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Informist, Friday, Oct. 23, 2026

 

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--HPCL: Got a small help from inventory gain in Q2
--CONTEXT: Comments by HPCL's mgmt in post-earnings analyst concall
--HPCL: Launching AI-enabled tool to make supply chain efficient
--HPCL:About 10% of pan-India retail outlets have non-fuel retail activities
--HPCL: Increased focus on solar, green portfolio for internal use
--HPCL: Trying to get our act together on biogas plants
--HPCL: Crude sourcing very unpredictable, volatile now
--HPCL: High crude oil prices in Q3 leading to under-recoveries
--HPCL: Freight rates have gone up on a sequential basis
--HPCL: Don't expect cracks to come down during winter months

 

By Anand JC and Pratyush Kumar

 

MUMBAI – The impasse in West Asia war and the resultant increase in crude oil prices have led to an increase in under-recoveries through sales of liquefied petroleum gas cylinders, top executives of Hindustan Petroleum Corp. Ltd. told analysts at a post-earnings conference call Friday. The under-recovery per cylinder in November has gone up to INR 327 from INR 245 in October as crude oil prices stayed well above $100 a barrel.

 

"Q3, with the high crude prices, there's a challenging number (landing costs) for us right now... we hope it comes down, it is obviously leading to under-recoveries," a senior HPCL official said.

 

The company's buffer receivables stand at INR 180.49 billion. This is the money HPCL is entitled to recover or adjust due to selling domestic cooking gas below international market cost. The company's overall under-recoveries from selling these cylinders increased by INR 5 billion during the September quarter.

 

On Thursday, HPCL reported a net profit of INR 34.83 billion for the September quarter on revenues of INR 1.39 trillion. The company reported earnings before interest, tax, depreciation, and amortisation of INR 98.22 billion after posting an EBITDA loss of INR 148.16 billion in the June quarter.

 

HPCL said marketing margins for the reporting quarter were "decent" compared with the significant under-recovery incurred in the June quarter. Its gross refining margin for the reporting quarter was $32.15 billion before accounting for the windfall tax, or the Special Additional Excise Duty, compared with $8.80 a barrel a year ago. The company's gross refining margin in the first 18 days of October was $16.1 a barrel, after accounting for the windfall tax. 

 

Its profitability was also supported by a small help from inventory gains, the company said. "We actually had a very, very strong July and August (in terms of lower oil prices). September pulled down the numbers of July and August," the company said, adding that leftover inventory from the previous quarter helped initially.

 

The state-run oil refiner's total debt-equity ratio stood at 1.38 times as of Sept. 30. HPCL's leverage ratio was 1.4 times at the beginning of 2025-26 (Apr-Mar) but the company ended FY26 with a leverage ratio of 0.80 times, before rising to 1.38 times now. Its leverage ratio is still at a higher level that it is comfortable with, when compared to its standalone average.

 

HPCL has refinanced its entire debt of around INR 450 billion-INR 500 billion at HPCL Rajasthan Refinery Ltd., which it expects will get its interest burden down by around INR 10 billion. "The entire debt has been restructured and we are probably 105 basis points lower than the original rate," the company said.

 

The company expects to save around INR 4.70 billion to INR 5.50 billion annually following this restructuring. "The government of Rajasthan has infused INR 15 billion of equity in this quarter. Correspondingly, HPCL converted INR 43 billion-odd subordinate loans into equity," the company said.

 

HPCL Rajasthan Refinery Ltd., a 74:26 joint venture between the company and the Rajasthan government, is currently running at a utilisation rate of around 60%, as per the company's previous guidance. HPCL has reiterated its previous guidance of hitting a run-rate of 8-9 million tonnes per annum at the refinery.

 

The refinery registered a gross refining margin of $12 per barrel in the September quarter. "The moment we move on to high-sulphur crude, which the refinery is capable of, with the current level of assumptions, this (gross refining margins) will be $20+ in Q4," the company said. HPCL will complete a sulphur recovery unit at this plant and take it to full capacity after Diwali.

 

 

HPCL expects diesel cracks to sustain but refrained from making a firm projection. "At least, they will not come down significantly during the winter months, given all the political stuff that we are in," the company said.

 

At its Rajasthan refinery, HPCL expects to acheive a throughput of 8-9 million tonnes per annnum as previously guided. In addition, high-sulfur crude processing could push gross refining margins to over $20 per barrel in the final quarter of 2026-27 (Apr-Mar). Currently, it is around $16 a barrel.

 

Sourcing of crude oil in the current market has become increasingly difficult for refiners, more so after the war between US and Iran broke. "It is very unpredictable, very volatile, which actually makes it very difficult for stable companies like us to work on it," the company said. While the premium on certain shipments have been higher, HPCL has also been able to book some at steep discounts. 

"We used to buy a lot on FOB (free on board). These days, the way we are looking at it, and also how the market is shaping up, we are buying a lot on delivered (basis)," the company said. The freight rates have risen sharply sequentially. Freight rates doubled between September quarter and the June quarter. 

HPCL plans to refine more of heavy crude such as those sourced from Venezuela. "Even in Vizag (Visakhapatnam Refinery) we have run Venezuelan (oil) already. Technically, there are some changes you already need to do, but we have been figuring out how we could blend it even more and more," the company said.

 

OTHER INITIATIVES

HPCL is launching an artificial intelligence-enabled tool to make its supply chain more efficient. "We have, in the last few months, upgraded our online platform. Multiple AI use cases are being used across businesses," the company said. On its non-fuel retail business, the company said around 10% of its retail fuel outlets across India have non-fuel retail activity, up from 5.5% at the beginning of the year. 

 

HPCL is increasing its focus on green energy solutions but is currently restricting it to purely captive usage. "We already have a couple of plans (for compressed biogas), we have been trying to get our act together in terms of high utilisation there," the company said.  End

 

US$1 = INR 94.95

 

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

 

Edited by Akul Nishant Akhoury

 

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