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Informist, Wednesday, May 7, 2025

 

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--HPCL: Large capex cycle coming to an end, to impact financials positively
--CONTEXT: Comments by HPCL's mgmt in post-earnings analyst concall
--HPCL: See FY26 capex at INR 130 billion-INR 140 billion
--HPCL: To begin crude distillation unit at Barmer refinery from Oct 1
--HPCL: To begin petrochemical ops at Barmer refinery from Jan 1
--HPCL:Growth in diesel sales muted, but still grew 2.2% vs industry's 0.3%
--HPCL: Have absorbed LPG under-recovery of INR 109 billion
--HPCL: Current LPG under-recovery at INR 165-INR 170 per cylinder
--HPCL: Nearly 90% of LPG under-recovery on household sales, rest commercial
--HPCL: Petrochemicals earnings challenged in terms of market prices
--HPCL: Pushing on bulk sales to boost retail
--HPCL: Recorded refinery inventory gain of INR 6 bln in Jan-Mar
--HPCL: Saw refinery inventory loss of INR 5.5 bln in FY25
--HPCL: Saw marketing inventory gain of INR 5.5 bln in Jan-Mar
--HPCL: Saw marketing inventory loss of INR 9 bln in FY25
--HPCL: Russian crude accounted for 35% of overall crude buy in FY25
--HPCL: Continue to get 5-6 cargoes of Russian crude every month

 

By Sunil Raghu & P. Madhu Kumar

 

AHMEDABAD – With its large and 'long-drawn' capital expenditure cycle of investing INR 730 billion in expansion of Visakhapatnam and Barmer refineries coming to an end, Hindustan Petroleum Corp. Ltd. plans to broad base its future capex, the company's management said in its post-earnings analyst conference call Wednesday.

 

The public sector oil and gas major did a capex of INR 145 billion in 2024-25 (Apr-Mar) and expects to invest another INR 130 billion-INR 140 billion in FY26. The management said that it would embark on a fresh wave of investments only after fulfilling already allotted capital expenditure. The management said that they could explore other lines of businesses, including in oil sector. They hope to finalise their plans "sometime in course of this year" adding that it would be more broad-based compared with the last five years where the company invested heavily on refineries.

 

"We needed to cover the gap between the product we sell and the product we refine. Now, that gap is reasonably well covered for us between our own increased refineries and the joint venture partnership we have. Now, over next five years, I would see much more broad-based investments including responding to new energies and taking on areas where we think we could be a leader in the market," company management said.

 

"We needed to cover the gap between the product we sell and the product we refine. Now, that gap is reasonably well covered for us between our own increased refineries and the joint venture partnership we have. Now, over next five years, I would see much more broad-based investments including responding to new energies and taking on areas where we think we could be a leader in the market," company management said.

 

The company on Tuesday said that it has already invested INR 569.5 billion on its upcoming 9 million tonnes per annum Barmer refinery, including 2.4 million tonnes per annum dedicated to petrochemicals facility. On Wednesday, it said that it was hoping to begin putting crude in the crude distillation unit by Oct. 1 and start operations at its petrochemicals units from Jan. 1, 2026.

  

While HPCL is hopeful of beginning petrochemicals operations at Barmer refinery, it said that earnings from the segment recently have been somewhat muted as market prices of the products had remained challenging. The company had to also absorb under-recovery to the tune of INR 109 billion on sales of liquefied petroleum gas cylinder to households in FY25. Of this, 90% was due to subsidised cylinders supplied to households. Currently, the under-recovery on each LPG cylinder stood at INR 165-INR 170. The oil marketing companies are compensated for selling LPG cylinders at a discount to households with income lower than certain threshold to make it affordable for these families to buy LPG. The Central government has already announced that it would pay INR 300 billion to the oil marketing companies for LPG under-recoveries in FY26.

 

 

Talking of other operational performance, HPCL said that with operational availability for both refineries in Visakhapatnam and Mumbai improving during the quarter, both the refineries operated at their nameplate capacity. Hindustan Petroleum's sales volume for the year was 49.82 million tonnes, up 6.4% on year. Within this, its sales of motor fuels were 28.78 million tonnes, up 3.2% on year, and sales volume of liquefied petroleum gas 8.95 million tonnes, up 4.5% on year. The company's aviation business reported an on-year growth of 24.5% for the year, and the lubricants segment saw an 8% on-year growth. The company also reported a pipeline throughput of 26.90 million tonnes for FY25, up 4.1% on year.  

 

HPCL management said that while the growth in diesel sales during FY25 remained muted, it was able to achieve a relatively higher growth of 2.2% for the year compared with the industry growth of just 0.3%. The company also clocked a marketing inventory gain of INR 5.5 billion and refinery inventory gain of INR 6 billion during the March quarter. For the entire year FY25, it recorded a marketing inventory loss of INR 9 billion and refinery inventory loss of INR 5.5 bln in FY25.

 

In its bid to give a further push to its sales growth, the company said that other than increasing volumes from existing network, it was also focussed more on increasing its bulk sales to industrial and commercial consumers. The company also plans to continue and expand its existing network to get additional volumes.

 

For the natural gas business, the management said that it had made 5-million-tonne-per-annum liquefied natural gas terminal at Chhara in Gujarat operational and already signed an LNG supply contract last month. "If you see the gas business, we are doing more than 1 million metric tonnes of sales there, both in city gas distribution as well as in our gas business put together. In terms of number of Compressed Natural Gas stations in our geographical areas, there are more than 600 outlets and in terms of total numbers, the total CNG stations in HPCL outlets is around 2,100," the company management said.

 

As for the supply of crude oil from Russia, the company said that about 32-33% of the company's crude oil consumption was met by Russian crude in March quarter and nearly 35% in FY25. The company had witnessed some amount of disruption in supply of Russian crude for a month or so but continues to receive 5-6 cargoes of Russian crude every month. The company heavily imported crude oil from Russia due to significant discounts from the latter. In the aftermath of Russia's invasion of Ukraine in early 2022, and the US pushing for sanctions on Russian global trade, Russia offered discounts to countries that were willing to buy its crude. 

 

Post-market hours Tuesday, the company reported a net profit of INR 33.55 billion for the March quarter, higher than analysts' estimates of INR 17.99 billion, on revenues of INR 1.183 trillion. The stock rose 2.1% from Tuesday close to an intraday high of INR 405.10 on the National Stock Exchange Wednesday, but turned negative and traded 0.2% lower at INR 395.95 at 1358 IST.  End

 

US$1 = INR 84.85

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Akul Nishant Akhoury

 

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