Good afternoon, ladies and gentlemen. I am Pavitra, moderator for the conference call. Welcome to Indian Oil Corporation Limited Q2 FY 'twenty one post results conference call hosted by Batliwala and Karani Securities Private Limited. At this moment, all participants are in listen only mode. Later, we will conduct a question and answer session.
At that time, if you have a question, please press star and one on your telephone keypad. Please note this conference is recorded. I would now like to hand over the floor to mister Bhavin Gandhi from Batliwala and Karani Securities. Thank you, and over to you, sir.
Thanks, Avita. Good and gentlemen. On behalf of Bativala and Karani Securities, I welcome you post result conference call with the management of Indian Oil Corporation. It gives us great pleasure to once again host the management of Indian Oil Corporation for this. Without much ado, I would like to hand over the proceedings to the management remarks, post which we'll open the floor for a q and a session.
Over to you, Us.
Thank you, mister Bhavin. We welcome you to quarterly earnings call. From management side, we have mister Sandeep Kumar Gupta, director of finance, Indian Oil Mr. Matthew Thomas, executive director, corporate finance and treasury. Along with them, we have mister Rohit Kumar Agrawal, general manager, corporate finance mister Prahat Himansinka, PGM treasury and myself, Avinash, chief manager, treasury.
To begin with, director finance will briefly touch upon the quarterly performance highlights. Thereafter, he will take the questions. Now I will request Director of Finance to address the meeting. Over to you,
Dear investors and analysts, a very good afternoon to all of you. At the outset, I pray that all of you are safe and remain safe, and I take this opportunity to welcome all of you to this conference call post announcement of the second quarterly results of twenty twenty twenty one. I believe you would have gone through the accounts posted on the website and through the updates received by most of you. I would like to briefly dwell on the results to provide additional clarity and insights. Highlights first.
First, on COVID-nineteen and its impact on the business operations of the company during second quarter of this fiscal. Capacity utilization of refineries was at about 90% in July. It fell to about 67% in Nagas due to planned shutdown of Paradeep refinery and invoke modernization of petroleum product demand in Nagas because of rainy season as well as intermittent lockdown with certain states. However, the utilization improved to 81% in the month of September. In October, on the back of a strong bounce back in demand, the refinery utilization has been ramped up to 95%.
Gasoline demand has consistently grown over the months post relaxation and lockdowns. As far as year on year demand is concerned, gasoline demand in July was at about 89% of last year's demand. It improved to about 91% in August and registered a positive year on year growth for the first time in September at about 102%. It has further improved to about 104% in the first four weeks of October. The preference for personal mobility has helped in strong rebound in demand for gasoline.
Gasoil demand has witnessed much more volatility in comparison to gasoline. After seeing a strong rebound in demand in the month of June, the the demand slightly tapered off in the month of July and August. In July, the sales volume for IOC was at about 7278% of last year's sales. This further moderated to about 75% in August before bouncing back to 91% in the month of September. The demand in October has registered a positive year on year growth and was at about 102% of last year's rate.
ATF continues to take the hardest hit with sales of only 50% in September, and then it continues on at similar level in October also. In an oil, naphtha cracker at Panipat and LEGBI plant in Gujarat continued to operate at full capacity during the second quarter. However, the PXPTA unit at Panipat and polypropylene unit at Paradeep operated at below 50% capacity in the second quarter, mainly due to lower product upliftments. However, capacity utilization of PXPTA has been closer to 85% in October, and the capacity utilization of Paradeep polypropylene unit has also been at about 65% in October. I would also like to touch upon couple of other new products launched by Indian Oil in recent months.
On October 20, Indian Oil launched India's first HcNG, that is Hydrogen CNG plant at Delhi Transport Corporation's Rajahat Depot in New Delhi. It is a pilot project and 50 DTC buses are part of six months trial. Once the pilot is successfully completed, HcNG is all set to be scaled up to more buses and private vehicles. HcNG is produced by blending hydrogen with CNG resulting in cleaner fuel and this process carried out on in situ basis. One of the main advantages of the fuel is that it can be dispensed using existing CNG dispensing setup with minimal upgrades to infrastructure.
It is thus an ideal interim fuel to achieve emission reduction and part of a larger quest towards ushering in hydrogen fuel economy in the country. Indian Oil has recently introduced differentiated LPG with the brand name Extra Stage for industrial users that gives flame temperature, which is 8% higher than conventional cooking gas, thereby cutting down cooking time and reduction in LPG consumption, thus increasing the efficiency. Now I would like to briefly touch upon the financial performance during this quarter. During the second quarter, the average price of crude in Indian basket was at $42.9 per barrel, an increase of 41 percent from the average price of the immediate preceding quarter, that is Q1 fiscal year twenty twenty one. With respect to the crack spreads, gasoline cracks continue to languish at about $2.87 per barrel during this quarter.
The cracks are significantly lower than the corresponding quarter of the previous years. Similarly, the HSD crack during this quarter was at $3.17 per barrel vis a vis crack spread of $13.69 per barrel in the corresponding quarter of financial year twenty nineteentwenty twenty. F4 continues to register negative crack spreads of $4.2 per barrel during this quarter as compared to a negative crack of $4.4 per barrel in the preceding quarter and negative crack of $1.7 per barrel in the corresponding quarter of FY 2020. In the petrochemical space, spreads for polymers in this quarter was 7% less than the previous and about 3% higher than the corresponding quarter of FY 2020. In case of PTA, the spread during this quarter at $75 per tonne was substantially lower than the previous quarter's spread of two forty eight dollars per metric ton.
The spread for corresponding quarter of FY 2020 was at $257 per ton. With respect to MEG, the spread in the current quarter was about 41% less than the previous quarter. However, while comparing to the corresponding quarter of FY 2020, the spread has been higher by 41%. This quarter, Indian Oil has registered a profit after tax of INR 6,227 crore. Although the refining profit continued to remain very weak during this quarter, the impact of the same has been mitigated by inventory gains to a large extent.
In the current quarter, Indian Oil registered an inventory gain of INR 7,400 crore as compared to an inventory loss of INR 3,196 crore during the preceding quarter. For the half year, the profit after tax is INR8138 crore as against INR4160 crore in the first six months of FY 'twenty. Revenue from operations during this quarter is INR 115,749 crore as against INR 88,937 crore in the preceding quarter of this year. Now let me briefly touch upon performance of major verticals during quarter two. First, refineries.
The throughput during the quarter was at 13,970,000 metric tonnes with a capacity utilization of 79.5%. As mentioned earlier, with a strong rebound in petroleum product demand, the refineries have operated at about 95% in the month of October. During Q2, distillate yield was at 79.6% and fare and loss was at 10.2%. Lower throughput has resulted in higher fare and loss during this quarter. IUSF refineries have registered a GRM of $8.62 per barrel during this quarter.
The normalized GRMs after stripping off inventory impacts and factoring in price lag for the quarter though is negative at $0.97 per barrel. Then benchmark Singapore GRMs during Q2 remained weak and was at about $5 per barrel only. Lower throughput and consequently higher period loss contributed to underperformance of refining margins during this quarter. Under pipeline, the capacity utilization of our pipelines was about 73.38% during this quarter as compared to 63.53% in Q1 of FY 2021. With increase in refining throughput and bounce back in petroleum product demand, the capital utilization of pipelines is expected to improve in the coming quarters.
Pipelines continued to generate stable returns, giving an EBITDA of about $12.92 crore during this quarter. The petroleum product sales during this quarter was 17,220,000 metric tonnes as compared to 15,480,000 metric tonnes in the preceding quarter. Resumption of economic activities post uplifting of shutdowns has resulted in growth of major products like MSHSD. Demand for ATF hour continues to remain low. Marketing EBITDA for this quarter stood at about INR 3,606 crore as against INR 7,701 crore of the previous quarter.
EBITDA for six months of financial year 'twenty one is INR 11,306 crore as against the EBITDA of INR 8,003 and 78 crore in six months of FY 2020. In Petrochemicals, during the quarter, the Petrochemical business reported an EBITDA of INR $12.11 crore as against INR $7.28 crore in the preceding quarter. While comparing with the current six months performance with that of corresponding period of last year, there has been an increase of about 33% in petrochemical EBITDA. On the borrowings, the borrowing as on 09/30/2020 was at INR 91,505 crore as against INR 98,605 crore as on 06/30/2020 and Rs. 116,545 crore as on thirty first March twenty twenty.
The borrowing includes lease obligation of Rs. 7,868 crore as on September 30. I will end my briefing here and will now take your questions. Thank you very much.
Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star and one on your telephone keypad and wait for your turn to ask the question. If you would like to withdraw your request, you may do so by pressing star and one again. Participants are requested to restrict with two questions in the initial round and join back the queue for further questions if time permits.
I repeat, ladies and gentlemen, if you have a question, please press star and one on your telephone keypad. We have first question from Vivek Anand from Ambit Capital. Please go ahead.
Hi. Thank you for the opportunity. I have two questions. One is the CapEx guidance of INR26000 crores that we had for FY 'twenty one. Where are we on this?
And is there any change in guidance or progress that you would like to highlight? Second question is on the major investments over the next year or so that we are making in gas product and LPG pipeline. Given the major investments made in these key segments, how should analysts and investors appraise you on these projects? Should we look at any specific cost metrics or any project IRR? Any thoughts there?
Yeah. The current year CapEx for IOC stand alone was about INR 21,000 crores plus for the current year with another about INR 4,800 and odd crores for JV and subsidiaries, making it a total of INR 26,000 plus crores. And we are poised to achieve this target definitely. In fact, there is a pressure from Government of India to increase the CapEx for obvious reasons to support the country's economic growth. And in that process, while we are making all attempts and if that support comes from Government of India to expedite some of these statutory clearances or maybe to avoid some of the clearances, that will only help us to complete our projects faster than that was envisaged and will result in basically the better economic returns on our projects.
So we are not at all concerned with doing more CapEx or maybe expediting our CapEx plans. As far as the future CapEx is considered, as I have mentioned in our previous discussions also, the IR we have got a system of hurdle rate based on weighted average cost of capital, which currently is 11%, and no project is approved unless we meet this hurdle rate from that investment. So whatever projects we are approving are definitely giving us, are projected to give us this kind of return, and hence, all are fairly appraised.
Right. And and just a follow-up, the government, pushing, for more CapEx, does this mean, that that you take on new projects or, advance the projects that you have already indicated, advance the time line?
Their call is for increasing the CapEx. Now how we do it is upon us. So while some on some of the projects, we are advancing our time lines. As I mentioned, if there are certain relaxations in the statutory clearances, that definitely helps us. Further, we have also expedited whatever was on the drawing board, we are expediting those plans also.
And as I mentioned, we are not approving any project unless there are viable returns from that project and that returns cross the hurdle rate, which is mandated by the company. So this one this entire process has only perhaps hissent putting up the project proposals in addition to expediting the current proposals which are going on. So we are not at all apprehensive about it because the faster we conceive a project, the better it is for the company.
Okay. Thank you very much. All the best.
Thank you, sir. We have next question from Divya Durginde from ICICI Securities. Please go ahead.
Yeah. Thank you. My question is well, one is relating to the you can give us the cost and the volume of crude inventory in September and some guidance on likely utilization of refineries in the rest of the year and on pet chem units.
Yeah. The the crude was valued at $43.76 per barrel at the end of September 30. And your second question was regarding the refining capacity. So as I mentioned in my opening remarks also, October, we have touched 95% already, and we are trying to ramp up the capacity slowly. And we hope that with the festive season of Diwali coming forward and the holiday season also coming forward, there will be robust demand of gasoline definitely and also of other products.
And we are sure to shortly touch the 100% level for refinery capacity.
So your experience on ramping up in the sense the ramp up in throughput was quite absorbed by the market is what we are suggesting, I guess, in
October and the volume It number was on the strength of the demand in the market that we could ramp up the value production. Otherwise, we do not have place to store the product. So it was only on the basis of the robust demand in the petroleum products that we could ramp up the refinery production.
If you could also give me add also as for the volume of crude and product inventory, if you could give that number for September?
We generally maintain about, say, 15,000,000 to 17,000,000 metric tonnes of crude and product inventory put together at any given point in time.
And you said in the past, crude is 8,000,000 tonnes. Is that fine?
Yes. Crude is about 9,000,000 tonnes and the product is about 8,000,000 Okay.
Lastly, on utilization in Petchem, madam?
Petchem utilization also I mentioned in my opening remarks.
Correct.
Yeah. In October in October, PXPTA is now closer to 85% level, and polypropylene of Paradek is also at a 465% level. And the naphtha cracker at Panipat and LAPE at Gujarat, in any case, were operating at the capacity here also.
So PP, is it likely to ramp up further or stability?
No, definitely, because our Panekat Naphtha cracker can has done in the past capacity utilization of in excess of 120% also. So in line with the demand, we will definitely ramp up the capacity utilization.
Okay. Thanks a lot. Thank you very much.
Thank you, sir. We have next question from Pinakin Parekh from JPMorgan. Please go ahead.
Yeah. Thank you very much, sir. So two questions. My first is you made some interesting comments on PN
on PNG and how it is being used in various, you know, on a
trial basis. Can you give us some color on a, are this at this point of time, is it being dispensed off in on your own retail outlets, which also have CGD outlets, or is it separate? And second, going forward, if this were to scale up, would this be entirely kept within IOCL's own retail outlets or will be shared with the CGD companies?
On SCNG, I mentioned that we have put up a demo plan, which is which has started operated, and this demo plant is only at Rajatipur in Delhi as of now. And 50 buses have been given by DTC, who will be fueled by this HCNG and will be on trial for six months period. And based on the experience, this particular activity will be ramped up on a Pan India basis subsequently. Now this technology of in situ, that is at the same place, putting up a reforming unit for spiking hydrogen in CNG, is a proprietary technology of Indian oil r and d center. And then based on perhaps any commercial arrangement only, it can be given to other companies.
Understood. Understood. And sir, in terms of scalability, it's it's right now a six month period, and then we'll see how it scales up. But from your initial understanding, sir, where do you think this can go over the next two to three years?
I think I think we will wait for one or two quarters. Maybe in the subsequent on call for q three, I will be in a position to give you a better pitch.
Understood. This is very helpful. Thank you, sir.
Thank you, sir. We have next question from Amit Rashtogi from UBS. Please go ahead.
Yeah. Good afternoon, sir. Sir, now we have seen that a lot of PSUs are rewarding the shareholders in the form of buyback. So is there any way of thinking at our level also, to change the way we were recording shareholders in the past and try to, help boost the market capitalization?
No. While we we we expected in the last buyback also that it will improve our share price and will result in rewarding to the shareholders, however, it did not happen so. So we do not think anymore that this is an effective way of, say, rewarding shareholders, more so at the current price. So as such, the company does not have any plan. Moreover, the government of India also has a holding left only at 51.5% level now, and I do not know whether they have any plans for, say, asking us to do any buyback at this point in time and whether that will be of any use or not.
So as of now, no plans of any buyback.
Okay. And sir, we have around 91,000 crore of debt at our company on around thirtieth September. So could you explain that are the components of this debt long term, short term lease liability? And still what extent we can go in raising the debt given we are already now stretching on the net debt to equity ratios given versus the past ratios?
So in fact, you should appreciate that there has been a lot of easing on this front actually. We touched a peak of INR 126,000 crore in April, higher from INR 116,545 crore on March 31. And now we are at INR 91,500 crore debt level. So there is a lot of ease on that front. And now with increase in sales and expected improvement in the crack spreads of the product with the rising demand, the situation of generation of internal resources should get strengthened actually.
And that will put that will ease their borrowing position further. So we are not at all apprehensive about it. Yes, our CapEx plan may have some impact on our borrowings, but down from 1.24 is to one debt equity as of March 3020, we are at 0.89 is to one. So definitely, we do not feel any pressure on the borrowing side as of now. Plus, you must also appreciate that this amount of INR 91,505 also includes about INR 8,700 crores worth of lease obligations, which is not borrowing per se.
So we'll which is included in this 0.89 is to one debt equity ratio. So we we are not uncomfortable about about this borrowing position.
Okay. And sir, how much what is our CapEx plan for this year and next year, remaining year and next year?
As I mentioned earlier, the current year plan was INR 21,000 is stand alone about INR 5,000 crore group companies, total INR 26,000 crore. We intend to better this figure. In fact, we spend more. And again, for next year also, our CapEx plan will be in this range only, but not less than that, definitely. And that is very important for our growth of top line also.
So and as I mentioned earlier, we are approving projects only based on strong viability. And so we are not wary of doing any CapEx approvals.
Okay. Great, sir. Thanks a lot, sir.
Thank you, sir. We have next question from Probal Singh from Centrum Broking. Please go ahead.
Thank you for the opportunity, sir. You mentioned about the core margin actually going to negative territory and inventory gains, of course, being more than almost $9 Now obviously, there is an element of inventory plus a price lag. Is it possible to separate the two, sir, for this quarter? How much has been due to that typical fifteen day lag in marketing pricing? And how much is just a crude inventory movement?
No. I don't have those figures right now with me. But on a cumulative basis, you should also see if we had inventory gains this quarter, we had inventory losses in the previous quarter also. So on a six monthly basis, if you see the inventory gain or loss on a net basis, inventory gain constitutes about 38% of my PBT only. The rest all is coming from the business.
38% of PBT is broadly from inventory. Right?
For six months period. Yeah.
For six months. Yeah. And okay. And, sir, the second question was you mentioned I think I'm sorry if I missed it, but you mentioned about the volume that you are holding in terms of inventory. Can you just repeat that number and tell us how many days of product and crude we are holding right now in the system?
I gave you a number of 9,000,000 tons of crude and 8,400,000 for products. Okay. Okay. I am not converting into number of days because
of the. Yes. Yes. That's fine, sir. And obviously, in terms of marketing EBITDA, there has actually been a if I look at just a gross margin or an EBITDA also, there has been a little bit of a decline.
Can you just throw some color in terms of what has actually driven that dip on a Q o Q basis?
Now while marketing how much margin we keep in marketing is something which is privy to us, and I will not like to divulge further details. What I can say is that we treat marketing margin as complementary to our refining margins. And in the periods when the refining margins core refining margins are low, we can definitely make up through marketing margins.
So this quarter, because with inventory gain, we have made better refining, we have actually given passed on that or have sort of moderated our pricing for marketing. Is that a fair way to look at it?
I'm sorry. I will not be able to tell more on marketing margin side. Yeah. Okay.
Thank you. You for your time, sir. All the best.
Thank you, sir. We have next question from Sabri Hazarika from MK Global. Please go ahead.
Good afternoon, sir. I have the first question I wanted to know is what are the refinery expansion plans expansions currently going on and which are, like, finalized as of now?
Yes. The first is our Bungayi Ore Refinery, where we are putting up an NDMAX unit and with commissioning of that very shortly, the capacity of Bungayor refinery will go up from 2,350,000 metric tonnes to 2,700,000 metric tonnes. That is happening perhaps within a month's time itself. The second is the Boroni refinery expansion from 6,000,000 tonne to 9,000,000 tonne, which we approved some time back and the work on that is progressing, but that may take about three to four years' time to make sure. It is also coming up with some chemical projects along with.
Then recently, we the Board approved the Gujarat refinery expansion along with U. S. Petrochemical integration. This will increase the capacity of Gujarat refinery from 13,700,000 metric tons to 18,000,000 metric tons. These are broadly the refinery expansion projects which are going on currently.
Nothing on funds for this filing in interim exemption, that has not been finalized, right?
Not not at this stage. The preliminary work is stage one approval was granted sometime back. The work on the detailed feasibility report is going on, but yet to come to board.
Okay. And second, I have a few bookkeeping questions. So what was the h one CapEx for the company?
It was 7,500 crores.
Okay. And subsidy outstanding from government?
In respect of claims launched up to September 30, the subsidy as on date is the I think you are talking about subsidy?
Okay.
Are you talking about
GOI outstanding? Yeah. GOI outstanding. Yeah.
So as as in respect of claims loss up to September 30, the outstanding amount is 7,285 crores as of now. As on September 30, it was $9.01 $6.03 crores, but further claims have been realized, and it is now 7,285 crores.
Okay. And that three cylinder subsidy has been totally reimbursed. And currently, it is not going on or is it going on right now? This free cylinder No.
It was it was not a subsidy, actually. The free cylinder advance was given, and the amount was to be claimed back from government of India based on the the refills taken by the the consumers. That period has now been extended up to December 31. And as and when the refills are taken, we will be launching the balance claims also with government of India.
Okay. And there is no delay in that recovery. Okay. And and lastly,
you Sorry mentioned to interrupt, sir. Could you please join back the queue for further questions?
Okay. Thank you so much.
Thank you, sir. We have next question from Sumeet Rora from Smart Sun Capital. Please go ahead.
Yeah. Hi, sir. Very good afternoon to you. Sir, just one question. I mean, I have two questions.
The one is basically on your fuel retailing outlets. So how many do we have in total? How many have we added, you know, in the first half of this financial year, and how many do you plan to add, you know, in the in in the rest of your part of this financial year? Sir, secondly, my question is, sir, now this question is more to you as an investor rather than an analyst. Sir, today, you know, it's actually a joke.
You know, our market cap of Indian oil is at $10,000,000,000. Okay. I mean, you know, I mean, it's truly unbelievable on what is going on. So on your point which you made about the, you know, buyback proposal, sir, my only point is that it's a very humble request that if you if you want to increase valuation, then obviously, the promoter of the company should never participate in a buyback. I mean, the matter of fact is that we have 51.5% government.
Government does not buy back our shares. I mean, like, you know, that they don't tender when you buy back. Your stake goes up to 60%. The share price can go up by three times, and, ultimately, this is India as well. So my only point is that, you know, why is, you know, you know, team you know, it's not being focused on, you know, value creation because, ultimately, you know, we we are the largest refining company in the country.
And how can we are the the largest refining com company in the country have a valuation of only $10,000,000,000? It's actually not possible, sir. So I really feel that, you know, you should set up a committee, and this should be looked into. You know, it's my it's my very humble request because, ultimately, it's gonna benefit all stakeholders, whether it is majority, minority, or whoever it is. Right?
And government or industry should never participate in any buyback. Why should they participate in a buyback? You know? So I have any questions. Please have a look into this, sir.
Yeah. Okay. So first, on the RO question, we have a target of about 2,400 ROs setting up in this year. We have now about 30,000 ROs.
We have about sir, how many do you plan to add in the in the next couple of years?
This is generally the plan. We will be adding about 2,000 to 2,500 ROs every year.
Okay, sir. That's wonderful, sir. Thank you so much, and wish
you all the best, sir. Thank you.
Thank you, sir. We have next question from Ditya Suresh from Macquarie Securities. Please go ahead.
Thank you for the opportunity. Firstly, to the previous question, Sumit asked, if we can get a response, sir, and glad to have a very pertinent question. Just on the buyback, again, just from a mathematical standpoint, if your stock is at five times speed, that's almost like a 20% earning deal. Right? And this return is likely to be far greater than any of the CapEx you're planning to do on refining or gas or any of that.
And the backdrop is one of exceptionally cheap cost of funds. So it seems mathematically compelling to do the buyback. So if you can get your thoughts on that in terms of what would it take for you to do the buyback. And, I guess, I have I have a follow-up to that, but if you can first answer that question, sir.
Okay. We will look into this issue of doing a buyback also. Though you are aware that we've been a government company with more than 50% holding by government of India. Any suggestion will be based on government's mandate also. So but we will look into this.
And I guess as a as a secondary question of this is if if if we were to be if we were if was a minority shareholder over the past, say, couple of years, your share price has fallen by about 60% to 70%. Right? So to the point about generating returns for minority shareholders, what are the steps which IUCL management is taking to to help minority shareholders?
Look, as far as physicals are concerned, physicals only are in our hand. And as far as physicals are concerned, you can see the performance of company has been extremely good and continues to be good. Now the prices, the international prices are not in our hands, And so is the case with the perception, which you create, you investors create, you analysts create, that is also not in our hand. So we are trying to do whatever is in our hands to the best of our capability.
Thank you, sir.
Thank you, sir. We have next question from Nafisa Gupta from Bank of America. Please go ahead.
Thank you. Good afternoon, sir. Sir, firstly, CapEx, could you provide a breakdown of the tech and CapEx for this year and maybe for the next three, four years? And also in the new technologies like hydrogen fuel cell and the battery swapping, how much are we looking at in terms of CapEx?
Yeah. Yes, sir.
Yeah. Hi, Nafisa. This is Abhinash. Hi. So basically, in the current year, as director of finance, we have spent on a stand alone, we are looking to spend something like 21,000 crores.
So in that, a little more than 4,000 will go into, refineries, which will consist of some balance payment of PS6 and the two gs ethanol plant and some of the brownfield expansions, which have been approved. Then in pipeline vertical, we will be spending more than 4,500 crores. So it will be going on, we are saying a natural gas pipeline in Southern part of India and also Paradeep Hyderabad product pipeline and also LPG pipeline on the Eastern part of India. On the marketing side, we would be spending little more than INR 5,500 crore. About INR 1,500 crore would be going into cylinders and regulators.
Then
about 1,500 to 2,000 crore will be going into retail outlets, and other amount will be going into revamp of storage points and FEG parking facilities. Then another major vertical is Spectrum where we'll be spending more than 2,000 crores. So currently, the MEG the MEG plant is being set up at Paradek Refinery and revamp of PXPTA and small time expansion of petchem capacity in Manipat is going on in full swing. Like we will be spending about close to INR 5,000 crore to in our joint venture and other projects. So this would be the broadly pickup for the current year.
Right. And for the newer technologies, like, the renewables and the hydrogen cell and EVs?
So, like, on gas, you'll be spending, like, more than thousand crore, then in other, like, it would be, like, less than 500 crore. Right?
Got it. So the mono activities, they do
not entail so much of CapEx. And the hydrogen things, etcetera, are in the nascent stage only. They are at r and d level only. So they will not call for immediate any sizable CapEx as of now.
Right. Sir, my second question is that Excuse me. I
yeah. Please go ahead, ma'am.
Yeah. So the second question is that in in the times of such fluctuations in crude prices, are we still do we kind of, you know, change that inventory holding period, which is about forty days? Do we reduce it in terms of such when there is such volatility?
No. In in our case, in the case of Indian Oil Corporation Limited, this this level of inventory is based on the refinery locations. And there because certain quantity is already locked up in the cross country pipelines for crude, which transport the crude from the port locations to the refinery locations. So, we do not keep any, string inventory to take the benefit of the price levels. So this is sort of about eight to 9,000,000 tons is sort of the optimum inventory for us.
Okay, sir. And, sir, if I may, the ethanol prices were increased by the government some time ago. What kind of impact does that have on your marketing margins if it does?
Oh, nothing because it does not have an impact. This is neutral for us. If the cost of ethanol is more we claim from government, if it is less, we surrender in the pricing.
Got it, sir. Thank you.
Thank you, ma'am. We have next question from Harshad Boragi from Mireya Asset. Please go ahead.
Yeah. Hi. Good afternoon, sir. Two questions from my side. So first is on the CGD business.
So once, let's say, Open Access comes in, so as a company, are we open to do CBD business on our continue to do in a daily format?
I'll ask
the second question after this.
Yeah. We have both the models operating for us. While for certain geographical areas, we have built one on our own. For others, we have done it through our JVs come two JVs where we are JV partners. And going forward also, we may operate both the models depending upon the situation.
So, theoretically, in case if Delhi and Mumbai opens up for third party, you would be open to, you know, a different CNV on your own to your own sessions. Is that correct understanding?
So let first of all, let be let it be opened up.
Okay. Sure. And secondly, on this discussion on buyback, so I was just wondering in terms of, you know, our CapEx, I think this year, we are planning some $2,526,000 crore CapEx. So in terms of capital allocation, so what's the hurdle rate, you know, on the CapEx side, and how does it compare it, let's say, you know, the returns if you buy our own share? So are we planning to do it already?
Have we done this kind of study?
We we as I mentioned initially, also, do not have any immediate plans of buyback, and hence, any any such kind of studies, we do not have this. But then, as I mentioned, since there are a lot of proposals for Pfizer, we will definitely look into it.
Sure. Okay. Thank you.
Thank you, sir. We have next question from S Ramesh from Nirmal Bank Securities. Please go ahead.
Good evening, and thank you very much.
Sorry to interrupt. Your voice is not clear. If you can just repeat the question.
Yeah. I I just wanted to understand the key drivers for the increase in the petrochemicals EBITDA from INR $7.20 crores to INR $12.11 crores on a Y o Y basis. Any particular product was it driven by volume or pricing? It was mainly because
of volumes because in the previous year, our PXPTIA did not operate for consider on period during the first half.
And the second part is, in terms of the trend in the current half year, you would have said that your petrochemical business will do better than refining business given that, you know, there is some traction in terms of and the display?
Your voice is not very clear. A lot of disturbances from your end.
Sorry. I was just asking based on the performance of the petrochemical segment so far, is there a sense that, you know, your your petrochemical segment perhaps may do better than your refining and marketing segment in the second half? Now we see the output going forward.
Petrochemical sector doing better than refining. Now I do not know whether you are on absolute or you are on percentage terms. I'm not very sure.
No. I I I'm just trying to get a sense in terms of your reading of the market because there is a significant improvement in petrocompany business. And My expectation
is that my expectation is that it has been very long that the refinery credit spreads are languishing, and it is not sustainable for any refinery world over. So with some ease in
the COVID situation as and when
that happens after the second wave, which has scrubbed the Europe and The U. S, I think the refinery crack margin should improve quickly. And I believe, definitely, the returns from refining and marketing would also be robust.
Okay. Thank you very much, sir. That was helpful.
Thank you, sir. We have next question from Maniganta Gareth from Access Capital. Please go ahead.
Yeah. Hi, sir. Thanks for calling in opportunity. Just wanted to check with you on this HCNG technology. Wanted to understand what kind of efficiencies that it can bring versus CNG.
That's the first one. And are we also say you know, going towards or thinking towards producing hydrogen, you know, end of the day from this technology. Is that possible, or that is completely unrelated? That's my first question.
Okay? The last part, I could not get. Which which technology?
So with this HCNG technology that you have brought out
CNG, I got.
Are we moving towards are
we moving towards the h two production directly, hydrogen production directly? Are we also working on this part?
Yes. Yes. So this HCNG, as I mentioned, as compared to CNG, this is expected to achieve over 8%, about 8% economy. But then as I said that we are on a trial basis, 50 bus DTC buses will be running on six for six months. And then based on the results, this will be further course of action will be decided.
On hydrogen production level, yes, our refined R and D center at Faridabad is working on lot of technologies through which hydrogen can be produced. There are at least three, four technologies which I am aware of, which on which they are working. So we have definitely good plans for hydrogen production also.
So what's your timeline that you are working with here for the hydrogen production?
So they are at presently research stage.
Okay. And just one question with respect to the ROADSON, sir. So as of now, have 30,030 retail outlets, and you said that you'll be adding 20 2,000 to 2,500 RO ROs every year. That's, like, 60000% addition every year. I see that our peers are adding at much faster rate.
And in the context of continuous production in market share in MS and HSD, just wanted to understand, is that enough, that our origin is enough with the scale that we currently have?
So, yes, we we we we are aware that we we were left out, actually, in this race of setting up RO for some time now. And now we have ramped up our RO setting up. And a lot of LOIs, new LOIs are now available with us on the strength of which I'm saying that we will be able to complete this RO setting up target of about 2,400 for this year. And going forward also, we will be setting up more and more ROs, and we will ensure that we are not left behind.
So we can squeeze in one question here. Where are these being targeted? Which parts of India, predominantly?
No. No. Especially, this this is a commodity which is consumed everywhere on a Pan India basis. So these these ROs will come in every nook and corner of the country. And, definitely, we are looking for good sites to have these ROs.
Understood. Thank you.
Thank you, sir. We have next question from Rohit Tahuja from BOB Capital Markets. Please go ahead.
Yes, sir. Thanks for the opportunity. So I just wanted a view on the petroleum product consumption growth. Now that we've seen a decline in the first half of the year, do you see a need to expand your refining capacity over the next three to five years considering that we are unlikely to grow our consumption beyond 3% to 5% at the industrial?
Yes. We have with us a lot of estimates from the consultants who project the demand for petroleum products by, say, 24%, 25% or 29%, 30 On the top of it, we have a full fledged corporate economic corporate planning and economic studies sell within IOCL, who also does an independent study and forecast the petroleum product consumption in the country. And in fact, our independent study has also cooperated the views of the consultants for consumption of petroleum products in the short term and the long term, which supports setting up of new refining capacity in the country. And we are proceeding accordingly for creation of new capacity. So whatever projects we have approved till date definitely find support by the demand numbers.
And going forward also, whatever projects are on the drawing board, we will be very cautious that if there is a demand, then only those projects are set up. There is lot of negativity around fossil fuels, and it is said that the consumption of fossil fuel is going to be stunted or maybe it has peaked, which is not. The recent BP report also says that for India, India is different than the other parts of the world. And India, the petroleum product consumption will peak around 2,050 only. So we do not have any apprehension that the petroleum product consumption in the country is growing is going to grow, very handsomely, and our refinery plans are in line, with that assumption only.
Do you see a risk there because we are net exporters of refining products. We are, like, refining capacity than what
we
consume. And if the export market shrink is expected over the next five years or after 2025, do you still see a reason for domestic capacities to expand?
No. I I am saying that we are not putting up refineries for exports. We are putting up refinery for domestic consumption. And as of now, the estimates what whether they are external external estimates or our internal estimates, all of those estimates support setting up of newer capacities.
And do you see still the reason for the JV refinery that was planned, Omega refinery along with Saudi, I'm calling an investor in that in Maharashtra. Do you still see the case for that to come up?
No. The case or not will be seen later on. First of all, the land issue is required to be resolved, which is still hanging on. So let's have that problem get first over some, and then we will see the interest of the Saudi Aramco and at NOK. And we will also have to see the scenario with BPCL privatization.
And then only any call can be taken on this West Coast of February.
So last year, we had seen a lot of, you know, craze on the buyback and concerns on the share price and the performance. But also one of the reasons being quoted is, you know, how what is going be your cash flow? Are you looking at any inorganic move towards any other PSU within this sector or in in series sectors that or you'll be asked to acquire any of them? Can you give any light on that?
No mandate. So no plans as of now. However, we'll be we'll be very happy if any such lead can come to us and if it makes business sense.
Okay. Thanks, sir.
Thank you, sir. Last question for the day comes from Sumit Arora from Smart Sun Capital, which is a follow-up question. Please go ahead.
Hi, sir. Thank you once again for giving me a chance. Sir, just I mean, on my reason for buyback, you know, I just like to would would like to highlight this to you. This transaction has happened in Asia as we speak today, okay, wherein Royal Shell, okay, has bought 51% of its local partner out for a valuation of 1,000,000,000, okay, for gas station, which is basically $13.14 p. So, sir, my only humble request is because I clearly see value creation in a huge way for Indian Oil Corporation, and I really believe in this company and its institution.
Hence, sir, I will tell you that if Royal Shell is buying its joint venture partner fourteen p, we surely, sir, at four, five p and a twenty month 10 earning yield, sir, we should definitely consider buyback because I clearly believe in you all, and I clearly believe this company is not worth under $40,000,000,000, sir. So it's my humble request to you, as an investor, please consider this option, sir, because this company is a true dwell of India. It is not worth $10,000,000,000. Please look into this, sir. You can see the deal today which has happened in Asia, and that's all I would say that, sir, it's all over to you, Thank you very much, and all the best
for a glorious future, sir.
Yeah. Thank you, missus Humid. Thank you for having confidence in Indian oil and its worth. We also have the same belief. I do not know how the markets markets are perceiving differently towards IOCL.
We also believe that perhaps this share price is not a true reflection of IOCL's potential and its performance. I I I I believe that as your role, you will definitely provide a better perception for Indian oil corporation.
Thank you very Because No. No, sir. Because the only reason is because I clearly see it. You know, I clearly see the global valuations. I clearly see.
And why should only Indian companies not get value? You know, I mean, we have the best of funds in India today, but they don't invest in public sector because of, you know, reasons of minority shareholders' rights. You know? So please look into this because there is huge value, there's huge opportunity, there's huge growth for this company, sir. A very small measure on your end will rerate the entire public sector in India today, sir.
That is my only opinion. And my humble request to you, sir. That's all.
Thank you very much.
Thank you, sir. That would be the last question for the day. Now I hand over the floor to mister Bavin Gandhi for closing comments. Over to you, sir.
Thanks, I would like to take this opportunity to thank the management for giving opportunity to host them for the post call, and thank you to all the investors for this. Thank you so much.
Yep. Thank you, sir.
Thank you for joining.
Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Doose Sabad conference call service. You may disconnect your lines now. Thank you, and have a pleasant evening.