Ladies and gentlemen, good day and welcome to Hindustan Petroleum Corporation Limited Results Conference Call hosted by Antique Stock Broking Limited. As a reminder, all participant lines will be in the listen only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please notify an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Varatharajan Sivasankaran from Antique Stock Broking Limited. Thank you, and over to you, sir.
Thank you, everyone. A very good morning to everyone, i t's my pleasure as always to welcome all the participants and the management of Hindustan Petroleum Corporation Limited. Represented by Mr. Vikas Kaushal , Chairman and Managing Director. Mr. Rajneesh Narang, Director, Finance. Mr. S. Bharathan, Director, Refineries. Mr. K. Vinod, Executive Director, Corporate Finance. The floor is yours sir, for your initial remark.
Good morning everybody. Thank you for joining the call. Thank you for your continued interest in HPCL . Thank you team for organizing this call. I'm Vikas Kaushal . I'm joined by my colleagues, Rajneesh Narang, Director of Finance, S. Bharathan, Director, Refineries, K. Vinod, Executive Director, Corporate Finance, and our corporate finance team would like to share our opening comments and then open it up for questions. Over the last 12- 14 hours many of you have written about us. We saw some analysts' reports. I've been tracking some of those.
Some have posed questions which we tried to address in the opening statement. If left unaddressed, please feel free to ask those questions. We had last met in early May when we talked about our year-end results and the board meeting which was held then. Since then we have been living in very interesting times with dynamic situations on multiple fronts: geopolitical, macro environment, economic supply challenges, etc. All I would say is Team HPCL has worked very hard to build momentum and push our business forward. We are in a good spot and we are bullish about the future. I give my opening commentary in two parts. I'll talk about the current performance, our view on the current performance and shaping up, how are we shaping up the future. On the first part, current performance, the results are all out.
You've seen we turned in a strong quarter on the refining side. 6.66 million metric tons of throughput, 15.6% higher than last year, 109% capacity utilization. A lot of it was driven by capacity expansion programs which we had led. As you are aware, Vizag, we had completed the capacity expansion last year and it is now running at 15 million tons. Just for context, it was an 8.3 million ton refinery in 2022. It is 15 million tons now, almost double. I'll talk of the remaining part of the expansion project in the second segment I talk on. In running our refineries we have been focusing a lot on expanding our crude baskets. We are trying new ways of going to the market. Those of you who track crude purchases, etc., can see what we are trying to do or guess what we are trying to do.
Through this we have processed four new crudes during the year, a wider basket of crudes, and we are currently and constantly working on upgrading our process and widening the participative interest from suppliers to supply to HPCL . We've seen some good results on that. On the sales side, sales were above 13 million tonnes, which represents a growth of 3.2%. This resulted in strong financial results. EBITDA at INR 8,124 crore. I think the numbers are all there to share with you, but profit after tax of INR 4,371 crore. If you just compare Q1 last year to this year, it's an 11 - 12 times last year. Even if you just compare running quarter, this is 30% over last quarter.
If you're looking at three quarters, just the last three quarters which have been a good run for HPCL , you will see we've been clocking way above INR 3,000+ crore every quarter and roughly about INR 1,100 crore back per month on a run rate basis. Coming to the projects, they are progressing well. This was a question many of you asked in your analyst commentaries overnight on Vizag project. The bottom upgradation project, we have the OSID and PESO approvals. I think we announced it last time. We are in the middle of pre-commissioning activities just as we speak. Earlier this week, we fired diesel into the flares. It is a very complex project, probably the first of its kind done in India. It will take us a few weeks to commission.
I can formally tell you that we are in the midst of pre-commissioning activities. We're targeting commissioning in the next few weeks. It could be before the end of this quarter as we had promised in the last analyst call or at best spilling a quarter or a few weeks into the next quarter depending on how soon we are able to take hydropower in. We are about to finish that project and we expect to capture the benefits of that in the second half of the year, especially when this stabilizes. October, November onwards on Barmer, there is 88% completion on the overall program. We have reprioritized how we are focusing on it and we have enhanced our focus on the refinery section in the last few months. Refinery section is 95% + completed as I speak. Twelve packages are fully commissioned there, 12 of 28 packages.
Pet chem section is 73% complete. We have started the process of taking safety approvals and PESO approvals for the packages which we are commissioning. We are gearing up for crude in as we have said in this year, we will do it in two parts. First, we will go in with the refinery section hopefully in the next few months as the activity is complete. As I said earlier, it's about 95% complete. Many of our other projects are going on track. Mangalore LPG storage cavern is ready. We are just awaiting pollution control before we do feed in onto that one. That's the summary of how we see the current performance.
Happy to take in questions later on, but let me talk also about how are we preparing for the future and our aim as a management team is to take HPCL to the next orbit of performance. We are already performing at a good clip. We talked of the numbers, but how do we go to the next level? There are four key planks we are working on and I'm outlining those four planks because in subsequent analyst calls we will keep harping on these four planks. That's the part of our thought process. First and foremost is improving operational efficiencies. This is something I will delve a bit deeper today.
The remaining three planks are planning for next wave of growth, working on our enablers, the people, the digital aspects of our business, digitizing more of our business, and then fourth, also enhancing our external engagement so that what we are doing is visible to you all. Today I'll just focus a bit more on operational efficiencies. In the subsequent analyst call we'll stick to these four buckets and keep updating your progress and you can hold us accountable on the progress on these in terms of operational efficiencies. I'm very happy to announce that as a management team we launched, you can call it as a cost takeout or a survivor and EBITDA enhancement program. It's called Samriddhi. It's actually being done internally and we launched it in May. The target is it aims at taking out up to about INR 1,000 -INR 1,500 crore.
INR 1,500 crore are aspirational targets of savings. An EBITDA uplift on our routine operational performance by March 31st. We are at 25% of locked in savings at this point of time and 16% of our target is actually accrued into quarter one. When you see the strong quarter one results there is some operational efficiency benefits which is already starting to click in. I can give you the specific numbers. Close to about INR 250 crore of operational efficiencies have been locked in through this program. We are building in the theme of continuous operational excellence in our business, and there is a lot of cross-functional team working on it. This is a shared goal, which is a KPI for all our senior leaders, EDs, directors, and me all together.
Second, operational efficiency theme is around, we've launched a program called Abhyuday, which is very focused on increasing our throughput and sweating our retail assets more. We are focusing on 4,500 retail outlets, and this started again two months ago and early days. We're getting the, you know, low single-digit KL improvement on an average in these pumps, but more could be expected there. In line with this, we've also upped our dealer engagements, and we have launched Sarvottam and Uttam Awards where we are engaging our dealers a lot more. Third area on operational efficiencies is around capital allocation. We have been, I would say, a bit more stringent on new capital allocation and roughly going at around 2/3, 60% - 70% of the run rate of last year.
In terms of new projects which we are looking at, the idea was to work on debt, equity, and deleverage ourselves a bit, the results of which you would have seen in the financial results. A few points I wanted to cover on the other aspects also, we are focusing a lot on sweating our assets. There is a better performance on fuel losses in our refineries. I talked about crude sourcing, I talked about throughput increase on refinery. Very briefly on two other initiatives on what we are doing for future, some of your practice would have seen we have signed a deal with ADNOC for gas supply. This is our second deal which we have done in this year. This is for a 10-year contract landing at Chhara Terminal starting from 2028. We've also posted that concluded sourcing of our cargoes for 2027.
In addition, if you have tracked, we have signed a green hydrogen tender for 5. It's been concluded for our Vizag refinery, 5 KTPA at a very attractive rate of INR 328 per kg, as far as we know is the lowest discovered rate in Indian market as of now. I briefly touched upon our digital transformation. We believe there is a lot more efficiencies which are feasible through redoubling our efforts on this. We had a program called Parikalp, but we are now taking the fresh wave of initiatives. It's a program sponsored personally by me and along with my leadership team, and we believe this will drive the next wave of operational efficiencies for us to conclude the opening remarks. We are on track to a strong year. More importantly, we are preparing ourselves for a stronger future.
I thank you all for your interest in participating in this dialogue and me along with my colleagues here. We look forward to your questions. Thank you.
Thank you very much. We will now begin the question and answer sessions. Anyone who wishes to ask a question may press star and one on your t ouch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use answers while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Yash Nandwani from IIFL Capital. Please go ahead.
Thanks for the opportunity. Sir, could you share the quantum of inventory losses in both the refining and the marketing segment?
See the losses. Inventory loss in refinery was around INR 1,400 crore and in marketing it was around.
INR 100 crore?
INR 600 crore.
Okay, sir. Secondly, sir, on LPG compensation, there are reports that the cabinet may approve it today. What is your view on this? And w hat would be the approximate compensation for HPCL in this regard?
Your view? Yeah, we are eagerly waiting for the decision as you can imagine over the last few. Can you just mute your line? I think there is an echo from your side. Yeah, we have been in discussions with the government over the last few months as you can imagine, giving them all the data which they need. The decision, of course, has to be taken by the Government of India and we also read the same news as you do and we are also waiting for the same outcomes there. I wouldn't want to comment on the quantum because I'm not privy to what is there and what part has been accepted, what's not been there.
All I would say is as a management team we are eagerly waiting for that decision and we hope and we believe it will be game changing for all the OMCs and also HPCL. We'll have to wait for the numbers.
I'll just add on, whatever may be the quantum around, our market share is around 27%- 28%. That percentage would.
Yeah, if you see a number in the press, you can look at 27% as us.
Thanks, sir. Lastly, on Russian crude, so what w as the share in Q1, and do y ou see any impact in the near term and just your comments how the discounts are trending in present?
As I said earlier, we do a very rigorous exercise on how we buy crude. We've only gone deeper and wider in this exercise. As we said, the Russian thing is just a few days old in terms of the sanctions. As a team we were already looking at what is the best economic decision for us. In quarter one, our share of Russian crude was only 13.2% in our overall portfolio, which was lower than last year. It's not because of any geopolitical reason. It was economic decisions on what we needed to run in our refineries. We did that in this quarter. The only place we ran Russian crude was in our east coast refinery in Vizag. In Mumbai, we found other crudes to be more attractive.
What would be the impact? It's not that we are not buying Russian crude. Those decisions are still open. It's just that whatever is economical will be bought there. There is no guidance or direction on that aspect or do this or don't do that. We are all free to do that. We are looking at alternatives as and when economic situations present. If we were not to buy Russian crude for any sanction related reasons, the impact is not too significant for us. As you can with the back calculations from the numbers, it was only 13% of it. Do the 13% into whatever little discounts you get on that crude. It's not a very significant impact.
Thanks a lot.
Thank you. The next question is from the line of Yogesh Patil from Dolat Capital. Please go ahead.
Thanks for the opportunity . Sir, sharp reduction in gross debt a pproximately INR 12.3 billion compared to the previous quarter. Sir, if you could give us some idea how much it was reduced due to the lower requirement of the working capital? That's one thing. Going forward, do we have any target of net debt to EBITDA or total d ebt to equity, which will be for t he period of FY 2026-FY 2027? If you could share some details on this side?
I think let me just give you an overarching comment and I'll request my finance colleagues to give deeper into the topic. See, year-end debt always is higher for us. Comparison on that is there. Not only for us, for others it's always higher. There are aspects of our business which we have tightened where we have reduced the short-term debt and more of that is going to happen. In the previous analyst call we had given a guidance that we would be somewhere in the region of 1.15 - 1.18 or somewhere in that region, less than 1.2 in debt equity there. Of course, we are conservative in that guidance. We are at 1.01 but that's in the in-year number. If I was to just extrapolate it for the year-end, this would be a slightly higher number. Is there a guidance on what we want to give for future?
No, not at this stage. We don't know the quantum of LPG recovery and in what shape it comes; that will have an impact on our debt. I can say as a management team we are very focused on deleveraging ourselves both at the parent level and on a consolidated debt level. That's one of our prime focus this year. We had already shared that in the previous analyst call. I'll request my finance colleagues to give a bit more detail on the numbers. Satisfy your answer there.
As regards the quantum of, normally the year-end extra debt which gets added on primarily on the short-term front, it is around between INR 6,000 -INR 7,000 more than what is stated here, and rest Chairman has already covered. Yes, one thing is there for sure that if the compensation what is likely to be announced today, in case the same comes in, it would be a very significant reduction in the number as compared to the current level, says what is.
Okay.
Sir, next question related to again the LPG under recovery during the quarter 1 FY 2026, what was the average under recovery on the domestic LPG, and during Q2 FY 2026 how much it has come down? If you could provide some details on the rupees per cylinder side it would be helpful. Sir, what is your in-house estimates for the LPG under recovery for FY 2026? Any reduction do you see compared to the FY 2025, that would be helpful.
Yeah. See, I will give you some broad numbers. We do not want to give all the details right now because there is a decision which is pending on this, but we'll directionally give you some numbers. So, [crosstalk]
If we look at the last year, the total under-recovery on LPG was around INR 10.9 billion, and if you look at the first quarter, it is around INR 2.148 billion. If we look at Q2, going by the current level of under-recovery, we may add another INR 1 billion c rores t o the on and bottom line basis in terms of the monthly pricing, it will keep on, it depends upon the Saudi CP, contracted CP price, and if I have to list down what were the under recovery in the previous few months, it was like in April it was around INR 167 per cylinder, in May it is INR 164, in June 1-
Ladies and gentlemen, we have the management line disconnected. Please stay connected while we reconnect the management line. Ladies and gentlemen, we have the management lines reconnected.
Sorry guys, the line dropped off. We are back. I think Director Finance had just talked about the numbers 167, 164, and 155 in the three months of the last quarter. All I would say is there's a lot of effort by HPCL and other OMCs also to make sure we are optimizing on the input costs on LPG to reduce any of the under recovery, and if you track Saudi CP, that has come down, which has also helped us in this period.
Last question to touch. Suppose the under-recoveries are on the sliding side, declining side. On top of that, crude will also come down. Do we expect the total debt numbers of INR 50,000 crore, INR 51,000 crore will come down to on the lower side? Is that correct?
Yeah. I shared earlier that as a management team we do want to deleverage, that's the trend we are using, so part of the money will be used to bring down the debt. We are already working on it. The numbers will be able to give you in the next analyst call or our guidance in the next analyst call.
Thanks. Thanks a lot sir. This was really helpful.
Thank you. The next question is from the line of Prabhu Sen from ICICI Securities. Please go ahead.
Thank you for the opportunity, sir. Just wanted to understand a little bit of the Rajasthan refinery economics. We have seen, you know, petrochemical spreads remaining depressed probably for longer than what we have anticipated, and obviously in this refinery we have a plan to have almost 30% if I believe of the throughput. So just your view on how you see the cycle evolving and does it impact the way our configuration is for Rajasthan refinery or any tweak that is needed to do that. Just your thoughts only.
Thanks. Probal, I'll go first and then I'll request to chime in on the numbers. I think our objective right now is to finish the asset. We are less concerned on the petchem specs, etc. The key thing is to finish the asset.
It has been delayed, but we are now having a line of sight of completion of the asset there. Having said that, yes, we all know petchem spreads have been lower in the last few years. There has been a lot of overcapacity in the market. We also think they are firming up right now. Who knows, maybe the asset will enter at the right time. On the third part of your question, is optimization tweaking feasible? Once the asset is done, a lot of things are feasible, and we do have plans for a lot of different things there. As I said earlier, as a management team we are very focused right now on getting the asset up and running. The subsequent plans would follow. Every asset does an optimization. We talked about Vizag going from 8.2 - 15.
We do have plans on what to do further with that in terms of debottlenecking, etc. There will be similar attempts at Barmer also, which will help optimize the asset further. I'll request S. Bharathan to add his thoughts on it.
Maybe a couple of things. Yes, it is one of the largest i ntegrated refined income petrochemical complex. From day one, 26% of the product comes out as petrochemical. At the same time, it's also brought in the best energy efficiency processes. The integration is done in such a way that the cost of production will be kept minimum.
These are some of the positives, and w e do have opportunities to optimize the intake cost, that is, crude cost also, which we will be doing along as we go. Thank you.
Thank you so much.
One more question. If I can do a lot of conclusive the extent of.
Mr. Probal, may we request you return.
Mr. Probal, may we request you use a headset?
Just one more question . This was about the inventory loss that has happened in this quarter. Forgive me for sounding simplistic, but the e xtent of loss seems to be a bit larger than I think what most of us were looking at. I just wanted to understand is there is s omething we're getting wrong in terms of t he holding period or the price changes, why GRMs got impacted a bit more this and what we will look, thoughts on this one.
Probal, you run the refineries on Excel sheets. We run the refineries on an actual thing where we have so many large customer bases to handle. There will be decisions we will take at different points of time on whether to increase our inventory or reduce the inventory. If you track what was happening during this period on geopolitical events, you would see there could be. There could have been decisions we have taken to buy some extra cargo as an insurance and all those kind of things. At the end of it, we run the business to ensure supply and continuity. Are there?
Yes, there are going to be times when we are holding more stock, either of finished products or inventories, given our judgment about how the demand supply situation will pan out. This was the period when there was a lot of challenge in Israel, Iran, Israel, since supplies were, a lot of you were writing about state of hormones and how it will impact. We as companies are also responding on what we wanted to do and how do we ensure the supply. We probably carried more inventories during this period.
That is very clear.
Can you repeat it please?
Thank you for the reply sir. I'll come back for more questions. Thanks.
Thank you. The next question is from the line of Sumeet Rohra from Smarts un Capital. Please go ahead.
Yeah, hi sir.
A very good morning to you, Chairman Sir, and to entire HPCL. Firstly, I would like to congratulate you. It's an extremely superior performance you have delivered. The way I always look at it is LPG is a control product, so that's got nothing to do with us. Looking at that, you've reported about an INR 6,500 crore to INR 7,000 crore profit, which is truly staggering. I mean, Sir, I remember five years ago HPCL used to report INR 6,000 crore annual profit for a year. Today, you have taken this company to a level where you are delivering this kind of profit in a quarter. So sir,
Firstly, many, many congratulations on that. You guys are doing a fantastic job. It's truly heartening as an investor to see the transformation which HPCL , you know, is going through. All thanks to a fantastic management team, you know, headed by all of you. Many, many congratulations on that, sir. Now, I just have a few questions if you can just help me understand. Firstly, you know, is, you know, on the Vizag, so on the residue upgradation project, now you said that, you know, we'll commission it now. Is my understanding correct that the middle distillates today, which are lower for us, you know, would actually then go to 84-85% and that in turn would get GRMs up by about $2 - $3? If you can explain a bit on that.
Secondly, it was very heartening when you spoke about the operational, you know, excellence program which you started. Sir, this INR 1,500 crore of which you said of incremental savings, you know, if you can basically just, you know. A lso, dwell a little bit on you.
That's already started, as you said, in INR 250 crore in Q1, etc. How do we plan to improvise more on that? Just one more thing, on the LPG part. I'm sorry I missed that part, but is my understanding correct that from September onwards the LPG loss on a cylinder would come down to about INR 50 or INR 60 or something of that sort?
Sir, thank you very much.
Thanks. Thanks, Sumit. Thanks for the kind words for the management team. We all get egged on and pushed on by the sharp questions you all ask on these things. They are very good guiding forces for us on what we need to do. Let me answer in the reverse thing because I probably forgot the first question. On the LPG under-recoveries, yes, the numbers could be there now. What it will be in September we'll have to see. As we talked, the trend was downwards and there has been a significant drop in Saudi CP last month. Yes, the trend is downwards there. I don't want to give an exact number on what it would be in September, but it's directionally headed towards that. I think that's point number one. On Vizag upgradation, it will be about 83% distillates.
If I'm not mistaken, you want to add, Bharatan Ji,
It's about 4-5% more than what we have been doing. Now it will be crossing that 80%, around 83% is what we will be reaching.
We still have one more step of optimization further on this, which is when we are able to pump in natural gas into the refinery. Right now it does not have a pipeline connection, so there will be one more uplift which will come later. By and large, you are directionally there. The distillate yields will start going up. On your third part, on the program on Samriddhi, I think we are attempting it at multiple things. One being sharper at how we spend our money, where do we spend our money. There are a lot of initiatives around real cost takeouts. Second, operational efficiency has been built in.
Just to give you an example, 60 bottling plants we have. How much throughput I can get through from each, what is the cost for each of the plants? Even if I benchmark my own plants within the whole 60 plants, I can get improvement areas, and every fan you stop or every light you turn off or every time you increase the speed of the carousel, it gives benefit. There are initiatives like that. There are a lot of big ticket initiatives which come from trying different things on sourcing and movement of products. We are attempting a lot of those things, shifting some movements from, say, a traditional way to a different route, leveraging coastal, trying to do different things. If you notice on how we are going to market in terms of buying our spot cargoes, you will see there are certain different things we are attempting.
I won't say thing A is the strategy or the thing B is the strategy. All I would say is we are much more nimble in terms of what we are attempting in the market. Just for one example, I can quote this because this is in public domain. We used to earlier go and buy every one cargo every week. Now there are times when we go to the market to buy four together. Those of you who understand cargo buying, you would know the leverage which can happen both in terms of our own optimization versus what we get from the market is there. The participative interest in our cargoes at times is really higher. Teams are running very hard. We have upgraded some of our tools in terms of optimization.
There are a lot of, I would say, small thousand such things which are happening all across the place which will give us the results. It's a very ambitious target. I think we are very confident of getting to 1,000+ which. We want to push ourselves towards 1,500. Just to give you a context, if it's 1,500 this would be $0.6 per bbl for the total number of barrels we sold.
Am I right on that?
$0.6 for everything we sell this year. This will be $0.6 per bbl if we get to 1,500 even if we fall short slightly, and we will keep reporting a non-analyst call. If you ask my thing on where I'm willing to give a guidance, I'm willing to give a guidance between 1,000 - 1,500 somewhere in that range we will call. I'm confident of 1,000. 1,500 is an aspirational goal, but we'll work for that.
Sure.
If I may just add one thing, now this is from an investor point of view, from an investor angle. I truly understand that, you know, we are going to now delever, etc. Sir, at some point of time, after you finish the deleveraging and when you're satisfied with all your financial matrix ratio, I humbly request that you must consider a buyback because today our market cap of INR 80,000 crore versus the balance sheet value of INR 2 lakh crore clearly is a big mismatch, you know, and there's absolutely no question that a company of this magnitude cannot be trading at this parity market cap. I would humbly request if you can, at the opportune point of time, please do consider this because it'll definitely be very value.
Accretive for all stakeholders.
Fair point. We take note of that.
Thank you, sir, and wish you all the best and good luck to you for the future, s ir.
Thank you.
Thank you.
The next question is from the line of Nitin Tiwari from Philip Capital India Ltd. Please go ahead.
Hi sir, good morning. Thanks for the opportunity and congratulations on good set of numbers and YoY improvement in your reported numbers. My question, first question is related to your refinery margins. The refinery margins were, for lack of better words, are they disappointing in this quarter at $3 whereas all the tax spreads, if we look at whether it's basically gasoline or gas oil, all the tax spread spreads have improved on a sequential basis. Why is that the case? Even if we adjust for the inventory mar there still the adjusted value.
Margin would be lower than what they w ere in the previous quarter. Whereas all the crack spreads have improved on a sequential basis, how should we look at this metric going ahead? I mean, you know what your guidance would be on that, especially in light of the project Samriddhi that you pointed out where you are looking at cost savings. I mean, your thoughts on that please?
That would be my first.
Sure. I think on the refining margins, what you see are after the inventory losses. We'll give you the specific numbers on refining margins. If the inventory losses weren't there, you.
If you look at the core GRM, if the inventory losses were not there, HPCL has a core GRM of 6.54. Now, if you have to compare it with respect to the Q1 of last year, it was 5.35. It is improved compared to last time.
For the interactions I was referring to the March quarter, your reported number was 8.44 and adjusted for an inventory gain it was 7.1. If I am correct, if I'm wrong over t here, w hereas the crack spreads have improved v ersus the March quarter, our economy margins could have gone up in the June quarter. I mean unless I'm saying there's something else actually which you probably want to highlight.
If you look at the cracks and spreads, don't get factored as part of inventory losses. Even if you look at Yo Y, it is even quarter- on- quarter. Yes, you are right. It was 7.1. If I go by the Q4 2024-2025 number, I will say 6.54 in the current. The differential is primarily because of the spreads also and the conservation of the refineries which we have. In terms of the various performance of the refinery is concerned per se, if you see we had a lowest fuel and loss in this one.
Sorry, yes sir. Sorry.
Yeah, please. I appreciate the lower fuel and loss part. That's why I was not able t o put everything together.
Part fuel losses are lower, the tax rates have improved versus the March quarter. Why is it that our adjusted depending margin is still lower than the March quarter?
I think we've explained the numbers. These are complex assets. Sometimes some things fall in a particular direction there because if you see between quarter and quarter also, while it is lower, it's not an alarmingly lower number that, oh, we have suddenly forgotten how to run refineries. I think we are conscious that we need to improve that. There is a lot of effort. You talked about Samriddhi. Yes, it includes a lot of improvement initiatives. We know the areas where we want to improve and there'll be a concerted effort on it. Hopefully, in the subsequent quarters you will see the core GRMs going upwards as first the rough comes up and some of the operational initiatives which come up, they are. They also sort of operational improvement initiatives. They start giving results.
See, when you start comparing numbers quarter and quarter, there are always sometimes a particular month, a particular unit was down and all those kind of or was under turnaround, etc. I think those things are, I would say, more in the realm of operational, I would say, day-to-day operational challenges. There was nothing alarmingly different from the way we ran the refinery. Are there areas where we can improve? Absolutely. You will see that improvement in the coming quarters.
Fair enough. My second question would be with respect t o the ethanol blending debate that is going on in the country, just wanted to understand what is the current and all blending rate. What is our target, if at all. I mean this rate is going to go up and what is our ethanol sourcing price at this instance?
On the ethanol blending, yes, there is some debate. It has got accentuated after some influencer also wrote about it recently. 20% blending is a mandate by Government of India. All of us have to follow that mandate. If I'm not mistaken, we are, I don't remember the numbers offhand, but you know that you can correct. We are close to 19 point something, 19.95 or something. We are following the mandate, and our plan for this year is to follow the mandate in terms of ethanol sourcing. There is an industry-wide optimization which happens on ethanol sourcing so that the distances are traveled less. We also keep on doing our own initiatives. Can we move things from here by rail to another location and all those kind of things. We are trying to optimize whatever we can do.
If you are asking specifically on the price of ethanol, I don't remember it offhand. I'll ask my team if they remember the price. If not, we can give you.
That varies depending upon t he feedstock, yeah, f or sugar or grain, grains or for maize and all, it depends upon the price of t he product.
But still the government listed price. We go by that as on date, as we speak. Notwithstanding the social media controversies or the campaigns around it, our plan for the year is to follow the government mandate of 20% ethanol blending Pan India.
If this understanding is long that I suppose the cost of procurement of ethanol, I mean excluding taxes, is about INR 57, 58, r ight.
I was just, you know, trying to understand that this price is higher than what your refinery price would be for petroleum product. In effect, more ethanol that you blend in petrol, there is a possibility of you losing margin because in a sense, while you're blending an expensive raw material in your product, your selling price is more or less unchanged. That still remains where it is. Is that understanding correct?
I would say that's partially correct in some form. You can look at it, there is more to ethanol blending than just these two numbers. There are characteristics of fuels, what gets changed, what we can do with our refineries around it. There is a lot more at play with these. There are a lot of technical aspects around it. The way I look at it is also it's a mandate by Government of India given to all the people. It's a Government of India program. We all have to. It's like you and I might not like that income tax we pay, but we have to pay the tax that the government mandates there. Is the management team kind of losing sleep on it? No. All what we are trying to do is optimize what is in our control.
The logistics, how do I ship, how do I store, what inventories I keep, making sure my blending is okay, making sure I'm not carrying excess inventories. That is something we are very focused on, ethanol blending, because unlike refinery happening in one place, ethanol blending happens in multiple different places. We are trying to work hard on operational aspects of it. If Government of India changes the mandates up there upwards or downwards, we'll react to it. You had something to add?
Yeah, just to answer him. Regarding the lower core GRM in this quarter compared to the previous, this quarter we had a higher inventory of ISD, that is intermediate stock. Once this will be converted into the final stock, that value will get realized in the subsequent quarter. In the July quarter, that could have already come. It is not loss of value. The only thing is that on the month end when this period got closed, this product was lying as an ISD where the valuation is less.
To give you more comfort around the entire thing, the reason for that is that's what I said earlier. One of our units was under maintenance, one of our diesel converting units was under maintenance. We had to carry more intermediate in our tanks, which will get processed. When you see the next quarter's numbers, you will see that reflecting in the higher distillate yield for that refinery. It was more of an operational thing, nothing unusual.
Understood.
Thank you so much for the answers. I'll get back in the queue for more.
Thank you. The next question is from the line of S. Ramesh from Nirmal Bang Equities. Please go ahead.
Good morning and thank you very much and congratulations on your results despite all the challenges. The first question is, can somebody clarify, there was a mention of a figure of INR 1,000 crore for LPG losses. Are you suggesting that the LPG loss will come down by INR 1,000 crore?
Yeah.
Going by the current level of the Saudi CP prices, in case there is no change in the retail selling price of the cylinder, what you are saying is right?
Yeah.
Okay.
Now, quarter one. Director of Finance talked about quarter one under-recovery being lower than just the pro-rated of last year.
If you look at the Vizag RUF project, the overall CapEx is about INR 30,000 crore per your presentation. How much is the balance, the actual project cost for the refinery project? If you look at the breakeven analysis, if you take the entire INR 30,000 crore, you need an upside of around $4 just to break even on the interest and depreciation. How would you see the economics of this CapEx on your project, and what is the absolute margin you require on an integrated basis for Vizag to make it profitable and get double-digit ROC?
I think just on the CapEx, the total CapEx, the number you say, give or take a few hundred, is exactly the number. Part of it is already being capitalized, which is the refinery expansion section. I talked in my opening comments about 8.22 mtpa going on to 15 mtpa. Refinery and throughput in the first quarter was actually 4 and 4 million tons. That part, the benefits are already starting to come in with the ROC getting commissioned and stabilized. I would also use the word stabilized because it is the complex technology, first time being attempted in India at this scale. We would see an uplift on the distillate yield and resulting uplift in the GRNs. The way we look at it is it is going to be a profitable project.
I don't look at it, actually we don't look at it, the break even the way you are looking at $4 breakeven and all, because there is a lot of complexity which can be done the way RUF works for us. Even more than just what is the distillate yield, it allows me a wider spectrum of crudes which I can handle and gives me more collateral benefit as an organization. When we have RAF and Barmer all coming on stream, our asset footprint is higher. Our choice of, we can process more dirtier crudes, we can manage our crudes between our refineries, so we can do a lot more asset based swaps, etc. The flexibility is something which will not get translated into just the IRR of that project. The flexibility goes into the system there.
As a management team, we are not really worried about $4 being, or I don't know how the $4 calculation is there. It doesn't rest with me fully, but I'll let my finance team answer onto that. They have question, but we are quite confident that once REP comes in, we have an incremental lift off on our EBITDA month on month, and already we are seeing an incremental impact on EBITDA as one of you just mentioned in terms of how the trajectory has gone upwards. We are quite confident on where we are. I would say cautiously optimistic on this getting completed. Cautious we are using because I said earlier it is a very, very complex technology. Anything to add on this? Yes.
Okay.
Hello.
Yes, yes, please. If you have a follow-on question, please let us know.
Yeah, before I go to the next question on CNG, the reason why I asked about Vizag in your branch accounting notes, in the results on page two, the auditor's notes, there's a loss of INR 512 crore after taxes. Opposed to rough project and the expansion benefits, from which quarter can we expect that number to, you know, become positive? What are the kind of steady state run rate because that's part of your overall results?
Right.
Just to get a sense in terms of that number, that's a loss.
As we speak in the first quarter.
Yeah, yeah, the losses because my initial statement, I had given you the inventory loss at refinery of more than INR 1,400 crore. That primarily is the reason.
It had gone into it. Okay.
Can we get the details on the standalone gas in terms of what is the current sales volume in the first quarter compared to last year first quarter and if possible the fourth quarter? We have given some numbers for the full year in the annual report, but just within the quarterly run rate. If you can give us the standalone distribution sales for your 14 gas and how many of them are in commercial operation.
Now.
If I have to just give the sales volume in this quarter, it is around 32 TMT of CNG sales vis-à-vis 22 TMT in the previous q uarter.
What was your next question?
What will be the corresponding number for the fourth quarter? 25. How many CNG stations are in? Pardon? 1Q25 for the fourth quarter, what?
Will it be?
Last year? 27.
Sorry, 27.
Fourth quarter 2025 is 27.
The current quarter is Q4 2024 of 27 TMT and the corresponding period Q1 2024 was 22.
Yeah.
Right. How many CNG stations or gas in commercial operation now and then what?
The number total CNG stations is 2,070 odd. CNG stations under HPCL, but in our GL it is around 350 odd.
The annual report has also mentioned that it's already up to 475. As on date, how many of them are in commercial operation? As we move along in FY 2026 and 2027, how many GA sour CG stations will be in commercial operation?
All are in, more or less, all are in commercial operation.
There's only a few months lag between just getting it ready and getting it. The gas onto the stations happens reasonably quickly.
The number which you are referring to may be including the JV ones which I am talking about where we are.
The.
The G.S. are with us.
Okay. Okay.
Is your EBITDA, if I may just, you know, dwell on this a bit more, is your reported EBITDA including some positive EBITDA contribution or are there losses in the standalone GS?
We are having positive EBITDA from our GS.
Okay.
I would like to give a suggestion. IOC has already started giving the gas segment details. We may also like to give that sometime in the first half or, you know, starting the second half. It'll be useful for us to understand the progress in the gas business. Thank you very much and wish you all the best.
Okay, thank you. Noted the suggestion.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one per participant. The next question is from the line of Achal Shah from Ambit Capital.
Please go ahead, sir.
Am I audible?
Yes, sir. What kind of volumes and % capacity utilizations are we expecting for FY 2026 at our Chhara Terminal? Where can we go with respect to volumes and % capacity utilization by FY 2030 and 2035?
Ladies and gentlemen, we have the management line disconnected. Please stay connected while we reconnect the management. Ladies and gentlemen, we have the management line reconnected. Sir.
Yes, please go ahead. I think.
Sir, I'll repeat my question.
Yes, sir.
What kind of volumes and % capacity utilizations are we expecting at Chara terminal for FY 2026? Where can we go from here, like FY 2030 and FY 2035? Where are we seeing these volumes and utilization levels?
I don't have the exact numbers. Do you have the exact numbers? We can dig out the exact numbers in terms of right now. As you know, the breakwater is not fully complete. As a result, we cannot offload cargoes during the monsoon period. Post that, we are starting with October onwards. From the previous gas deal, we will start having our cargoes already. If I'm not mistaken, four cargoes are being planned this year for the second half. Of course, we can always look for additional spot cargoes. Whatever gas we had has fully sold for this year.
We are expecting a massive capacity utilization. It will probably be low teens. If I'm not mistaken, I don't have the exact number with me. From next year onwards, we would be looking at a further increase in the terminals there. I'll ask Rajneesh to give the numbers. He has dug out the numbers as this progresses. FY 2027, as I talked earlier, we already have signed a deal for FY 2027. We already have a second deal done for FY 2028 onwards and more of these would become. We are also looking out for giving out capacity to others who are landing in there. This is the year when we hope to complete the breakwater and from next year operate as an all-weather port. You want to share those additional numbers?
This year we are targeting that the capacity utilization will be around 10% - 15%, and next year we'll be targeting between 35% - 40%.
Got it, sir. Just one last question if I may. What is the current Russian discount in?
Q $1 per bbl and in July $25 per bbl.
That depends on the moment of the trade and it's difficult to give you a broad number on what is the things I gave you. What is the impact on us and what amount of Russian crude we are using, which was 13%, and I told you that the impact if we were to use zero was sort of not or it was easily absorbable by us in terms of our current performance. I would not like to go into specific discounts on any specific cargo. Thanks sir.
Thanks for the clarity.
Thank you. The next question is from the line of Mayank Maheshwari from Morgan Stanley, please go ahead.
Thanks for the call, sir. One question from my end was more related to the marketing side.
If you look at both on diesel.
Gasoline, you have seen a bit of a loss in market share. Can you just talk to us about the strategy in the wake of the competition now, especially from private players as well? What are you kind of thinking on maintaining or increasing market share after the Vizag refinery upgrade?
I think that's a great question. Two things I would say. One, when you look at the loss share, if you look at the last year Q1, you would see we had literally a spike in that period. If I remember the numbers correctly, it was a 5.5% market share. The base effect for us was higher. Having said that, we believe we could have done better in the market. July has been better for us in terms of fight from competition. That is a reality. We have our own strengths. The private sector has their own strengths.
I become less worried about what they are doing. I'm more keen on what we can do. We talked about upgrading the throughput. We talked about greater dealer involvement. That is an area where we are reinforcing ourselves, trying to do more and more of activities so that the customer connect with us. The customer experience with us goes better when you are handling 25,000 retail outlets, almost 25,024 to be precise. It's a long exercise. As I said earlier, we have launched a program on 4,500 of our retail outlets where we are doing many of these experiments which will result in throughput increase. More importantly, it is sharpening the way we are getting into the market. Market share is never an easy thing to fight for, especially in the market in retail. It is going to be a fest and we are gearing up for it.
Just to follow up on that.
I think the industrial side is where I think there is more pain. Is there anything that you're thinking?
About on that front?
You can go deeper into the number. I won't say that there is a market share loss, but remember the fact that we buy a lot of product. There was no business case for me to sell product at lower than RTP, which some of the others have done in the market. They might have surplus product on it. If we have surplus product, we can also fight that battle and use some of our refining margins to gain the market share. In this quarter, if you are a cricket follower, I would say that ball was well left by us because that market was going way outside the off stump in terms of even INR 11,000 scale or INR 10,000 scale per discount. We took a very conscious call of preserving our bottom line rather than preserving our market share.
Great analogy, sir. Thank you.
Thank you. The next question is from the line of Vikash Jain from CLSA. Please go ahead.
Hi, thanks for taking my questions specifically. I think you've spent some time on Samriddhi but there are other two projects that you talked about. One was Abhyudaya and the other one was, sorry, I forget the name which was to increase throughput per retail outlet. When you talk about this INR 1,000 -INR 1 ,500 crore EBITDA gain, is this across these projects all put together or these would all be other things which are more longer term and radiance will come in but over and above that number but slightly longer time come in.
See, the way we look at the number, INR 1,000 to -INR 1,500 crore, that's the umbrella somewhere. These are umbrella initiatives. As I said, we have launched it. We are doing it currently internally without external help. There are a lot of initiatives under this. The way we count that number is this target is it should be locked in in some form. Either it is a one-off gain which gets accrued in the year, you know, you source certain deals better or you do optimization on certain kind of things. Those are one-off things. There are the structural things which we are doing. They should be locked in on a run rate basis by end of the year. Clearly, that covers a wide range of things. Actually, Abu Dhabi is a second. I'll talk on that also so that there is clarity on this one.
There is a wide range of initiatives from operational efficiencies to different kind of sourcing, different things, differently sourcing efficiencies. If you can factor costs kind of thing. There are wider areas of, you know, how we are doing, crudes, etc. There are logistics savings. You can see a mix of sourcing, operational, and better utilization of cash. Those are the three buckets. I would say on Abu Dhabi, it's actually not a cost takeout. There'll be an indirect impact for EBITDA. Abu Dhabi was to the question being asked by the gentleman earlier. It is about strengthening our retail and making sure our assets throughput was up. We have lower throughput than DTC on an average basis. We want to close that gap and focus on making sure our retail outlets are generating more money.
It will have an indirect impact on EBITDA, but we are not counting that because then it becomes too complex accounting. I want to keep that counting very simple. I hope that clarifies the difference between those two.
Yeah, just one small follow up and then maybe one clarification because I did not, firstly I did not hear the number on inventory loss on marketing. It was INR 600 crore you said, right?
Yes, 600, you heard it right.
Yeah. Coming back to the Abhyuday, does that also mean that we will be far more judicious than where oil marketing companies have traditionally been in terms of opening up of retail outlets? Since we are far more focused on getting that metric on throughput and asset turns right, will that mean that we will be far more judicious in terms of locations and density, etc.? I am not trying to suggest on what the processes were historically, but is that something which is part of the.
Yes, yeah, okay.
Thank you so much, sir.
Thanks for taking my questions. Thank you. The next question is from the line of Somaiah V from Avendus Spark . Please go ahead.
Thank you for the opportunity, sir. First question is on the crude sourcing on a blended data beginning Q4, the Q1 would crude sourcing cost, would it have gone up? That's the first part. Second, what are the dynamics that changed between Q4 to Q1 which led to a lower Russian crude procurement. You also mentioned that it was more used on the eastern part. Is there a cost angle or anything? What dynamic change and is that kind of reversing?
That's my first question.
Yeah, did you get the first part of the question?
See, if you look at the results, that itself is signaling that the crude costs have come down, and that is primarily because the crude prices have softened. That is getting reflected by almost a reduction of INR 10,000 crore.
The cost of goods consumed.
Just a small clarification that we get on a blended basis between Q4 to Q1. Has that narrowed or a blended basis for overall portfolio?
It's very difficult to give an answer to that because every week you go for crude buying, the discounts vary. It's a very dynamic market. It's a demand supply driven market. I won't want to generalize on it. I think at a general level you can take the guidance which Director Finance gave on the overall crude because otherwise we'll be giving you a wrong impression. Crude, very same crude could be on a discount, a lower discount or a premium this week and on dated Brent and next week it's in a different position based on who has the cargoes, etc. We'll probably leave it at that.
On the other part, on your east coast, when we buy the crude and we process it, there are two aspects we should understand. There is obviously a cost of it, which landed cost. Yes, trades are different, etc, but that is only one part of it. The bigger part is what do I do with the crude and what do I do with the mixture of the crudes I have, what demand am I meeting. There is a big science behind, you know, each crude has its own signature, the essays around it depending on what products have, what inventories I have. It's a very complex buying thing. It's not just crude price and the freight landing at my refinery that's only one time the input.
There are times when we buy a crude which is much more expensive than what is landing cheaper because that gives me a product set which I can sell in that month at a much better price and hence my net realization is better. It's a very complex process I would say. In generalization, if you ask me to be more specific on why it wasn't used in west coast. When we went to the market we got better crudes which were giving us better realization. A lot of if you see what has gone up in our portfolio in that period is actually West African crude. We managed to get some good starburst on West African crude. It comes in distance and time is shorter there and freight is shorter and then we were matching the products which we wanted to sell. Our portfolio has got a bit more.
The West African crude in our portfolio has increased during this period.
I'll just say that the decision to buy crude doesn't depend upon what is the extent of discount being given, but on which crude will make more higher product, good GPW—we call it higher group gross product worth—or what value it will create in our system through our model.
Understood, sir. One clarification on the debt part. What was the working capital release this quarter? Also, you will mention Q4, generally. If you just help us.
3, 4, 6 Q1, what are.
The main charts in terms of debt production this quarter?
The short term debt is around INR 6,547 crore, primarily which is used for the working capital, and in March it was around INR 20,000 crore.
The second question was how much is the spike in the year end so that they can factor in it.
Around 6,000- 8,000.
Yeah,
Thank you.
Thank you. The next question is from the line of Saurabh Handa from Citigroup. Please go ahead.
Thank you for the opportunity. The questions are primarily pertaining to the LPG side. Assuming there is some announcement in the near term on LPG subsidy, is it fair to assume this would pertain to last year's under recoveries?
I think it's difficult to comment on it because, as I said, all things are under review. You've also read what's in the press. I can only comment on it. I won't comment on what's been discussed between us and the government, but we hope there is a more comprehensive solution. Let's see. We're keeping our fingers crossed on it.
Is there any discussion on a better mechanism for you to account for subsidy receivables from the government? Because otherwise it just significantly understates your income statement. If you aren't able to account for it at least as a receivable, which was the situation prior to this buffer accounting.
I understand that. I don't know whether that's the topmost thing government wants to solve. I would leave it to them to handle it. The way I know this causes a concern to all who are tracking it and it causes. Ideally I would also like to have a clean, consistent set of reporting quarter on quarter without having to explain buffers, etc., but that's also the reality on it. Again, as a management team we work within the constraints where we operate in and we try to do our maximum on the operational side. Let's see. Hopefully things will. Let's wait for the decisions. Maybe some things will come out which will help us all understand this thing better.
Okay, just again following up on that. If there is an announcement anytime soon, you did say that it would bring down your debt. Are you expecting a cash dispersal also to happen soon, or could that happen later in the year with the supplementary?
I'll wait for the decision is what I would say.
Sure, I understand. Thank you so much.
Thank you, ladies and gentlemen, due to time constraints that was the last question for the day. I would now like to hand the conference over to Mr. Varatharajan Sivasankaran for closing comments.
Thank you, everyone. I also had a couple of questions, maybe if that is addressed right now.
One was on the HMEL details, like.
I'll sit on share and second.
Issue was, like, you know, constantly we.
Keep getting queries on the potential or possible increase in the CapEx cost from Rajasthan refinery. While we know you already spent almost INR 60,000 + and the overall number of INR 72,000 odd and the escalation should not be. There's not much scope for escalation. However, we saying that and you saying it will be any differential. If you can see some input on that.
Yeah. On the Rajasthan refinery you talked about the previously approved numbers. We are taking a final stock on where the project costs would end. I think by the time on the next analyst call we'll be able to have a sense on it. Obviously, it's a complex project, there have been time delays etc. All I can say at this point of time on the hard costs, we do not anticipate any major changes from the last estimate.
The delays have obviously impacted working capital, which depending on where we commission will have some amount of additional working capital burden onto the project. Not sorry, working on IDC burden. You guys are smart and you can calculate that by the time next analyst call comes in we will be able to give a guidance on what we expect as the broad final cost on the project. I hope that was there a second part of your question.
No, that is perfectly fine.
HMEL numbers if you can share it.
HMEL, the GRM was around $7 + per bbl, and in terms of EBITDA, it's around INR 1,000 crore.
Great. In case you have closing comments, please go ahead, sir. Closing comments.
Okay.
Thank you, Rajan. Thank you all for your interest on it. I hope we've been able to answer the questions. As I said in my opening comments, our teams worked hard on delivering a strong performance. Some of you have recognized it, some of you thought it missed your estimates. From our management side, it didn't miss our estimates. It did. We did aspire for more and hopefully we will do more. We were proud of the achievement, what the team has done. As you can see, we are gearing up to take Hindustan Petroleum Corporation Limited to the next orbit in terms of its performance. Many of you asked some very sharp questions, some have given suggestions. We'll take note of that and we would like to keep the dialogue on with all of you. You give us valuable suggestions.
Some of you met us, met me, met Director, Finance, Executive Director, Corporate Finance and others. If others want to meet at times, we are happy to have a dialogue there and otherwise we lead. We'll meet at the end of the next quarter, hopefully with some good results behind us and which shows a consistent track record of performance for HPCL . Thank you all for your interest in the company. Thank you all for supporting us. Thank you all for challenging us, which is very important in our business. Have a good day.
It was a pleasure having you. We should thank all the participants as well as the management for taking time out to have this very fruitful discussion. Thank you everyone and have a nice day.
Thank you on behalf of Antique Stock Broking Limited. That concludes this conference. Thank you for joining us. You may now disconnect, Alliance.