Ladies and gentlemen, good afternoon, and welcome to the Indian Oil Corporation Limited four q f y twenty call organized by Batiwala and Karani Securities India Private Limited. At this moment, all participants are in a listen only mode. Later, we will conduct a question and answer session. I would now like to turn the conference over to Mr. Bhavin Gandhi.
Please go ahead, sir.
Thank you, Ashish. Good afternoon, everyone. On behalf of Bhaktiwal and Karani, I welcome you all to this post result conference call with the management of Indian Oil Corporation. It gives us great pleasure to once again hold the management for this post result discussion with the investors. I would now like to hand over the call to the management for the initial remarks, post which we'll open the floor for Q and A.
Over to you, sir.
Thank you, Mr. Bhavin. We welcome you to Annual Earnings Call. From management side, we have Mr. Sandeep Kumar Gupta, Director of Finance Mr.
Matthew Thomas, Executive Director, Corporate Finance and Treasury. Along with them, we have Mr. Rohit Agrawal, General Managers, Corporate Finance Mr. Prabhat Himansinka, CGM Treasury, and myself, Avinash, chief manager of treasury. To begin with, director of finance will briefly touch upon the performance highlights.
Thereafter,
we
will take calls from you. And since this is a earning call, I will request you to restrict your questions to annual accounts. Now I hand over I hand over the call to director finance, Ayushil.
A very good afternoon to you all, dear investors and analysts. First of all, I pray for you all being safe, including your family members, etcetera. And I take this opportunity to welcome you all to the conference call post announcement of the Q4 results of twenty nineteen-twenty twenty. I believe you would have gone through the accounts posted on the website and also through the updates sent by us. However, I would like to briefly dwell on the results to provide additional clarity and insights.
First, dealing with highlights. Before going to the numbers, I would like to touch upon the impact of COVID-nineteen on business operations of the company during April 2020. The capacity utilization of our refineries had dropped to almost 40% in the April. The Corporation has been able to gradually raise the throughput of its refineries from about 55% of rated capacity in the May 2020 to about 78% by the end of month and above 90% during first three weeks of the current month, that is June. And we expect that we can reach 100% of the capacity utilization by July.
The demand for gasoline was about 42% in April. It gradually recovered to about 64% in May and has been about 84% in the first three weeks of June. Similarly, for gas oil, the demand was about 45% in April, 69% in May and about 87% in three weeks of June. ETS, though, took the hardest hit with sales of only 9% in April, about 17% in May and about 31% in the three weeks of On the contrary, LPG witnessed robust growth and it was a double digit growth in April as well as May, partly also because of the firstly, because of the lockdowns and the stay of people at home and secondly, because of the Pudhanvantri Karip Kalia and Yojana, where the cylinders were to be given free for the first three months to the PMUA subscribers. With the gradual lifting in lockdown restriction, several downstream industries in the petrochemical sector have resumed operations from late April twenty twenty.
Indian oil's naphtha cracker at Palipat is now operating at full capacity along with downstream units for production of polypropylene, HBPE, LLDPE and MEG. The polypropylene plant at Paradeep refinery has also come back and is online now, while the PXPK at Sanipat and LAB unit at Kuala refinery continued to operate even during the lockdown period. Work on all major projects has restarted on ground. And in fact, we are continuing with all of our projects. The COVID period was starting in start very challenging, and the functional directors met almost on a daily basis through video conferencing to cope up with the challenges.
The strong information technology capability not only ensured uninterrupted services of ERP and other applications, but also their use from home by employees. Digital technology was extensively leveraged for review monitoring, monitoring, information sharing and knowledge management. To ensure that the supply of petroleum products is continued undeterred, we also provided support in the form of excretia to our various business partner employees, which are basically LPG delivery man or RO attendants, etcetera. We declared an X ratio of five lakhs in the case of death of any of those and also provided insurance of 3.2 about 3.1 lakh front line personnel to gain their support and continue the supplies uninterrupted. As far as crude supplies were concerned, initially, we did serve force majeure notices on some of the Middle East suppliers.
But then based on mutual agreements, either the parcels were deferred or they were canceled. And we could also manage with whatever parcels were not canceled or deferred. We diverted some of the parcels of about 7,000,000 barrels to Indian Strategic Petroleum Resource Limited and took the upfront payment from them. So this way, we could manage our situation well as far as crude procurement is concerned. And with increased LPG imports, we could also manage the increased quantity from our various term suppliers and also through spot contracts.
We also extended credit to our RODers because the sales were not that much to support the refineries continued run. We extended credit to them and so that the stocks can be held by the RO dealers. And those all credits are also now fully recovered. We also started the advanced winter stocking for Ladakh region in the April itself, which was at least two months ahead of the normal schedule to see that some quantity of production can also be shifted to that region for that purpose. Now, let me briefly touch upon the major verticals.
The throughput during the quarter was at 17,100,000 metric ton and is less than throughput as recorded in Q3 of current year, which was 17,500,000 metric ton. The demand for finished products was impacted in March 2020 due to COVID related lockdown, which in turn led to lower throughput. The distillate yield was higher at 81% during the quarter when compared to previous quarter of 79.8% and also marginally higher than the corresponding quarter of financial year 2019, which was at 80.6%. Failure loss during the quarter was 9%, whereas during the preceding quarter, it was 8.8% and the marginal higher Failure loss is also because of the lower devices. Our refineries registered a negative GRM, dollars 9.64 per barrel during fourth quarter, which was primarily due to the huge inventory losses, which we had to suffer because of the crash in the prices.
And the total inventory loss was to the tune of INR16184 crore, which has been accounted in the refinery business vertical. The normalized GRMs after stripping off inventory impacts and factoring in price lags for the quarter is $2.15 per barrel. For the full financial year, the normalized GRMs for the full year twenty nineteen-twenty twenty is 2.64 per barrel as against $4.81 per barrel in the year twenty eighteen-twenty nineteen. The decline in product crack spreads, which is also reflected in benchmark Singapore GRMs has been the main reason behind the fall in normalized GRMs. Coming to pipelines, the cross country pipelines are globally recognized as the safest, cost effective, energy efficient, reliable and environment friendly mode of transportation of hydrocarbons.
In order to maintain a smooth placement and supply of products across the country, our pipelines are being augmented. Indoreal is now focused on LPG and natural gas pipeline infrastructure apart from conventional crude oil and product pipeline networks. The capacity utilization of our pipelines was about 88% during the quarter as compared to 88.7% in the previous quarter. Our pipelines continue to generate stable returns, giving an EBITDA of about INR1540 crores during this quarter, which is at similar levels as that of the preceding quarter. The EBITDA for financial year 2020 was lower by 2.2% when compared to the previous year.
Coming to marketing, the product sale during this quarter was 20,644,000 metric tons as compared to 21,765,000 metric ton in the preceding quarter. The fall in sales volume is mainly on account of COVID related shutdowns. On year on year basis, the product sales fell by about 700,000 metric ton to 83,887,000 metric ton in financial year 2020 as compared to 84,615,000 metric ton in financial year 2019. These can be attributable to fall in sales in almost all the products in March 2020 due to COVID related issues. According to the marketing, EBITDA for this quarter stood at INR2332 crore as against INR3914 crore in
the previous quarter. The
marketing EBITDA is INR14623 crore on a full year basis as against INR1532 crore in financial year 2019 and hence continues to be stable. In Petrochemical, during the quarter, the EBITDA was INR475 crore as against INR742 crore in the previous quarter. However, while comparing with the year on year performance with that of the corresponding year of last year, there has been a sharp downside in EBITDA. The major reason is due to the shrinkage of petrochemical spreads in Polymers, MEG and PTA. Moreover, the PTA unit was also under shutdown for in the 2020 due to the MEG instructions.
We believe as we go forward, the PEDCAM will continue to contribute handsomely to the bottom line of the company. Coming to borrowings, the borrowing as on 03/31/2020 is at INR11645 crore as compared to INR86359 crore as on March 31. Company is going through a phase of expansion and upgradation of its infrastructure facilities across business segments, be it refining, pipeline, marketing or natural gas. Accordingly, company has spent about spent INR28316 and 16 crores during twenty nineteen-twenty twenty under the head capital expenditure. However, the internal accruals remained muted during twenty nineteen-twenty twenty, mainly on account of inventory losses and subdued remaining margins as well as petrochemical margins.
Further, as per India's 116 on leases, which has become effective from April 1, company has recognized new leases of about 4,400 crore during the year. These increase has and with the previous leases totaling to about INR 8,000 crore is shown as borrowings in the accounts. Further drop in sales of petroleum products during March due to lockdown resulted in lower cash collections, whereas payment for crude oil supplies were continued to be made as per the contractual terms. This led to elevated working capital requirements during the year. We also have taken a permission of Board and now we'll be approaching the shareholders during our AGM for increase in the borrowing limit to INR 165,000 crore.
And I must clarify that this is only an enabling provision so that we do not we are not required to go frequently to the shareholders. The last such increase was ten years back. And though we are taking this enabling authorization from the members, But we do not anticipate our borrowings to go to that level. In fact, as against the February smart levels of INR11545 crores, we expect that by end of this month, we will be perhaps lower than 1 lakh mark also. I will end my briefing here.
We will now take your questions. Thank you very much.
Certainly, sir. Ladies and gentlemen, we'll now begin the question and answer session. If you have a question, please press star and one on your phone, and await your turn to ask the question when guided by the facilitator. If your question has been answered before your turn and you wish to withdraw your request, you may do so by pressing star and one again. We have our first question from Praful Sen from Centrum Broking.
Please go ahead.
Thank you very much for the opportunity, sir. Good afternoon. I had a couple of questions. One, if you can give us some sense in terms you mentioned that the core margin or the rather the normalized margin, net of even the marketing led, inventory gain was about 2 point something dollars for the quarter. Can we get a sense of what trends you have seen in first quarter, particularly given that in the first quarter, at least as per reports,
we did get some benefits due
to crude costs also, discounts being much sharper from the Middle East suppliers. Have we got any benefit of that in terms of margins? And the second question was with respect to CapEx. Given the disruptions that has happened in project work and obviously the lockdown, is it fair to assume that FY 2021 CapEx could actually be materially lower just because you won't be able to actually deploy that much capital in this year? And if so, if you can give a guidance on what that number could look like?
Yes. So first, I will come on the expected margins during the current quarter. So the OSPs declared by the Middle East suppliers have shown quite quite handsome discounts for the first quarter months. And we definitely get the benefit because we are eligible to the price, which is declared by the Middle East suppliers, which is in the form of OSPs. So that benefit definitely accrues to us.
However, the crack margins, which is based on international coated prices, is very, very subdued because of the destruction of the demand. So I believe these things will set off each other. And as far as first quarter is concerned, I do not see a very handsome GRM levels, and they will remain subdued. However, going forward, as we have also mentioned that our refining throughput has reached above 90% levels. The sales are to the tune of about 85% to 86% for MS and about 88%, 89% for HSD percent as compared to the previous corresponding month of the previous year.
We expect the demand also to further go up. That all will perhaps be very supportive for the crack margins even on global levels. We expect and some recovery going forward at least for Q2 and Q3 as far as refining margins are concerned. Coming to
your question on
CapEx, we reviewed the entire ongoing projects, and we felt that there is nothing worth dropping as of now. While you are sure that while you are correct that the demand has taken a beating, but since our projects also take some time to start production, we are not deferring any of the ongoing projects. While we will be very cautious to go ahead with any future projects, and we will definitely consider the destruction of this demand, which may perhaps take one or two years to revise. So we will be cautious in approving new projects. But as far as the CapEx plan of the current year of about INR26000 crore is concerned, we are hopeful that we will be able to do that, and our internal resources will also recover to support that CapEx.
Thank you very much, sir. Sir, just if I can follow-up quickly, what I meant with the in respect to the CapEx question was also that the sheer problems on the ground in terms of actually getting project was done, whether it is the lockdown related issues in terms of accessing the sites or the labor shortages also. I was saying that practically speaking, can you actually achieve this kind of capital deployment?
I mean, deferment you are not doing,
that is that is appreciated. But literally, to get the amount of work done that you would have planned, is it fair to assume that because you lost one quarter and now monsoons will also start, it can actually restrict the amount of CapEx that we can actually complete in this year? I was asking more from that point of view, sir.
Yeah. We we also examine from data point of view also, And and we we, in fact, took a stock of all our projects. And 300 plus projects, we reviewed, and we we sort of, got information that the work is on all those projects on ground. You would also be aware that in many parts of the country, the labor force has also started returning. So we are, as of this point, we are hopeful that we will be able to achieve this CapEx for the current year.
Got it, sir. Thank you so much. I'll come back if I move. Thank you, sir.
Sure. Thank you.
Thank you, Mr. Singh. We have our next question from Sabri Hazarika from MK Global. Please go ahead.
Yeah. Good afternoon, sir. I have got three questions. The first one is is the bookkeeping question, sir. You reported around 11,300 karat of exceptional inventory loss loss because of COVID.
So can you give this the breakup between the signing and marketing for this? I mean, it will be both for refining as well as marketing. Right? Can you give the breakup of the exceptional inventory of in refining and marketing?
Yeah. Refinery is about 8,000 crores out of this $11.03 $0.05 crores, and balance is marketing.
Balance is marketing. Yes, And second question is, so this year, you are if I look into FY 2020 earnings, so you had a INR 1,300 crores profit, of which we've had around 11,000 karat of inventory gain. Inventory, sorry, it has got inventory loss also. But but net net, I mean, this year was an exceptional year in terms of it has led to, like, significant increase in debt levels. And also the fact that the CapEx of 28,000 crores was by no means able to meet through the internal excellence.
So how do you see FY '21 considering that the outlook still is somewhat volatile in a way, and the items are also currently not that high. And marketing margins, of course, maybe good, but, again, there are certain uncertainties regarding how are you purchasing the extra? How do what kind of free cash flow generation you are targeting for the 05/21? And do you think that you'd you're they could remain at around one level or it could even do have, like, list of it going up to, say, higher levels?
Well, look, while there is a lot of volatility in the prices and a lot of certainty around COVID also, whether there is going to be a second phase or not, to what extent and to what part the recovery will happen in demand. So there are a lot of ifs and buts, but we are hopeful that looking into the present circumstances, the demand has come back faster than what was expected initially. And perhaps the situation will improve and we hope that there is not going to be any second phase of this COVID virus. So with demand picking up, we expect that the refinery margins also will quickly correct. In fact, you would have seen in the past week also, there is a marked improvement in the crack spreads of gasoline as well as gasoil and Caroitiev also.
So we expect this correction also to happen quickly and with increased level of operations. We are hopeful of a decent refining margin also in the balance period of the year. Now if that happens, so there will be certain internal accruals which will support CapEx. Otherwise also, like I've said that by end of this month, we expect our borrowings to go down to INR 1 lakh crore level. So there is a decrease of about INR 26,000 crore from the highest level which we achieved, which we had to sort of face sometime in April, which was INR26000 crore.
So we expect the borrowings to dip further with increase in demand. And even if supposing the internal accruals are not that decent, with the current dip in the borrowing levels, even if we have to borrow something more, our debt equity levels still will be very manageable and perhaps will be lower than 1.24, which is getting reflected as on March 31.
Right. And suppose suppose, predicting for it, but suppose the residing market remains weak and there are, like, further inventory loss, you know, they're coming up. So would you be, like, quite comfortable in increasing marketing margins to, like, cover up for this kind of shortfall, or do you have some kind of a gap regarding marketing earnings?
I think this question is very hypothetical. Let the situation go.
Alright, sir. And so just one small question.
What is the government subsidy outstanding for the FY 2020 end?
It is about INR 13,000 crore as of now. And but then we have recovered about INR 5,855 crore since April 1, and we are also recovering some amount now in the current month. So every month, we are getting some payments in liquidation of GIDUs. And you would also be aware that the because of the lower Saudi CP prices, the LPG subsidy has practically went off. There is no practically no SCO subsidy.
So going forward, the addition in the subsidy levels is not there and liquidation only is expected.
Okay. Thank you so much, sir. All the best.
Thank you, Mr. Azarika. We have a question from Pinatin Parekh from JPMorgan. Please go ahead.
Yes. Thank you very much, sir. So three quick questions. My first question is the financial statements say that there has been an inventory impairment of roughly 11,000 crores or so, and there is an inventory loss of around INR 18,000 crores or so. So from here in the first quarter, given that oil prices have rallied, how much of this can reverse or will nothing of this get reversed?
We so first of all, I hope you are clear about this, what is this INR18000 crore inventory loss. This is in comparison with the opening inventory levels. And INR1305 crores, we have classified as exceptional, is the write down below cost of inventory, which was there on March 31. So as to your question, the closing inventory rate was around about $36.37 dollars per barrel after the inventory loss hit. And now the present rolling price of the crude is at about $41.42 dollars Now it all depends how the prices behave going ahead because we have to take net realizable value in account while declaring the results for the period ending June 30.
So if the things remain at the current level and there is no downward trend, then we can expect some amount of inventory gain in the quarter one. But that all depends on how the prices behave going forward.
Sir, sir, just to clarify the close yes, sir. But just to clarify, the closing crude price, you assume is thirty first March Brent or the average for the last fifteen days or something? Because of closing thirty first March Brent was, I think, around 22 or 23.
As per accounting guidelines, we have to see that if that crude is processed into the products, that products will be sold at what price. So since we had a longer period available when we declared the result after March 31, we have considered the net realizable value of all that product which got produced from that crude. And based upon that, we have valued our inventories.
Understood. So my second question is that, when we go back, to BS VI, IOCLX undertaken a CapEx of INR17000 and back before COVID, there was talk about a onetime increase in fuel prices to recoup the cost of the the investment. At this point of time, sir, what kind of price increase on a step up basis would be required in diesel and petrol to recoup that INR17000 crores? Mean, would it be INR1 price hike be enough? Or will it be a more or a smaller amount?
No. Without going to the details, what I can assure you, first of all, this amount cannot be recovered in a short period. The projects are there. They have got a life. The BS VI also has got a life.
So we calculated a compensation, which was desirable considering perhaps the life of the BS VI product. And the entire amount, was of fair compensation to the refiners has already been inbuilt in the prices, and we are already start recovering that.
Okay. So basically, right now, the current prices reflect whatever you as a company would have assumed as a fair return, sir. Correct. Right?
Yes. Yes.
And lastly, if I look at petrochemical sales volume, it was around 2,280,000 tons for FY twenty. Now, sir, how should we look at this segment over FY twenty one and '22? Because there were major projects which were completed in FY twenty, and there is some of that can capacity also coming up. So how would this business trend over this year and next year in terms of volumes, in terms of margin mix or shift in margins?
Well, look, as I mentioned in my opening remarks, the PXPTA did not work for one quarter in the last years. So as far as PXPTA volumes are concerned, it will definitely see an increase in the current year as compared to the last year. E and CP was normal, LAP was normal. So those normals will continue. Over and above that, our polypropylene, the second chain also was commissioned in February, and we can expect full production out of that chain also.
Understood. Understood. Thank you very much, sir.
Thank you. We have a question from Mr. S Ramesh from Nirmal Bank. Please go ahead.
Good evening, gentlemen. First, a housekeeping question. So in the company handouts, you have given an inventory loss of around INR 18,000 crores. So does that include that exceptional loss of INR 11,000 crores?
Yes. It does include that.
So if you look at your EBITDA numbers, based on the segment EBITDA, it adds up to a loss of minus 9,370. And usually, you include the other income in your EBITDA. So if I add back the other income of 1722, there's a loss of around INR 11,000 crores. So what is this due to? Is it is part of the exceptional also included in that?
Because you're not able to reconcile yeah. See, if you look at the EBITDA excluding the exceptional loss
You asked the question very fast, I couldn't get you. Perhaps Yeah, sir. But, mister Rohit, I will always be able to tell you.
Yeah. So if you look at the EBITDA excluding the exceptional loss, it will be around $2.32 crores. But if you add back the other income and the or support the other income in this negative EBITDA loss, the actual loss is something of the order of 11,000 crores. So I was just trying to reconcile that with the, you know, reported EBITDA excluding the exceptionals. This EBITDA, I suppose, is including exceptional.
I said this EBITDA includes exceptional? Yeah. Because I'm seeing EBITDA 11,000 only for which you have got the breakup.
Maybe they're like breaker. Because I'm I'm able to look
at this, I mean, to you. And if I'm Yeah. $9,003.50 marketing plus 7,000 sorry. Quarter wise. Quarter $4.09 minus $9.03 $7.00.
That totals to your $1,111,051. I hope you are looking at that, Avita. Yeah. I'm I'm asking about the quarter four, fourth quarter Avita. Yeah.
That's a minus nine three seven zero?
Yeah. Yeah. Yeah. So it yeah. Yeah.
That is so there's
no impact that exceptional out of the to that.
So this doesn't include the exceptional loan?
Yeah.
Yeah. Then so but if you add back the other income, the other income is included in that. Right? Yes. So minus 9,000 is including all the inventory losses, including the exception.
No. I understand that. So if you want to get the EBITDA excluding the exception because the exception is below the line. So we if you look at the EBITDA, if you add back the other income, you if you remove the other income, there's actually a loss of around 11,000 crores. I'm just trying to reconcile that with the reported EBITDA in your P and L for the fourth quarter.
So that I think we can discuss with you separately. Think
Yeah. We'll that. That. We will give a recall.
Sure. And second thing is, no, when when you're looking at your prospects for improved refining margins, now you see the complex refiners, they have settled based on the fact that the light heavy or towards with differences have been pretty much next to nothing. So you are banking on improved spreads or do you also expect the average free differentials to widen in favor of the lighter crudes or sweeter crudes? So would that also be a factor which would have helped improve your refining margins going forward?
Can you please repeat your question?
Yeah. So, yeah, in in, the commentary given by mister Gupta, he said, finding margins could improve over the next, you know, rest of the year from second quarter based on the improved spread. So I just wanted your perspective on the prospects for complex refiners like IOC there where you have secondary processing. So if you look at the PowerSuite differential or light heavy differential, you know, that also helps the complex refining margin. So, are you just banking on the, the improved spread for the products on a basic benchmark?
Or do you see the benefit from the light heavy differentials or your average crude slate, you know, being cheaper than, say, the normal benchmark, and that also to help you, you know, improve your margins?
Look. Our product we we we are generally processing about 50% sweet and 50% sour. Okay. So so if that is the trend, it you know, perhaps does not matter much with the differentials, I believe. So our mainstay is on the crack product margins, and we expect that that should improve to give us some something.
Yes. Just one last question. Now in terms of your consolidated segment number, the other segment has reported a fairly large increase in the losses, so about INR2200 crores. So can you give us the break up in terms of how much would be the loss in E and P or where exactly you lost at the EBIT level in the consolidated numbers? Other
We lost in E and P only and that is because of the impairment. We have to say it's because of the crash in the prices. And that is also disclosed by way of note number, where it is INR1345 crores for our Canadian assets and eighty four, eighty five for US. And some minor amount for US.
Okay. So basically, it's for the North American. Okay. Thank you very much.
Thank you. Before we take the next question, I would request participants to press star and one to ask a question. We have a question from mister Vidya Der Ginde from ICICI Securities. Please go ahead. Hello.
Good
afternoon. So my first question is that if you could share with us some color on your food imports, the source, I would really like to ask what proportion of your crude imports come from Saudi Arabia, Iraq, UAE, Kuwait, Nigeria. And then we get some idea on the kind of discussion you may have enjoyed this quarter.
Look. This is a classified information.
A rough idea or a group? Look.
Can I say that it
is roughly in India's import basket?
Pardon?
We have some idea on the, extent of crude India imports from these countries. So is your, looks likely to be very similar to that?
I cannot really divert the sources of my crude procurement.
Okay. Okay. So, currently, you said that your crude after adjusting for inventory last time, it is $36.37 dollars in March. So what is it at cost? What does it at cost?
Now, but the cost
Well, I think I
But that can be calculated because we have Yeah.
It's about $17.18 dollars. Was around 54. Only around 54 then because I think that is a it's kind of the inventory loss.
I do not have
Yeah. It what was the one that kind of a.
Back escalate and do it because we don't do that back escalations. And lastly on escalation, therefore, you can back escalate it.
Lastly, on if you could give us some color on your likely tech scale utilization rate basis?
As I mentioned earlier, in answer to one of the questions, the P and CP, Dab and PXPK all are likely to operate at normal levels, and this is generally more than the capacity. And we also have now polypropylene both chains functioning, and we also expect that to run to full capacity.
So except for the first cup during the lockdown, initially, rest of the unit will be
Yes.
So the impact only will be in the first quarter.
Yeah. But we explained to you that some of the units even during lockdown continued uninterrupted.
Correct. Correct. Correct. Thank you.
Thank you, mister Ginde. Participants are requested to restrict the questions to two at a time. We have a question from mister Rohit Ahuja from DOB Capital. Please go ahead.
Hi, sir. Thanks for the opportunity. I have two questions from my side. First thing would be on overall operations sales volumes and the marketing margin movement. Do you see things coming back to normal by this month and from next month, especially on the margin front and the volume front?
Yes. As I explained to you that our refining capacity is now more than 90%. Level of operation is more than 90% of capacity, and we expect all of our refineries to come back to 100% level, let us by July. Sales, as I explained, MSHSD sales are in the range of 85% to 90% on Y o Y basis corresponding to the corresponding month of the last year. And we and as I mentioned that the recovery rate has been faster than what we expected initially.
And we expect that with this and things not deteriorating in the terms of maybe second wave, etcetera, we expect that the demand will quickly recover to the original levels. I cannot say 200% levels, but definitely, not more than maybe 5% to 6% hit.
So second question will be on the inventory loss, whatever you reported in Q4, would most of it will be made up for in Q1? And do GRMs still look good in terms of crude discounts that you enjoyed from Middle East?
I would not say they look very handsome because the discounts which we are getting through OSPs of Middle East suppliers, first of all, the quantity of those Middle East supplies is not full. There are other suppliers also who do not work on OSP system. And that discount is also set off because of the lower tracks which are prevailing as of now, starting from the lockdown periods. So the Q1 GRs definitely may not be very handsome. But going forward with this revival in demand and the cracks also forming up in last few days, We expect that going forward, the cracks will be hence.
Inventory loss, I mean, do you see good results again?
As I mentioned, the level of the inventory evaluation was to was about $36.37 dollars per barrel. And the crude prices, which are rolling as of now, is about $41 $42 So there is some recovery, but then a large it depends largely on what prices prevail even beyond June 30 because we are required to value our inventory at net realizable value.
Okay. Thank you, sir.
Thank you, Mr. Hujia. We have a question from Nafisa Gupta from Bank of America. Please go ahead.
Thanks. Good afternoon, sir. So my question is, again, on inventory losses. So according to the results, it says that in the specified period, the write down on valuation of inventory below cost is to the tune of $506,800 per hour. But then we're taking exceptional losses, 11,300 per hour.
And this is due to a specified longer time period of which has been taken for inventory losses. So I just wanted to understand as to what this longer time period is, and why have we considered a longer time period and not just the quarter?
Normally, when we close our accounts, say, within forty days, thirty five to forty days of the close of the period, we take a particular cutoff date, which is within April. But this time since the prices, there was an abnormal reduction in the prices and we had a longer time available to check what is the net realizable value of these stocks, which were there around March 31. We adopted the longer period and took a larger hit on a conservative basis.
Sir, otherwise, would this number have been a part of this one q number? If not, the four q?
Yeah. Definitely.
Okay. So so we are just hoping to recover some of these, and then so that is the reason that we kind of put them in the 4Q itself. Is it correct?
You cannot you cannot be sure of that. As I explained to you, we will have to again see what is the net realizable value of our stock as on June 30 based on the prices which remain after June 30. So I'm not sure whether that will get recovered within this quarter or not and to what extent. But definitely, with the increase in prices, this amount will get recovered. As I mentioned, we valued at about 36%, 37%.
Now the prices are 40%, 41%.
Got it, sir. And sir, my second question is on refinery expansions. So if we check the TPSC data, it says that Haldia has seen some expansion in the last fiscal year. Just wanted to know what is the status on the others, Koyali, Buran, Haldia and the other expansions. Where are we on this?
No. We've Haldi had a project of distillate yield improvement. So 500,000 ton was the increase in its capacity. Behind that, there is no other capacity expansion at other refineries except for our project at Koroni, which was declared, and we are increasing its capacity. With the commissioning of Indemax at Mumbai Ghor refinery, our capacity will increase to 2,700,000 tons from the present 2,350,000 metric tons.
Okay. Thank you. And sir, just a related question, know the others have asked it already, given that we have a large refining capacity and also we have large capacity to store crude, Can we say that in this quarter, we will get some benefits from the discounted crude that we procured in the last couple of months?
Yes, we should actually. If I see my inventory levels, say on March 1, we had 8,800,000 tonnes of crude. April 1, had 9,800,000, May 1, we had 11,400,000 metric tonnes. So we definitely, June 1, we are expected June 1, it was 10,200,000 metric tonnes. And going forward, in the subsequent months, we are back to our normal levels of 8,000,000 tonne of inventory.
So we definitely built up some inventory during these periods. We did not surrender much of crude except for the 7,000,000 barrels, which we gave to 7,000,000 barrels, which is roughly about 1,000,000 tonne only, which we gave to ISPRF for its strategic reserves. So we definitely have growths bought in this low period scenario, which should give us some benefit going forward.
Thank you so much.
Thank you. We have a question from mister Mayank Maheshwari from Morgan Stanley. Please go ahead.
Thank you for the call, sir. I had the first question was related to your marketing business. How has been the market share for MS and HSD over the last quarter? And how are you kind of thinking about the market share on the industrial fuel as well? Can you give us some comments around that?
So nothing very significant. With the increased play of private players, we have been losing some market share, which is very, very natural to happen to the at least to the biggest player. So our market share during you asked about last quarter? Yeah. How has been done over the yeah.
I was
just looking at last quarter and how has been it faring after that.
So in fact, during the lockdown period, we may have gained some market share instead of loss. So definitely, there is no loss of market share during this lockdown period.
Okay. But in the fourth quarter, what was your market share, if you can just give us some detail?
We will give you the details of it.
Okay. And sir, the second question was more related to the gas business itself. Can you just kind of talk about what's happening on the City Gas front in terms of your new geographies as well as the node terminal?
CT Gas, we continue with about 40 geographical areas from on it on our own 17, on our own 23 joint venture. And the projects are progressing normally. As far as NOR is concerned, we are still constrained because of the pipeline thing, which will get commissioned by February 21 as per the latest estimates.
So what's the utilization rate on NOR now?
Of now, what utilization is low, it is only 1,440,000 metric tons as of now, MMS, MDN as of now, which is about less than 10% on a yearly basis. So it is low and constrained because of the pipeline thing. The pipeline thing is likely to be, over by, say, February 21.
Okay. Okay. And on the city gas side, you're saying that our project is rolling on time, or is there any impact of this COVID on on your plans there as well?
Because of COVID definitely there is some impact on the project timelines for which we will have we have been taking up and I am sure we will get some that MWP relaxation from PNG already also.
Got it. Thank you, sir.
Thank you. We have a question from Mr. Vikash Shyam from CLSA. Please go ahead.
Yes. Hello. Just to thanks for taking my question. Firstly, if I understood this correctly, had the longer reporting period not been allowed, just for argument's sake, you were supposed to value the inventory at the same price as it existed, say, sometime in April that you typically do, you would have been forced to use a price possibly lower than 36, 37. So the loss the inventory loss number would have been much bigger.
And because of the same reason, the inventory gain in 1Q will be much lesser. Is that understanding correct?
So I think it is on the reverse side, in fact. We adopted a longer period and we were very conservative while reporting the profits for the period ending March 31. We took a bigger hit in twenty nineteen-twenty twenty. Had we adopted had we continued with the shorter period, the part of the inventory losses would have got shifted to Q1 of this year.
No. So basically, what I want to understand is your valuation is about $36 $37 per barrel of crude oil. That if you were if you would have assumed prices prevailing around April would have meant a realization which is even lower. So when you mean adopting a longer period, essentially what I mean, had you not done that, would your valuation be higher than $36.37 dollars? That's something which I'm not clear about.
So if we had we adopted the shorter period for testing our one NRV, our inventory valuation rate would have been higher, and so the losses would have been lower.
But, sir, if prices in April were far lower than, $36.37, then how would net realizable value?
In calculation the of net realized value, the product prices are to be seen.
No. No. That's fine. But I thought that thought that it is 37 is the implied Okay. To Okay.
Okay. Okay. Fine. So basically, you know, if the fact that you're you you have the ability because there was a kind of a a no change in retail prices for a while, you have the ability to sell at a for that brief period at a higher price. Therefore, your net realizable value was much higher.
You know, so that's why I've taken a higher $36.37 dollars kind of a realizable value.
Don't think you are opening any answer for this.
And sir, on CapEx, can you give us your expected CapEx numbers for FY 'twenty one and 'twenty two? Sorry if you have already given that, but I
what you catch 2021 and 2022, your budget is CapEx, FY 2021 and FY '21.
For the current year, I can say that it is INR26000 crore. For the last year, we spent INR28000 crore. For 2021, we plan to spend INR26000 crores,
which
includes, say, refining about INR4000 crores, pipeline is about INR4500 crores, marketing about about INR INR6000 6,000 crores, crores, Petchem Petchem about about INR INR2300 2,300 crores, crores, and some joint venture investments about INR 4,800 crores, including CGD, etcetera.
In terms of volume addition on the back of this CapEx, that isn't of course, I mean, you'll get more retail selling space and all that. But from a capacity perspective, your capacity the last big capacity increase was the PP expansion, which has just started in February, right? I mean there is nothing which is happening in FY 2021, which would add to your capacity production capacity. So
there are certain projects which are not for capacity expansion, but they are for say reduction in logistics cost like our packaging terminals or So there are certain expenditure in that. There are certain leftover expenditures in respect of the projects which are completed already. There are certain expenditure in respect of even the production facilities like for MEG at Paradeep. So we we we can share the details with you later on.
Yeah. Sure. Absolutely, sir. And finally, you know, you've been pretty upfront about the so just the last one, and that's it. If you've been upfront about the fact that full normalization of demand would not happen anytime soon, So what is your the way I know it's everybody's guess and it's very difficult to be exact about this, but the way you're seeing it, by when do you think we get too close to say flat Y o Y and then start seeing the growth as we used to see in the last couple of years.
So what are your likely timelines for that?
Look, we are also guided by the studies which are done internationally. A lot of agencies, lot of consultants keep on reporting various numbers. And based on those estimates, only we are saying that the current year petroleum product growth will be, say, perhaps minus 5% or so. And perhaps sometime the next year, the demand may come back to the original levels. Now the product wise difference within this will be there, while MS and HST may come back very quickly, LPG has seen a growth.
ATF will take a longer time to recover. So product wise, differences will be there in the recovery rates. But on an overall basis, perhaps 2021, 2022 should see the normal levels as are prevailing pre COVID.
Okay. Thank you, sir.
Thank you, Mr. Jain. We'll take our last question for the day from Mr. Vineet Joshi from Goldman Sachs. Please go ahead, sir.
Hi, sir. Thank you for taking my question. So my question is on inventory and working capital that you mentioned earlier. So if I heard correctly, you said that you have 8,000,000 tons of crude inventory. But can you also talk about the like I think the oil industry mentioned that the Indian companies have opportunistically bought crude and stored in floating storage as well.
So if we look at both the land as well as the floating storage for Illinois, what that amount would be? And the second question is, you mentioned that, there has been some additional investment in working capital, which has led to the higher debt. Can you please quantify what that additional working capital investment is, which we should be normalizing in our numbers going forward? So first on the inventory, as
I mentioned, our normal levels are about 8,000,000 tonnes of crude inventory. And we had on April 1 9,800,000 tons, on May 1 11,400,000 tons, on June 1 10,200,000 tons and perhaps by July 1 we will sort of revert to the normal levels. So we did procure certain crudes despite the certain additional crudes, despite the reduction in the processing rate of the refineries. And we believe that it will give us new benefits in the periods to come. Your second question was on There increase.
There is as we explained, there is no permanent increase because working capital, in fact, a lot of working capital has got released because of the reduction in the prices. And our borrowings level, which were at the level of 126,000 at maximum during April, are now back to about INR 104,000 crore level, and we expect it to reach the INR 104 crore level below INR 104 crore level very soon. So not exactly any pressure from working capital side on the moment.
So this 25,000 extra was because of the working capital, which is already reversed is what you're saying. So there will be no further reversal from, you know, the the current levels. It's already baking in all the extra ones.
Yeah.
Okay.
Thank you.
Thank you, mister Joshi. I would now like to hand the call to mister Bhavin Gandhi. Please go ahead, sir. Mister Bhavin Gandhi? Sir, any closing comments from your end?
So
so on a nutshell, this is we expect that the demand recovery is going to be there in q two and also in the later part of the year. We also expect that if they demand recovery, the spread, it is natural for them to correct two, three, three COVID levels. We also expect our working capital requirements to be lower going forward because of liquidation of GRE's views, because of low price levels, because of perhaps no deal subsidy for LPG and ESCO going forward based on these low prices. So we are bullish that we will be able to perform handsomely for the rest of the years. That is all as a closing company.
Operationally, in any case, we have been doing well and we will continue to do well. Thank you.
Thank you, sir. Ladies
and gentlemen, this does conclude your conference for today. We thank you for your participation and for using iZumption conference service. You may please disconnect your lines now. Thank you, and have a great day.