Good evening, ladies and gentlemen. I'm Pavitra, moderator for the conference call. Welcome to the Indian Oil Corporation Limited AQ SY twenty post results conference call hosted by Patliwala and Karani Securities. 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 Atriwala and Karani Securities. Thank you. And over to you, sir.
Thanks, sir. Afternoon, everybody. On behalf of Investors
and analysts, We have with us director of finance, Indian Oil, mister SK Gupta, and we have ED corporate finance, mister Matthew Thomas. We also have with us CGM corporate finance, mister RK Jain. We have with us GM corporate finance, mister Rohit Akhrivad. We have with us DGM treasury, mister Prabhad, and myself, Avinash. So I will request Director of Finance, IOC, to address investors.
Thank you, Avinash. Good afternoon to all of you. I am SK Gupta, Director of Finance Indian Oil Corporation Limited. I take this opportunity to welcome you to the conference call post announcement of our third quarterly results for the year twenty nineteen-twenty twenty. I believe you would have gone through the results posted on the website and also through the updates sent by us.
I would like to briefly dwell on the results to provide additional clarity and insights. Coming to the highlights first. As you would have perhaps read in the media, Indian Oil has debuted to the coveted Global 500 list of world's most valuable and strongest brands across sectors for the year 2020. The list was released at the World Economic Forum in Davos by Brand Finance, the world's leading independent brand valuation consultancy. There are only 11 Indian brands in this coveted list, and Indian Oil is the only Indian brand in the oil and gas sector to feature there.
Our INMEX technology has been selected through global tender by NIS of Serbia, owned by Russian oil and gas conglomerate Gazprom Neft for production of higher value products. This is the first ever energy agreement to license the refinery process technology overseas from India. Adding a few more weathers in the cap, Indian Oil introduced first ever indigenously developed wind turbine gear oil, lubricant for Indian Army's main battle tank and extreme pressure lubricants for drilling applications, breaking the monopoly of a multinational in these segments. Climate change is a more pressing reality now than ever. A key question before all of us is whether we can reduce the greenhouse gas emissions and also at the same time cater to the fuel demand and perhaps continue the business.
In order to realize this, year 2019 witnessed consolidation of our R and D efforts in the area of two gs and three gs biofuels, our commercial projects for producing ethanol from bio residue and from waste gases are progressing in time. As part of Sattat's scheme of Government of India, which is sustainable alternative towards affordable transportation, Indian oil fuel stations in Pune and Kolhabur have commenced marketing of automotive grade compressed biogas or CPG produced from agricultural, sewage and organic waste. Earlier during the year, Indian Oil also became the world's first company to transport ethanol blended MS through pipelines. Never nowhere in the world, ethanol blended MS is transported through pipelines. We also introduced first time winter grade diesel in the areas of Lakdad.
So earlier, the diesel which was spent there was not usable during the wintertime, but we became the first company to supply the winter red diesel to the area of Ladakh. Talking about numbers, the average crude price, which is Indian basket, during this quarter was at $62.57 per barrel, a marginal increase of 1.43% from the average price of the immediate preceding quarter that is Q2 FY twenty twenty. If we compare on a nine month basis, the average price during the current nine months has been $64.01 per barrel as against $72.05 per barrel in the corresponding nine months of FY 2019. With respect to the crack spreads with reference to Indian market price of the crude, MS cracks have remained steady during this quarter as compared to the preceding quarter. When compared with Q3 FY twenty nineteen, MS cracks have improved significantly.
For HSD, the crack spreads during this quarter have been lower by about 15% as compared to the preceding quarter. It is also lower by about 9% in the corresponding quarter of FY twenty nineteen. F4 crack spreads during this quarter has been significantly lower as compared to the preceding quarter and corresponding quarter of FY twenty nineteen. In the petrochemical space, the spreads have been on the declining trend over the last one year. Spreads for polymer in this quarter was 19% less than the previous quarter and 32% less than the corresponding quarter of FY2019.
In case of PTA, the spread during this quarter was about 36% less than the previous quarter, while comparing with the corresponding quarter of FY2019, it is 58% lower. With respect to MEG, the spread in the current quarter was about 29% less than the previous quarter. However, while comparing to the corresponding quarter of FY 'nineteen, the decline over the year is much more pronounced, which is about 73%. This quarter, we registered a profit after tax of INR 2,339 crore, higher than the preceding quarter, which was only INR $5.63 crore. Although Q3 has witnessed a sharp fall in refining as well as petrochemical margins, However, the impact of the same has been mitigated by inventory gains in this quarter as compared to inventory loss in the earlier quarters.
In the current quarter, there has been an inventory gain of INR1608 crore as compared to the inventory loss of INR1807 crore during the preceding quarter. From a nine month perspective, the profit after tax is INR6499 crore as against INR7795 crore in nine months of FY 'nineteen. The sharp fall in refining as well as petchem margins have resulted into the fall in profits. Revenue from operations during this quarter is INR 144,820 crore as against INR 132,003 and 76 crore in the preceding quarter of this year. Now let me briefly touch upon the major verticals, refineries first.
The throughput during the quarter was 17,500,000 metric ton, which is same as in the preceding quarters, but was lower than the corresponding quarter of FY twenty nineteen. And the planned shutdown in refineries for BS VI upgradation have impacted the throughput to some extent. The distillate heat was steady at 79.8% during this quarter, which is marginally higher than the previous quarter but lower than the corresponding quarter of FY twenty nineteen. Fail and loss during this quarter was 8.8%, whereas during the preceding quarter, it was 8.9%. Our refineries registered a GRM of $4.09 per barrel during this quarter as compared to $1.28 per barrel during the previous quarter.
The normalized GRMs for the quarter is $2.15 per barrel as against $4 per barrel for the previous quarter. If we compare on a nine month basis, the normalized GRMs for the current nine months is 2.8 per barrel as against $5.4 per barrel in the corresponding period of last year. The decline in product crack spreads has been the main reason behind fall in 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 for hydrocarbon.
In order to maintain smooth placement of the supply of products across the country, our pipelines are being augmented. Indian Airlines is now focused on LPG and natural gas pipeline infrastructure also apart from conventional crude oil and product pipeline networks. The capacity utilization of our pipelines was about 88.7% during this quarter as compared to 92.2% in the previous quarter. The fall in capacity utilization is mainly attributable to fall in crude throughput because of refinery shutdowns. Our pipelines continued to generate stable returns, giving an EBITDA of about INR1545 crore during this quarter, which is about 3% lower than the preceding quarter and lower by 4% from the corresponding quarter of FY 'nineteen.
The current EBITDA on a nine month basis is lower by 2% from the corresponding period of last year. In Marketing, the product sales during this quarter was 21,926,000 metric tons as compared to 20,181,000 metric tons in the preceding quarter. On a nine month basis, they have remained almost same, that is 63,711,000 metric tonnes in nine months of FY 'twenty versus 63,649,000 metric tonnes in nine months of FY 'nineteen. Accordingly, marketing EBITDA for this quarter stood at about INR 3,914 crore as against INR 3,813 crore of the previous quarter. While comparing the marketing EBITDA on nine months basis, it is seen that the EBITDA of nine months of FY 'twenty is INR 12,292 crore as against the EBITDA of INR $8,001.84 crore in nine months of FY 'nineteen.
So marketing EBITDA continues to be stable. In Petrochemicals, during this quarter, the Petrochemical business reported an EBITDA of INR $7.42 crore as it reached INR $7.74 crore in the previous quarter. However, comparing with the current the current nine months performance with that of the corresponding period the last year, there has been a sharp downside in Avista. The major reason is due to the shrinkage of petrochemical spreads in polymers, MEG as well as PTA. Moreover, the PTA unit was under shutdown during the first quarter of the current year.
The PXPT plant has commenced production during the second quarter. We believe as we go forward, the PATCAM will continue to contribute to the bottom line of the company handsomely. In borrowings, you must have observed that the borrowings as on thirty first December twenty nineteen have decreased by about INR 10,653 crore and is at about INR 75,706 crore level as compared to Rs. 86,359 crore as on thirty first March twenty nineteen. The borrowing level as on thirtieth September twenty nineteen was Rs.
80,382 crore. 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 make 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 cell phone keypad.
Participants are requested to restrict with two questions in the initial round and join back the queue for further questions. First question comes from Avadhoot Sabnis from CGS CIMB. Please go ahead.
So first, my first question relates to dividend. I think last two, three years, You know, obviously, there has been some interim dividend for the first nine months. So it's after quite a little big gap. There is no interim dividend in the first nine months. So if the board in its system has decided not to give dividends for the first nine months, would it be safe safe to assume that the dividend, if any, for FY twenty will now come only with the fourth quarter results?
And secondly, again, last three years, we have had a higher payout of 50% dividend payout compared to the minimum level of 30%. Is there a possibility of going back to the minimum level of 30%? That's my first question.
So now you have observed that the profits during the current period current for these nine months in the current year was substantially lower. So we thought that it will be prudent to seize the view of the profits coming in the fourth quarter before we take any call on the interim dividend.
And secondly, related question, which is on CapEx. Firstly, think you have given a guidance of CapEx of INR25000 crores for this year. I presume that still stands. Could you just is there a guidance for next year? Basically, where I'm coming from is that you have given a very aggressive CapEx guidance for the next five years, which would imply that the CapEx would actually accelerate going forward.
FY 2122 will probably be higher than FY '20. Would you be looking to look at reviewing that CapEx number given the lower profitability in refining?
So the indication perhaps was for a period of five years. So that, in any case, will not scale up to that level immediately. So that will happen gradually. Maybe you can expect some increase definitely next year as compared to current years.
And the current year $250,000,000,000 is required to have a gross standard? Yes.
So there can be a marginal increase from that level as immediately in the next years.
Thank you, sir.
Thank you, sir. We have next question from Prabhupal Singh from Centrum Brophy. Please go ahead.
Yeah. Thank you for the opportunity. I had
two questions. Number one, sir, on the tax rate front, just wanted some more clarity. Is there has there been any
clarity in terms of what whether you will be moving to the new lower tax rate of 35 odd percent as per the new rules or because of outstanding math provisions, you would stick to the normal margin tax rate of between 30% to 33% for this year and the next? And the second question was, has there been any clarity from the government or internally in terms of what premium you need to charge from April when Bharat VI will start to be sold from a majority of your fuel pumps?
So on the first question, for the current year, we are not going to opt for the new rates, the lower rates. For next year, though at present, it is not likely, but we will have to take a call depending upon the situation, profits and other things. And on the second question, the prices of auto fuels So we do not need to or expect any guidance from the Government of India on this aspect. So we will take a suitable call.
Definitely, there has to be some increase to compensate the refiners for the CapEx and the OpEx, which they will be incurring. They have incurred or they will be incurring.
Sir, is it not it's not possible to quantify at all any range of the price increase you'll need to take for that, given that it's two months away?
I think it is already in the media. Yesterday, our chairman had taken the press conference, and I think we have indicated some range, maybe of 50% of only that, which which which can be there. But then we attract workings because the investments of each refinery will be different. So we it will have to be calculated actually that what kind of increase is there for every refiner. And maybe because the prices cannot be divert at least for a company, so we will have to arrive at a sort of a weighted average rate.
Okay. Thank you. Thank you very much, sir. I'll come back in the queue for more questions.
Thank you, sir. We have next question from Rakesh Sesiya from HSBC. Please go ahead.
Hi. Thank you for the opportunity, sir. So two questions from my side. First, on the refining capacity expansion for Baroni, which you have announced. I think the press release mentioned a number of close to about INR 13,000 crores for a capacity of INR 3,000,000.
But could you explain, is there any other economic benefit apart from this INR 3,000,000? And what sort of economic benefits investors should be looking up from this project? Because intuitively, INR 13,000 crores for INR 3,000,000 ton of capacity expansion, that sounds not too much number from economic returns perspective. And secondly, if you could help us understand the where the NNOR project is right now And what kind of volumes one should be expecting over the next couple of years? And what are the companies planning to evacuate those volumes beyond the territory of Chennai?
Yes. On the first question, now any expansion of refining capacity, which is happening anywhere is definitely coming out with some petrochemicals also. So so is the case with our Baroni expansion also. So the cost is at this level because there is inclusion of some poly, some PP also in this project. And definitely, you can expect that our, say, cost of capital is about, say, 11%.
So definitely, we are expecting returns of that order. On the second question, our present capacity utilization is to the extent of about 15%. We are doing about 0.7 MMT of gas from the terminal. And that is constrained only because of the connectivity by pipelines. But all the major anchor customers in that region are already being serviced like CPCL, Madras Fertilizers, Tamil Nadu PetroProducts and Manali Petroleum, etcetera.
We expect the capacity to be ramped up shortly. And perhaps we expect almost full utilization by, say, mid-twenty twenty one, maybe the Q1 of calendar year 'twenty one or next Q2 of calendar year 'twenty one.
Sir, just one clarification. To go to 100% utilization level, you would not need any separate pipeline? Or is there any pipeline under construction to evacuate those volumes? Yes.
We have presently only Enrol Manali section, which is only 22 kilometer commissioned, through which we are servicing these for four major customers, which I just mentioned. And we are commissioning we are working on Ramnakpuram to Tutikorin section, which is 143 kilometers, perhaps expected to get commissioned by March 20. And and lower Ramanudar Ramanapuram and through a Lower Bangalore section, which is about 1,279 kilometers by the time frame which I indicated
Understood, Thank you very much.
Thank you, sir. We have next question from Sabri Hazarika from MK Global. Please go ahead.
Yes. Good afternoon, sir. I have two questions. The first one is on this BS VI itself, my Chairman mentioned that the prices may go up by around INR0.521 per liter. So this benefit will accrue to the refining division or the marketing division?
This definitely, the investments and the OpEx is done by refining by by the refinery vertical. So and within this company within a company, it is doesn't matter to which work we to which vertical we are tied into. But then it is due to the refining division.
No. So it will be, like, whatever the BS IV prices are, the benchmark prices, plus 50 paisa or would you benchmark it to something like a Euro six benchmark itself?
So as I said, we are we have to attain the finality on the price on the cost, which we will be incurring CapEx or OpEx. And today, the Euro 6 benchmark pricing is not available at least for both the products. So we will have to see how to do that.
Okay, sir. And second question is on the on few book bookkeeping question. One is one is the government subsidy outstanding at the December?
It says about INR 11,000 INR 10,800 crores and some odd crores. So INR 10,859 crores to be precise, is the outstanding around December 31.
And of this, how much would be kerosene and LPV?
Outstanding. Yeah. Kerosene, $17.55 is how much? $17.50 is for Kerosene, and balance is.
Okay, sir. And and one last question. You mentioned that your adjusted was around $2.5 for the quarter. Right?
We said 2.15.
2.15. Okay. Got it, sir. Thank you so much, sir.
Thank you, sir. We have next question from Pinakin Palik from JPMorgan. Please go ahead.
Yes. Thank you very much. So my first question is on refining. If you look at the throughput, basically, in the second quarter of, I think, FY third quarter of FY 'nineteen, throughput touched 19,000,000 tonnes on an annualized rate of 76,000,000 metric tonnes. But since then, over the next four quarters, throughput has been on a quarterly basis below 17,500,000 metric tonnes.
So going forward, is this the run rate of throughput that we actually should expect? Or basically, there was a bunch of maintenance and refinery expansions which pulled back throughput and going forward, we can expect throughput to rise?
Yes, you are very correct. It is only because of the shutdowns in run up to BS VI preparedness that the throughputs are down. And you can expect a higher, more than 100% capacity utilization in the next year when practically no shutdown will be there.
Sure, sir. Thank you. And sir, my second question relates to the Petchem expansion. Now the capacity has come on stream, but is it fully operational and profitable? Or are they still in the process of ramping
up and therefore higher costs?
So just wanted to understand how will the profitability yes, market spreads are one thing, but from a plant perspective, should the operational profitability improve as it ramps up or now that is fully captured?
So I I believe you are talking about PXPT. No. We just doubt. Yes. Yes.
So PXPT is now fully operational, and it is only constrained due to the prices.
And the PP one, sir?
And the PP that Paradeq, one train was commissioned earlier in July 19. The second train is mechanically complete and is being commissioned now.
Okay. And sir, lastly, are there any new petchem expansions or refining volume growth over the next twelve months, CapEx which has been spent over the last six to eight quarters, which could enter commercial productions over the next twelve months?
So it is only the second chain of PPD which have we talked about. Nothing beyond that.
Understood. Thank you very much, sir.
Thank you, sir. Our next question is from Anubhav Agarwal from Credit Suisse. Please go ahead.
Yeah. Good afternoon, sir. One question was on the fuel oil sales. Right now, annually, we're doing about 3,000,000 tons of sales. Over next two years, will this quantum go down or will it largely stay here?
So this furnace oil, the high sulfur furnace oil, in any case, we are planning to sort of reduce year over year. Now our yield of FFO is of the order of 3.5% to 4% only. With the production of about 1,000,000 metric tons of IROMO compliant Furnace oil and Gujarat refinery and perhaps some more quantity will come from earlier refinery. So the production of F4 is not likely to increase, that high sulfur F4 at least.
But is it likely to go down? So 1,000,000 ton is IMO compliant. What what about the remaining 2,000,000 ton? Would we continue
like that? No. That is that is that is the reduction in the F4 will be linked to, say, any upgrade in the refinery split, refinery units. Okay? So since we have already completed our distillate issue improvement project at Haldia, no more further such facilities are NV sales in the near future.
So this is likely to be at the same levels.
Okay. My second question was on the marketing volume growth. Can you give some volume outlook over there? My specific question with was with respect to the LPG penetration. Now that we are industry is already reaching a very high utilization rate for LPG, and that's one of the highest segment in terms of growth for us.
Let's say for first nine months, I see that our volume growth in the marketing segment is only 1%. Over next one or two years, how do you see overall marketing volume growth for us?
So 1% you said about the total products perhaps?
Yeah. Total products.
Absolutely. Not I'm saying it's
it's 1% despite LPG growing at 89%.
Okay. So now while the whether it will be mostly determined by the demand also or that the demand remains, But some reduction in because you are saying 1%, that reduction is also because of the SQ volumes going up sharply. So what number should I give you for the demand? I think we can come back on this demand numbers separately. Sure, sir.
Thank you.
Thank you, sir. We have next question from Vishnu Kumar from Sparth Capital. Please go ahead.
Good afternoon. Thanks for your time, sir. Just wanted the actual debt numbers that is excluding the lease and India's adjustments out of the 75,000 crores.
It is 68,521 crores. $6.08 $5.02 1.
Got it, And comparable marks, how much was that number, sir?
$8.02 $8.04 8. $8.02 $8.04 8. Got it, sir.
And in terms of your OpEx cost for refining, the the per barrel works out almost 3 and a half dollars per barrel. Is there any one off or something in that number? No. I mean, if I take the report at GRM against and back calculate my EBITDA, the balance is working on almost three and a half. Normally, I believe it's
Only because the throughput was down as you or some of the, perhaps, the speakers also mentioned. So once the volume goes up in the next year because the shutdowns will not be there, we see this number coming down.
Steady state, what would be your ideal OpEx cost, sir?
It should be about $3 considering all in that depreciation section.
Right. I mean, in OpEx operational level, I'm asking cash OpEx EBIT before EBITDA in terms of dollar per barrel or
It can be between around 2.2 to 2.3, 2.4.
Got it, sir. Thank you.
Thank you, sir. We have next question from Nafisa Gupta from Bank of America. Please go ahead.
Thank you. Good afternoon, sir. My question is again on BS VI. Any other refinery shutdowns planned during the fourth quarter? And also, could you give us a breakup of the CapEx done on BS VI transition?
Our total spend is likely to be of the order of about 17,000 crore for BSX projects. And we have a few shutdowns in q four also. So what are you interested about?
Sir, any major ones? Any major ones in 4Q? So we will have Or all the major ones are down?
We will have Guwahati, Bumbai down, and Muthra coming up in q four.
Okay. And sir, my other question is that in this quarter, the utilization of higher sulfur was high at 60% relative to the previous quarters. Is that a one off, or should we see that trend And did that also contribute in your refining margins in terms of feedstock benefits?
So I think we were operating around this. Okay. So 60% high sulfur utilization. We will come back on this separately.
Sir, sir, thank you. And if I may, sir, can you also tell me the CapEx numbers for 3Q? And also, you mentioned that you expect the CapEx to go beyond $250,000,000,000 in FY 'twenty, sir. Any particular reason why?
Yeah. So CapEx for you wanted q three. No? Q three. Yeah.
Q three CapEx. That's the business. So total CapEx for this period is 17,801 crores. And for q three, it is INR 7,995 crores.
Sorry, sir. And and the other follow-up question was, any reason why you expect the full year CapEx to go beyond INR $250,000,000,000, as you mentioned in answers to your previous question?
Because we have ambitious CapEx plans as the earlier question and also if not for mentioned. So there are a lot of projects which are lined up in various verticals. So that is why I mentioned it will be shaped better in the next year.
Got it. Thank you.
Thank you, ma'am. We have next question from Rohit Ahuja from Bank of Baroda Capital Markets. Please go ahead.
Hi, sir. Thanks for the opportunity. This is going back to the question on dividend. I didn't get that clearly. So I said you normally have a trend of paying interim dividend, especially in Q3.
And I think your profits for the nine months are pretty good. So can you clarify why the decision not to pay dividend this quarter?
Oh, while you feel that it is pretty good, we feel it was perhaps not that good. It was much lower than the corresponding period of last year and definitely from full year. So we decided to have a better view of profitability before taking. We did not want to pay multiple times also, so we will see. We will take a call in this quarter.
Okay. So secondly, on on the IMO, we haven't seen TRM moving upgrade was expected about a year back. And rather, we are seeing the new concern on trade rates being pretty high. Can you just clarify, sir, when do you think situation could normalize on the benchmark GRMs and your GRMs? And when do
you see this turning out? So despite these BS VI shutdowns, our operational performance has been largely good. And it is only a factor of the prices that the GRMs are low. So now while we do not have any control and perhaps the prices cannot be forecast very accurately, So with any correction in the prices, we expect the GRMs to be stronger. Okay.
Thank you.
Thank you, sir. We have next question from Maliganda Gore from Axis Capital. Please go ahead.
Hi, sir. Thanks for the opportunity. I have two questions. One is, can you please guide us your view on
the marketing margins going forward? That's my first question. And the second question would be can throw some light on the strategy going for going forward for the debt space, especially what's happening with your lending terminal as well as the PGD. What's what's the status there?
I have your question. Marikanth, I think you should I mean, morning, all. You should repeat your question because you're not audible at all. I believe you did ask about first thing about is the marketing margins going
forward. Yes, sir. Is that right? Are not able to believe
the EBITDA numbers of marketing, and they have been quite steady. And I believe they have continued to be steady over the year and over the quarter. Even in the last year, you found that these numbers were almost similar, so we are almost reaching to the same numbers. So we'll continue to have the marketing margins at the same levels. So I think your second question, we have not heard it correctly.
Can you just repeat that?
Yes, sir. On the first question itself, remember, in your first quarter conference call, you have mentioned that marketing margins would gradually trend down from there and onwards. So I was actually more asking towards
You want it to trend down? I don't know. So I'll just ask. So I believe that we are making good progress in marketing. So I think you should be appreciating the fact that we'll continue to make that progress.
Sure. And the second question is with respect to your strategy going forward for the gas base, especially with respect to the CGD and LNG terminal.
So LNG terminal, we just explained earlier Yeah. On the anode terminal. And CGD, again, we are working on the for the HTAs, which are allotted to general as stand alone or in the JVs. So I think a lot of work is still to be done. These will start, but we are only working on these GAs.
On some of the GAs, the work is yet to start. So, definitely, we are very bullish on the gas, and we will be availing any space which is available in the gas.
Sure, sir. Can you if possible, would it be possible for me to throw some light on the open access policy?
So sorry to interrupt, mister Manikar. Could you please join back with you for further questions, sir?
Yeah. Sure.
Thank you. Next question comes from Mayank Maheshwari from Morgan Stanley. Please go ahead.
Thank you for the call, sir. And I had one question related to your on the refining business. As you saw in fourth quarter, think the overall spreads on GRM that you kind of did was about $2.2 and the operating cost is roughly around that similar level. So is there a plan that you're kind of thinking where some of the refineries are running below cash cost? Is there some plan to kind of take utilization notes lower in any of those refineries?
Utilization? Lower utilization? Yeah. Because cash, we
are running just below cash cost. So I was just trying to see if there is any plans for the less complex refineries to be run at lower rates.
No. No. There is no such plan. And I we believe that these this pricing scenario is perhaps temporary only, and this should connect it to sort of incentivize the refining. So we do not have any such plans of cutting down on the capacity of any refinery.
Okay. And so the second thing was on the crude side and the shipping side as well, you have seen the OSPs on the crude side kind of move up pretty materially in 4Q. Can you just talk about at least subjectively in terms of your strategy on crude sourcing now for next year?
We are as such, besides this OSP hardening of OSP, as such it is in the interest of the company as well as the country to diversify the supply sources. And we are also doing the same thing. Last year, we introduced The U. S. Groups, which we will continue in this year.
Besides that, we are also looking through four or five different geographies and would try to include those groups also in our basket.
Okay. Can anything say on
the shipping side? Like how was you how much was the impact you saw on the margins in the last quarter because of shipping cost increases? And do you think things have normalized now for you?
No, the freight rates continue to be higher. They are at least today also, they are about, I think, 25% to 30% higher than what levels they used to be in the previous year. And that definitely impacts the margins. One is perhaps because of IMO and second is perhaps because some companies were sanctioned and some of the ships were out of circulation. So we do not have any view on what will happen going forward.
But definitely, it is impacting to some extent, though not materially, but to some extent, definitely in the refining margins.
Okay. Thank you.
Thank you, sir. We have next question from Ripple Shah from Sumangal Investments. Please go ahead.
Hi, sir. Can you repeat the energy gains for marketing and refining for this quarter, please?
Yeah. Just a bit. So for this quarter, the for the finding, the price line. So for refining, the inventory gain is, say, INR 1,900 crores approximately, And marketing, say, about this price line is a little bit for what, if I may? Yeah.
So for refining, you take about 1,700 crores. And for marketing, is negative INR100.
Negative INR100. Okay. Thank you, sir.
Thank you, sir. We have next question from Vinit Joshi from Goldman Sachs. Please go ahead.
Hi, sir. Thanks for taking my question. Sir, in terms of VLSFO, can you please tell us what kind of margins are you making when you're selling VLSFO? And what is your total capacity of VLSFO for next fiscal year?
So our capacity is going to be a 1,200,000 metric tons approximately combined with Gujarat and Haldia. And Okay. Margins, I'll not be able to share as of now.
Okay. And and, sir, I think you mentioned that that this VLSFO is not, like, coming at a cost of HSFO. So this is, like, new production that they're doing. So is it, like, some new upgrades that you have taken which is helping you produce this? Or does it is it, like, coming at the cost of, say, producing gasoline or some other refinery molecules which you are diverting to produce VLSFO?
No. I I perhaps I did not say that way. I said my total pool of FO is about 3.5 to 4% in the refinery yield, and we have upgraded some of that to the IMO compliant f.
And then how have you upgraded that? I mean, you added any residual operation desulfurization capacity? I just wanted to understand that how are you producing this.
You are welcome for a refinery visit.
Alright, sir. No worries. In terms of petchem, can you please tell us of of your new capacity, like, what utilization rates they are running at? Because the production volume right now is still 630,000 tons. And in the past, you have done volumes as high as like 700,000 tons in 4Q FY 'seventeen.
So what sort of volume should we expect for next fiscal year?
The numbers of you're talking about petrochemically as a whole, Emily?
Yeah. Yeah. Yeah. So overall volumes that you report in the PDF is around, you know, 630 kt.
Yeah. Yeah.
Right? And in the past, you have done as high as 700 kt. Right? But now you have capacity, which has expanded as well. So I'm just trying to understand like what sort of volumes will you do in FY 'twenty one?
And like what utilization rates are these new capacities running at right now?
See, the new capacity is only about BPP that you're talking about in that is around six eighty KPA plan and that too because only one train is in operation. So from August to December, we had 116,000 metric tons capacity utilization was around 82%. The second train is I mean, it's already mechanically completed and it will be under commissioning. So once it is on track, probably our the production numbers will be ramped up. As far as the existing petrochemical plants are concerned, we had mentioned earlier Petrofinance also mentioned that our PTA plant was under shutdown for quite some time.
And that's the reason why we could not have the correct order, the targeted numbers of production. And now that it has come back on stream, going forward, our numbers will be up to the capacity that it has been designed for. So we are not envisaging any decrease in capacity going forward because the plants are up and running. And the new capacity, of course, as I mentioned, once the second train comes into play, the capacity will increase.
Okay. Thanks a lot, sir.
Thank you, sir. We have next question from Vigas Jay from CLSI India. Please go ahead.
Okay. Hi, sir. Thanks for my taking my question. Just one, your could you please tell me the unit inventory carrying cost for crude that that you have as of the end of the quarter?
Unit inventory carrying cost? In US dollar per barrel. Oh, so you if you want the price, I can give you what is the closing price. I believe you can calculate the inventory carrying cost. No.
I mean, what I mean is that you'll be carrying inventory, which will be, like, twenty, thirty day old. Right?
I mean, so what is the average carrying cost at which the inventory has been valued? It's
right? Will we at cost? The closing price of our crude inventory is $67.27 per barrel, and we are carrying about forty three days of crude. Yes. Does that to reply to your query?
Yeah. That's right. I mean and the product, if you have a similar for, like you said, forty three days of crude, what would be the, you know, like, we will end up with
Our products are installed our products are installed at several places. So there's some Okay. At refinery end, some at marketing end. So what for some in pipeline. Put together, that is also about thirty seven days.
Okay. Thank you so much.
Thank you.
About thirty days thirty days for products and seven days for maybe intermediate.
Thank you.
Thank you, sir. We have next question from Vidyadhar Gindi from ICICI. Please go ahead.
Yeah. I have couple of questions. One was on this in the first quarter earnings call, you had talked about You are killing for getting. So could you give us any update on what's happening on that?
Because IGN had taken the matter to court. So if you could give us an update on that issue and how do you think that's going to pan out?
Gedar, I think you need to repeat this question because there's a lot of buzz behind you. There's a lot of humming sound.
No. No. The question I was asking yeah. Yeah. So the question I was asking is that in the first quarter, you had talked about your interest in getting into Mumbai and Delhi in CT gas distribution if you are allowed to.
And you had also said IGN has taken the matter to court. So if you could give us an update on what's happening on that and also your view on how that's going to pan out.
I think, we gather, we have to talk on this separately because I think we can talk separately on this.
Sure. Sure, sir. And the second question is on your earnings call, you had talked about possibly bidding for BPCL or maybe even investor. Will give any updates on that?
I don't remember. Have you said that we will be going to bid for BPCS?
No. No. Not bid, but it a potential. It was it was not clear. No more clear.
Yes.
So still the position is same. We are sort of not officially informed or asked to bid or not to bid. It is only the media reports which are doing the rounds. So once that offer or otherwise is available, then only we can perhaps take any call.
And on Gale, what is happening or what's happening there? On what? Gale? Gale. Gale.
Gale.
No. No. Same situation as of as far as we are concerned, but I believe Gale, there was a talk of perhaps bifurcation, which would take some time. But we have not heard anything on that. Hello?
Are you there?
Yeah. I'm there.
I'm still. Okay.
Shall we take the next question, sir?
Yes. Next
question is a follow-up question from Avadhoot Savnis from CGS CIMB. Please go ahead.
Yeah. So firstly, I guess, I'm a bit confused on the BS VI pricing of product. My understanding right now is that there's a uniform pricing system for products, whether it's petrol or diesel because when the marketing arm of IOC buys from the refinery, it's not just from your own refinery. Right? It's from other refineries of other PSUs as well as to potentially private refiners.
So the uniform pricing applicable for everybody is my understanding. So, a, am I wrong on that? And two, wouldn't the same apply for PS six pricing as well? There will some whatever the pricing will be, you will come across the
Your understanding is correct, and that is not likely to be disturbed.
Okay. Okay. So basically Second question relates to, again, the your refining margins. Okay. Your your normalized refining margins have dropped very substantially, looked exactly far ahead of, you know, what the normal sort of lower crack spreads.
Firstly, can you and I'm clearly not getting any positive sort of the contribution that was expected to come from Paradeep. Would it be possible to share what was the Paradeep normalized year in third quarter or for the nine months of this year? And related question is that when you discussed GRMs, even in the second quarter, you said, you know, you have to make a detailed sort of analysis of why GRMs are low. You know, if you could share the result of that analysis?
Yes. In the previous con call for the last quarter, we had mentioned that there is a significant gap between Singapore benchmark margins and our normalized margins, which we were to look into. And in fact, we realized that perhaps now it will not be appropriate to compare our GRFs with Singapore benchmark margins also because the prices are playing a havoc. The yield of the products in the Singapore benchmark margins and what the Indian refineries do is significantly different. And as long as the prices of various products move in tandem, that does not create a problem.
But now the prices are moving quite differently. Like there is a crash in the F4 prices, high sulfur F4 prices, for which the yield in Singapore is very high. Earlier, the MS prices, in fact, were in fact, had gained some strength and the weightage of MS in Singapore was high. So that is all creating a problem. So while we were lower than Singapore benchmark margins in the last quarter, we are higher than Singapore benchmark margins for this quarter on a normalized basis.
So firstly, what I was trying to get at is that other than the normal market cracks, are there refining specific issues which could have contributed to the lower G and A, I. E, because of shutdowns and stuff like that? Is there any refining specific issues which you could quantify, if at all?
No, I don't think there is any such issue. It is only the factor of the prices and partly because of the BSX shutdowns that our GRMs are slightly lower. But otherwise, there is no such refinery specific issue.
And sir, the number of the Paradeep normalized GRM?
So our people will give you separately.
Okay. Last question, if you could just try to squeeze in. There is a drop in the debt level from September to December. I'm just happy to understand why there is a drop given that the CapEx number seems to be higher than operating cash flow, and the government subsidy dues also are virtually flat or slightly increased?
No. As of March 31, we had about INR 19,000 crore of government dues, which have come down to about INR 1,300 crores, and that is the primary reason for decrease in the borrowing.
Sir, sir, I'm asking December or September? Because
of the price level, the working capital require current working capital has also gone down. So there is some relief in the working capital also.
Thank you, sir. Thank you so much.
You, sir. Last question for the day comes from mister Ramesh from Nirmal Bank Securities. Please go ahead.
Good evening, gentlemen. Thank you very much. In the consolidated numbers, the share of JVs and associates has come down very sharply from $4.50 to four for the third quarter last year to 218 crores this year. Can we get some sense in terms of what the letter is for the share of JVs?
It is primarily because of CPCL, perhaps.
And yeah. So sorry. I said, Arani, our LNG and LNG plant, which till last year was under commissioning. And it is not up to you know, we said 15% capital utilization. So it will take about a year to be profitable.
So that, you know, operating small loss is taking away other's profit.
So it is definitely the no terminal loss which is relating to the fall in the current deal? Yes. Yes. Okay. In terms of the petrochemical business, so it's interesting to see that you're talking about oil, chemicals and brownie.
So the broader question is now if you see the capacity numbers, you know, we are talking about still a lot of capacity additions coming in. So in terms of your competitive positioning, how are you reading the demand supply in the region and, you know, across the globe? And how do you what is the basis of your confidence that you'll be able to, you know, operate at, say, 90% on your full certificate capacity given the kind of excess capacity we have in the world?
For petrochemicals in India?
Yeah. It is
it is still conceptual. So I think situation in India perhaps is irrelevant for us to see, and I believe there is lot of capacity available domestically for BP.
Yeah. So the question I'm asking is talking about, you know, a downstream chemical strategy quality problem. If you
see the
global situation, that's what drives your margin. So to that extent, you know, you wanna understand in terms of your reading of the business, what gives you the confidence that, you know, you'll be able to, you know, generate cash flows in the, petrochemical business, say, in the next three to five years? Given that there's a lot of, capacity is lined up, including a lot of oil oil to chemical strategy. So I just want to get a sense in terms of what your rating of the petrochemical business is.
We we feel that the prices, in fact, should correct in polymers also. And we based on that, only we are going ahead with our petrochemical brands.
Okay. Okay. Thank you.
Thank you, sir. That would be the last question for the day. Now I hand over the floor to mister Bhavan Gandhi for closing comments. Over to you, sir.