Ladies and gentlemen, good day and welcome to the Hindustan Petroleum Corporation Limited Q2 FY26 Earnings Conference Call hosted by Antique Stock Broking Limited. As a reminder, all the 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 touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Varatharajan, sir, from Antique Stock Broking Limited. Thank you, and over to you, sir.
Thank you, Sarthik. A very good morning, everyone. It's my absolute pleasure to welcome all the participants and the top management of HPCL to this business call. We have with us the senior management team of HPCL , represented by Mr. Vikas Kaushal, Chairman and Managing Director, Mr. Rajneesh Narang, Director of Finance, Mr. S Bharathan, Director of Refineries, and Mr. K Vinod, Executive Director, Corporate Finance. Before we proceed, I'd like to hand over the floor to Mr. Vikas Kaushal for the initial remarks. The floor is yours, sir.
Thank you, Rajan. Good morning, everyone. A very warm welcome to the call. On behalf of my colleagues, Wartha Rajan has already introduced all of us on the call. At the outset, I wanted to welcome you all to the Q2 analyst call of a trillion-rupee market cap company. On 28th of October, our share touched INR 478 briefly, and the market cap crossed INR 1 lakh crore, a trillion rupees. I think we have broken into the top 100 of market cap, which I believe is not the rightful place. It should be much higher. Nevertheless, we'll take it in stride. I wanted to begin by thanking you all for your support and passion for HPCL . Since our results broke out two days ago, many of you have written about it.
Of course, many of you are invested in HPCL , while many others advise investors. There are a lot of positive opinions about the results. We have read through many of those. There are some who have not been impressed. Believe me, I've read through those most carefully, as these highlight some diverse expectations, which gives us reason or food for thought for what else could be done. All these are good inputs for the management team, and I'd like to thank everybody who's opined on the result. In context of the call, we will stick to the pattern of what we have been following in the last two calls that I've had the privilege of doing with my colleagues. We'll talk about the management view on the current performance, and second, what are we doing to shape the future of the organization.
I'll just cover a few data points because the detailed results have been all given out in all the stock exchanges and everything. Presentations have been given, so I'm sure you have pored over those. I'll just give you our views on how we look at it. Talking of the current performance, obviously, we gave a very solid performance. Our H1 profit at INR 8,201 crore is 731% up from last year. Again, I'm not gloating on just how much percentage is up because we know the first two quarters of last year were a very depressed base. Nevertheless, in the first two quarters of this year, we have earned more PAT than we earned in the whole of last year. What I wanted to highlight was something different. It is the consistency of the performance.
Those of you who have been tracking the stock for a period of time would recall that in all of the last four quarters, HPCL has consistently given quarterly profits above INR 3,000 crore. Q3 last year was INR 3,023. Q4 was INR 3,355. Q1 of this year was INR 4,300. Q2 was INR 3,820. On a run rate basis, not on a financial year basis, HPCL delivered a PAT of INR 14,579. If you put the last two quarters of the last financial year and this, first two quarters of this, which is INR 1,215 crore per month, and you can do 40 crores per day kind of numbers or whatever the math points out. During this period, EBITDA of HPCL was INR 28,606 crores. I've not done the exact cash generation, but I estimate that the business spun out cash of around INR 20,000 crores.
I don't track all the stocks as closely as many of you do, but I can't think of too many businesses in India who are generating that kind of cash in a 12-month period. In one of the earlier analyst calls, maybe 12 or 15 months ago, I wasn't part of HPCL at that time. Director of Finance had laid out a pathway for a INR 40,000 crore EBITDA. We are on track of that. The 12-month running is INR 28,602. As you'll see later on, there are positives which we anticipate in the coming quarters, which will take it up higher. This is not the end point. We will aspire to take it to INR 50 crore and even beyond that. Just to remind that HPCL has consistently given high returns to the shareholders. I know each shareholder has their own different expectation.
I just looked at the last 10 years' data, which has again been posted on the stock exchange disclosure areas. We gave a 19% annualized return over a 10-year period to our shareholders, September 30th, 2015 to September 25 there. If you look at the stock surge in October, this 2019 might be touching 20% itself. The market cap during that period increased from INR 26,230 crore - INR 94,263 crore on September 30th, 2025, which obviously has gone beyond one lakh crores right now. I think HPCL is one of the few companies who have consistently, over a period of time, rewarded the shareholders, whether it is in the form of a 13% annualized increase in market cap and the dividends which it continuously pays. Our strong performance in the year is backed by a lot of good physical performance.
Our quarter two GRM was $8.8 per barrel, even if I knock off inventory losses, which many analysts are very curious about. It was $8 per barrel was what refineries generated. The refinery throughput has also increased. If I just look at the throughput in quarter one of last year, it was $5.76. In quarter two of this year, it is $6.57. Same three digits, except probably going in a different order. It's a 14% increase in refinery throughput in the last five quarters. The distillate yield, which is often a mark for profitability of refineries, we were able to increase the distillate yield from 72.7% in quarter one 2025 to 77.7% in quarter two 2026. With completion of some of our upcoming projects, we expect to take it further. We've also consistently grown the market side.
3.5% increase in market or total sales in H1 of this year as compared to H1 of last year. With these strong results, we have worked to reduce our debt. As of March 31, 2025, we had INR 63,323 crore of debt at a debt-equity ratio of 1.38. On September 30, 2025, the total debt has reduced to INR 55,808 crore, with a debt-equity of 1.07. As we have been talking in the earlier analyst calls, debt reduction has been a focus for the management team, and we wanted to deleverage the company and get it into lower debt-equity levels. At the first analyst call or the analyst call in May at the end of annual results, we had given a guidance of 1.1 for FY2026 end. We are confident that we are going to achieve this.
In fact, as a management team, we are revising our target to a sub-1 now in terms of debt-equity ratio by the end of this year. As many of you would have known, or probably everybody knows by now, the LPG under recovery for the previous period has been announced. HPCL is going to get INR 7,920 crore over the next 12 months' period. It is INR 660 crore every month starting from November, which would mean INR 3,300 crore of additional PAT. Sorry, additional numbers for us in FY2026. Some of it, as you can imagine, would go towards reducing the debt further. We, as a management team, are very confident of the trajectory, and this is reflected in the decision of the Board of Directors to announce a 50% interim dividend for our shareholders.
With a quick overview on the financial, and I'm sure you have questions, we can take them later. Let me come to the status on the projects, which I'm sure you want to hear from the management team. Since we last spoke, we have completed a couple of significant projects. Our underground LPG storage cavern, which is a fantastic engineering marvel, is complete now. The gas has been charged, and it is back into full operations. About three or four weeks ago, we completed a much-delayed project on the Sangrur-Bathinda pipeline. The pipeline is fully laid, it is charged up, and products are moving through that. Coming to the big ones, Visakh, I'm very excited to announce that yesterday we completed the pre-commissioning test of the refinery. Now, from today, we are starting what we call as startup activities there. This is typically a three to four-week cycle.
My teams promised me a commissioning date, or a feed-in date as we call it, of 24th November. I'll give them a few days here and there because these are complex hydrocarbon projects. In a nutshell, RUF is expected to go on stream in the next three or four weeks. It will take a few weeks to stabilize. As we had announced in the previous call, we would get full returns or we'll get a full quarter of RUF performance. We would anticipate the GRMs to ramp up as we get used to the new complex project which is there. Barmer has also progressed well. When we declared the result on the 29th, we had taken our Board of Directors to Barmer and we met there. The overall refinery is 89% complete. Overall project is 89% complete. Refinery is greater than 95% complete.
We had given a guidance of crude in this year. We are holding on to that guidance. In the next couple of months, we will do the crude in. I'll again caution it could shift by a few weeks here and there because each testing throws up a surprise. While talking of the projects, let me also very quickly address the issue which might be on many of your minds, the one which we declared to the stock markets earlier on Monday. As we had, in spirit of complete transparency, proactively declared it with the stock markets, we did face an issue of chlorine contamination on one cargo which came into our refinery. Somehow, it invaded into our asset and caused a bit of damage.
A part of the refinery, not the whole part of the refinery, was shut down and the remaining part had to be run for lower throughput. Those of us who are engineers can understand this is a highly corrosive material we treated with. The good news is we are almost through with that, except for just dealing with some of the contaminated products. As of last night, the unit which was down is fully back, and now we are ramping up to full capacity. I'm sure you are curious to know about the impact of it. We are working out the full impact, but whatever we know as of now, I can kind of share it with you. The good news is it's not as bad as we had anticipated when we gave out the stock market guidance.
We were able to contain it much better with a lot of proactive efforts by our team. We have impact on three or four buckets. First, we have a bad product, essentially naphtha about 100 TMT. We had no options but to export it at a discount, and that knocked us back by INR 150 crore. There are some postponement of revenues because one of the final finishing units was down, so we had to hold back intermediates. That is only postponed. The revenue is still going to come later in the next months. We have some crude which is left over. We are trying to do the disposal on it. As and when it gets done, maybe it will have some more impact, but we don't anticipate it to be massive. The last impact is when the unit was out and extra movements we have to do.
We think we'll be able to contain it within about INR 150 crore or thereabouts. Overall, because of a lot of proactiveness by our team, we were able to get it in a much more controllable zone. The unit is back up, and we took this opportunity to advance one of our shutdowns and do some of those activities. Overall, it's manageable. As you have seen, our savings, which are coming from our cost program, this will be very well contained within it. As a management team, we are comfortable at being able to mitigate the financial impact of it. That was on the current performance. I'll quickly talk about shaping the future. As you know from the last call that we have been focused on four key planks, and I will stick to those four planks.
Under these four planks, there are 14 initiatives which we are doing across the organization. In the interest of time, I'll just call out the planks and then highlight a few of them. First is operational efficiency. Second is future growth strategies. Third, working on enablers. Fourth, communicating our performance and our message to the external stakeholders. Few key highlights. I'll not go into every individual area, but few key highlights. On the operational efficiency, we had announced two major programs. SAMRIDHI, which was a cost takeout program. We had given a guidance of a INR 1,000 crore target as a cost takeout. At the H1 level, the accruals are INR 823 crore, which translates roughly about $0.5 per barrel. In one of our discussions with an analyst team, they asked us this question on what's recurring and what's one-time of it.
35% of this is recurring, which is INR 301 crore, and INR 522 crore is one-time savings which we have been able to do. We are very confident we will exceed the initial target of INR 1,000 crore. My Head of Corporate Finance, K Vinod, who heads this program, has promised me that he's going to try for INR 1,500 crore, though we are not giving that as a guidance. We are also going to do SAMRIDHI 2.0 from April 1 because we believe there are more efficiencies we can target. At the right time, we'll come back with a guidance on what's the next level we are looking at. I think this has gone across our organization quite well. Those of you who are very deep into the numbers will know that our OpEx is lower.
Part of that OpEx is lower because of direct savings the SAMRIDHI cost optimization program has achieved, and part of it is lower because everybody knows the cost is being watched there. There is a prudence in spending. The second program we had talked about was increasing efficiency of our retail network. As we had told, it's been launched at 4,700 outlets. It's given mixed results. We had hoped for more. It's been a good learning process. Just in terms of quantification, we have about 3 - 4 KL per month as a throughput increase from these outlets, whereas the industry averages have been flat or minus. These outlets have performed better than that, but they are lower than the target which we have and we had hoped for. Nevertheless, the teams are working on it.
We have also launched an initiative working with an external agency, one of the top management consultants, to work on a future-ready retail organization. The third thing I wanted to talk about was on digital. While HPCL has done a lot of steps in the last five, six years on digital, we are now starting a program with, or we have started a program with, again, a reputed international consultant to prepare the next wave of digital roadmap. How do we capture some of the latest developments on digital into our day-to-day working? I will very briefly talk on some of the future initiatives we are doing. We are doing a significant effort on non-fuel retail, where we are trying to expand some of the activities and, in a way, leverage or make use of our retail footprint much better.
On petchem , we are in an advanced stage of readiness for our launch, which is anticipated in the middle of next year when Barmer petchem stream goes online. A lot of R&D effort is going into creating niche grades. We've also worked on expanding our gas portfolios. We had announced two gas deals already. In between, we have worked on picking up spot or term cargoes, doing some selling of gas short-term and medium-term, and working towards increasing utilization of Chhara. There are many other initiatives which are getting us ready for the future. I will not take a lot more time because I want to leave the time open for questions and a dialogue. I'll summarize. HPCL is on a great and solid trajectory.
As I just said earlier, generated INR 28,000 crore of EBITDA in the last four quarters on a running basis and plus INR 20,000 crore of cash, give or take, that's an approximate number, but roughly INR 20,000 crore of cash. We have a very energized team which is excited about creating greater glory for HPCL and greater value for its shareholder. Once again, I'd like to thank you all for your interest in HPCL . Thank you for joining the call. The management team here with me is happy to take each and every question you might have. Thank you. Varatharajan, back to you .
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone 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. Our first question comes from the line of Probal Sen from ICICI Securities. Please go ahead.
Good morning, sir. Thank you for the opportunity. If I may take a moment to say this was an extremely useful and focused briefing that was given at the start of the call. It covers a lot of the areas that we anyways tend to focus on. Thank you for that. Having said that, just a couple of follow-up questions, specifically on the petrochemical part of the Rajasthan refinery. I think in the initial plans, it was shared that about 27% or 28% of the product deal would be essentially petrochemical projects.
In that time, actually, the petchem throughput comes out. In the first half, let's say, after the commissioning of the refinery part, what sort of throughput can we actually expect from Rajasthan refinery? Is there any sort of guidance that can be shared?
I think it will, Probal, thank you both for your comments. You always win the early bird prize on the call. I want to send you a nice gift hamper for that. Jokes apart, at the There will be a ramp-up of the crude as we assemble all the units in the refinery, ramp-up of the refinery utilization after the crude in. Within a three-month period, we expect the refinery section of that to be able to be fully geared up for a 100% run. Without the petchem being in place, we should be able to run it at around 8 MTPA or thereabouts.
Now, this is just, I would say, our broad plan as of now. These are assets which are highly complicated, and they have a life of their own. That is our expectation. Till the time petchem comes on stream, once all the units are up and kicking, which will be roughly a three-month ramp-up, we would be able to get from a 50, 60% utilization to an 85, 90% utilization on the CDU.
Got it, sir. The second question with respect to the Visakh refinery. Residual functions and the commissioning feed will happen at November end. I think you did mention about the full quarter of performance coming through. Is it safe to assume that even building in a couple of months, FY 2027 Q1, we should have mostly the full commissioning and Visakh along with secondary processing running and full tilt starting of FY 2027?
Yes, I think it would be sooner than that, Probal. We have taken a lot of time to ramp up the unit and do all the checks and all those things required. When I said that it will take some time to stabilize is when we synchronize all our crude purchases and we synchronize all our downstream activities to it. We would anticipate, given the effort which has already gone in, that the fourth quarter of this year, we should be able to run close to where we would want to look at it. As goes with any such asset, further optimization keeps on happening. Your presumption that full benefit for next full year should come is a very safe one. A little bit conservative.
Mr. Chandyawan, last question, if I may, housekeeping one.
If I can get a CapEx guidance broken up into segments of FY 2027 and 2028, if it is available. For the future CapEx?
Yes, for FY 2027 and 2028. Have we done that? You want to? On an average, we'll be doing around 30% on the refinery front. Then around 60% would be on the marketing, and the rest would be the new business lines which we'll be focusing on. Sir, any amount you can share in terms of range of the number? We haven't done our CapEx balancing. This year, as we had said in our earlier analyst calls, we had gone conservative on CapEx because we wanted to get the debt-equity under control. Looking at our debt-equity right now, we will come out with this thing. On average, we have been spending INR 12,000 -INR 14,000 crore. We expect to spend in that range.
If it is more than that, then we will come back in the subsequent analyst calls.
Perfect, sir. That's very useful. Thank you so much. I'll come back.
Thank you, Probal.
Thank you. Our next question comes from the line of Vivekanand from Ambit Capital. Please go ahead. Yeah, hello. Thank you so much for the opportunity. Extending the question on debt. Would you also have any color at this stage on the debt level of HMEL and HRRL? A related point on that front is you had outlined value unlocking as an agenda and announced that the Lubes business will be demerged, and you would seek the best value for that.
Just wanted to understand or also pass on this feedback that when investors look at HPCL , typically we look at standalone debt, but we also understand that there is a large amount of debt at HMEL and now HRRL. Now, because those two refineries are going through their own issues, for example, HMEL through a major cyclical downturn in petrochemical and deleveraging being hard there, and HRRL, of course, is a new refinery, so there will be accumulated losses that you will have to absorb. Vikas, I want your thoughts on, at an overall portfolio level, how should one think about HPCL from a deleveraging/value unlocking perspective or capital recycling perspective, however you may have thought about it. Thank you so much.
Sure. I'll request Director of Finance to just first share the numbers, and then I'll opine on it.
Coming to the debt of the group companies, and primarily HRRL and HMEL, as on date, in HRRL, that is the Barmer refinery, the debt level is around INR 40,000 crore. As regards the debt in HMEL, it is around INR 35,000 -INR 36,000 crore. Looking at the group level for the entire HPCL and the group of companies and the proportionate share in the individual companies, the debt-equity would be around 1.8. This is when the HRRL is not performing. There is no EBITDA contribution from them yet. As and when these companies start operating, even the others where, like in case of HPLNG and all, where we are gradually ramping up the facilities, the EBITDAs will also improve. That would also. Enable us to contain the debt-equity levels. In the near future, you will see that progress and change in that direction.
S ure.
No, thank you. I think Director of Finance has already covered the overall debt-equity. We are looking at that, and that also should come down in terms of deleveraging on the aggregate front. HRRL will give a boost. There are enough public announcements right now on Andhra Pradesh refinery, which BPCL is doing. Some of you can benchmark the numbers and then see if that refinery is viable. HRRL is also going to be generating a lot of good revenues there. On your other questions on unlocking, I think my stand on that is very consistent with what I've taken in the last two analyst calls. Yes, the HPCL board had taken a decision at one point of time to unlock the lubricants business. We had moved an approval note to the government because we need to have a DPEM approval on that.
Having said that, in the last six months, especially when I came in, we had discussed there, we figured out that the better value for HPCL and its stakeholder is not to immediately deleverage, not to immediately unlock that business, but build the consumer-facing part of that business bigger and stronger so that it gets the right return around it. For any management team, doing an unlocking by a financial restructuring is a lucrative option which is available at any point of time. I personally believe that that alone does not give long-term value creation for the shareholders. The long-term value gets created when you fundamentally build the businesses. On the lubricants business, our focus is very clearly building our consumer side of the business much more rapidly. There are two sides of the business. There is a consumer, and there is a bulk supply side.
We are very focused on building the consumer side. There are a lot of moves and tactical things which need to be done there. I'm very happy to share that that business is growing very high teens for us in terms of growth. In some ways, we are postponing any potential decision of unlocking lubricants at this point of time for the quest of creating a higher shareholder value there. The unlocking can happen at any time, but for the moment, we want to build that business further. That's a consistent stand we have had in the last three calls that I have done. It is our stand as a management team. We are very transparent on it.
Vikas, this is very helpful, and thanks for sharing that. Just one follow-up.
Now, I understand Loops has a very big consumer side to it, but the utility assets that you may have, is there scope for you to perhaps unlock value through alternative structures like InvITs or perhaps get in focused investors who are looking for fixed returns on those assets? I'm just asking in the context that HMEL itself, the debt level in the last two years has broadly remained the same or marginally gone up. The context is more broad in terms of at an overall portfolio level rather than just looking at Loops in specific. Thank you.
Sure. I think that's a very fair push on that. Obviously, HMEL, I won't want to opine alone on this because we are an equal partner to an international group, and it's a joint decision which people have to take on that.
That runs at an arm's length relationship, given the nature of the relationship. We have a very strong relationship with our joint venture partner, but both of us are very respectful that there is a management team which runs it, and we provide arm's length guidance on it. Without discussing with the partners, I'll not comment on HMEL option on it. On HPCL side, I think that's a fair thing. To be very honest and transparent, in the last seven months that I've been here, our focus has been on a lot of here-and-now issues. We had a lot of CapEx which was delayed. A lot of you were asking us tough questions on the CapEx, etc. Now, at least I can see you're asking us future kind of questions, which is, I think, a good sign that you're satisfied that at least we are getting the CapEx right.
All these, I would say, would be topics as a management team we would be taking on board maybe in the first quarter of next year. It's taken us a lot of time to get these assets really at a stage where we can start returning on the capital which has been deployed. Believe me, running any hydrocarbon asset is not an easy thing there. Very valid suggestions. We will make a note of it, and in some of the future calls, we'll discuss our viewpoints on it. As of now, there are no immediate options on, say, we are going to do an InvIT here or not. Possibly, we could do it in future. Yeah, we could explore that possibility in future.
There are a lot of other things we could do in terms of increasing value, but the fundamental principle I get driven by is making sure that the intrinsic value of the asset is not lost. We have an LNG terminal. We could monetize it, but we are also clear that there is a potential to create one of the best LNG assets there. Our focus on that right now is to make sure we are getting it into a cash break even immediately. After that, it gets me a flexibility of creating a bigger asset there. It's 5 MTPA. We could easily scale it up to 10. It has potential to be a much, much bigger terminal as LNG grows.
We are keeping our options very, very open at this point of time without going down onto one specific path because we believe the basic infrastructure, the basic asset base HPCL has is already generating good cash out. We will be able to deleverage it. We'll be able to absorb the consolidated, you said, accumulated losses. HRRL, yes, every hydrocarbon asset greenfield has accumulated losses in the first few quarters, etc. We are very confident we'll be able to absorb. That's why I started off by giving you the cash the system is generating right now.
Great. Vikas and team, thank you so much for your detailed answers and all the very best.
Thank you. Our next question comes from the line of Sumeet Rohra from Smartsun Capital. Please go ahead.
Yeah. Hi, sir. Good morning.
Firstly, congratulations to the management team and chairman sir for a fantastic performance of INR 8,200 crore in the first half. Sir, I will take just a few minutes because the entire management team has done such a wonderful role because I remember I've been with this company now over the last decade. There were years when our company would make about INR 1,200 crore in a year. Today, you all are working so well that we are making INR 1,200 crore a month. I have to say that this management team is one of the best management teams I've ever seen. You guys are doing a fantastic job. Sir, a great show. Good luck. God bless you all. Sir, now coming to the fact that you guys are generating INR 20,000 crore of cash, that is a huge number, right?
The matter of fact is that two crore Indians use fuel pumps on a daily basis. In fact, I said this on your PR call as well. If this is not a consumer stock, then what is? We still get value that 0.25, 0.3 times sales. Sir, definitely, the markets are not rerating us in terms of the actual performance of what we deserve because I clearly appreciate the fact that we are a INR 1 lakh crore market cap today. Many congratulations on that. Our journey is long, right? Because today, BPCL is talking about a $11 billion refinery for 9 million. Your entire 45 million ton plus retail outlet plus plus plus is available at INR 1 lakh. There's something which the market really needs to get more confidence on earnings.
Sir, I would request if you can just spend a little bit of time talking about our $5 billion EBITDA because of the fact that today we are nearly INR 28,000, INR 30,000 crores. Now with the Visakh residue upgradation project, which you've highlighted in detail, plus the Barmer starting to kick in in the next few quarters, if you can just throw a bit of light on the $5 billion EBITDA, it will kind of reassure the investor psychology that where this company is headed over the next couple of years. Thank you so much, sir, and wish you all the best to you and the management team.
Thank you, Sumeet. I appreciate your question. You are the one who has been pushing things hard on all those calls. I would answer this in two parts, and I'll request my colleagues also to chime in on this.
First, as much as your frustration on the valuations, we also get sometimes frustrated on that entire thing. I said in the open remarks that each one of us can think how many businesses in India generate INR 20,000 crores of cash in a year. I can't think of too many. We leave that valuation part in the safe hands of the analysts to each to their own ways of looking at things. The way we look at the business is two, three aspects. One, we have a very solid business, has great predictability of consistent performance in some ways. We shouldn't forget that we are a diversified company. We are strong on refining, and with upcoming Barmer, the RAF, other projects which at the right time in the future, we'll announce some debottlenecking, etc. In the next couple of quarters, we'll announce some of those.
We are increasing our refining capacity and coming closer to matching refining versus selling. That gives us a great comfort. I know many analysts focus on GRM. I personally do not worry too much about GRMs because for me, the GRM is my refinery divisions' one-upmanship on the same internally. For me, what really matters is the crude price and what I'm selling the product at. Crude, as we all know, has been reasonably range-bound. From a year ago, or six months ago, it has come down. Each one of us can have our own views on crude, but we think it will be range-bound in mid-60s around that time. There will be spikes, but by and large, even a few weeks ago, it went to 70 and then very quickly corrected. Then it went down to 64. It's today 64. That's a benign kind of a movement.
It is not the 100 kind of a movement. That's point number one. The second point is our selling price has been by and large steady. I know many analysts have this, so this election, the price will go down, that election, price will go down, etc. I think for those of you who were present at the analyst meet or the discussion with analysts, with the Honorable Minister and Secretary he had done, they gave the government's view on that entire thing that they expect the companies to be earning reasonable profits because they have been well-weathered off capital investment and creating a lot of value. We forecast reasonably steady fuel prices. I would say even if there is a minor one or two rupees here and there, we are strong enough to absorb those things.
We gave transparently the loss we would have in the recent MR incident because as a management team, we are confident that we can take it in our stride and move forward. Those things keep happening in the business. We have a steady business on the fuel, the whole refining and fuel side. The second part is we also have a very solid LPG business, which, interestingly, now we have INR 9.7 crore consumers, almost touching 10 now, where we get into the homes every month. In every month or two months, we send a delivery boy to their homes. That business also has improved a lot. If you look at even prices, the under-recoveries on that have narrowed very, very significantly with the lowering of Saudi CP prices.
If you have been very closely following, some of it has come in press. HPCL , and I would say some of the peer companies have either individually or collectively done initiatives to even that business under control. Besides that, we have other businesses which on their own are reasonably big businesses. I talked about the lubes in a different context. That itself is a few thousand crore of business for us, completely, I would say, partially consumer-facing because there is a bulk business in that, but increasingly growing on the consumer-facing side. We see the business as a very solid one. The supply chain modes we have, the assets we have are definitely good.
What gives me even more confidence in giving out the projections which I've been giving out is the fact that we also believe there is a tremendous improvement potential we have in the business. We gave a guidance of INR 1,000 crore as a cost takeout at the beginning of the year. We are tracking to that guidance. Today, we announced that we are going to do another wave of cost reduction next year. While we have not given a number, we think there is an efficiency which is feasible there. The third instance I would want to say, our assets itself, we are improving the way we are running. We gave the numbers on distillate yield improvement. There are more such efforts which are going to come in the times to come that will increase our margins there.
Last but not the least, I think, Sumeet, your pain on us not being viewed as consumer companies is in some ways valid. I hope more people view it that way. One of the things we are also going to do is make sure that we are making or doing steps more as a consumer company. I talked about reimagining our retail of the future. How are we going to serve the retail customers? How are we going to own the customer? There are initiatives which are there. Think of the unlock potential there. I talked about INR 9.7 crore customers where we get into the home every few weeks. I don't remember offhand, but my colleagues said, "How many petrol pump guys do we have? 2 crore a day or some huge number which you have to count a number of zeros?" INR 1.75 crore retail customers there.
As of now, we have not yet worked out the cross synergies, cross leverages, etc. Those are aspects. In our future plans, we would work on those, and that will make us even more stronger as consumer automation. I'm quite hopeful. I look at it optimistically. While the rating or the valuations is an individual choice, people can decide. As a management team, we can only focus on the results we can give. We are very, very focused and very confident of the consistency of our results. Even if there are shocks in terms of prices going up and down at times, we are strong enough to absorb those. That's all I can say on this, Sumeet. Each one of us would have our own judgment on this.
Thank you, sir. Thank you so much. Wish you all the best, sir.
Thank you.
Just one thing, Sumeet, we can give you also the breakup on the, you had asked the other of $5 billion EBITDA. We can give you a breakup on that. Yes, sir, please. A Chairman had already during his speech said that in the past four quarters, we have already touched INR 28,000 crore as regards to EBITDA is concerned. Now, what is it it's going to increase further? Now, the moment our rough unit is going to come, we are going to add around INR 2,500 -INR 3,000 crore at EBITDA level. If you come to HRRL, at the EBITDA level, considering our share of 74%, around INR 5,000 -INR 5,500 crore at the EBITDA level. We have our new units at HPRG and the HPLNG and all, where we are taking baby steps.
In a year or so, maybe another two to three years, we will be getting around INR 1,000 crore of EBITDA contribution from them. Plus, there are so many other various efficiency and profitability improvement initiatives and all which are being taken up. This number of INR 40,000 crore is a number which we would definitely be achieving. Our target is to go beyond it, but this is what INR 40,000 crore seems to be a number where we feel we are fairly confident of achieving.
Thank you so much, sir. Thank you for the detailed explanation. Thank you, sir.
Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit the questions to one per participant. Should you have follow-ups, please rejoin the queue.
Another quick reminder to the participants to keep your lines on self-mute while the management is answering your questions to ensure there are no disturbances in the conference. Our next question comes from the line of Yogesh Patil from Dholat Capital. Please go ahead.
Thanks for taking my question, sir, and congratulations for the good set of numbers. First question related to any inventory gains during the quarter, and if you could share core GRM during the quarter. Sir, my second question is related to the project SAMRIDHI. In the first half, we have saved approximately INR 8.23 crore and $0.52 per barrel kind of a saving at EBITDA level. How you have arrived at this number of $0.5 per barrel? Because we are trying to back calculate it on the refining volume, the number is a little bit coming slightly higher.
If we add the marketing into the refining volume, then it is indicating a little bit lower compared to the $0.5 per barrel. It is total considering at the sales volume level. We have said that last call that it will be this is represented basis the total sales of the corporation. And your question. In inventory?
Yeah, inventory.
Inventory, we had. 8.8 was the reported margin, of which INR 338 crore, amounting to about $0.80 a barrel, was the impact on account of inventory. This is a crude inventory. This is a crude inventory.
Yeah. Okay. Marketing is INR 569 crore. Again.
Sorry, sir. Go ahead, please.
Yeah, go ahead. Go ahead. Go ahead. We are done. That's all.
Yeah. Last question related to the product slate. How much is the diesel, petrol, and the naphtha product slate at HPCL refinery level, excluding the Bathinda right now? If you could share.
HPCL. We should have that number there, but maybe. You have the. Typically, we do diesel is about 50%. MS will be about 20-25%. Balance all other bottoms, LPG, and specialties will be the balance.
Lastly, touching to the operating expenses per unit at a refining segment. If you could also share on the marketing segment, can you give us any broader numbers? What are the operating expenses per unit on the refining side and the marketing side, if possible?
Refining is around $2.50 per barrel.
Thanks. Thanks, sir. Thanks a lot, sir.
Thank you. Our next question comes from the line of [Somaya V. from Awendus Park]. Please go ahead.
Yeah, thanks for the opportunity, sir. Sir, my first question is on the Russian crude sourcing. If you could just help us with the last quarter, what is the mix of Russian crude sourcing?
In a situation where in case we need to kind of transition away, if you could just help us both qualitatively and if possible quantitatively, what could be the impact on crude sourcing cost?
Yeah. I'll be very honest. Russian crude does not keep me awake. I'll give you data, then you can understand why. See, we have been consistently saying crude buying is a very economic decision based on prices and the quality of the crude and which refineries can take what crudes. In the second quarter, if I look at the total crude we bought, it was 6 million tons or thereabouts of total crude we had, of which 1.1 million, 6.1 was the total, 1.1 million was indigenous crude, 5 million was imported. My Russian crude in my overall basket was only 5% in the last quarter for a very simple reason.
Whatever parcels we could look at, they were not economical to run on our refinery. We would look at it elsewhere. We run a lot more on Middle East crude and increasingly on West African crude. Frankly, for 5% crude on a run rate basis which are running on my refineries, I'm not losing my sleep. I can easily get them from other sources. I don't worry about it as much as the press worries about it and everybody else because we are very well structured there on our assets on other crudes. Even when rough comes in, the crude mix we have to look at it. We know which crudes we need to get the two, three margins, and they are not the Russian crudes. We could run Russian crudes there also, but we have alternatives with us. I'm not worried about it at all.
Got it, sir.
Thanks for this explanation. Second question is on the CapEx. Now that Barmer is coming to more like on the completion phase, how should we think about it generally? We will get into an investment mode once existing projects get completed, but here we also have a deleveraging plan. Is it okay to think that maybe next 12 months or 18 months until the balance sheet gets a bit more leaner, we will not take up major CapEx programs?
Yes, I think that's a fair thing to look at it. Having said that, you can understand in an asset as large as ours, getting to INR 5,000 crore, INR 10,000 crore network expansion, replacements, all those things are routine CapEx would be in that region. As of now, there is no major big $5 billion, $10 billion CapEx program on horizon for us. There are projects.
There are also de-bottlenecking projects which we are going to take up in the next couple of quarters, but they are in the smaller ranges which we are looking at.
Sure, sir. One bookkeeping question. HMEL, if you could give us the EBITDA number and PAT number for the quarter and also petchem contribution. That would be helpful.
I think earlier participant also was asking any inventory impact on the marketing side. If the data is available, if you could share, that would be helpful.
I think marketing data was shared earlier. Vinod, you can repeat that. Maybe it got missed.
Yeah. The marketing inventory was INR 569 crore. No, no. You're talking for HPCL, aren't you? Yeah, marketing is for HPCL.
Y eah, HPCL. Yeah. The other question was on the HMEL EBITDA and PAT.
HMEL EBITDA for Q2 was INR 1,400 crore.
So PAT and petchem contribution within this is possible and the PAT number?
The PAT would be about INR 170 crore. petchem contribution was around 35%, 40% of this.
35%, 40% of the EBITDA. Is that the right understanding?
Yeah. Quarter two actually has been better for them than quarter one because refinery cracks, as you all know, have been at historical highs right now or very good numbers on refinery cracks. They've done well on quarter two. They've improved on quarter two a lot.
Got it, sir. Thank you.
Thank you. Our next question comes from the line of Akash Mehta from Canara HSBC Life. Please go ahead.
Hi. Just one question.
In terms of the crude impact because of, I mean, the refined product impact because of high salt and chloride content in the oil that you have processed, you have mentioned the impact in terms of the naphtha output. You all will still be selling oil which is already there. In terms of resumption, in terms of normalized throughput, by when can we expect all the units running back on a normalized level? You could just highlight that and also progress on that.
As I said earlier in the call, as of yesterday evening, we started the last unit back after taking the shutdown. Each of these units, you could look at them for 24, 48 hours so that they are stable. For all practical purposes, we are back on stream fully, give or take a few hours in terms of there. We restarted it last night.
Sure, sure.
That helps. Yeah. Thanks a lot.
Thank you. Our next question comes from the line of Vikas Jain from CLSA. Please go ahead.
Hi. Thanks for taking my question. I have a couple of them. Firstly, on the inventory numbers, the numbers that you mentioned were both gains, and this is for this quarter. Can you just remind us again on the 1Q numbers? Because what I have is a rounded number. So INR 569 crore is the gain for 2Q in marketing. What is the loss number for 1Q? INR 650 crore. Okay. Similarly, for refining, INR 338 crore is the gain for 2Q, right? And the loss for 1Q would be how much? Around INR 1,500 crore. Okay. Just one other thing, the EBITDA growth potential that you highlighted by project was clearly very useful.
Could you also give a sense of how capitalization picks up for each one of them? For example, you said that the Barmer project, for your 74% share, you see the EBITDA, I think, about INR 5,000 crore incremental coming in a couple of years of stabilization. As compared to that, say, for example, depreciation and interest, how would those numbers look like when it is fully capitalized?
The depreciation, nowadays, the refinery is being depreciated over a period of 40 years. If you take the 40 years and then you depreciate, it would be around INR 2,000- INR 2,500 crore. Actually, INR 2,000 crore. Yeah, INR 2,000 crore of depreciation. In terms of the interest cost, it depends upon the cost, the rate of interest.
Even if I take the current ruling rate, definitely the moment this project is completed, the COD is achieved, there will be ample scope for us to do the refinancing also and bring down the cost. Even if at the current level, if I take, it would be around INR 4,000 crore of interest cost. Interest.
Okay. Sure, sure. In about saying by FY2027, your capitalized interest for last year was standalone level was about INR 1,000 crore.
How do you see that coming down by FY2027? I think there'll be very limited capitalization, right?
Next, by 2027, everything will get capitalized. After that, everything will go in P&L only.
Basically, everything will be expensed by FY2027 almost, right?
Yeah. In fact, on HPCL books, the bulk of capitalization will happen this year with rough. Because remaining is on HRRL books on the console, it will be done.
After Visakh refinery, which we expect to capitalize this year, nothing major is left. Of course, we have routine expenditures, but those are part of the course. That will bring in additional EBITDA also.
Yeah. Okay. Understood. Thank you so much, sir. Thanks a lot.
Thank you. Our next question comes from the line of [Amit Garg] from Axis Capital. Please go ahead.
Thank you. Just on the Rajasthan refinery, it was mentioned that INR 55,000 crore will be your share of EBITDA, which you are projecting into the INR 40,000 crore expectation. Just wanted to clarify, this will be an associate accounting, right? That EBITDA would not be consolidated. Is that correct? Or are you planning to consolidate the refinery in your financials? No, it will not be consolidated. Only the profit portion would be added. Essentially, that EBITDA then will not show up in your EBITDA, right?
It would not, but typically, any investors and even the bankers would like to have a full view of the same. That is why, for good governance as well as for better transparency, we are sharing those. Like you guys are consolidating debt, which was done earlier in this, you should consolidate EBITDA also for your numbers because you gave us.
No, no, we are not consolidating debt. I don't think anyone is consolidating debt.
Okay, okay. Yeah. No, no, that's fine. It should be like to like. That's all.
The number was INR 5,500 crore, not INR 55,000 crore. I would love it to be INR 55,000 crore, but these assets don't generate that much.
I said, no, no, my bad. I meant INR 5,500 crore. Also, just lastly, is there also a review of the ROE, ROC frameworks when you take up new projects?
Or how do you really go about evaluating projects?
We keep on doing that consistently at all points of time. There are obviously thresholds we use, and then there are also strategic calls where you go below the threshold. I think that's a routine management activity. We keep on working on it at all points of time. We have a board-approved investment philosophy, structured policy on the same. Yes, depending upon the individual project as well as the size of the project, individual calls, project-specific calls, considering the project risk, project opportunity, strategic call, and all. All those are factored and accordingly decided. If it gives you comfort, I can tell you the current management team is not dollar happy in that fashion.
We are frugal, or we demand a fair amount of returns, and we stress-test those returns quite a few times in taking any investment decision, big or small.
Sure. No, why I asked that is because I'm sure you are aware about it. With the current petrochemical spreads are so bad that, I mean, unlikely there will be significant ROC generation on petrochemical projects at current spreads. Just in that context, I wanted to understand how you go about evaluating new projects.
We are not right now. Right now, the petrochemical, we have $2.4 million. That investment decision was probably taken five, six years ago. What we are doing is working on improving the realizations. As I said earlier, we are looking at niche products.
We are doing a lot of work on R&D so that we can improve the realization in the current market situation, which we all know about. Also, any further investments are going to be very specific downstream activities, which are building on what we have right now. As of now, there is no horizon that another INR 30,000 crore of CapEx is coming up or anything of that sort.
That's all from me. Thank you. And best wishes.
Thank you. The next question comes from the line of Sabri Hazarika from Emkay Global. Please go ahead.
Yeah. Just one clarification. You mentioned that you are trying to restrict the EBITDA loss from this chlorine contamination to under INR 150 crore. Is that right?
No, we said there are two buckets of the loss.
There was one which is already incurred in terms of the product which got contaminated, which we have to sell at a discount, which is naphtha, which roughly would be around INR 150 crore as and when that export parcels are done. Second, there was movement which we had, and then some product loss, etc., which again, numbers have to be finalized. Anyway, in any routine business also, there are some amount of movement losses which we have that we are restricting or we are trying to get it under INR 150 crore. The early commissioning, we were initially anticipating 4th November when the units come back, but early commissioning was helpful. The third open bucket is the crude, which is the part of the crude which is still sitting with us, which we are talking to others who can process it, and that could have some amount of it.
Having said that, we would also be raising claims in line with all the crude agreements, etc., we have, and in line with what we have declared to the stock market. There will be some recovery on that. Overall, I think we are in a real. While it was a big impact in terms of contamination, something of this sort has not happened in an Indian refinery in the recent memories. Our team was very smartly able to do and with a lot of effort. This was all happening around the Diwali time, so a lot of people spoiled their Diwali and trying to keep their setback there. We were able to contain it very nicely and even get the units back early.
I wish it had not happened, but as the CEO, I'm happy that the pace at which the team got it back and the amount we were able to mitigate there. That's all I would say. We can take it in our side. It's absorbable by us. It's not a. In fact, we have been able to limit the damages much lower than what we had anticipated when we gave the stock market guidance at the beginning of the week.
Right. Just one question to Vikas regarding this LPG market. You've given some view on crude prices, but LPG is currently seasonally, it should have gone up, but there seems to be some sort of price war or something of that sort why in December also we are seeing prices just coming down. What is your assessment?
Is it like a temporary phenomenon, or do you see a permanent reduction in LPG prices by the likes of Aramco or even U.S. players?
Most, if I could predict those prices, then I wouldn't have to work 12 hours a day to earn my salary. Jokes apart, I think some of what you are seeing is the effort which has been done by the companies. I'm not going to speak much about the strategies on the call, but if you carefully see what had happened in the last five, six months between all the three OMCs, even with what is in public domain, you can decipher one strategic factor why the cost is now lower. We hope the Saudi CP and all remain lower. It definitely helps in the business.
There has been an effort which has been done not only by HPCL , but at other OMCs. All three individually and all three collectively have also done some things which have, I would say, reshaped the market a bit. I will not go into specific strategies on what we did and what was done. You guys can do your own judgment on it. We hope it remains benign and it does not spike like it used to do every December.
That's great. Thank you so much, and I wish you all the best.
Thank you. Our next question comes from the line of S. Ramesh, who is an investor. Please go ahead. Thank you very much, and congratulations.
On your results and your insights on the management thought process, on the historical performance, and the way forward. If you can share your thoughts on the roadmap for the renewable energy subsidiary in terms of capitalization and when you will see visible cash flows and any timeline for listing that subsidiary. Secondly, you mentioned on the digital pathways, any thoughts in terms of going in for the benefits of artificial intelligence, since you mentioned the consumer-facing businesses and the consumer footfalls you have. What is the kind of thought process on that? If you can also link it up to your non-fuel retailing, that will be helpful. Thank you very much.
Sure. Thanks, Ramesh. Two, three questions you had asked. On the first question on green, see, while we have declared an ambitious plan earlier, we haven't actually deployed much capital on it, partly given the earlier part of the call we were discussing about capital and deleverage and all those things. Secondly, as a management team, we believe that plain vanilla solar and wind is not likely to give companies like us the best returns. We are not best placed for those bulk utility projects. Hence, we have been very selective in what we are doing. Currently, what we are doing, there are two planks we are working on in the CBG business as of now. One is a lot of greening in and around HPCL , which itself will take it to potentially about 1.8 gigawatt of portfolio in the next, say, 12, 24, in that month.
In a couple of years, it'll take it to that portfolio. We are also looking at augmenting green, which is going to go additional activities like, as we do hydrogen, can we bundle some of our green in? Some of the factors which are around our business rather than doing a plain vanilla solar park somewhere just for sake of getting renewable numbers. The second plank we are working on is on the CBG business, which we believe is a very nascent business, still not giving returns, but an important one from the long term, even the net zero commitments of refiners. We already have a couple of plants, especially our main plant in Badau, which is yet not generating a lot of positive cash flow, but our teams are really working deeper onto understanding how that business can be made profitable.
If we can get the unit economics right, we have a plan to scale up that CBG. We have line of sight or, you know, roadmap for another 20, 25 plants. We will do the massive scale up only after we get the unit economics right, not before that. I don't want to have 10 plants which I want to improve the economics. I would improve the economics on one plant and then ramp it up. That's the current roadmap on green. It's an evolving one. We will add more. As we get free, as we get lower, our debt, our leverage, reduces, and we get more cash coming out of the business, that's the time we can add more on it. We have refrained from going after big CapEx there. IPO, we have not yet firmed up when we would want to do IPO on that one, very honestly.
I think that's one. On the digital side, I think those are exactly the things we are trying to do and see how we can get more digital tools into our system to get what one of the earlier colleagues was saying on making more of us as more of a consumer-facing businesses. Obviously, everybody is using AI. The only question I would say on AI is, I read an article yesterday which says 85% or 85 or 90% of AI projects have actually failed across the world. We are careful on what we want to add. It's a mixture of AI, mix of other digital tools, mix of increasing things like consumer RCRM databases, etc. We are working on a complete digital roadmap on this. I hope I've answered your question, Ramesh.
Yeah, just a follow-up on the non-fuel retailing. Any numbers you can share in terms of how it may add to your overall volumes?
It's too early for the numbers right now, because it's too small in context of our retail right now.
Okay.
We are working on some very interesting strategies, which, if it unfolds over the next six months, you might see some more visibility around our non-fuel retail business. Right now, the numbers are insignificant. I wouldn't even call, as an investor, you shouldn't worry about my non-fuel retail business. It's just that if the intent goes right, then it adds to what I think Sumeet was saying that earlier on, we get closer to the consumer, and we also start generating more business. It adds to my bottom line. Maybe in six months from now, we'll be able to give a guidance on what quantum does it add.
Thank you very much and wish you all the best and the best of season greetings. Thank you.
Thank you.
Ladies and gentlemen, we will take that as our last question for the day. I now hand the conference over to Varatharajan sir.
People in the queue, I would request them to take up the questions with us or directly with the Investor Relation team of HPCL. The floor is open for your closing remarks, sir. Before I.
Okay. Sorry. I thought we were waiting for a question. Anybody who's left with questions, I think the time's over for all of us to be there. We'll be more than happy to take the questions. I would only reiterate what I said in the beginning of it. The business we are following or business you are investing in is an absolutely solid business on a growth trajectory, on an increased profitability trajectory. We have performed well. We are hopeful and confident that we will continue to perform well and generate both growth opportunities for the organization and its and our people, and also wealth-creating opportunities for anybody who chooses to invest in HPCL . I'll close by thanking you all for a very active participation, the questions you all had. Should there be any residual questions, shoot it to us.
If you do want to have follow-on discussions, we are more than happy, depending on schedule. Director of Finance and me can easily meet. Vinod and others in our team are always available for interacting with the analysts. Till then, till we meet next time at the end of next quarter, thank you all for your interest and appreciate your joining the call. Wishing you all the best in the times ahead. If we don't speak before the year-end, wishing you all a very happy new year. Thank you.
On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.