Thanks, Kasi. Good afternoon, ladies and gentlemen. On behalf of Batlivala & Karani Securities, it gives us great pleasure to host the management of Indian Oil Corporation for this 1Q FY 2021 post-result conference call. Without much ado, I would now like to hand over the proceedings to the management of the company for the initial remarks. After which we will open the floor to your Q&A session. Over to you, sir.
Thank you, Mr. Bhavin. We welcome you to quarterly earnings call. From management side, we have Mr. Sandeep Kumar Gupta, Director of Finance, Indian Oil. Mr. Matthew Thomas, Executive Director, Corporate Finance and Treasury.
Along with them, we have Mr. Prabhat Himatsingka, GM Treasury, and myself, Avinash Singhal, Chief Manager, Treasury. To begin with, Director Finance will briefly touch upon the performance highlights for the quarter gone by. Thereafter, we will take questions from your side. I would now request Director Finance to address the meeting.
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 sound. I take this opportunity to welcome all of you to this conference call, post announcement of the first quarterly results for 2021. I believe you would have gone through the accounts posted on the website, and also through the updates sent to you.
I would still like to briefly dwell on the results to provide additional clarity and insights. Highlights first. Before going to the numbers, I would like to touch upon the impact of COVID-19 on business operations of the company during June and July 2020. Refineries ran closer to full capacity in the month of June 2020, and the capacity utilization was at about 97%.
In the month of July 20, the average utilization though fell to about 90% because of the lower demands primarily. For gasoline, in June, the demand was at about 85% of last year's volume. It has further improved to about 89% of the last year's volume in the month of July. The preference for personal mobility seems to be helping in sustaining the demand for gasoline, despite reimposition of lockdowns in certain parts of the country.
On the gas oil front, sales stood at about 82% of the last year's sales in the month of July and have dropped to about 77% of the previous year's sales in the month of July. The slowdown in gas oil demand is primarily driven by the monsoons, in addition to the lockdowns in some parts of the country during July.
ATF continues to take the hardest hit, with sales being only 35% in June, and it continued to be on similar levels in July. With the gradual lifting in lockdown restrictions, several downstream industries in the petrochemical sector have resumed operations from late April 2020. Indian Oil's naphtha cracker at Panipat operated at full capacity during June and July, along with downstream units for production of polypropylene, HDPE, LLDPE, and MEG.
The LAB unit at Koyali Refinery continued to operate at full capacity. The polypropylene plant at Paradip Refinery operated at about 50% in the month of July. Let me briefly touch upon the performance of major verticals during Q1. First, refineries. The throughput during the quarter was at 12.93 million metric tons with a capacity utilization of 74.4%. The throughputs were severely impacted in April and May due to lower demand for petroleum products.
During Q1, estimated yield was 78.3% and fuel and loss was at 10.9%. Much lower throughput than the design capacity in the months of April and May has led to deterioration in above performance parameters in comparison to previous quarters. IOCL refineries have registered a negative GRM of $1.98 per bbl during the first quarter.
Though the normalized GRMs after stripping off inventory impacts and factoring in price lags for the quarter is positive $4.27 per barrel, as against benchmark Singapore GRMs of - $0.94 per bbl, during Q1.
I n refineries, there is an inventory loss of INR 4,588 crore also. Coming to pipelines, the capacity utilization of our pipelines was about 53.53% during this quarter as compared to 88% in the Q4 of financial year 2019/2020. Impact of COVID-related disruptions on demand resulted in lower utilization of both crude as well as product pipelines during the quarter.
Pipelines continued to generate stable returns, giving an EBITDA of about INR 11,150 crore during this quarter, which is lower than the preceding quarter due to lower throughputs. Coming to marketing, the petroleum product sales during this quarter was 15.48 million metric tons as compared to 20.64 million metric tons in the preceding quarter.
Major products like gasoline and gas oil recorded a negative growth rate of about 35% each, whereas ATF volume de-growth was closer to 80%. The bulk of the hit on demand was during the months of April and May. Marketing division recorded an EBITDA of about INR 7,700 crore during April to June 2020.
This includes an inventory gain of INR 1,392 crore. Excluding inventory gains, the marketing EBITDA stood at about INR 6,300 crore. In petrochemicals, during the quarter, they reported an EBITDA of INR 728 crore as against INR 475 crore in the previous quarter.
The EBITDA for corresponding period of last year, that is Q1 financial year 2019/2020, was INR 686 crore. Improvement in polymer and PX as well as PX spreads during the quarter helped become negating impact of lower sales volume during the quarter.
On borrowings front, borrowings as on 30th of June 2020 were INR 98,605 crore as against INR 106,545 crore as on 31st of March 2020. The above includes lease obligation of INR 7,749 crore as on 30th June 2020, which has been classified as borrowings. I will end my briefing here. We 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. I repeat, ladies and gentlemen, if you have a question, please press star and one on your telephone keypad. First question comes from Aishwarya Agarwal from Nippon India. Please go ahead.
Thank you very much. Can you just help us about this timing inventory losses which you have? I remember last quarter, we have some $37 or $36 kind of valuation for inventory, and I was expecting some meaningful inventory gains because the crude is at $43, whereas the result was otherwise. What is it, sir?
Yes. The accounting guidelines, as you would know, does not allow us to book the gains which are there because of the uptick in the price level. We had procured our inventories, crude oil, raw materials, at lower than the 30th, 31st March valuation price also during the month of April. That is what is getting reflected in the inventory losses during the quarter.
As you would know, unlike other coastal refineries, IOC has most of its refineries in inside locations, and it takes long time to bring that crude oil from the source country to the refineries for processing and then moving back to the marketing locations for sales.
Now, while this all resulted into inventory loss in this period, we have now crude bought at much cheaper prices subsequently in April and May. Going forward, we should have hope of some inventory gains.
What valuations are there for the current quarter when it comes to crude?
The crude is valued at $32.64 per bbl as on 30th of June.
Will I be right to assume that the current crude prices are again, say, $40-$44? If the prices holds on, then we'll be valuing it at these prices, $40 around?
This crude, whatever we are having at about, say, $30- $33 at the end of June, will get converted into the products, and the products will be sold at the then prevailing prices. If these prices remain high, we will have gains. If these prices again crash, we may have losses.
That's very helpful, sir. One last question is, if I look at the EBITDA number, and if I look at the way the CapEx are happening here and now in three years, if trending against 25,000 to 30,000 crore, I don't see the commensurate increase in EBITDA happening. Though the refining is rich, I agree, but everything is going to refining or what? Whatever CapEx has been done, there is no benefits are coming in the EBITDA number.
A large amount of the CapEx which was done in the last years was also because of the BS VI projects, which were for the survival of the refineries, actually, because of the change in the specification of the.
Okay.
The EBITDA has been low in last year, and it continued to be low in this year. Last year it was because of the lower gasoline prices primarily. In this year, COVID has played down on the EBITDA. Definitely, I agree with you that the investments have happened in refinery, and it has not given commensurate results. It was because of exogenous reasons and is definitely not driven by the performance.
Even for current year also, sir, we have some INR 26,700 crores of CapEx. Again, I don't know how much will get reflected in EBITDA. We are doing so much. We are putting so much of money into the CapEx, but how it will get reflected or whether it will get reflected or not is what is worrying us.
Any company and definitely of IOC's size, definitely approves the project based on its merit and based on the economic returns which are expected out of such projects. If there are no extraordinary reasons, these projects will definitely bring returns. While some of the projects may be refinery linked, many of them are linked to the pipelines and marketing installations and the LPG filling plants and other things. Definitely these go on to reduce my logistic costs and other operating costs also.
Yeah. Sure, sir. Thank you.
Thank you, sir. Next question comes from Nitin Sawhney from Antique Stock Broking. Please go ahead.
Good afternoon, sir. Thanks for taking my question. I hope I'm audible. Hello?
Yes, you are audible. Please go ahead.
Yeah. Sir, my question is again on inventory loss itself to start with. Just staying on that topic, you just mentioned that if prices go up, you can't book inventory gains. If you can just help us elaborate to help to understand that and elaborate a little bit more on that.
I believe in your call in last quarter, you did mention something around Net Realizable Value, where we consider the value of products for valuing inventory. If you can just understand the process of inventory calculation for one. Secondly, again, it's related to inventory itself. What is the number of days of inventory that we carry on crude side and on the marketing side? If you can just also Then I'll ask you some questions also.
Sir, the valuation of inventory is done based on the accounting norms of cost or net realizable value, whichever is lower. That is the principle which everybody follows for valuation of inventory. In a period, the inventory losses would happen if there is a drop in the prices, and inventory gains will happen if there is an increase in the price levels.
As I mentioned earlier, in the earlier question, we had certain inventories as on thirty-first of March. Subsequently, the prices have dropped further, and while we procured our raw materials at lower prices, the sales realization was also at correspondingly lower prices. Apart of that, whatever was accountable was accounted on thirty-first of March, and balance got accounted in this quarter.
Going ahead, there is a rise in the prices subsequently as against the lower priced crude which is available now at say, about $22 or $23 per barrel. If it is sold corresponding to the present crude cost, then we are under the steps to recover certain inventory gains in the coming quarters.
Great, sir. In March quarter, we did mention that the calculation was based on Net Realizable Value as of 15th of April. Correct me if I'm wrong over there, because I believe it was also mentioned that had we stuck to the values of 31st March, the inventory losses would have been higher.
We had moved to basically calculation on the basis of Net Realizable Value and compared the two. Is this calculation based on 15th of July or as of 31st of June? Is it based on crude price or Net Realizable Value of products as such, like inventory, I mean, refinery-based products?
The valuation of inventory for products, in any case, it has to be benchmarked with the product realization only. For crude oil also, we have to see what is our cost of crude oil on a particular date and have to compare it with the realizable value of the product which we will produce out of that raw material.
Accordingly, valuation was done based on best estimate what was available till we closed our accounts for 31st of March. Whatever subsequently on 30th of June, whatever balance was there, that is reflected in the inventory losses for this quarter.
Sir, the number of inventory days that you are carrying for crude and for marketing?
Well, for this period, it may be a little skewed because the sales are down. We generally used to carry about 45, 46 days of crude inventory, it is a little higher at this point in time, not in terms of the absolute number, but in terms of the number of days.
Right. On marketing, how many days product inventory?
Product inventory, again, we used to maintain about 15 days stock for products. Corresponding to the current level of sales, naturally the number of day sales it is appearing at a higher level.
Great. Sir, second question is related to CapEx. Again, as you mentioned that some amount of CapEx is going into marketing infra and pipeline. One, if we can have a breakup of CapEx numbers. Secondly, we have basically put up number of fuel stations.
At some level, are we looking at rationalization of this network infrastructure in ways that it is more efficient rather than going ahead and adding basically outlets to our network? What's the thought process over there? Are we going to continue adding outlets or are we going to take a pause and rationalize right now?
First, CapEx. Mr. Matthew, if you can go ahead.
Hello, yes sir.
You want to know the CapEx numbers of this year?
Our plans as of today is that we would be spending close to INR 26,000 crores during the year, which comprise around INR 4,000 crores for refineries, an equal amount between pipelines, around INR 5,000 crores for the marketing, and petrochemicals will be close to INR 2,200 crores. There will be some for our R&D and for investments in JVs and so on and so forth.
Most of the expenses in refineries will be related to the spillover of the BS VI expenses, which will happen this year. In pipelines, of course, we have got the Ennore-Tuticorin and the R-LNG pipeline, and the Paradip-Hyderabad pipeline is on. In marketing, we've got the new cylinders and pressure regulators. There'll also be modernization of retail outlets also, and at the same time, we have construction of retail outlets, too.
There'll be some terminals and depots having a bit of construction as well as revamp. Not to talk about the bottling plants, we think they'll be having some construction and revamp. LNG import facility in Paradip, Kamarajar, and Kochi. These are comprising for marketing. Petchem, of course, the MEG project in the Paradip, there will be some expenditure over there. We'll have a bit of expenditure and other expansions in Vadodara.
These are mainly the broad classification of CapEx throughout the year. We have also earmarked some for possible assets. Of course, INR 26,000 contains something for possible assets, and they're all possible. If we find some good assets, then only we'll invest that. Otherwise, we won't invest. That's having our strategy all through, and we continue to do that strategy.
As on date, and I repeat my words, as on date, the plans stand as on date. As we move forward, as the events unfold, things can be different, priorities can be different. As on date, this is what we are working on. This is with respect to CapEx. Coming across to the retail-
On CapEx also, I want to further add that out of this INR 26,000 crore of CapEx, about INR 5,000 crore is in respect of our group companies, in which also, again, about, say, INR 1,100 is in respect of RRPCL, which I do not know what will be the progress because it depends upon the land issue being solved. Some portion, say about INR 800 crore, is on HURL and other things.
The breakup which Matthew has given, you can see that in refineries, there is an investment of only about INR 4,200 crore. The greater investments are there in pipelines and marketing and Petchem. Which we feel Petchem definitely is a profitable segment. Pipelines and marketing investments are towards reduction of my logistics and operating costs. We believe that the benefits will flow out of these CapEx. Your next question was on the ROs.
While we have an ambitious plan of RO network expansion, not necessarily all ROs will come in the A site category, as there may be many ROs which will come in the B site category, where investment by the company is very minimal. That is a factor of our marketing strategy, and I will not be able to divulge anything further on this at this point in time.
That's all. Those were my questions.
Thank you, sir. Next question comes from Ravi Agarwal of UTI. Please go ahead.
Good afternoon. Sir, my question is again around the valuation gains and losses. basically, if I can just get to know, what was the valuation which was done on 31st of March, and the inventory, and what was the valuation for 31st of July for valuing the closing stock?
As I mentioned, valuation is done based upon the principle of cost or net realizable value, whichever is lower. We continue to value our inventories consistently on this practice. As earlier said, while the valuation of, say, raw material inventory was at about $36, $37 per bbl as of 31st of March, it is at about $32-$33 per bbl as on 30th of June.
Basically, if my calculation is correct, INR 3 is what this closing inventory, and as you said that your cost of procurement in April and May or maybe March was very low, maybe at around INR 32, which you said. That was valued at around the same level. Basically, is that the reason? I mean, the opening stock was around INR 33, and the closing valuation was around INR 30, something like that. Is this the correct calculation?
No, I couldn't get your question very clearly, or it was a wrong question.
Yeah. I'll repeat. If you have valued the inventory at $32-$33 a bbl for 31st of July, this has resulted in an inventory loss. Basically, wasn't the price around the $30-$33 the entire quarter? I mean, I'm just trying to get the reason for the inventory loss of around $35.
I mentioned that it was $36, $37 as of 31st of March. It is at $32 to $33 per bbl as on 30th of June, not 31st of July, 30th of June. This reduction in the value of inventory is because we value at cost or Net Realizable Value, whichever is lower. Even if the Net Realizable Value is higher, if we are carrying inventory at a lower value, we will have to value that inventory at a lower level.
This reduction during a period is termed as inventory loss. While we are holding a set amount of, say, about 15 to 17 million tons of hydrocarbon inventory, we keep at any given point in time, if the value of that inventory in international market goes down, so that will get reflected in the inventory losses.
All right. Can we expect a further increase in the core GRM because of the lower procurement price of the crude during the quarter?
I would say core GRMs will not go up. Yes, we are set to gain some as the inventory gains, because we would be selling our products at a higher price as compared to the price of crude at which it was bought. We are set to register certain inventory gains going ahead. While the core GRMs are going to remain sort of subdued, which are linked to the cracks which are there in the international market.
All right. Thank you very much, sir.
Thank you, sir. Next question comes from Chinmay Gandre from Bharti AXA. Please go ahead.
Yes, sir. Thank you for taking my question. Sir, can you please shed light on how the margins have been trending in products in marketing apart from diesel and petrol, specifically like LPG, ATF, exports, SKO. How those have been trending like sequentially or at a trend level?
I will not be able to give this information product-wise. We have already given you the marketing segment information.
Other portfolio like diesel, petrol, normally, what is the trend in the product side?
Can you repeat your question, please?
My question is, ex diesel and petrol, the marketing margins in the remaining products, as a trend, are they pretty much stable or how is the trend as a portfolio?
They are stable. As far as marketing is concerned, the marketing margin, product-wise, product to product also are going on as per the regular philosophy. They are stable.
Okay. Even in Covid times, when volume was there and it was significantly different, the margin impact in these products was not very high.
I'm saying per unit of the product sales, they are stable. Covid has impacted the sales also.
Yeah, volume is okay.
Contribution.
Yeah. Volume is okay. Volume-wise Okay. Just regarding, this has been discussed a couple or three times. Regarding the inventory loss which you mentioned, basically, shutdown since January. Basically, your cost of certificate and raw material crude average for the quarter was around INR 51, INR 52. Basically, that's why the inventory loss has come up.
What you are saying is, like now the closing inventory is around INR 32, INR 33, and we are at INR 50+ now. Again, that stays over the period. You now, again, because your cost INR 50 at INR 32, INR 33, and you'll be selling in your crude of INR 50, right?
Yeah, I believe you have understood correctly.
Yeah. Normally, we carry like 40, 45 days of inventory, which you mentioned. During Q2, because your volumes are a bit lower, so this 45 days could be extended to what? How much like we have been covered for like two months, two and a half months?
You can calculate this figure, in fact, when we say that the absolute inventory remains.
Based on INR 15 million-INR 17 million, do you have in mind?
Yes.
Yeah. Okay. Basically, we are kind of covered for a quarter, more or less. Yeah. Okay.
Not for the full quarter.
Yeah.
Giving the inventory in terms of number of days sales is very tricky in these times, actually. We do not know how the thing unfolds going forward.
Yeah. Fair enough. Thank you.
Thank you, sir. Participants are kindly requested to restrict with two questions in the initial round. Next question comes from Sumeet Arora from Smarteen Capital. Please go ahead.
Yeah. Hi, sir. A very good afternoon. Sir, I want to understand how many fuel outlets do we have currently, and how many outlets are we looking to add in this financial year? The reason I ask you, sir, is because there was an international deal which happened yesterday, wherein Marathon Petroleum sold its Speedway fuel outlets, 3,900 outlets for $21 billion.
I am very confident that marketing is a very precious business which is not being recognized by markets today, but it will be going ahead. Can you just shed some light on basically our fuel outlets today and how do you see this would be in the next couple of years?
Currently, it is about little more than 29,000 retail outlets. This would involve various categories of retail outlets, like this would be city outlets, highway outlets, rural outlets. Going by the past trend, I think we would be adding more than 1,000 retail outlets per year. That could also depend on various strategies in place.
Okay, sir. Thank you so much.
Sumeet, I think I mean, the totality of the numbers may not be appropriate right now.
Sure.
The concept that Prasan was mentioning was that we would certainly like to strengthen our marketing arm because they are giving steady returns to us, and only steady returns from a competition point of view also. Certainly we'll be strengthening those segments.
We have earmarked money for investments in those sectors, maybe modernization of our retail outlets or increasing the number of retail outlets. Both will be done throughout the year. That's one of the strategies that we follow, and we continue to do that.
Okay. Understood. That's helpful, sir. Thank you, sir. Thank you so much.
Thank you, sir. Next question comes from Amit Rustagi from UBS. Please go ahead.
Sorry, good afternoon, and thanks for taking my question. Sir, first of my question is, we had been saying that when Paradip Refinery gets over, our CapEx will decline, but still we are consistently maintaining INR 25,000 crore, INR 30,000 crore of CapEx every year.
Don't you think that we need to take a pause here and rethink about our strategy and maybe refurbish our thought process on the projects which we should take and maybe sharpen the skills here? Because we have not been able to add any value by completing these projects.
Look, as I replied to an earlier question, our CapEx is evenly spread in various segments. There is some CapEx in refineries, some in pipelines, some in marketing, some in gas, some in petrochemicals, some in our joint venture companies. We are not having an overhand in any particular segment. It is evenly spread.
These all investments are approved based on their own merits with due diligence, if they are expected to generate a particular kind of return. We believe that whatever projects are ongoing must continue.
We have reviewed that also, and those projects must continue because those projects, say, as far as pipelines are concerned, they will go to reduce my logistics costs without any, say, impact on my end sale price.
Similarly, if we are putting up some terminals or other plants, LPG plants, et cetera, that is also for the purpose of reduction of logistics costs as well as the operating costs. There is a value in all these investments, and we are expected to get benefit out of these investments.
You have been taking the name of Paradip Refinery time and again, actually, you could. Definitely a project of this size does take some time to actually give adequate returns. We have very ambitious expectations from the Paradip Refinery project also.
Sir, don't you think that in the given environment where the challenges and uncertainties remain, we should take a pause on the CapEx plans going ahead? You think that we'll keep on investing the way we have been investing in all the projects everywhere, every segment?
As I mentioned you, while our CapEx for in the earlier years under refinery segment was for BS VI. After Paradip Refinery, it was primarily for BS VI investments, which were, in fact, the question of survival because of the change in the specification of the oil. Going forward, we have, say, a few expansions only. We have Barauni Refinery expansion clear.
No other expansion has yet been approved. That expansion is also to take care of the future demand. This project was announced when COVID was not there. After COVID has impacted the demand globally and for the country also, we have been very carefully examining whether we should go with further capacity expansion or not.
As far as our other CapEx is concerned, it is in this field of, say, pipelines or marketing or gas or petrochemicals. If we do not do these investments, then we lose on the potential of margins from gas business or petrochemical business, which are definitely high margin businesses, futuristic businesses.
If we do not invest in pipelines, we lose on logistics costs. If we do not put up investments in marketing terminals and bottling plants, et cetera, we lose on the potential volumes also. LPG consumption, you can see that despite COVID-19, LPG consumption went up.
We feel that whatever investment plans we have as on the date, they are all justified, and we are not risking. We must carry on with CapEx program. Definitely, your concern is our concern also. We are being very careful in embarking upon any future project. We have recently announced the PX-PTA project at Paradip Refinery, but that again is a petrochemical project, which we feel would be profitable.
We have also announced the North East Gas Grid, which is a futuristic gas project. We are also being very careful in investing any major amount for a sector where the demand may get impacted in future.
Sir, my second question relates to the opening of CGDs by the regulator, PNGRB. Currently, we are selling gas through our stations, but they are branded like IGL stations and Mahanagar Gas stations. Do you think to enter this market when the regulator brings open access in the existing CGD? Do you have any plan for this as well?
It will not be appropriate for me to disclose the plans because this is a recorded call. Definitely, we will have certain strategy in these fields. All the guidelines are yet to be notified.
Yeah, guidelines are yet to be notified. Do we have any plans for the gas business, per se, [audio distortion] , from maybe five to seven years into the future?
You know, we have very aggressively bid in the CGD projects. We have 17 of our own, 23 in joint venture. We have GAs with us going forward also. Gas, we have definitely chosen as a future business segment where we want to expand.
Okay. Thank you, sir.
Thank you, sir. Participants are kindly requested to restrict with two questions in the initial round. Please join back the queue for further questions. The next question comes from Sabri Hazarika from Emkay Global. Please go ahead.
Good afternoon, sir. I will go back to the inventory question once again. I just have it clarified, sir. Your sister company, Chennai Petroleum, reported around $12 of GRM, and you reported -$2 GRM. The difference was mostly because of the inventory gain, which you have reported versus a loss.
Was the difference only because of the fact that Chennai Petroleum is a coastal refiner, and you are mostly inland? Was it the only reason why the difference was there between their reporting and your reporting?
Yeah, I believe so. That is what I mentioned in my opening remark also, perhaps to the answer of one of the earlier questions, that the coastal refineries could clock the inventory gain very fast. IOC refineries located in the hinterland would take some time to book the gains, and you can expect that in the coming months.
All right. It will be probably after two, three months max. It will come in Q2. Okay. Second, I have a few bookkeeping questions. The first one is, I just wanted to ask you how much was the pipeline CapEx for FY 2021? Around 1,800 crores, sir?
It is about INR 5,000+ crores.
Okay, thank you.
5,000 crores.
5,000 crore. How many retail outlet addition you have made, sir?
We have in the pipeline INR 4,571 crore of CapEx in the current year, which also includes the gas R-LNG pipeline of Ennore to Tuticorin.
4,571 crore. Okay.
Yeah.
Okay. How many Retail Outlets you are planning to add every year? I missed it actually. Around 1,000?
As Mr. Avinash mentioned earlier, every year we have been putting up about 1,000 outlets, and that program continues.
How many of this total, out of 29,000 outlets, how much is COCO outlets in your case?
We do not have a figure right now.
Any ballpark number, around 5% or something like that, sir?
Our team will give you subsequently.
Okay. Sir, just one last question in the debt. You had mentioned that around INR 7,700 crore was the lease liability. Is that right, sir?
Yeah.
What about government actually outstanding? Any breakup of the debt? Do you expect it to fall further from this INR 98,700 crores going forward?
This amount includes a government outstanding of INR 11,080 crore as of 30th of June, which has now dropped to INR 9,100 crore as on date. Every month, now that the LPG and kerosene subsidy are practically not there at the current international price levels, we are expected to liquidate this particular GOI outstanding every month going ahead.
Sir, $350, $360 from Arab Gulf LPG, you don't expect any LPG subsidy also.
At this price level, there is no subsidy involved. If this price level continues, there is not going to be any subsidy involved. Our GOI dues will only reduce.
We should be around INR 90,000 crores if we are able to generate enough cash to meet the CapEx for this year, right?
I couldn't get you.
We should be falling just around INR 90,000 crore kind of gross debt unless our free cash flow itself is negative because of delay in earnings recovery.
Yeah, I think you can expect so.
Okay, sir. Thank you so much. I'm done with questions.
Thank you, sir. Next question comes from Mayank Maheshwari, from Morgan Stanley. Please go ahead.
Hello, sir. I had two questions. First was regarding, I think you had taken some new initiatives on the new energy side, specifically coming in on the battery swapping as such. Can you just highlight your long-term plans and the CapEx you're thinking about on that front?
We want to be present in every segment of EV, short of, vehicle per se. We have plans for the technology. We are working on various kind of chemistries for battery technology. We have international collaboration also on that, and our R&D is also working on that.
We have plans for battery swapping. We have plans, we already are putting up EV stations, EV charging stations. We have also plans of manufacturing the battery domestically using one of the accepted technologies. We have very ambitious plan for this segment.
How much would you be spending in terms of CapEx around this for this year or even going forward? Is there something you can give us some idea about, of what is the investment you're planning on this?
No. While the present investment may not be very significant in this particular segment for the current year, in future, we will have to plan out our strategy depending upon how things make progress. The chemistry also, an acceptable chemistry of battery should also be decided upon. Based on that, we will have the plans in the future years.
Okay. This year itself, if you think about second half of this year, is there any plan, like how many stations or how many retail outlets would you be offering this, either EV charging or battery swapping? Is there something that you have in your mind?
We will provide you this information subsequently.
Okay.
We will let you know.
The second question was more related to the PX, PTA expansion that you were talking about earlier. You are spending about $2 billion on this, and I think there is massive oversupply on the PX side in at least globally for the next multiple years. Can you just help us understand what has gone into the investment decision to go ahead with this PX, PTA and if not, any other chemical?
No. While there may be a global oversupply as of now, going forward, we have anticipated that there will be a demand, at least domestically. While as on date, there is no duty, it was revoked. We are also confident that no dumping perhaps would be able to take place. We feel that this project is going to give us some returns.
Okay. Any specific reason to just go ahead with this part of the value chain in petrochemicals, not any other part?
No. We are also going on other parts, like for Gujarat, when we earlier we went for oxo alcohol. It is not that we are only looking at on a particular product for our projects. We are sort of diversifying, and we have done a robust study, and we are confident that this project is of value.
Okay. Thank you.
Thank you, sir. Next question comes from Vidyadhar Ginde from ICICI Securities. Please go ahead.
Yeah, thank you. My first question is, in case of LPG, in the past you used to have some input costs which were compensated. I presume that is now completely gone with subsidies also gone. Are you able to recover all that and are you making some marketing margins on LPG?
I would not be able to go into that detail on this call. As mentioned earlier, our marketing margins on LPG also continue to be stable.
Continue to be?
Stable.
Okay. They are positive, they're not negative?
Definitely.
Yeah. Okay, thanks. That was the first. The second one is regarding the, as far as your CMD has been mentioning in the press release saying that utilization by the end of the month was at 70-75%. Is it because of Paradip shutdown, and should we expect that kind of utilization until Paradip restarts?
No. Paradip thing is only for a couple of weeks.
Yeah. During that time, will you be at that level and then again come back?
No. What he mentioned was a long-term, perhaps, I would not say long-term, but for, say, balance of the year. It was not linked to Paradip shutdown.
Yeah. That also he said that.
Yeah.
That also he said, but he also apparently said as per positive record of that at the end of the month, utilization was at 70%, 75% compared to 93% in the beginning of the month. I'm sure at the end of the month, your utilization was lower than 90, which probably is due to Paradip.
Sandeep, as I said, the Paradip shutdown is only for a couple of weeks.
Correct.
With the kind of lockdowns which are happening and the second wave of coronavirus globally coming, we have certain apprehensions on the volumes going forward. Though nobody can say for sure what is going to be the normal levels in India or worldwide.
Correct.
We expect that it may not be back to normal situation maybe in another six to nine months.
Okay. Any idea you could give us on what were the exit rates on diesel and petrol consumption for July? You gave us the average for the month. What was the average exit rate of petrol and diesel consumption in July? You gave us average for the month that petrol was 59 and diesel was 77. By end of month, were they worse off, similar?
Yes. I think I mentioned during my opening remark. I did mention about gasoline and gas oil sales, no?
Yeah, you mentioned about the average for the month, so I wanted to ask you just that by end of the month were you worse off or similar, roughly, the consumption was similar throughout the month?
No, for say, you are wanting July numbers?
No. July you gave us a number. I was asking whether end July was similar to average July, or it was better or worse, is the question. I'm trying to get some idea on August.
Our team will give you this information separately.
Okay. Thanks a lot. Thank you. That's it from me.
Thank you, sir. Next question comes from Pinakin Parekh from JP Morgan. Please go ahead. Mr. Pinakin Parekh, please go ahead with your question.
Yeah, thank you very much. My first question is on the retail fuel prices of diesel and petrol, last time, the company had mentioned that the BS-VI costs are being captured. At this point of time, sir, given where retail prices are and retail fuel margins are the entire BS-VI related costs already been captured, or in your view, we need to see further hikes in prices to capture whatever the IRR that the company was working on the BS-VI investments?
This was confirmed during last con call also. We reiterate that whatever was expected has already been built in and is being carried away.
Sure. My second question is that when we just move to the CapEx number, and maybe I missed it, you have mentioned it earlier, what would be the standalone CapEx in IOCL excluding the group companies and given the restrictions that you are Sir, what do you expect to incur this year if the restrictions are not lifted on especially international travel in the exports not coming through?
Out of total, about INR 26,000 crore, about INR 5,000 crore is for group companies. Rest is INR 21,000 for standalone IOCL.
We want to complete this CapEx because there is no point in deferring CapEx on a scheme which is already approved by Board with due diligence. We will be sort of losing its return if we defer it. We want all these schemes to be taken up on priority and spend the entire INR 21,000 CapEx which is planned for the current year.
To what extent we will be able to do that, given the circumstances of COVID-19 related problems and the availability of workforce and work fronts, that is to be seen. We are trying our best to complete this, to spend this entire amount in the current year.
Understood. Thank you very much, sir.
Thank you, sir. Next question comes from Manikanta Gali from Axis Capital. Please go ahead.
Thank you for taking my question, sir. I wanted to confirm what was the inventory level of crude you have mentioned as on June end? Absolute number.
Inventory ratio?
The absolute amount of inventory, crude inventory that you have as on 30th June 2020 something.
You are wanting volume or what? Quantity you want?
Yeah, quantity. Yes.
Close to about eight million ton.
Okay. What was the number you have mentioned, within 50 million, 60 million-70 million tons of inventory? That is including product inventory also, is it?
That is what I'm saying. I'm giving you the breakup of crude. Our total inventory, total hydrocarbon inventory consists of crude products and intermediate stocks.
Okay.
Out of which, I've given you the crude number.
Sure. Sir, my second question is similar to last con call, you have mentioned that the cutoff date for calculating NRV is this quarter. If you may explain, what is the cutoff date for this quarter, for Q1?
It is 15th of July.
Okay. Thank you, sir. That's all.
Thank you so much, sir. That would be the last question for the day. Now I hand out the floor to Mr. Bhavin Gandhi for closing comments.
Thank you, Bhavin. I would like to thank the participants and the management for giving us the opportunity to host this call today. Thank you so much, sir.
Thank you.
Thank you. Thank you for participating in the call.
Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Chorus Call Conference Call Service. You may disconnect your lines now. Thank you and have a pleasant evening.