Hindustan Petroleum Corporation Ltd. — Q1 FY27 earnings call

Thanks good morning everyone. It's my pleasure to welcome all the participants as well as the top management of HPCL. Today we have Mr. Vikas Kaushal, Chairman, Managing Director. Mrs. Srividya Venkatraman, Director Finance, Mrs. S. Bharathan, Director of Refineries and Mr. K. Vinod, Executive Director, Corporate Finance with us. I'd like to take this opportunity to congratulate Mrs. Srividya Venkatraman on taking charge as Director Finance and wish her all the best in the role. I'd like to hand over the call

box.

Good Morning Everyone

Pleasure connecting to you early in the morning on a Friday morning. Hopefully look all Thursday morning. I was thinking it's Friday. Maybe I need the weekend soon. This is our first quarter one analyst call. Before I get started as was introduced I'm joined by Mr. Bharthan Director Refineries. Srividya who just joined us as Director of Finance recently. We are very privileged to have her as part of our board and this is our first call.

And I'm sure you're going to hear from her now and even going forward. K. Vinod ji, you know from the past and all the other colleagues.

I was preparing my opening thoughts for this and that we'll follow the same pattern which we've been doing in the last talk. I'll speak for five seven odd minutes and then open it up for a Q and A. So we last spoke on 13th of May and I was reflecting last night as I jotted down some points on what the quarter was it seemed to me

circle of life and twice over in this quarter. It's almost seems we have seemed to lived a lifetime. Why did I make that comment? Well, we had the Rajasthan refinery, there was a high on 20th July waiting for the inauguration, an incident on sorry, 20th April waiting for the inauguration, incident of a small fire in the CDU, we had to postpone it. And then we recovered from that and July 4th we dedicated that asset to the nation.

That was one circle of life. The second one was on the performance. We 13th we spoke on a high of 17175 crore of FY26 to the negative of this quarter which I'm sure you have analyzed ad nauseam since last evening. That's the second circle of life. These are times we live in. You all have also agonized it on excel sheets. We have agonized on it on a daily basis over the last quarter.

lot of challenges. We'll talk about it but very proud of the way our team fought it on a daily basis bravely and managed to keep the supply chains going in times of high uncertainty. At moments like these, we take high and low in our stride and move forward.

Coming to the current situation, I will not talk much about it. All of you track it. We know the uncertainty which prevails. Just one benchmark talks about it, what was proved.

30 or 40 days ago, what was it? 20 days ago, what is it now? So that's a highly uncertain situation. It poses four key challenges to any team like ours which is operating on it. First, extreme uncertainty on price. I talked about crude. At one point in time you are taking a benchmark which is going rent is going into 110 and 115. You are buying it in one and a half, two months in advance and then suddenly it drops $25. What do you do?

to do with that inventory. By the time you figure that out, it goes up to 96. So extreme uncertainty on prices and also not only on the crude, also on the cracks. So cracks have been less volatile, though they have been consistently high.

Second on an operating basis, we had to take or any refiner had to take a lot of decisions based on availability rather than optimization. So during this period, most refiners, most certainly us, could not run the most optimal crudes we would have want to run for RSFs. For a very simple reason, some of them were on sitting on the other side of the state of formals. There is no way of getting them out. So a lot of non-regular crudes, the idea was to keep the throughput going and as a refiner,

which is working refining and marketing company which is working to keep the wheels of motion, wheels of the nation in motion. We had to make sure the throughput was there. So we didn't have that option of going down on throughput or we didn't exercise that option.

Third, there were demand pressures. If some of you have tracked the industry, there have been spikes in the demands. There were days when our supply chain was required to put in 40% more product into the market. Uh, those are not things which are usual. You can all imagine what kind of challenges exist on the supply chain.

And last point I want to say, it's a constant challenge. Many of us in services industry, I belong to that industry, often get Saturdays and Sundays. I would say our teams don't get that also and the fact that it is now going for 120 days is not, it leads a lot of peer and tear. Having said that, I will once again reiterate, I'm extremely proud of the way HPCL has performed, notwithstanding the numbers and I know we will get a lot of questions on the numbers.

We are ready for that. The organization has delivered under the crisis, kept the assets running, and it's managed to keep the customer expectations going. As I said, it takes a lot of effort to manage the crisis and the teams are focused on it. Yet, as we were doing it, we are also keeping an eye on the future and taking some fundamental improvement initiatives.

The numbers are all there and I'm sure everybody's looked at it. I chanced upon at least three or four clash reports from analysts. I read them and very fair observations by many of you. And we'll address those questions in our thing. What I wanted to cover in the remaining part of my opening dialogue are just two things. One just a couple of key events which have happened in the recent past. And then I want to talk about which I'm sure you want to hear what is our

our response strategy to the current situation. On the event, the biggest one was HRRL. Finally, we have running refineries in Rajasthan, Rajasthan's first refinery. We declared scheduled commercial operation on 22nd June. The refinery is ramping up as of now. CDU is running at 60% capacity utilization and slowly we will get other trains of downstream units going up. Diesel.

MS and a lot of other units are there and likely today, tomorrow, PFCCU which is one of the money splanner units of the refinery is also going to be inline and a lot of effort has gone into it. We are expecting the refinery to ramp up to the full capacity in quarter three and petchem by end of the financial year, but the refinery gains and running the CTU at full capacity would be at quarter three. During this period, we have already tested the CTU.

at a full capacity run for a period of couple of days. So right now we are running it at 60% utilization. Second was an exciting small pilot but it I wanted to highlight it because it shows you the mindset on what we are operating at. Some of you might have caught the news of our latest LPG product called HP Nabia. It was launched on 15th July which was our 52nd foundation day. It's an on demand premium LPG product sold through New Channel.

channels, new look of cylinders, new delivery mechanisms, new channels. In Bangalore, we are piloting it with Swiggy. Right now it's available in a radius of 5 kilometers but slowly will be ramped up. In Mumbai, we have started it through our own channels. We are expected to hit five more cities by 31st July and 25 cities by 31st August and pan India, it will be mostly urban centric. So pan India about 200 to

250 cities by Diwali, which is the goal. The idea is to move some of the

For people who are willing to look for comfort, who are willing to look for better service and pay a price for that, LPG will be available in a different mechanism or different mode in India, no longer waste and no longer you'll have to call up people to get an LPG cylinder. You can go and pick it up from your neighborhood shop. There are some other interesting pilots which we are doing on use of biomass and fuel. I'll not talk of it there in subsequent meetings, we'll probably cover that.

Obviously we have I'll come to the second point which is the response strategy. you've all seen the numbers as a management team any such numbers disappoint. They don't surprise. You can always say there was a margin of surprise in the end because of I would say inventory write downs etcetera. But we knew what was coming and we have prepared our response strategy on it. There is a seven pronged response strategy which we are working on and I will elaborate that at the end of it then I'll stop and .

open it up for questions. First is about improving our balance sheet. what gave us strength at this point of time was the fact that last whole year we had improved our balance sheet. Those of you who had been on the calls would recall that our debt equity had changed from 1.43 at the beginning of last year to 0.8 at the end of the year. That gave us the headroom to withstand this crisis. Right now it has risen up to 1.5 again, the debt is 72,000 crores. as we

Speak, we added about 1900 crores a week during this period last 13 weeks.

But this organization knows how to correct it. At the Ukraine crisis, the debt equity went up to 2.33. It came down to 0.8 in about three years. I'm very sure it will come down faster this time and this will be one of our first objectives on making sure we climb down on the debt equity and create that headroom again. Very difficult to give a forecast given the prices there, but obviously this is on top of the agenda for Shri Vidya Media.

company and other corporate finance team literally looking at it on a daily basis. Second in response to the time is the CAPEX control. As it is we had set a lower CAPEX. Most of you have practiced for a long time know that we are at an end of a long CAPEX cycle. Things are starting to fall in place, taking a bit more time than we would have liked in terms of stabilization, but nevertheless they are falling in place. We don't have to spend that much of money. As a result our annual target which we agreed with Government of

9700 crores or in that ballpark. In the first quarter, we spent about 1700, 1700 crores roughly. And all of that is, I would say most of that is essential thing. You still have to spend on turnarounds and you have to plan for your turnarounds, etcetera. You have to buy the cylinders, all of which go in CAPEX. So at this point of time, we are really focused on especially in the short-term money outflow on really critical CAPEX.

It's very tightly managed and prioritized. If the current situation prevails, we would expect the CAPEX to be lower than 90-700 also. We want to conserve cash as a management team.

Third response strategy is interest costs. With the rising debt, we do have interest costs, though they have been very tightly managed. And last year you saw how we came down on the interest cost there. Right now, a couple of things we are doing, looking at all kinds of revenues for our parent balance sheet and also the HRRL balance sheet, which is the bigger subsidiary debt or joint venture debt. We have obviously leveraging the ECB window, etcetera, some of those things.

But the idea is to get our interest costs in control. The seriousness of this you can know from if you track our receivables, you'll see how they have come down and have stayed down.

Fourth response strategy is profitability improvement, making our assets work more. You you had tracked us on the Samriddhi program last year. We

came in it was about 1600 odd crores. I don't remember exactly the split between recurring and one time, but the recurring ones have already been baked into this year's plans. Of course, with what happened in the first quarter, a lot of plans got topsy turvy at last minute movements, etc. But nevertheless, we have reinitiated after hits of about three weeks, three months in the crisis. We have reinitiated Samriddhi 2.0. We already are working on 100 plus ideas. The we have taken despite only nine months left.

in the quarter or three quarters left in this year. We've taken an aggressive target of 1500 crore on a run rate basis and we are going to aim for 1000 crore on accruals in this. This would come in in three or four forms. There is obviously cost takeouts. There is also an emphasis on a top line improvement again happy to give you details now or later in the call on one on one discussions. And then there are also some of the things we are trying to do.

more on intermediate movements which can saturate our refineries etcetera better. More on that topic in my one of my next response strategies. The fifth one is winning in retail. Some of you tracked we are at end of marketing company. Very proud that we have been listed in top 20 brands in India across all sectors across all companies. We have

continued our efforts on increasing on the retail side. Last year we talked about retail improvement Abu Dhabi. We had done it about 4500 outlets. Wasn't the most successful program as a management team, we would have liked it to perform better, but we learned a lot from it and we have launched Abu Dhabi 2.0 at 4900 retail outlets. And we have been at it for last three months. Of course, if you I just wanted to give a metric of volume increase and without doing anything my volume throughput of my retail outlet.

increase because of the demand state-owned enterprises had on their retail outlets. But we measure apple to apple and getting good early results from the measurable set. We are getting about 100 to 150 basis points.

higher growth on our 4900 retail outlets. You know, I'm just this is over and above the market growth, which is I would say the tide rising. But our Abu Dhabi outlets are starting to outperform the non-Abu Dhabi outlets in the market. So, parallelly we are also focused on non-fuel. It's a small part of our bottom line, but nevertheless something which starts adding to bottom line and we are very hopeful by end of this March, we will start seeing this as a additional line on our

P&L in terms of contribution. The sixth area is refinery improvement. That is obviously one of the biggest ones. We do have held room on our refineries to improve further. There are three or four things which we are aiming at. First, in the next three quarters, as our refineries sort of settle onto the new paradigm, we are going to be increasing sourcing for our internal

one of the things which has hit us this quarter is our need to satisfy our marketing footprint by buying from third party players that dependence is going to slowly reduce. In fact if I count my own refineries and the joint ventures by end of this year I would be almost self sufficient maybe surplus on some products by taking in total of my own refineries and joint ventures.

two major efforts on this. we talked about HRRL ramp up and I'm sure there is you're going to have questions on rough. That also we've been in the process of stabilizing. So tough technology we've had a couple of I would say unexpected technological challenges on it because it's a high pressure, high temperature kind of a situation. Dealing with tons and tons of catalysts becomes difficult. But we are mastering that art slowly and this will start giving us both product and

consistently addition on the bottom line. In an essence, we are making our assets work more. Our turnarounds are much sharper. They finish bang on time now. We are making a very concerted effort on energy costs because between the two refineries on our balance sheet, we probably would be spending close to 2000 or even more crores on energy. So that's one effort it'll be actually much more repair fuel and losses. That's one effort we are doing. And I talked about intermediate stream leverage there are some

Interesting experiments we have done on buying intermediates to satisfy some of the units where there was potential to look at it. So whether it is DGO or Pi gas we have been making those efforts. Last but not the least with three refineries fully working and then even joint venture of HML in the fold we are looking at even crude optimization across our refineries lot more having a significant storage capacity at Mundra for HRL gives us

the flexibility of doing innovative things like bringing in VLCCs there and shipping it to Mumbai in a different fashion. So there's a lot of effort going on on our refinery performance. The last but not the least is the effort we've been talking about is on the digital side. again it's not only about just the fancy world of AI but it's hardcore using digital to improve efficiencies. in the we've been talking in every quarterly call. from the last time to this time we've launched a supply chain of

optimization solution. we are working on it. This will help us optimize our movements much sharper in a state of the art tool. A lot of digital analytics use cases are being worked on and focus is on efficiency measures. So those were the seven I'll recall improving our balance sheet, CAPEX control, lowering the interest cost, profitability improvement program Samriddhi 2.0, winning in retail, refinery optimization and improvements and digital.

How do we look at the future? Uh, the management team, we look at the future with a lot of confidence. Uh, I can look at the last quarter and say, oh, there is this negative. That's fine, it is there. I can't do anything to undo it at this stage, but we are very confident of our future. A lot of uh, foundational elements, some which we will talk and some which we will not talk in this call are in place. Uh, the ones we will not talk, we want the world to see them down the line, uh, and some of you guys to find it out

But we look at the future with a lot of confidence. Uh, we will be turning around the current situation. Hopefully by the time quarter call, second call happens, you all would be happier with the numbers. Uh, we are coming out of the crisis stronger with a more balanced portfolio and hungrier. That's all I had to say in my opening comments. Thank you for your patient hearing and also the continuous interest in HPCL. Uh, as I said, keep your details.

reports flowing, even if you praise us or critique us, all of them are very valuable. I did mention earlier all the reports which came my way on WhatsApp since last night, the flash reports. I've personally gone through all very interesting comments, good analysis. So keep that coming and if of course we are happy to take questions now, me and my team and also if anybody wants to meet us later, we are more than happy to meet you separately later. Thank you and over to Vadarajan and the team for

Further moderating the cost.

Good morning, sir. Thank you for the opportunity and thank you for the very detailed and extremely useful briefing at the beginning of the call. I just had a couple of questions, perhaps from a slightly near-term perspective. You had, I think, spoken in detail last quarter in terms of the sourcing that you had in place and the kind of number of days of inflation. Can we just get a sense, given we clear up in the crisis again, how you are looking at sourcing? You too, I assume, would have anyways been mostly tied up.

at this point of time. But looking forward to Q3, are you facing any fresh challenges in terms of arranging for sourcing, given what is happening in the street economies right now? And you know, what's the strategy and what's the kind of mix if you can for any car in terms of how your crude sourcing is looking like, specifically now that your Rajasthan refineries is also up and running. So obviously our crude requirements have gone up to that extent.

Yeah, thanks Prabal. This is a dynamic time and just to be very predictive on what we are going to do on sourcing is very difficult. Just to give you a sense, at the beginning of the year we do always do a term and a spot mix. This time in the first quarter we hardly got anything from our term contracts because a lot of the term contracts were sitting on the other side of state of hormuz. Having said that, we are very well covered for our crude.

till end of August fully. In fact yesterday we were starting to buy for September. You know, there is always barring one cargo which is stuck here and all but those are operational things we are able to handle. I'm first talking of crude only then I'll talk of LPG itself. I think crude availability is not an issue. Pricing of course goes up and down and is very difficult to handle given you are always buying dated print and five months pricing or two months prior pricing. So

There's a bit of a challenge on crude sourcing this time. So we don't anticipate an issue on crude sourcing. There is enough crude which is available. In terms of mix, I think with what is happening and moment HRL is at full steam, actually the mix plays more into our hands right now because if you look at it, both of our bottom upgradations rough is still in stabilization phase as I said and Rajasthan well delayed cooker is started but

of units have to get on stream for us to get it full there. But moment HRL roughly stabilized and HRL is only at full capacity on the refining section, we actually will be even more stronger position because we can buy even dirtier crude. So on crude I don't see an issue. On LPG I think it's once bitten twice shy. All OMCs have worked very hard to diversify the mix. One of the things pri pre crisis all of our ships used to be looking at state of farmers and buying in.

turning up and down there. We've been buying a lot of cargos from US and other places also. So I think LPG is much more, I think we've learned the drill. There is a lot of margin memory now on to do that on how to do it. Of course, the situation is very dynamic. Things could bombs flying all over is a difficult thing. So we'll adapt that is, but I'm not worried about buying that LPG or crude at this point of time. Pricing of course is a concern.

Alright sir, and with respect to just the, you know, inventory movement that you mentioned, it's fair to assume that there would probably have been a negative inventory impact in the quarter both for the refining and marketing segment and that will probably reverse in this quarter given the kind of spike we're seeing in prices or it's too simplistic to look at it in that way at this point of time.

Yeah, I think part of the statement is absolutely correct, Rahul. We did have a significant amount of inventory and also two things happened in this quarter. You should remember that it was very uncertain times to secure more inventory. At least we carried more than usual inventory with us. That was a conscious call we took because as I said, we were first looking at keeping the throughputs going. So and also during the month end some cargos which were stuck in SOH they landed. So

We did carry more crude into our tanks on 31st, 30th of June. Obviously, there is a write down on those given the where the prices were and one can say oh you would have anticipated that drop but I'll be wrong in saying if I would have thought the crude will drop $25 in a matter of two weeks there. So to that extent there will be a reversal automatically. How much? Very difficult to predict because it's now again going up at 95. It was at 95.

120 there is a different reversal if it goes down to 75 there is a different thing. But in July onwards we are carrying a reasonable amount of marked down crude. We did carry a lot of marked down crude. So July we have been running marked down crude.

Alright. So one last question if I may, it's a housekeeping one. What was the LPG loss on a per cylinder basis for the quarter and what is the kind of level we are seeing right now?

I don't have the quarter number. June it was 680 per cylinder. July it dropped 490 per cylinder. Quarter things my team can give you to you later. Go on the averages. I just have the June and July number with me.

No problem. Thank you so much and all.

was giving some additional numbers. 510. 5104 was the whole quarter.

For the 3 months it was 510 per cylinder loss.

Alright sir, that is very, very useful. Thank you so much. I'll come back to you.

Thank you very much.

Yeah, this is adjusted for SAD.

The reported numbers are adjusted for SEBI.

Sorry, Shividya is just giving an additional statement.

Yeah.

See, for the whole quarter there is a significant under recovery on this. This has been said even on the public platforms by a lot of people including high ranking government officials. So there has been a significant there just to give you a sense the marketing under recovery for the whole quarter was upwards of 26000 crores. 20 of which was and these are rough numbers was on MS and HSD put together and

about remaining was on LPG. So it was a significant under recovery for the whole quarter. We were every liter which you and I were buying from petrol pump was being subsidized by one of the three organizations.

Okay.

Hello

I think this is a very, very dynamic situation. Plus in last three days the crude has gone up three working days it's gone from 85 to 96. So it's a very difficult one to predict and given the as it is we have not given too many forward looking guidances though we gave some last year but this is the least time as a management team we would want to give forward looking guidances. Having said that I will say that we were happier with July.

We hope we'll be happier with August, I would say. No point getting into specific numbers because you guys can do your own backward calculation. You are very smart around it, but it's a very dynamic time. Before we speak tomorrow, anybody caught the news today, 1,000 product tanker is on fire in the Red Sea. Houthis have done that. So that's at least floating around in the media right now. I don't know whether true or wrong. So it's a very dynamic situation. Crude could go 100 tomorrow or it could drop $10. So we'll have to take it

But we were happy with July.

same question Amit was asked last time. again, you leave that with us as a number. All I would say and I made that statement earlier, we were carrying higher crude inventory and we also were keeping sufficient product for. So in a normal situation, I wouldn't have carried that much of crude in my tanks which I was carrying on 30th of June because we were apprehensive that war could go anywhere all the time. So it is a significant number

I'll give you one more few my team is going to kill me after that but if you let it off the loss number would have been on the other side of five digit number by a good margin. Remaining you can calculate yourself.

So at 8:45 today morning my head of refinery told me that he's hopeful of getting it stable very soon. Now I don't know whether he was revising that question at the first that's the first call I make when I leave home to get to work. Jokes apart I think let's also recognize that it is a very very technically complex asset. I've given this in the last call also. Imagine running something at 380 bars at 400 degree temperature and I told last time

just to see how powerful that reaction is. The walls of that reactor are 25 centimeter thick. So it's a challenging situation. we are learning the art of doing it.

Even Lamas who is a technology provider has not run. This is the first time they are running a unit this large there. Again, it's a technological leap HPCL has taken.

the good thing it's an it's an engineering problem. And engineering problems can get solved more easily than financial or pricing problems. our team is working on it. We are getting faster and smoother. We are hoping to have good run on that in this quarter itself and in the next quarter itself, hoping to have it fully stabilized there.

And I hope I remain hopeful God will be kind to us in making our hopes get realized. It will start giving us a significant thing. It will also as I said significantly shift HPCL's HRL and Vizag rough coming fully on stream. So on a run rate basis third quarter onwards I would hardly be dependent on anybody except my own refineries and my JVs for diesel.

Still, on MS, I'll probably need only 10% MS from anybody else. So we are in that phase where we are really hoping our assets will start working on it and as a CEO, I'm impatient for Ruff to get started soon, but as a practical person, I have to give my team the entire space to get it running and learn the technology. We'll get there. We are very, very confident about it.

Yeah, I think I gave the understanding on the broad numbers. We said 9700 was the target we had taken for the years. We expect it to be lower than this. Obviously, we will react to the environment. If the thing is benign in the next quarters, we will spend some money. If it is not benign, we will conserve that money. And 1700 odd which we have spent right now also includes a lot of money which has been spent on buying equipment, catalyst, etc. for the upcoming year.

coming turnarounds which are absolutely essential for keeping a refinery running. In fact, all of the refineries have been delaying turnarounds in the last few months to keep the product flows going. Which segments? I think a lot of it is around discretionary things, things we would want to do more, like I can always upgrade 200 pumps in a year, I can upgrade 1000 pumps in a year. If I have more money, I will upgrade 1000. If I have less money, I will upgrade 1000.

per year 200. On the refining side, the major CAPEX has already been done. There are a few projects going on, but for a company of our size spending 4000-5000 crores on a 4-year, 5-year long project is not too much of an issue. There will be periods where we can accelerate that spending. There are other things where we can spend in terms of

I would say administrative expenses, upgrading some of our infrastructure, those things we can always postpone. Like we can do it one quarter later. So that's something the management team will take a call on. But nothing critical will be starved of funds and yet the discretionary spends can be pushed back a bit.

all results, all things were available to everyone and all I would say not only HPCL, every single refining company and marketing company, private and public collaborative collaborated extensively during this period to get the country out of the crisis. The amount of collaboration which happened I guess none of you can even imagine. So SPRs were available, our own infrastructure was

was available from others, others infrastructure was available to us. If I was running short on something, somebody else was helping me, somebody else was running short there. It takes a lot of people to work together to get over a crisis like this. It was a non-trivial situation. Many nations bulked under it, but we came out of it because all our companies, whether it is standalone refiners, whether it is private sector refiners, public sector, all of them worked very, very hard on this. On CAPEX, I've already given you a number.

Beyond that, as I've said, this call is not about giving any guidances. We have stayed away from that. We have said the maximum we are going to spend is ₹9700 crores. If there is less money on this year, we will spend less than that.

So, I think on comparison VPCL, I will leave it for you to do. Not my job to compare with VPCL. I picked up the phone and congratulated VPCL CMD on an exceptional performance from their side. Proud of appears turning out what the numbers are. I have but I have not spent time trying to dig through what were their refining margins. I have enough of work on my hand to do on what are my refining margins and where do I want to dig. So I'll leave that comment on VPCL to you to handle, but remember they have a higher refining

Uh, and there are structural things. Refining is not just an easy task. It's a complex thing. On your second thing, I would turn the clock forward 1 year later.

You should ask me the same question on the same call and you will have an HPCL asset which will have the highest margin. See the margins are generated by the assets we have. And if you understand refining and go deeper into that entire thing you will understand there are like if I do not have a delayed cooker in my Mumbai, I will not get a refining margin or uplift which say another refinery which has a delayed cooker which will have but I have a delayed cooker which is already working in HR.

I will get that uplift out there. Second, our uplift on rough will happen, Vizag will happen. That will take our distillate yields up from what it is right now to in 80s. But there is also structural disadvantage rough has at this point of Vizag has two ones. If I compare it with the West Coast refinery that's in East Coast. You always have to carry more inventory in East Coast. The crudes are more expensive on East Coast. That refinery also does not have natural gas right now.

which my other refineries have. So there are it's not just an apple to apple comparison that if you look at one reported number and compare it with other and say oh this guy is good and this guy is bad. You have to look at what is that guy capable I have two kids if I have two kids and one is capable of cracking IIT and the other one is not capable of cracking IIT should I say that the second kid is bad? No. I have to look at what is that kid's capability and what is that kid performing on that. Having said that, we understand

And we are on track for improvement on that.

Great numbers. DPC analysis call and ask that question. You can't ask me questions on DPC on this.

Yeah, so I think you guys are all smart to calculate the SAD impact yourself. If you need help on that, you can always speak to my corporate finance team, Vinod and the team. They can help you understand the SAD impact the way you look at it. And what was the second part of that question? Inventory, I've already said what I have to say. I will not say anything further on inventory.

Thanks Sumit and thanks for your kind words. On the aspects on how I think many first it's not my brief to talk on what the government's going to do. I think there is a different set of people who should be talking on it. So the questions probably are best addressed there. Having said that if you read or there's been a lot of talk and government's been talking about the fact that there was a way things have happened and there was something which was done to keep the wheels in motion in this way. So I'm sure all those

things would be taken into account. They have been taken into account in the past and I'll draw your attention onto what was said at the analyst meet in Bombay last year where the then secretary and also the honorable minister actually talked about saying that how the fact that these assets are bulwarks of the keeping the wheels of the nation in motion. So a lot of I would say support is there in different forms. What specifics? This is not the right forum to talk.

about that. What's our outlook as I said earlier, very difficult times to predict the outlook you guys have been tracking these oil market for years, you will know probably you never have seen the extreme volatility which is occurring right now. There have been eras for high prices, there have been era of $20 prices also. But the spikes and the crushes which are happening, the frequency of the volatile of the volatile nature is kind of

unprecedented and that has its own set of challenges in giving guidance. Having said that, we are very bullish about the future.

Why? Two, three things. One, we believe a lot of homework has been done. Some obvious, some not so obvious. Some giving results right now, some will give results in the future, which make us a stronger company. The fundamentals of the company are being worked upon. All of us are together in it and everything which is there, work on it and just as a simple thing while we did not share and I refuse to comment on BPCL thing, our teams have been analyzing everything.

said there because we also want to see where is an improvement area in us and not only us we are looking at every single results which are being declared to find out our improvement areas. Similarly I talked about lot of effort going on into marketing side we talked about the new LPG launch all those things are things which take make the company stronger in the long run. I hope benign conditions come if that looks at it I would no management team ever wants a red quarter or a red year.

We are also a team which are very proud and we will also not want to have a red quarter. We cannot avoid it this time, but we would also not want to have red year. So that's all I would say on this Sumit. Hopefully quarter two the results would be better and then we can be more sure about where the year is going to end, but very difficult to predict at this point of time.

Thank you.

difficult to answer in any way because it will depend on

where you are buying what crude you are buying because you could buy an extremely light low sulfur crude which is at premium to rent. There are other things there could be a seller which is in a distress wants to get a rid of a cargo. So it's a very difficult question. If you ask me what is my landed crude today of all I'm buying for my refinery like no I won't be able to give you that number also because it varies literally from crude to crude there. So I my suggestion is from your calculation purpose is just look at the

bridges rather than getting deeper because crude buying is also there's about 200 different types of crude floating around in the market.

Okay.

And it is like you are asking me to predict the oil prices. I I have I was just thinking as you are asking me that question. I have no way to give you and I will throw it open to my team if they have any better guesses because

Even in this crisis there are times when you have picked up crude which are discount to the Brent. There is some other crude which is at a premium to the Brent. Every crude goes then at a different thing. There are times when the same today that crude is at a premium to Brent, two weeks later that is actually at Brent, one week later it might be at minus to the to the Brent. And everything is shipping and all is very standard. There is no, of course shipping rates went up in the recent past but that's a standard thing. So

I wish I had that straightforward answer to that.

I think two things have happened. One, the Saudi CP price, which is one of the markers, has come down by about 200 dollars per metric ton. The second, as a reaction to the crisis, we have also diversified our LPG procurement mix. So there are like last time we were almost in the call also said and it's been said in public domains by a lot of people that we were all dependent upon

90% on LPG coming from other side of state of hormuz. Now that dependence, of course, it was not available, but even otherwise there's a systemic diversification which are happening. There are Indian time charters which are going to US to pick up cargos which never happened in the past. Now because of the diversification, I'm less dependent on the spot and as a result the spot prices have cooled down there. Now I don't know what is today after the latest hits which have happened, but by and large they have cooled down a bit and also we have

are much more resilient in the way we are buying right now.

I I think difficult to give you a number offhand on on that. again from the when I made that statement you have to look at it in the context of the quarter. If those things were I would say things which have moved the needle a bit to the other side of a five digit number. But remember we were also we talked about the overall under recovery of 26000 crores. That itself is a big number.

And HPCL on its own balance sheet carries about 55-60% of our total POL and other products sale if I keep LPG out of it. Or approximately 55% is supplied through our own P&L. Some part is supplied through a joint venture. So we would always have that complexity of some of the numbers even in the best of the times falling through the consolidated numbers and others coming to the P&L there. But

Let's wait for a couple of quarters when all these things are normalized. You will start seeing the uplift in the GRMs and right now one thing you should all keep in mind that when you're looking at GRMs, everybody buys crude which is on dated rent, some with 1 month. I think there were some with 2 month pricing and this was unusual period. So high GRM is not only a reflection of performance of the refinery, it is also a reflection on

Uh, the timing there. So just to give you sense, uh, again, um, there are days, uh, when I'm running a particular parcel, my Vizag refinery has given me above $30 GRM. And next day when you look at the dashboard, first thing on your thing, they're saying, yar, kal toh ye positive tha, aaj negative kaise ho gaya? Because next day they are starting to run a different which is at a different price.

So, current fluctuates based on the crude which you are buying. Refinery consistency and their performance is a structural thing which can be altered over a period of time. But on a daily basis, crudes, if I had cheaper inventory in some days, on a particular fortnight, say, my GRM could be sky high.

in some ways yes because lot of units in Vizag. See, you all design to certain specs. There is some part of Vizag which is designed to the spec and maybe director can add to it. He's much more knowledgeable on this topic than I am.

Okay.

So the alternatives are not readily available in the market with the same goal. So that whatever impact that he had seen that and gone through that.

Yeah, yeah sir, this my question is that your auditor highlighted that there is the at the Wi-Fi refinery, there is the 26 billion loss is mentioned in the notes actually. So so what's the reason is that despite the very strong VRM you reported sir?

They're just checking up, the team is just checking up.

You can take.

Maybe this is ₹2635 crores that is after factoring in the inventory losses.

Maybe.

the losses that might happen.

Okay sir, it's only the eventual loss of that. Okay. What is the, I mean the utilization I for the September quarter and FY27 and how much is the product third party that you purchased is expected to replace at the full utilization level?

Okay, I think utilization as I said we are running at around 60 odd percent right now for the whole it's a new refinery so there will always be a few things here and there but overall we are for this quarter we are expecting 50% or thereabouts utilization. We are not going to thank our team for plus minus on that because it's a new refinery ramping up. Refineries take time to ramp up. On third quarter of this year maybe October onwards we are expecting

Expecting an 85% utilization run rate and by fourth quarter we expected to have close to full utilization on the refinery section.

Petchem as I said will take some time to ramp up, but till that time we'll be able to sell the other products including LPG which is always a demand. So we are going to start literally from today or tomorrow we are going to start producing a significant amount of LPG at the refinery. On FY27 we would expect sorry FY28 we would expect a full run on the refinery. We we are quite hopeful of that getting stable soon. In terms of what we are buying so if I just look at

First quarter, just take HSB as an example. We bought about 50% is our own, another 27% is through joint ventures. HMEL where we have the marketing rights for the liquid products. And another 24% was bought out. If I just do fast forward to next year, 56% of that will come from my own, including the rough things. 40% will be from joint ventures because HRIL.

can at that point of time and only balancing will come from third party refineries. balancing more from there are some places where it might be better to buy from them because of better serviceability especially in town south.

So that's a dramatic shift we are expecting in the next two to three quarters which will, as I said in my opening remarks, which will structurally alter our numbers and then obviously with HRL coming in and kicking in at good numbers, we would have a different set of comparisons to do next year.

You want to take the interest question first. First, Shived is going to answer first.

Okay.

Thanks, thanks Mayank and I did read your one page fast report. I think I always like the analysis you guys put together. Even when it is not favorable to what I would like it to be but nevertheless it was a good good quick analysis. Thank you for that. Keep keep keep it flowing. I think the way you've said I'll try to give it a more holistic answer to it. It also tells you how as a management team we are thinking about it. See there are

When we are at a moment like this, there are two things you have to do as a team which is leading a large team, large asset base and has lot of those things.

Of course, you have to do the things of keeping everybody motivated, keeping everybody excited. So we have a different task of how do we motivate our people after the loss numbers yesterday. So we are again doing our town halls and talking to everybody and talking about our future there. But as a management team, there are two things we are looking at it. One is what are we fundamentally altering?

And second is what helps me immediately in the short term. And that's how I would answer your question on those seven parts. On what could help me in the short term, frankly, it is crude sourcing and optimization. More volatile the environment is,

More opportunity exists for short-term optimization.

And there is a lot which we have done. Unfortunately, as I said earlier, we did carry a lot more crude on 30th June and we didn't think the bombs will stop or the crude will drop $25 in a matter of few weeks there. But there are some very fundamental things we have done like for example I talked about HRL coming on steam. There is a cot which is at Mundra. We sometimes bring in VLCCs and we use smaller ships to transport to Mumbai which allows us structure.

structurally to avoid crude cuts and gets it cheaper into Mumbai. Things like ship to ship transfer, all those kind of things which allow us structurally to alter and there are opportunities there. There was a moment one day we were very happy because an event happened and we had just negotiated spot cargo. An event happened and we renegotiated it, we got $6 off.

On a VLCC and $6 off, it's a lot of money. Um, uh, 2 million barrels, $6 off, you can calculate that number. So I think that, uh, opportunities exist in the short run.

Second in the short run, Samriddhi will give me benefits, and I'll talk of Samriddhi benefits in a minute. But there are two, three things which will be, obviously sharper on cost. HPCL has a good cost consciousness. Last many quarters we have been at it. So every bit small and big matters, just as a context, while in a different form. Tomorrow we have a event where 1600 of our people have participated in a digital hackathon, 499.

ideas for improvement. 30 of the final teams are going to be at our training institute and all of us as the leaders are spending the whole day with them looking at their ideas. So that's just the building a bottom up swell on many of these things. So those ideas will definitely give us benefit. There will be short term spikes on or short term uplifts on things like I talked about using VGO for something and by gas and all those things look at it. So those are short term lifts. But as a

Management team, the second prong we are working on is the fundamental shifts which we are doing. Slowly moving things. Now you might see the Navya gas which we have launched. Somebody might say what will you do, 9 crore cylinder. But if in a matter of 2-3 years if I'm able to move 50 lakh cylinders to that,

I move the needle on certain other things. Similarly, there is branded fuels. Again, I don't want to talk more about it. You do your own research, but you'll find out that HPCL is doing quite well on those. It does not show up on the numbers right now, but in two years it will start showing up on the numbers. We talked about supply chain optimization tool which we are implementing. It will not give me results this year. If I have to do further optimization, I still have to rely on Excel sheet. But next year when

My team would have a state-of-the-art latest digital optimization tool which can allow them to do unplanned movement.

Much more faster. Another area I'll talk of, RTCs and RTOs and APCs in our refineries. We are making sure that all refineries except HRL, we'll do it a bit later because it has to stabilize. But both our other refineries are going to have a saturation of all those units and wherever we have started measuring, we are starting to get

0.4, 0.5% uplift in the yield etcetera. So there are a lot of fundamental things which are there. That's why I made that comment at the closing part of it. We are bullish about the future. Yes, there is a short-term hiccup, but we are very bullish about the future because there are dozens and dozens of those things which you are doing. We have a very charged up team. I told 1600 of my colleagues participated in it. There are 499 ideas which came out of it. They might be good, they might be bad. Somebody might say $5, somebody might

But one fifth of my employees participated in it.

It's an exciting thing for a management team to look at it. Those are the fundamental changes we are attempting to make which you look at it. Of course, from a quarterly results, the first bucket, opportunistic, intermediates, some energy costs, some brutal cost take out. Those are things which will help in the short term. I hope I've answered your question.

Sure. Nikhil, I'll attempt a quick answer then I'll request Vardhan ji to give more details. You all know him from us, he knows this subject. I think we are actually very excited with what has happened on HRRL in the recent times, especially after how our team bounced back after the CDU fire incident. See, we had a sequence and I'm talking in layman's term, Vardhan ji will explain in terms of technical details, more detail. As a layman, I would say, we had a sequence.

the sequence of commissioning which was lined up, CDU and then DHDT, DCU, those kind of things which were lined up.

Lo and behold, we had the CDU started. We were hoping to sort of do the commissioning at that time. Or at least the starting at that time and commissioning few weeks later in April when this happened. That caused us to do rework, shut down, take a shut down in CDU. But in June, we commissioned four or five major blocks within fortnight or maybe said three weeks. This include recommissioning of CDU.

DHTT, the diesel hydro treater. HU which was always working, we had taken a shutdown, we restarted it. Then we also committed the the amine systems and the solar bottle etcetera. So those we all got it going Delight Coker, I talked about it. In fact, Pet Coke was the first product we commercially sold from there. So it probably is unheard that refinery got all the units in six weeks and

3 weeks, 3 to 4 weeks everything got commissioned because we had the deadline of June end to get the scheduled commissioning.

What we did as a team is we pulled in best of our people from Vizag and Mumbai and 150 of our people are stationed in HRRL right now to assist the teams on the ground to make sure asset is up. As they said PFCCU which is the Petrofeed cracker unit is literally on the block of commissioning right now. It's a matter of hours by which we will be able to commission it. With that from my perspective bulk

of the units on refinery are commissioned. There are some units where we have a single train like in TCU, we have one train working right now. Second train should work in next 2, 3, 4 weeks somewhere, but we have enough to process there. The block which is left for full commissioning is SRU, which we are hoping by end of this quarter give or take couple of weeks would be there. At that stage all refinery units

More or less would be done. There would always be small things. So but come October end we would expect the refinery to run at 85-90% small things here and there. But Pratin ji, you can add with your .

it will be fully maximum utilization will come. And all the individual units also have been in detail mentioned already. we would like to also add that the MS production also has started. LPG though it's not a normal product after the PETCOM unit comes. Right now we have started shipping out LPG also. So with this all the fuel products which have been targeted are already under production. And gradually it will stabilize. The key challenge

The challenge here for an inland refinery is, any of the intermediate products gets surplus, will not.

not be able to move out hostilely. So we are overcoming that by matching all the units at the right capacities and at the right times.

But Nikhil, just one overarching comment. We've been talking HRRL at least the five or six times I've done endless calls. I'm personally very confident on the team. It's going to get a remarkable job by our team and this refinery will work. Very confident about. There will be challenges, it always comes when you start a new asset, but we are quite confident that we have the line of sight to the full run on this refinery. Petchem, we do have.

a bit more work to do, but till that time we will sell LPG and other products.

I think it's there are two three different parts of SPR actually some part of cabins which are next to SPR HPCL owns directly some part of the cabins. We also own in Vizag a cabin ourselves. SPR we did take crude from there and so did others. I think the crude there is a permission you actually have to go to SP ISPRL board to do that and you put in a requisition they do that. It's that I think at the market prices

and then there is some sort of agreed etcetera which is there. So, that's one. The filling is done by government. But when we bought out crude from there, we got it out at the market prices. There is a part of SPR which if I'm not mistaken is one of the international oil major stores its own crude. That might work slightly differently. I'm not fully conversant with those details. But we did buy crude given that what we were buying from there was I think Gabon and Vizag had Astra if I'm not mistaken.

you couldn't even replace because nothing was coming out of it so but it was given at the market price and some fee etcetera. ISP is good setup for doing that and they are very quick on it. there were times when we needed something urgently, very quickly we got those. I think BPCL and others also took it.

Thank you Nikhil.

that would roughly be similar. give or take a thousand, 2000 here and there. It's roughly the similar. I think we had just to give you some broad sense on on the debt. I think we were looking at

Sort of this being again very difficult to predict the future, but if today's situation holds, I think we are at the top of the mountain. I don't know whether it's a peak going down or a plateau, but it's roughly the similar at the end of the quarter.

The good thing Vikas on that one is there are two others who have bigger problem to solve on ETF than I have. So when this problem comes to my desk I said, yaar mein paas aur problems hain bhi solve karne ke but I know Shivda if you have any thoughts on that I I'll see if my team has otherwise if they don't have the details we can give them to you offline. I'll be personally honest I've applied myself less on ETF considering our market share is not the largest on this one. So Vinod will help address that

Uh, hi sir, thanks for taking my question. I just want to get the number on refinery or refinery on his GRS. I'm sorry to interrupt you.

Uh yeah, so I just wanted to get the refinery-wise GRM across all three refineries and some performance updates of each and every one.

I think on JRFs we have been very consistently giving what we have given out and we'll stick to that that level of exposure and we've been very consistent with it.

Okay.

Thank you. Uh, sir, like if you have any closing remarks, Mr. Kaushal, please.

No, I think we've said enough. I'll only say if anybody has follow up questions, our team is always available. If anybody wants to meet us, we are more than happy to look at it. And as you guys write your comments, do share with us. We'll also learn from whatever, whichever way you are looking at it. I've always said you all look at it from different perspectives. It's always interesting to look at what you have to say. So we look forward to all all the comments there.

Thank you for patiently listening to the thing, a lot of good and interesting discussions. I'll just sum it by saying it's been a tough time for this industry. But at the same time, tough time makes people stronger, teams stronger and ours is a very strong team which will as I said, we are hungry, we are mean, we are keen to perform strongly. So hopefully things will be better when we meet next time three months from now.

Thank you all.

Thanks everyone for participating in the call and for HPCL to continuously giving us this opportunity to host them. Thanks everyone, have a nice day.

Thank you.