Good morning, ladies and gentlemen. I am Pavitra, moderator for the conference call. Welcome to the Indian Oil Corporation Limited 1Q FY 2020 post-result conference call, hosted by Batlivala & Karani Securities India Private Limited. At this moment, all participants are in listen-only mode. Later, we will conduct a question and answer session. At that time, if you have a question, please press star and one on your telephone keypad. Please note this conference is recorded. I would now like to hand over the floor to Mr. Bhavin Gandhi from Batlivala & Karani Securities. Thank you. Over to you, sir.
Thank you. Good morning, ladies and gentlemen. On behalf of Batlivala & Karani, it gives me great pleasure to host the management of Indian Oil Corporation for this post-result conference call. I would now like to hand over the call to the management for the initial remarks, and then we'll open the floor for a Q&A session. Over to you, sir.
Thank you, Mr. Bhavin. This is Mathew, Chief General Manager, Corporate Treasury of Indian Oil. I welcome all of you for this conference with respect to the first quarter results of 2019-2020. Along with us in the management team is Mr. Sandeep Kumar Gupta, Director of Finance Designate and the CFO of the company. Along with him is Mr. Rohit Agarwal, the General Manager of Corporate Finance, Mr. Prabhat Himatsingka, the Deputy General Manager, Corporate Treasury, and Mr. Avinash Singhal, Corporate Treasury and Investor Relations. Just to set the tone, let me just remind you that while we speak about the accounts and the numbers that are there, which has been circulated to you, we would request you that we'll keep our questions restricted to the accounts that has been put forward.
The other related questions can be taken separately as and when the time permits us. Thank you very much, and I request Mr. Sandeep Kumar Gupta to give his initial remarks on these accounts.
Dear investors and analysts, a very good afternoon to all of you. I take this opportunity to welcome you all to this conference call, post announcement of the first quarterly results of financial year 2019-2020. We have uploaded results yesterday on the website. You must have gone through that. You would have definitely received the updates from our side also. Still, I would like to provide some additional clarity and insights on our results. Coming to highlights, first of all, the global Fortune 500 list for 2019 has been announced. We are pleased to inform that Indian Oil has improved its position to 117, with a relevant turnover of $77.6 billion. This is a jump of 20 spots from the previous year's ranking.
As regards the crude price, because of various geopolitical factors which counterbalanced each other, the crude prices remained range-bound, and are expected to be so in the near future also. Petroleum product consumption in the country for this quarter saw a drop of 0.2% as compared to the same period last year. Except for MS and HSD, every other product registered a negative growth. With respect to the crack spreads of the products, the MS cracks witnessed an upside during this quarter at $5.3 per barrel as compared to the preceding quarter, where it was $1.9 per barrel. However, if we compare with Quarter One of financial year 2019, then it is lower by 40%. The MS crack at that time, in the corresponding quarter, was $8.90 per barrel.
Similarly, for HSD, the crack spreads during this quarter was INR 10.4 per barrel, which is lower by about 10% as compared to preceding quarter, where it was INR 11.5 per barrel, and 18% lower than the corresponding quarter of financial year 2019, where it was INR 12.5 per barrel. In the petrochemical space also, the spreads in INR per metric ton have witnessed a declining trend in the last one year, and spreads for polymers in this quarter were about INR 556 per metric ton lower, which is 2% less than the previous quarter, and 18% less than the corresponding quarter of financial year 2018-2019. Similarly, in the case of glycols also, where the pricing of MEG of IOCL is priced, the decline has been sharper, and it came down by almost 88% in this quarter as compared to the corresponding quarter of last year.
Despite the above negative factors, which does play a crucial role in the profitability of our business, this quarter, we have registered a profit after tax of INR 3,596 crore. It is 47% lower than the corresponding quarter of financial year 2019, but this better performance in the corresponding quarter of financial 2019 was primarily because of a very high inventory gains of almost INR 7,800 crore. The revenue from operations during this quarter has registered an increase of about 3.9% as compared to the previous quarter, which translated to INR 150,135 crore as against INR 144,472 crore, and is also slightly higher than the corresponding quarter of financial year 2019, which was INR 149,747 crore. Let me touch briefly on the major verticals.
Coming to refineries vertical first, the throughput during the quarter was 17.3 million metric ton, which is, though marginally lower than the preceding quarter of 17.4 million metric ton, as well as the corresponding quarter of financial year 2019, where it was 17.7 million metric ton. The capacity utilization was more than 100%, this is, we believe, is commendable considering that there was a major shutdown at our Gujarat refinery owing to our BS VI preparedness. The distillate yield was at 80.2% during this quarter, which is also in line with our plans. Consequently, the refineries have registered a GRM of $4.69 per barrel during this quarter. That is compared to $4.09 per barrel during the previous quarter.
As per practice, followed during the earlier quarters also, we have continued to work out the GRMs, where the inventory impacts are stripped off and the price lags are factored in to arrive at the normalized GRMs for comparison with Singapore benchmark margins. Accordingly, our normalized margins for this quarter is $2.27 per barrel, as against the Singapore benchmark margins of $3.50 per barrel. We may mention that the higher Singapore margins are basically because of the movement of cracks, which favored Singapore benchmark margins, considering that the MS proportion in the Singapore benchmark margins is more than our product distillate. Coming to pipelines. Our pipelines continued to generate stable returns, giving an EBITDA of about INR 1,623 crore during this quarter, which is about 2% higher than the preceding quarter. The capacity utilization was about 92.8% during this quarter, as against 90.2% in the previous quarter.
Pipeline capacity utilization, as you would know, most of these pipelines are captive, so they are utilized in accordance with the refinery requirements and refinery production. Coming to marketing. The domestic petroleum product sales during this quarter have been flattish. That is, they have maintained the same levels as that of the previous quarter, 20.521 million metric ton. As I stated earlier, though, the industry witnessed an overall drop in consumption by about 0.2% as compared to the corresponding quarter of last year, Indian Oil per se has registered an increase of 0.3% as compared to the corresponding quarter of financial year 2019. That way, we have sort of bettered as compared to the industry performance as regards sales are concerned. Accordingly, the marketing EBITDA for this quarter stood at INR 4,565 crore as against INR 6,848 crore in the previous quarter.
The marketing EBITDA for the corresponding quarter of financial year 2019 was INR 4,369 crore. On the petrochemical front, the petrochemical vertical is very important vertical for Indian Oil and does contribute handsomely to our profits. This quarter, because of abnormally low cracks of petrochemical product, our margins were lower and also one of our plant, that is PTA at Panipat location, remained under shutdown because of an NGT issue. We are glad to inform that since now it has commenced operations recently. Coming to the borrowings. With respect to the borrowing levels, our borrowing as on June 30, 2019 have decreased by about INR 14,000 crore and stands at INR 72,227 crore as compared to INR 86,359 crore as on March 31, 2019.
It may also be noted that this borrowing of INR 72,227 crore is inclusive of about INR 4,000 crore, which is because of accounting of lease obligations pursuant to Ind AS 116. Correspondingly, if we exclude this, also an investment of INR 1,600 crore, which stands in our balance sheet as on 30th June 2019, then the comparable borrowings work out to INR 66,627 crore as compared to INR 86,359 crore as on 31st of March, which is a drop of about INR 20,000 crore. This has been possible only because of settlement of our government dues. I end my briefing here. We will be glad to take your questions. Thank you very much.
Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star and one on your telephone keypad and wait for your turn to ask the question. If you would like to withdraw your request, you may do so by pressing star and one again. Participants are requested to restrict with two questions in the initial round and may join back the queue for further questions. Ladies and gentlemen, if you have a question, please press star and one on your telephone keypad. First question comes from Nilesh Ghuge from HDFC Securities. Please go ahead, sir.
Good afternoon, sir. Sir, as you are aware that PNGRB is in the process of determining network charges for those GAs where marketing exclusivity is already over.
Yeah.
OMCs had shown the interest in CGD business through their JV and through various bidding rounds. They're participating in various bidding round and are on the better footing. That is what I feel. They already have outlets. In that case, what are your plans? I mean, will you enter into these areas where you have to compete with the incumbents, or it is more prudent to go into new areas through upcoming bidding rounds? Your thought on that, sir.
We definitely want to be a player in these GAs also. We understand that one of the participants, that is IGL, perhaps has gone into court challenging this end of exclusivity. This is one factor, and another factor is that assurance on the availability of gas at the domestic prices to other players after this exclusivity ends is also not very clear. Once these things get cleared out, we are definitely very interested in these GAs also.
Just let's assume that government allocate gas to the new entrant as well. That's a hypothetical case. Notification is still not yet to come, or there is no clarity as I understand. If that clarification comes, are you interested, or are you interested in increasing your commission rather than entering into the fighting with the incumbent?
No, definitely, we will be interested in these GAs also, which were awarded to other players, because being OMC, we are positioned well to have our significant presence through presence of our ROs, we can have CNG dispensing, et cetera. We will be interested. However, it is premature to say because these issues are yet to be settled.
Okay. My second question on Ennore LNG terminal utilization, sir. Can you throw some light on that, and who are the anchor customers as of now?
As of now, we are supplying to CPCL and Madras Fertilizers and Tamilnadu Petroproducts, because the complete pipeline is not yet commissioned. That complete commissioning will take time up to maybe February 2021, after which we will be increasing our capitalization of terminal.
How much it is now, and what it will be after February 2021? Any number?
We are expected to do about, I think 0.75, maybe 0.75 million metric ton by the end of this year, say about 1.3 to 1.4 by the end of next year. Once this pipeline gets commissioned, then we believe there should be substantial ramp-up of capitalization of this terminal.
Thank you. Thanks, sir.
Thank you, sir. Next question comes from Sujit Loda from Birla Sun Life Insurance. Please go ahead.
Sir, one thing. Regarding the comparison with Singapore GRM, you said you are 3.2 ton and Singapore 3.5. In that sense, how would an inventory gain will be stripped while looking at the Singapore GRM with the inventory gain compared because that product is made at the end of the quarter and have sold at the average during the quarter. Shouldn't the reported GRM plus inventory gain be comparable to Singapore GRM? What am I missing here?
No, as you may be aware, Singapore benchmark margins are theoretical margins only, which are reported.
Right
by Reuters based upon 100% high sulfur crude processing and a fixed product slate. This all is theoretical only.
Right.
It is calculated based upon daily prices in the international market, that is at Singapore. Okay?
Right.
Since these are on real-time prices, daily prices, so they do not take into account any inventory gains, losses. That is why we strip off our reported GRMs with such inventory gains, losses, price lags, et cetera, to make it comparable to Singapore benchmark margins.
That I'm aware that it's a theoretical calculation. What I'm saying is that if you remove the inventory gain, what else is the component? What is the price lag? Shouldn't the inventory gain be taken care of the price lag impact or what is that which you strip off and you say normalize your current margins?
No, while daily pricing has been implemented for market, as far as the transfer pricing from refinery to marketing is concerned, that continues on fortnightly basis. Our reported GRM consider this RTP, refinery transfer price, based upon fortnightly pricing. This price lag is for stripping this also off to make it comparable to daily price.
Basically what you're saying is that the end marketing, which takes care of the RTP prices in your calculations, that is a 15-day lag, and that is what you are stripping off.
This does not include marketing margin. This is only refining.
Right. Only the RTP.
Assuming that these refinery transfer prices also change on a daily basis.
Okay. Should it be assumed that it will have a negative impact therefore?
Negative impact?
In a rising GRM scenario, what will be the impact of the lag? Will it be a negative impact or will it be a positive impact?
Yeah, in the rising scenario, refinery transfer price will be based upon a lag. It will be a loss, but we will strip it off. In the rising scenario, there will be inventory gains, but there will be a negative because of price lag. When we strip both off, it will be comparable with the daily.
Correct. Thank you so much. Sir, one more for this. This PTA plant which you were saying in the past term, PTA plant in Panipat. What are the number of days it was shut down? How many days?
It was shut down in February for a plant shutdown, and it was to come up in March, but it did not come up because we got a notice from NGT. Since March, practically it is down.
Practically the whole quarter it was not there.
In last week of July, it has been resumed.
The whole of the quarter it was not there.
All of the quarter, it was not up operationally.
Okay. Thank you so much.
Thank you, sir. Next question comes from Aishwarya Agarwal from Reliance Mutual Fund. Please go ahead.
Thank you. I just want to know this marketing income, which we see at a very high level versus the earlier regulated one. How we should see it in the future? Should we see it elevated or should we see it at a regulated level, which used to be nine months before?
Last quarter, you can refer, last quarter was high, and we did say that there will be some corrections, and we consider these quarter margins to be near normal levels.
Okay. then how about current quarter, sir? This 1Q FY 2020?
Is what I'm saying, the first quarter financial year 2019-2020 can be considered at normal levels.
Effectively it is INR 4,200 crore for the quarter, and we should multiply it by four, some INR 16,000 crore plus.
That is for you to assume. The numbers are with you.
Okay. Sure. Thank you, sir. Best of luck.
Thank you, sir. Next question comes from Aditya Suresh from Macquarie. Please go ahead.
Thank you. Just a follow-up on the same question. In marketing, what is the price lag impact which is booked in the quarter, if any? The second question is into IMO, what sort of operational kind of changes are you all making at the refineries? Is any yield enhancement projects which you all are thinking about, any maintenance which we should be aware of? Thank you.
The first question, I am not clear. Can you repeat the question, please sir?
The first question was that in refining, presumably the performance has been dragged by these price lag impacts. Conversely, in marketing, the opposite holds true, right? Has marketing performance been kind of enhanced by these price lag impacts, which was hampering the refining business?
There will be a corresponding impact. Corresponding to refinery, there will be an impact in marketing.
Exactly, sir. Can you help us understand what that underlying marketing performance was, except price lag impact?
Mr. Suresh, here, I would just like to intervene and say that probably you can leave that calculations to us, to the company to deal with that, because we would not like to dwell into the nitty-gritty of things here. You need to excuse us for this, because you have to see the margins from a long-term perspective. You see that on overall basis, on a year-to-year basis, how this is panning out. Yes, there are impacts.
Right
Probably we may not be able to delve much into that.
As regards IMO, I will not be able to tell you the technical aspects of the changes which we are making in our plant. What I can share is that our Gujarat refinery will be ready to produce 1 million metric ton of IMO compliant FO, and Haldia Refinery is also being prepared to supply 0.5 million metric ton of IMO compliant FO.
Thank you.
Thank you, sir. Next question comes from Vidyadhar from ICICI Securities. Please go ahead.
Thank you. Good afternoon. Couple of questions. One is, what is the status of the polypropylene plant and any guidance on production ramp-up and utilization for the current year and next?
The plant has been commissioned in July. Though it was mechanically completed long back, but it has been commissioned finally in July. July production, though, was low at 2,900 tons. Now that the plant is commissioned, we expect it to produce at the desired levels in the coming months.
Any guidance you could give on current year or next year or some guidance, some idea on what kind of ramp-up? Can we assume say 50% utilization for the rest of the year or somewhat higher? What about next year?
Maybe we will come back on this. We do not have the exact guidance as of now.
is it too early to basically
Because it was commissioned recently.
Yes, okay.
first of July only. We need to have this input from technical point.
Sure. Second question is on, what's your LPG kerosene subsidy outstanding from the government right now, or as of June, and what is it as of now?
Yeah. Rohit?
Yeah. The total GOI outstandings as on June is INR 9,700, and it remains at that level.
Okay. Thank you.
Thank you, sir. Next question comes from Sabri Hazarika from Emkay Global. Please go ahead.
Good afternoon, sir. My question is regarding your group sourcing on the back of changes in the global market. We have got the light, heavy differentials shrinking. What I've noticed is that your high sulfur crude intake has also fallen to around 49%. Are you going for more light crude? What are the economics there? Especially U.S. crude, what kind of economics you are seeing there?
Definitely, while sourcing crude oil, we do take the differentials into account. It's not necessary that always high sulfur processing or heavy crude processing may give us better results. We do optimize on that based upon the differential.
Do you think the market has become difficult now, or it is more or less stable in terms of the margins that you earn in the refining business?
The refining margins are definitely suppressed, as it can be seen from Singapore benchmark margins also. The margins are definitely suppressed, and it is really difficult for the refiners. It's a difficult period for the refiners.
Broadly speaking, what kind of guidance would you give if we assume Singapore to be around $5? What kind of margins could you be targeting under such a scenario?
As you would have also seen, our margins are around Singapore benchmark margins. If you're assuming that Singapore benchmark margins will be $5, then we should also be very near to that.
Okay. Thank you so much.
Thank you, sir. This question comes from Srinathan Sridhar from JP Morgan. Please go ahead.
Yeah. Thank you very much. My first question is on diesel and MS market share. If you look at the trend of the last few quarters, IOCL volume growth on a year-on-year basis has lagged the industry volume growth, but the difference has narrowed. Sir, do you see the market share stabilizing in diesel and petrol, or do you think that this trend of IOCL growing at a rate lower than the industry could continue for the next few quarters?
With any entry of a private player, we being the largest market holders, there is going to be some shrinkage in the market share. For MS, at least I can say, in Q1 2019-2020 versus Q1 2018-2019, our growth has been 8.8%, whereas the PSU growth was 8.7%. However, industry-wise, you are correct that there has been lower growth as compared to industry. Sir, we do lose if the private players are very aggressive, but this may not sustain for a very long time. We have ambitious expansion plans in the retail sector. Plus, we are doing a lot of improvements in service factors and other product differentiator factors also. Let us see how the things proceed.
Thank you, sir. My second question is on the petchem. While you would come and give a more detailed guidance on the polypropylene plant later through the year. Sir, the ongoing projects of the MEG plant at Paradip and the Naphtha cracker at Panipat, sir, what are the timelines we should look at in terms of commissioning?
Yeah, that's it. The MEG project at Paradip, the progress is around 12% right now. The scheduled completion is by October 2021. It is a 357 KT capacity plant. If you're talking about the Panipat Naphtha cracker, it has just gone to the first stage clearance, and it will take maybe around another three years down the line.
Understood. Sir, just two more quick questions. Sir, given where the net debt is on underlying basis of INR 66,000 crores, the visibility that you have. Over the course of the year, do you think that this will go up sharply, stay flat, come down? How are you looking at the debt situation, sir?
That largely depends upon the GOI borrowing positions. The GOI dues position, actually. Presently, the GOI dues are down to INR 9,700 levels. If we get claims settled on regular basis, then definitely borrowings will be at this level. If the GOI dues go up at the end of the year, then definitely there will be an increase to that extent.
sir, INR 9,000 crore, INR 10,000 crore is basically what a run rate due will always be, right, sir? I mean, on a steady state basis.
Yeah. Yes.
Understood. Sir, lastly, just a quick comment on Singapore complex. I mean, the last couple of weeks, fuel oil has seen very strong strength. Sir, the IOCL refining margins to the benchmark, if we have a strength in FO, and given where the other product cracks are, should IOCL still report in line with Singapore complex? You think, at that point of time, there could be material variance if you have a fuel oil driven higher refining margin?
Our fuel oil production is very low as of now. With Haldia, the FO production will further go down. We do not see any material impact on our GRMs because of FO cracks.
Understood. Thank you very much.
Our FO yield is only 3.8%, 2.7 million metric ton only.
Okay. Understood.
For this quarter.
Thank you, sir. Next question comes from Amit Rustagi from UBS Securities. Please go ahead.
Sir, good afternoon. Sir, could you explain us that how much was outstanding from the government at the beginning of this financial year? How much has come through till date, up to July, in the last four months? You have already mentioned that around INR 9,000 crores is still outstanding from the government at this moment. Is that correct?
Yes. The opening dues were, as on 31st of March 2019, the dues were INR 19,121 crore. They are down to INR 9,772 crore, to be precise, on 30th of June 2019.
We received around INR 9,300 crore from the government. Sir, I'm saying in the last one month, in the month of July, have we received anything from the government, and what is the outstanding now?
Yeah. Outstanding, I said INR 9,772 as on 30th of June. The amount received-
I'm talking of 31st of July.
You want 31st of July?
31st of July. Do we have?
We did not receive anything further.
At the end of July, the position remains the same.
Okay. There's a second thing. What was our Paradip refinery margins for the current quarter, and how do we see turning them out in maybe next one year or so?
Paradip margins also in line with other margins, was not good, because the refinery performance remained suppressed because of the lower cracks. Again, its profitability, like any other refinery, will depend upon the cracks which remain in the future period, also at the price levels. If the price levels are high, naturally the final loss impact, et cetera, will be high.
Sir, are we trying to do something different with respect to Paradip refinery because given its complexity, that we can recoup better than Singapore margins? Singapore margins right now is averaging $7 in last one month. Can we expect that going forward, the performance of Paradip refinery will be beating Singapore GRMs?
As I explained, if Singapore margins go up, then our refinery margins will also go up. That has been the trend in the past also for last several quarters.
All our refinery margins will move accordingly in line with Singapore margins, because our margins are impacted by the international cracks. Further, the profitability of Paradip refinery will improve now that the polypropylene unit is now commissioned, that will also give some additional yields based upon polypropylene cracks.
Sure, sir. Okay, sir. Thank you much, sir.
Thank you, sir. Next question comes from Nitin Tiwari from Antique Stock Broking. Please go ahead.
Hi, sir. Good afternoon. Thanks for taking my questions. Now, one is, what was the CapEx in this quarter? If you can give us basically a breakup of where the money was spent, in what all segments, and also a CapEx guidance for the year. Then I'll ask the second question.
We have a plan of about INR 25,000 crore for this year. We spent about INR 4,250 crore in this quarter. We have a whole list of projects where the CapEx is going on. They range from all verticals, refinery, pipeline, marketing, Petrochemicals, E&P. Everything is there. Maybe you can separately take down the details. The total CapEx, I told you, INR 25,000 crore is the plan for the year. We did about INR 4,250 crore in this quarter.
You don't have the breakup with you right now?
Okay. If you are interested, then refineries, the yearly plan is INR 7,300 approximately. Pipeline INR 5,600. Marketing INR 6,400. E&P is opportunity-based, but we have capped about INR 1,000 crore. Petrochemicals about INR 1,500 crores. Gas and et cetera, about INR 230 crores, and others, balance is other projects. Okay.
Right. Sir, what is the refinery CapEx largely around? You are spending INR 7,300 crore, what's the CapEx mostly around?
As mentioned, we have BS VI projects. Out of INR 7,300 crore, practically INR 4,200 crore is for BS VI quality upgradation projects itself. Plus, we have INDMAX project going on at Bongaigaon Refinery, and some brownfield expansions at Barauni, Panipat, Gujarat, et cetera.
Great, sir. Sir, my second question is around calculation of inventory gains. If you can just help us understand the basic modalities of how we arrive at inventory gain or loss. Can you help us understand?
Whenever the prices rise, you recover based upon the latest price while processing the raw material which was procured at the old price.
Right.
This gives you the gains.
Right.
This is accumulated as margin, and we term this gain as inventory gain.
What is the time frame in which basically the prices are compared for calculation?
Opening versus closing?
Yeah.
We compare opening versus closing for the quarter.
Opening would be end of March quarter and end of June quarter would be the closing?
Yes.
That's where my question actually stems from, because a broader sense was that given that crude corrected very sharply over June as compared to the March quarter. Most of the correction happened over the month of June. Prices should have been actually been lower in the month of June compared to what they were at March. It's not like that?
No. Based upon our crude slate, our closing inventory valuation rate was higher than the opening.
Right. Okay. June, actually, we had basically a higher sort of a pricing compared to March, and that's why we ended up with the inventory gain. That's what you're saying?
Yes.
Both on the crude and the Sorry, on the refining and the marketing side.
Yes.
Okay, sir. Thanks. Thanks a lot.
Thank you, sir. Next, we have a follow-up question from Sujit Lodha from Birla Sun Life Insurance. Please go ahead.
Sir, thank you for taking my question. Sir, in BS6, what is the total CapEx spend and what is the monetization expectation on that? How do you monetize anything?
CapEx, as I mentioned earlier, it is INR 25,000 crore for the year. For this quarter, we spent about INR 4,250 crore.
No, sir, I'm talking about BS6 CapEx you must have spent till date.
BS6 CapEx, totally about INR 17,000 crore we are spending.
Okay.
Total CapEx, different years put together will be about INR 17,000 crore on quality upgradation.
Sir, is there any monetization of this? I mean, would you be charging extra on the retail pricing or there's no sort of clarity on that?
As of now, not because let the projects be commissioned. Maybe around February or March, we will have more clarity on this.
February, March. We have to start by January 20, right?
We have to start by 1st April 2020, BS6.
Sorry. Got it. Will it be available from 1st April 2020, or would you be starting it from any of the pumps much earlier than that?
We have to, because there is some requirements of dilution at marketing terminals, et cetera. We will be sort of ready perhaps a month in advance.
A month in advance. Okay.
Though you know that in the NCR region, we are already providing BS6 fuels. In the NCT from March 2018, and in the extended NCR region some months back.
This will be exactly same price that what you are normally selling.
Absolutely. Presently same price. Yes.
Exactly same. Okay.
Yeah.
Okay. Thank you.
Thank you, sir. Next question comes from Rohit Ahuja from Bank of Baroda Capital Markets. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, a question on refining. I know this was mentioned earlier, but if you can clarify what are the steps you're taking to maximize the GRM potential at your refineries and especially at Paradip in run up to IMO. Second question, your marketing business performance was good, and we see the granular details of the sales trend. We are seeing that you're losing market share in petrol, diesel, but you're making up market share in ATF and other industrial products. Are these products that giving you improvement in marketing margins?
Your voice was not very audible. It was very low. Ahuja, can you just repeat the first question? We'll take it one at a time.
Yes, sir. My first question was on refining. How are we ensuring that we maximize the GRM potential for IOC's refineries and also Paradip in run up to the IMO regulations?
How do we maximize refining margin run up to IMO?
The GRM potentials of the refinery.
I do not know how to answer this. You are aware that we run a LP model of optimization, taking our refinery configuration and the crude available, and accordingly source the crude. I do not know beyond that what you are seeking. It is not very clear.
Sir, are we intending to increase the diesel output in our refineries?
Any distillate, for that matter, whether it is diesel or whether it is MS, definitely it gives more margin to refiners, and we do intend to increase our distillate yields at all our refineries.
Right, sir. Paradip, we've seen that it's not yet running up to the potential in terms of GRM contribution. Could you help us then, would it be at its optimal potential by January 2020 and when IMO kicks in?
Definitely we expect so. It lot depends upon the international prices. If the prices remain depressed, Paradip can only do a physical performance. The financial numbers will depend upon the international prices.
Sir, we were talking about increasing the heavy oil utilization at our refineries. Where are we in that trajectory of using high sulfur fuel?
Actually, as I said earlier also, the economics of processing high sulfur or heavy crude should be there, then only that it makes any sense to increase that. It all depends upon the differentials which are prevailing, and those all are factored in while sourcing the crude for refineries.
Right. Second year marketing, I just would like to repeat that if I look at the trend product wise, you have lost market share in petrol and diesel while gaining in ATF and other industrial products. Is this a reason why your margins have been strong in marketing?
No. On one side, you are comparing with industry. I do not know whether you are comparing marketing EBITDA also with industry. We do not have industry marketing EBITDA. We have our own. Our own has increased because our market share basically, the volumes have increased.
It's specifically driven by ATF and industrial products? That's where the products you have gained margin?
No, I'm saying even for MS and HSD, our volumes have increased.
The increase in volume in percentage terms is lower than the industry.
In that, how does it matter? We are not comparing our EBITDA with others' industry EBITDA, no. We are comparing our EBITDA with our previous EBITDA. The market share does not play any role in it. The volumes play a role.
Right. This EBITDA you're saying is sustainable, what you reported this quarter?
We believe so, yes.
That's helpful, sir. Thank you, sir.
Thank you, sir. Next question comes from Vishnu Kumar from Spark Capital. Please go ahead.
Good afternoon. Thanks for the time, sir. If you could just give us the average-
Little louder, please.
Sir, if you could just give me the average crude inventory days that you carry in terms of number of days.
Our average inventory holding for crude is about 46 days.
46 days?
Yeah.
If you could just give the closing dollar carrying rate as of June, if you have the number.
Dollar carrying rate means what?
What is the inventory rate in terms of dollar terms in Brent or Whatever crude we are carrying as on June thirtieth, what is the value in dollar terms for that?
We do not have that at present. We will inform you later.
Yes. I'll take it offline, sir. Just one final question. Once you move to BS6, currently, is there any crack difference in terms of the international pricing between the current diesel petrol between BS4 to BS6, and what is the delta that is there?
We have not been tracking this because this is too premature. The pricing has to be effective 1/4/2020. We are not presently tracking.
Okay. Would that be very negligible or?
I am not sure.
Got it, sir. One final question on CPCL is talking about making a greenfield investment in their Cuddalore facility. Any thoughts on that?
Not Nagapattinam.
Sorry.
It's Cauvery Basin Refinery.
Okay. Are we making any investments there, and how much would be the investments in terms of from IOCL side?
There are plans to increase the capacity to 9 million tons, the project can be perhaps around INR 25 to INR 27,000 crore. Now since there is investment by NIOC also, it will have to be seen what will our contribution in that.
When are we likely to take an FID on this? Sorry.
No, go ahead, please.
No, I was asking, when are we likely to take a final decision on final investment? I understand it's currently in pre-FID stage. When are we likely to finalize on this CapEx or plans?
I think CPCL would be in a better position to answer this question. Being a listed company, they would be certainly aware of this plan they've got. From our perspective, it has to go through some stage of clearances and due diligence from our side. Currently, we are working upon it. It's already on our working table.
Got it, sir. Thank you, and all the best.
Thank you, sir. Last question for the day comes from Mr. Anubhav Agarwal from Credit Suisse. Please go ahead.
Hi. Good afternoon. Clarity on two questions. One is, in this quarter, there's a lease change.
Please, a little louder, please.
Yeah. The other expenses in this quarter are lower by INR 187 crore because of the lease accounting change. Just wanted to check in which division this benefit would have flown in, like gone to marketing, refining, petrochemical. Where the impact was more predominant?
Right.
Yeah. We're looking at Q1 versus Q1 on other expenses?
No, since effectively other expenses are lower by INR 187 crore just because of the lease changes, lease accounting changes this quarter, right?
Lower as compared to what?
Okay. What has happened is the depreciation and finance costs have gone up because the lease account changes, other expenses have gone down.
As you would be aware that the rent expenses comes down.
It's largely marketing, that's how we take it?
Yeah.
The reversal that we've done on the provision side, which is INR 626 crore, that would have also flown completely to the marketing division?
Yeah.
Okay, sure. Thank you.
Thank you, sir. That would be the last question for the day. I hand over the floor to Mr. Bhavin Gandhi for closing comments. Please go ahead, sir.
Thank you. On behalf of Batlivala & Karani, I would like to thank all the participants for taking time out for the call. Thank you to the management of IOC as well. Thank you, sir.
Thank you very much. We thank you all for participating in this conference call. Thank you.
Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha Conference Call service. You may disconnect your lines now. Thank you, and have a pleasant day.
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