.
Okay. One last question, sir, if I may. In terms of the marketing margins, is there any discussion at all in terms of relooking at the pricing, given how sharply product spreads and prices have increased? I know you cannot answer in terms of timeline, but just wanted your sense on how you are looking to navigate the higher retail marketing losses, which I am sure you are encountering, at least in October. How are you looking at the situation?
If you see the quarter two numbers, integrated side, there is no big stress on the balance sheet and profitability. We are almost at a normal level of profitability for the quarter, slightly on the lower side, mainly for the higher losses in the marketing under recoveries. But we thought crude prices will stabilize, but still the war is continuing. There is no clarity by what time things will improve. But one thing we are sure, once this war resolves, crude cannot come in at this price, because supplies are there, production is there. Only thing, this route is the disturbing thing. This Red Sea side, volumes are coming, Yanbu side. Even there are certain Houthi attacks on Saudi side, but still good amount of volumes are coming from the Red Sea.
But once this route is resolved, we are hopeful crude can come back to the reasonable levels. But some more time, we have to wait and see. We are reviewing every month on month, what is the under recoveries, how long this will continue. But there is no further discussions on any improvement on the marketing margins at this point of time.
Understood, sir. Thank you so much for your detailed answers. I will come back.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. Next question is from the line of Vivekanand from Ambit Private Limited. Please go ahead.
Yeah, hi. Thanks for the opportunity. Just two questions. Number one is on the Mozambique asset. You said that the construction is, I think, 40%, I guess, is what, 47% is what you said. Can you refresh us on the targets that are there in terms of by when should this project come on stream and first gas, and what will be your share of gas in, let us say, FY 2030 from this asset? That is number one. The second one is in terms of your CapEx outlook. Any change versus the guidance given, I believe it was around INR 25,000 crore in the past. Any change on the annual target for FY 2027 and 2028, along with maybe a key update on the Bina expansion, if you could talk about that. Thank you.
Yeah. Let me explain on Mozambique first, because the project is progressing very well. 47% project progress has achieved. We are expecting mid of 2028, either June or July, the commissioning date. They have declared June 20th, the first gas we can see. As of date, there is no change in the scheduled date. Based on the current progress of the project, we are hopeful mid of 2028, we can see the gas. That is one. In terms of the gas flow, size of the gas, the first phase development is for 13 million metric ton of two trains development, out of which BPCL is having a 10% share. That means our sharehold will be around 1.3 million metric ton of gas. This is only for phase one development. Subsequently, based on the reserves, we can develop two more trains.
Once this particular project is completed, other trains, we can plan it. The total size will be around, BPCL share will be, BPCL share will be around roughly 4.2 to 4.5 million metric ton of gas. The first three trains are developed based on the reserves. The second question, in terms of the CapEx program, our financial year FY 2025, 2026, the target 2026, 2027, the target is INR 25,000 crore. In the six months period, we have already reached around INR 13,000 crore. We are keeping the same target, but in case if any good progress on the project side, slightly it may go up beyond INR 25,000. Depends on the project progress. Even certain activities, if the progress is good, maybe this CapEx program can go up slightly.
Right, sir. Thanks for the answers. Just one follow-up. Any plans on tying up the Mozambique gas to get to Indian customers, given that now you have visibility of completion of the project by mid of 2028?
Mozambique, we have already tied up SPA for 1 million metric ton of gas to bring it to India. Out of 1 million metric ton, already we have started marketing in Q2. Q2 itself, we have started marketing, and certain customers already we have tied up, but small volumes. We have started marketing of the gases.
Right. By when can we expect this gas for you to get tied up, the whole 1 MMTPA, and do you have plans to bring the entire 1.3?
We have started in Q2 on the sales side. On the sales side, we have started marketing of this gas in Q2. Maybe next two, three quarters, we can complete 1 MMT.
Right. Thank you very much.
Thank you. Next question is from the line of Sarthak from DSP Asset Managers. Please go ahead.
Hi. Thank you for the opportunity. Sir, just a couple of questions on the Mozambique side as well. If we see the balance sheet on the intangibles under development, can you please split as to how much of the 19,000-odd intangibles as well as under the equity method of 29,000 would be pertaining to Mozambique? How much have we spent post the force majeure, and what can we expect as incremental spending on the Mozambique side?
Yeah. Mozambique, as of date, cumulative basis, we have spent around $2.8 billion. It is almost around INR 27,461 crore. The future CapEx commitments based on the current approved project cost is $1.8 billion in the next coming couple of years we have to spend. The total investment in this Mozambique project will become 2.8 + 1.8, around $4.5 billion-$4.6 billion of investment, including the exploration activity, everything.
Okay. This will be up till the gas will be started, so that is till 2028, right?
2028, mid of 2028.
Okay. How much incremental interest cost is there? Has there been any uptick on the interest cost for this project?
For this project, this project development is happening under the project cost, project financing. There are consortium of around eight or nine bankers consortium at project level. The interest cost will be varying. It starts from 6%- 8.5%, 9% based on the current interest rate. So different lenders at different terms and conditions, this project financing has been concluded.
Fair. This was very clear, sir. Thank you. One last thing, the delta that we see in the balance sheet of intangibles, that is mostly pertaining to Mozambique. Is my understanding correct? So INR 16,000 crores has increased to INR 19,700 crores, the intangibles under development, and a similar increase has been there on the investment under equity method as well.
Yeah. Investment under equity method is mainly due to a particular project, Mozambique project. Earlier, it was under PA Holding. PA Holding means whatever CapEx, straightaway it used to come under the CapEx program. Subsequently, in the last two quarters, there was a development. All the assets under development has been moved to AssetCo. That means instead of CapEx, you will see in the investments. At project level, all the assets under work in progress moved to equity under AssetCo. So that this CapEx program, whatever incurred CapEx program under development, it has moved to equity.
Okay. Got it. This was helpful. Yeah. That's it from my side. Thank you.
Thank you. Next question is from the line of Yogesh Patil from Dolat Capital. Please go ahead.
Thanks for taking my question, sir, and congrats for the good set of numbers. BPCL GRM has dropped quarter-on-quarter, closer to $32 per bbl compared to the Q1. What's driving this decline in the BPCL GRM? Because most of the independent refiners actually saw their GRM jump on a sequential basis. Could you walk us through what's behind this quarter-on-quarter dip in our reported GRM, and was there any crude inventory gains during the Q2?
Crude inventory gain, generally we don't calculate because our average inventory is around 22-25 days, so there won't be any big impact on the crude inventories. If any inventory gains are there, to the extent of intermediaries, if you are holding a very big amount of intermediaries, then there may be an impact. Otherwise, compared to Q1, the GRM reduction is mainly two reasons. One is slightly the GRMs are more or less GRMs are in the same level as Q1 and Q2. Q1 average gas oil spreads are $55, now it is $56 in Q2. Gas oil is also 24 and 24. There's no big change in the spread. But two important things have happened in the crude procurement. One is the crude freight costs have significantly increased compared to Q1. The Q2 freight costs are very high.
Secondly, Q1, I think most of the period we used to get Russian crude either at benchmark to discount or around the benchmark. But in Q2, certain cargoes, we don't get any discounts on the Russian crude. We have to buy either at the premium of benchmarks or benchmarks. So these two have impacted, mostly on the high sulfur grades, impacted the refining GRMs compared to Q1. Otherwise, if you compare the Singapore benchmark GRM, still our GRMs are much higher.
But sir, the freight cost has gone up for every independent refiner. So why in our case the crude cost is mattering to the GRM calculation?
I don't know other industries, what is the impact of crude inventory gain or intermediary inventory gain, what is the carry forward from Q1 to Q2. We don't have any such information. We generally track what is our performance compared to the trend of the spread, what is the crude procurement compared to the market trends. As long as we are better than the market trends, we can conclude our refinery performance is better.
One of the reason is the freight cost that has gone up and that is impacting on our GRM. That is the correct understanding?
Russian side, discounts are not there in Q2. For example, earlier, most of the total procurement, around 37% of Russian procurement. If Russian procurement is not available at discount, particular refineries who are using the high sulfur grades, definitely the margins are, compared to Q1, it is on the lower side.
Okay, my next question, sir, on again GRM side. The freight cost has already gone up for the crude. Here I am trying to figure out, are those higher freight cost or expenses actually negatively impacting to our GRM? That is one thing. Because are you passing those oil product prices when you set up the RTP? Our understanding on this RTP side is that it is a combination of import plus export parity side, and the imports is making up the bigger chunk out of that RTP, that freight cost is also the part of that. Considering all these inclusions, the question is very simple, that the freight rates are impacting on a GRM or not?
RTP is for the product pricing formula. Product pricing formula, product freight is one component. My procurement of crude freight is another component. If both the freights are in tandem, if it is moving, there won't be any impact. Sometimes if the crude freight component is going up, whereas freight component is not going up, there is a squeezing on the refining margins. Or on other side, for example, product freight costs are going up and crude freight cost is not going up, there is an advantage. These are the market trend. There is no change in the formula, but this time, whatever the freight cost on crude has gone up, similar extent, the product freight is not gone up.
Okay, sir. Thanks a lot for this clarity.
Thank you. Next question is from the line of Mayank Maheshwari from Morgan Stanley. Please go ahead.
Hi, sir. Just an extension of the previous question around crude sourcing. Can you just give us a bit of an idea about how September quarter crude sourcing was and what you are doing for the current month and the next few months, since you are loading, I suppose, for November and December as well, what is going on and how you have seen premium shift. Freight, you have addressed partly. But what is going on in the crude market and what you are seeing on your cost side? Thank you.
Let me explain on the Q2 side. In terms of the volume, 37% of volumes come from Russia, and 17% is coming from Abu Dhabi, and 19% coming from Saudi, Q2, and around 6% from Oman and 9% from U.S. And other countries, it is only 4%- 2%, 1%. Broadly, in Q2, our term contracts for Saudi and Abu Dhabi, majority of the volumes are coming from the term side. These two countries a little bit gone to the spot, but Russian, still we have maintained at 32%. Coming to October and November, in terms of the percentage, more or less same. But in terms of the November, Russian volumes have come down compared to PG grades. PG grades actually more commercially viable compared to Russian grades. That is the reason November Russian will be lesser.
But December completely we have not concluded, maybe another couple of cargo still is pending. Maybe another one week or 10 days, we can conclude on the December side also. Overall, we are getting the full volume, but there are challenges. Certain cargoes, unplanned. For example, cancellation of the cargoes, immediately you have to replace with some other cargo. There were challenges, but during the quarter we have come across all the challenges, we have addressed all the challenges. We are getting the full volumes and our throughput is clear. In terms of the market pricing, completely volatile. I can say certain period of time, crude is available at a discount. Certain period of time, crude is available at a premium. For example, certain cargoes, we are the first one. We have taken one cargo for SOMO crossing the [SFOEC].
Earlier we never tried, but this time we have tried with a good amount of discount, we got the SOMO cargo. But the second cargo, again, there are certain issues. So there are some challenges, getting crude is at discount, getting crude is at a premium. So it is a mix. Daily it varies. So there is no clear trend whether crude is on premium side or discount side. But volumes, we are sure volumes we will get.
Got it, sir. Very clear. I think that is pretty helpful. I think the second question was more related to the Andhra Refinery. Can you just give us a sense of the steps now going forward and-
Yeah.
What will be the timelines around FID, et cetera?
Yeah. One is, in the last board meeting, our board has approved for creation of a separate subsidiary company, initially with 100%, and whenever the potential partners are ready to join, subsequently, the dilutions will happen. For that, the first step, we have approved for creation of the WOS, and it will go to the DIPAM MOPNG. After MOPNG recommendation, the incorporation of the company will happen. In terms of the DFR, we are almost at final stages. The numbers have been frozen, just reviews are going on. Maybe another couple of weeks, we will conclude on the number. Broadly, we are looking at a configuration of 10 MMT of refinery with a high intensity of petrochemicals, around 32%-33% of petrochemicals. The cost numbers, once we are finalizing and take it to the board, that time we can share full details.
In the scheduled timelines, we are expecting maybe in next two, three weeks, we will take it to the board for final investment decision, subject to financial closure and subject to CCEA approvals, because this investment is happening through subsidiary company, it requires, based on the Maharatna Powers, it had to go to the Ministry and CCEA approvals. We are expecting, maybe once board is approving, another two, three months, the CCEA approvals will come. But parallel activities, pre-project activities and licenser selection and other things are going on. Parallelly, the selection of licensers and CCEA approvals, the notes will move. Maybe three, four months, we are hopeful the entire approvals will be completed. In terms of environmental clearance, the discussions are completed. The minutes have been recommended by the committee to the EC authorities. We are expecting shortly that EC clearance also.
Once it is there, maybe we can start the actual physical work on the site. In terms of the land procurement, around 4,700 acres of land has been registered in the name of Bharat Petroleum. So that is sufficient for initial work for refinery, but another 1,400 acres, which is required mainly for green belt and other things, we are expecting by November, the entire 6,000 acres requirement of land will be fulfilled by the AP government. So this is the status of here.
Yeah. Sir, is there an equity level you are comfortable with in terms of a minimum that you want to have in this project?
We are planning either 70/30 or 65/30 debt equity. We are keen to dilute at least 30% of equity dilution when the project is in progress, because discussions are still going on. Once the terms are agreed, then the partners will join with us. With this, we are comfortable in terms of the investment. Even earlier also, we have discussed our peak debt equity on standalone basis. Our target debt equity around one, it should not cross beyond one in a significant way at the project peak CapEx. Once the projects are commissioned, again, we will come back to 0.3, 0.4 level of debt equity. That is what we are projecting. When we take any CapEx project, similar trend we follow. At the peak CapEx, we take a debt equity at 1.1 level of leveraging.
Once projects are commissioned, we are hopeful it can come back to 0.4, 0.5 of debt equity. That is where we are comfortable on a standalone basis.
Very clear, sir. Thank you.
Thank you. Next question is from the line of Nitin Tiwari from PhillipCapital India. Please go ahead.
Hi, sir. Good morning. Thanks for the opportunity. Sir, just for the sake of summarizing, if you can give us a summary of all your ongoing and planned CapEx projects, the large ones, and also a guidance for FY 2028 and 2029 CapEx numbers.
Yeah. Major projects, I can say one is Bina Petrochemical Complex. Bina is now scheduled completion is around 40%. Yeah. Approved project cost for Bina is INR 43,367 crore. This is excluding taxes, ITC. Cumulative CapEx till date is INR 7,566 crore already incurred and progress is 40%. Scheduled commissioning is mid of 2028. We are hopeful Bina project will be completed as per the schedule line. There is no revision at this point of time. The next major project is PP at Kochi Refinery, Polypropylene project at Kochi Refinery. The total approved CapEx is INR 4,850 crore.
Till September 2026, we have incurred around INR 1,178 crore. And most of the commitments are done, like for example, tendering activity and prices have been frozen. And actual progress, 55.10%. And scheduled completion date is October 2027. This is on polypropylene at Kochi. And third project we have recently approved is PRFCC at Mumbai Refinery.
The total project cost is INR 13,626 crore. As of date, the initial activity started, the CapEx Q2, we have incurred only INR 130 crore, and planned CapEx for this year is around INR 1,500 crore, and actual progress 9.2% completed, and scheduled completion date is September 2029. This is the project. Other major projects are small projects compared to this. All are INR 1,000 crore and INR 1,500 crore projects. All projects are going well, including the ITPL. There is one pipeline project, it's almost delayed by seven, eight years. That also, it is taking a good momentum in Q2. We are expecting the project will be completed by December, January. Otherwise, all projects are in full swing. We are expecting as per the schedule projects will be completed.
Right. And the guidance for FY 2028 and 2029 for the CapEx?
28, 29 CapEx. 28, 29, we are expecting INR 40,000 crore plus. It depends on the project progress. Maybe INR 40,000 crore to INR 45,000 crore. 26, 27, INR 25,000 crore our target. Maybe slightly it will go up because the projects are in full swing. Projects are progressing very well. Maybe this INR 25,000 crore, it may go up maybe 5%-10%.
Right. So INR 25,000 in 2027, then about INR 30,000-INR 35,000 is what we can expect in FY 2028?
Yeah. FY 2027, 28, INR 40,000 crore you can expect, INR 40,000-INR 45,000. We have to find a major project, anyhow, the plan we have. Other than major projects, beginning of the year, generally we review. Otherwise INR 40,000 crore, as per our cash flow projection, INR 40,000 crore we have taken. 28-
Sorry. This INR 40,000 includes your CapEx in Andhra as well? This is-
No, Andhra will be addition. Once FID is approved, then Andhra will be an addition. My equity commitments, whatever equity commitments, Andhra will be an addition.
Understood, sir. Lastly, sir, just a sort of clarification question again. What is our dependence on basically petrol and diesel when it comes to taking it from other refineries as a percentage of our sales?
Yeah. Our dependence, this year we are expecting around 6 million metric ton of products we may take by end of this year, because this year the growth is very high. Our own requirement, 89.27%, it is coming from own refineries for MS. HSD, we are expecting 79.34% comes from our own refineries.
6 million ton in total, I mean, both MS and HSD is what you are going to take?
Yeah. We are expecting by end of
Okay. Thanks, V.R.K. That is very helpful. I will get back in next week.
Thank you. Next question is from the line of Bineet Banka from Nomura. Please go ahead.
Hi, sir. Thanks for the opportunity. On throughput, I think the number has been very strong over the last few quarters. So this quarter was 118%, and it has been consistently over 110%. So can we expect similar run rates in future as well? If there is a refinery turnaround over the next few quarters?
Yeah, this year there are turnarounds. Mumbai Refinery Q3, we have certain planned shutdowns, around 30 days for Mumbai Refinery. Bina, a small shutdown of 4.5 days. Kochi Refinery will be around 30 days, 30-40 days, because three units are going for a shutdown. It is a regular maintenance. Maybe slightly Q3, Q4, we may not be at 118%. If you remove the HSD from the shutdown, definitely our refinery throughput will continue similar lines.
Okay. On a follow-up question on Andhra Pradesh, can you share the IRR at mid-cycle crack? Not at the current level of crack, maybe around $15-$20 per bbl of diesel, gasoline crack. What will be the IRR from this project?
Generally, we take any projections, when we take a large project, we take a 10 years average. We cannot deploy any capital based on the short-term trend. We will share the numbers very shortly. Once FID is clear, we can share. Otherwise, when we take the assumptions, any crude assumptions or price assumption, we take a 10 years price trends.
Okay, sir. Lastly, one more on the LPG compensation. The buffer has continued to go up, because the under-recovery is higher than what you have been recovering from the government. Are there any discussions going on regarding the same from the government side? How do we go about it?
LPG, already industry, we have submitted our representation to ministry for support. As a precedence earlier also, whenever LPG under-recovery is, ministry is always helpful and they give the support. But it is a process. There is a process of getting budgetary support. After that, the announcements will happen. Otherwise, we are in consultation with the ministry for LPG subsidy.
Okay, sir. Thank you.
Thank you. Next question is from the line of Amit Murarka from Axis Capital. Please go ahead.
Yeah. Hi. Thanks for the opportunity. I missed if you have already shared the number on the call, but what was the GRM net of SAED in the quarter?
$14 per bbl.
$14. Okay. Ballpark inventory gain, if you could give. Last quarter, I remember you had mentioned $3- $4 as inventory loss. This quarter ballpark number, if you could share.
Very difficult to calculate inventory gain/loss because the crude procurement is so volatile. The freight components are so volatile. Earlier, when the prices are stable, maybe one can calculate what is the inventory gain/losses. Today, very difficult. How we are doing the valuation, there are different principles. A crude cost itself is one cargo to another cargo, the cost differential is around $20- $25 due to the freight and other things. We stopped calculating what is the inventory gain/losses, because our average inventory is 25 to around 25 days only. If you are bringing any cost efficiency in the crude procurement, that is an efficiency. It is not an inventory gain loss. Do not try to calculate as an inventory gain loss in terms of the crude.
Sure. Got it. Just a question on other expenses. It seems to have gone up quite a bit in the quarter. Even if I exclude the FX loss of about 400 odd crores, even then it is like 9,000 odd crores. Usually, it is a number of close to 7,000. Could you highlight what are the specific reasons for this jump?
Yeah. There are certain one-time items, there are certain regular items. Mainly the transportation, because of increase of the diesel cost, the transportation cost has gone up slightly on account of volume. That is around INR 150 crore for Q2 increase compared to earlier quarters. Second impact is normal increase of octroi taxes, around INR 150 crore increase. Forex, anyhow, you said you are aware. The one-time impact is generally as a risk management policy to cover my refining operating expenses. Every year, certain percentage of volumes, we sell the spreads in advance. Those spreads, whatever we have sold in advance for the next 2- 12 months requirement, again, as to my refinery throughput, certain percentage of spreads we sell it. But due to this very high spread, there is a MTM losses, significant amount of MTM losses during this quarter. These are the major things.
Maybe in case if the spreads are normalized in next six months, this MTM reversal can happen. That is the one-time hit because this particular period, the spreads are very high.
Sure. Could you give that number of what is the MTM loss?
MTM will be INR 1,300 crore, other than revised MTM derivatives, around INR 1,200, INR 1,300 crore something, MTM.
Got it. So that's the bulk of the movement on Q2 basically.
Yeah, that is it.
Sure. And generally, you mentioned a lot about the crude sourcing already, but if I have to kind of just understand the whole movement around the various crude and the discount premium. So I believe you were getting a meaningful advantage from high Russian crude sourcing, which was coming at a discount and which is gone now. To that extent, is it fair to say that the, let's say the premium over Singapore, which was being high, would probably now moderate now to more normal levels, let's say, as we have been seeing for other refineries or, let's say in the prior years for you?
Yeah. Russian discount, definitely it helps a lot in terms of availability of the crude and commercial margins for the refineries. In fact, if you see the trend in the month of October, Russian crude is at a premium of $12- $13. Now, recent numbers I can say it is only $1- $2. Maybe in the next month, if the Russian is available at a benchmark or discounts, maybe we are much better than Singapore. If it is at a premium, definitely we may not be at the Singapore level, but as for the refining performance efficiency side, definitely our efficiency is much higher than Singapore side. One is our distillate yield is 83%, 84%. In fact, 84% plus only. In fact, last couple of quarters, we are ensuring 84% plus of distillate yield. Secondly, our swing between gas oil and gasoline.
These are the unique advantages for our refineries. Most of the times our GRMs, even there is no Russian discount, our margins will be better than Singapore.
Sure. Just a last question on CapEx. You mentioned INR 40,000 crore-INR 45,000 crore for next year. Does this include the planned spends on Mozambique as well?
Mozambique bridge is already factored. Only AP Refinery we are not factored in our CapEx program. Once the board is approved for the AP Refinery, accordingly, we will rework our CapEx program, and we can share the revised numbers.
Sure. These are all committed CapEx, irrespective of the cash flow situation next year or something?
Almost, maybe a little bit percentage we do not commit because as and when requirement, like for example, maintenance or upgradations. During the year we plan it, there will not be any commitment. At least maybe 15%-20% non-committed. Every year we have to plan it, and during the year we commit it.
Sure. That is all from me. Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants, please limit your questions to two per participant. Next question is from the line of Sumeet Rohra from Smartsun Capital. Please go ahead.
Yeah. Hi, sir. Good morning to you. Sir, just two questions only. One is, sir, on the LPG. So last year, sir, what was approved for us, I think were the monthly payments till November or something of that sort, sir. Can you explain? So if my understanding is correct, that means, sir, for the last tranche, sir, we will get paid in November and then we will not get paid further, or what is my understanding? Can you just explain on that, sir?
Sir, last-
Secondly, is that you- Yeah.
P lease go ahead.
Yeah. My second question is, sir, on the Brent. You know, today the matter of fact is that Dated Brent trades at about 127, 130, and Brent future trades at about 115. Sir, basically what is more relevant for us? The physical oil when you buy is, we should look at the 127, 130 level, or should we look at the 115 level, which is the Brent futures which trades every month? Because, sir, if my understanding is correct, we are benchmarked about $90, $95, and beyond that, then our marketing side starts kind of losing money. I just want to understand what's the thought process, because the war is absolutely an unknown, right? I mean, nobody knows it. It may finish today, it may finish after two years after President Trump leaves. So nobody knows anything. So we are dealing with a very big unknown.
So sir, just wanted your thoughts on how you are looking at the scenario, and what is the timeline of saying that, "Okay, we will make a decision if prices stay longer for higher periods." I just want to understand your thought process on evaluating the crude on the marketing side of our business. Thank you.
Yeah. One is on LPG, last time whatever subsidy support government has announced, that is for 12 months, that will be ending in the month of October. Around INR 632 crore per month for BPCL, it will be ending in the month of October. Any new support, if it comes in this quarter or maybe next quarter, we are not sure what form or what amount the support will come. Then accordingly, that will be an addition. But otherwise, last subsidy mechanism, it will be ending in the month of October. It comes to crude sourcing, yes, I agree there is a big gap created between the ICE Brent and Dated Brent. What we see in the TV channels, it is only ICE Brent. The Dated Brent, yes, presently it is hovering around 125, 127.
Most of our contract, I can say significant contracts are linked to Dated Brent, not to ICE Brent. Certain cargoes may be Dubai-based, it happens, but most of the cargoes are on Dated Brent. As long as the Dated Brent is on the higher side, our cost of crude will be definitely on the higher side. Most of the times, if you see the trends, recently I have not seen that much of gap between the ICE Brent and Dated Brent, but last two months is due to certain issues of war, so the Dated Brent is on a higher side. So the cost of crude procurement will be on Dated Brent. Definitely, our cost of crude will be on a higher side.
Sure, sir. Sir, if I just may very quickly ask you one thing. Sir, as you mentioned that October we will see the end of whatever money we were getting on the LPG account. Sir, the matter of fact is that, if I heard correctly, you highlighted that the LPG underrecoveries are going up to 300 plus in November, and October also has been very high. Plus, sir, we are seeing Dated Brent or normal Brent or whatever being at such high levels. So sir, my question more views as an investor, so how do we look at it? Because we are losing money on practically every product we sell today. It is definitely not a very exciting environment. So, what is the thought process on pricing, et cetera? Can we look at some pricing method changing going ahead?
LPG, definitely LPG, a controlled product. We do not have any control over the price declarations of LPG. It is completely under control, and only the underrecovery support mechanism, government will support some point of time. So there are some precedences. It is not the first time. Otherwise, we do not have any control over the LPG pricing, because there are periods, for example, September the LPG underrecovery was INR 199. Maybe July it was INR 490. November, we are expecting INR 328. So how the things will move, what decisions will be taken, maybe ministry will take appropriately on the LPG underrecovery. In terms of MS, HSD, one should not see on the short term basis. One has to see, everyone is hoping the war will resolve.
In case if it is continue for a longer period of time, again, we have to review, but at this point of time, we are not hoping this war will continue for a longer period of time. Once the war is resolved, crude is available. It is not that crude is shortage. Only the transit is the issue. Otherwise, crude is available. Sufficiently production is there everywhere. Only refining side, there are production losses because there are production facilities has been hit. Refining spreads will continue. So on the refining side, definitely we are hoping the higher refining cycle will continue. In terms of the crude, we are expecting at least if war resolves, there won't be any higher level of crude. It will come back to the reasonable levels. So that is what we are expecting.
Sure, sir. Okay, sir, thank you so much, and wish you all the best and good luck.
Thank you. Next question is from the line of Aanchal Shah from Axis Capital. Please go ahead.
Hi, sir. Am I audible?
Yeah. We can hear you.
Sir, just wanted to know, could you quantify the incentives available for the AP refinery project with respect to GST or power concessions? Broadly, what could be the ballpark figure as a percentage of total CapEx or absolute number?
No, there are good incentives. Still we are under discussion. Earlier, government of AP approved based on our earlier estimations of CapEx, roughly in couple of elements, maybe tax refunds or GST and CapEx refund during the work in progress. There are certain incentives, but roughly I can say it is like a percentage of CapEx what we have invested. For example, if we are investing some INR 50,000 crore or INR 100,000 crore, principally, AP government initially, they have indicated 75% of capital, what we have invested in the asset, they may reimburse over a period of 15 or 18 or 20 years. Okay? But otherwise, the subsidy support will come from the AP government. We are expecting the same principle of 75% of capital subsidies over a period of 15 or 20 years, or in between, maybe in the discussions, we will finalize with the AP government.
Got it. Sir, second is a more structural question. Sir, how do you see the medium to long-term demand outlook for MS, HSD in India? Specifically where I am coming from is factors such as increasing EV and CNG penetration impacting MS growth, and then changes in transportation and industrial activity affecting HSD demand. Any views on that near to medium term? Even long term.
Yeah. At least we can forecast a little bit medium term, maybe three to five years, because India is growing at a 7%, 7.5% growth level. The exports also slowly. If there is no tariff impact of U.S. and most of the FTAs we are signing with various countries, it will help a lot in terms of the export of manufactured goods. With this background, definitely diesel will grow. Initially we thought 2% or 2.5% growth diesel. Now based on the current trend, when we see the diesel growth can go up to 3% and up to 4%. MS, even earlier years also, almost 5%- 6% growth we are witnessing. We are expecting the similar level of growth for MS also. Even there is a little bit improvement in the EV penetration, but in terms of the numbers, still the volumes are coming for MS HSD.
Got it. Sir, any sense of where BPCL could end up with respect to the number of retail outlets from the current level, next five years, 10 years?
In the last advertisement, we have almost advertised 4,000 to 5,000 retail outlets, but every year we are taking 1,000 outlets. Maybe next three years, maybe one can add maybe 3,000. It depends on the land availability, mainly issue of land. Getting land in the proper locations, market, that is more important. Otherwise, every year we are planning in the CapEx for 1,000 ROs, we are planning for CapEx.
Understood. Thank you a lot, sir.
Thank you. Next question is from the line of Saurabh Jain from HSBC. Please go ahead.
Thank you for the opportunity. I am going back to the point that has been discussed a lot in this call. Is it possible to give a sense in terms of your overall procurement of crude? What could be the premium that you would have paid over the benchmark Brent? Some sense of that number can be helpful for us.
Very difficult to how much premium, because different terms. Some cargoes have an FOB, some cargoes some DES, some are, for example, through FTS. For example, in the en route, maybe some portion of the distance they will incur, some portion of the distance we will incur. So terms are completely different. So one has to see what is the cost of procurement. One should not see what is the premium or discount. Certain cargoes, for example, Iraqi cargoes, you got a $20 discount, but finally after the freight, if you are adding maybe it is at benchmark, a $5, $6 benefit. So various components are involved. So very difficult to say how much a premium from the benchmark. Even someone is calculating it is not a representative figure of market trends.
One has to see what is the landing cost of the crude and what is the value the crude is giving. The differential is the GRM only this particular period of time when both are volatile. The spreads are also volatile, the crude is volatile, the freight is volatile. It will not give any representation if I say even it is available at a benchmark, it is available at a discount or premium.
Okay, no worries. You also made a comment that the Russian crude is now available at only a premium of $1-$2. But then you also mentioned some time back that you are still preferring the Middle East crude.
Yeah.
Does it imply the Middle East crude is actually available at a discount to the benchmark?
No. I am talking November. November, the trend is Russian is available at a $10-$12. Okay? Compared to $10-$12 benchmark, then PG side is commercially viable. Now, December month, for December month, there are certain offers of Russia, $1-$2 premium over benchmark, that is a delivered product, and freight rates are very high. Maybe today, if anyone is offering a Russian cargo, Russian cargo is preferable than a Middle Eastern cargo for December month, because November month already we have concluded.
Okay. What is your sourcing for Middle East? Is it on a delivered basis or how is the arrangement?
Term contracts are on FOB mainly, but spot basis may cargo to cargo it vary. Some traders, if the cargo is available, if the cargo is on the float, then they may offer at a delivered basis. Otherwise, if the cargo is available at the tanks, the supply point, they offer at FOB. If the vessel ideal from their side, they may offer DES, mean delivered. So different combinations. There is no standard combination whether delivered or FOB.
Okay. Separately, Aramco sometime back had announced that they will not ship cargoes to India. I am a bit confused. Is it into place? Is it into effect or you are easily getting available crude from Aramco as well?
Nothing. There is nothing. There is no such communication. At least we have not received anything from Aramco. I do not know which news article you are referring.
Okay. Maybe some wrong news that we are looking at.
Yeah.
Lastly, is it possible to also share the refining margins by the refinery?
Refining margin we have shared already. Individual refinery wise you want?
Yeah.
Refinery wise you want?
Yes.
We will share separately.
Okay. No worries, sir. Thank you so much, and all the best.
Thank you.
Thank you. The last question for today is from the line of Aman Sharma from AS Capital. Please go ahead.
Yeah. Am I audible?
Yeah, we can hear you.
Thank you for this opportunity. Basically, as you have mentioned, after SAED, GRM is $14 per bbl, right?
Right.
I want to understand, when you transfer the refined products from your refinery arm to marketing arm, how do you calculate this refinery transfer price? Is it after taking the SAED adjustment?
When we purchase product from any of other private refineries, it is after SAED. Similar principles we apply for transfer pricing between our refinery to marketing.
But if I am not wrong, the SAED is only on the export volumes, right?
Yes.
Even then you pass on the benefits to the marketing arm.
Yes. Even when you purchase from private refineries, we will pay only after SAED.
Okay. My second question is again on the inventory gain calculation. I understand you are not calculating the gain loss this time, but could you clarify how you usually do the inventory gain or loss calculation?
Inventory gain losses we have stopped calculating long back for crude. For finished goods, we calculate because inventory gains generally, when any refinery is holding a crude of around 20 days, my monthly pricing is for 30 days monthly pricing. It won't give any inventory gain loss. Only, for example, in the processing side, some old batches, if you're not processing, keep it in the inventory tank, it will have an impact. Otherwise, you have a continuous process. Mostly first in, first out, last cargo process will happen. After that, a new cargo will come and replace it. In that scenario, generally, we don't calculate any inventory gain losses. Whatever refining margin based on the current market trend, that is the refinery generated.
Okay. That's all from my side.
Thank you.
Thank you. As that was the last question for today, I now hand the conference over to Mr. Varatharajan, sir, for closing comments.
I think that's it. Sir, if you have any closing comments, please go ahead.
Thank you for your questions and for your engagement on today's call. Above all, we sincerely appreciate the trust and confidence you continue to place in BPCL. It motivates us to keep delivering and creating sustainable long-term value. Should you wish to discuss any aspect of the quarterly results further, our investor relations team will be happy to assist. I look forward to speaking with you again. Thank you once again, and let me take this opportunity to wish you and your families a very happy and prosperous Diwali in advance. Thank you.
Thanks, sir.
Bye.
I would like to thank all the participants and the management for engaging this call and spending time answering all the questions and wish you all an advance Diwali wish. Thank you.
Thank you.
Thank you so much. On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.