Bharat Petroleum Corporation Limited (BPCL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Bharat Petroleum Corporation Limited Q2 FY '22 Earnings Conference Call hosted by Antique Stockbroking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to [ Mr. Varadarajan Sivasankaran ] from Antique Stockbroking Limited Ltd. Thank you, and over to you, sir.

Thank you, [ Nirash ]. Good morning, everyone. It's my pleasure to welcome all the participants and the management of Bharat Petroleum Corporation to this 2Q FY '22 Earnings Call. We have with us today, Mr. V.R.K. Gupta, Director Finance; Mr. Manoj Heda, Executive Director Corporate Finance; Mr. Pankaj Kumar, CG and Corporate Treasury; Ms. Jenny C L, BGM Pricing and Insurance; Mr. Piyush Borania, Senior Manager, Pricing and Insurance. I'd like to hand over the floor to Mr. Piyush for taking it forward. Over to you, Piyush.

Thanks, [ Mr. Varadarajan ]. On behalf of the BPCL team, I welcome you, one and all, to this post Q2 results con call. Before we begin, I would like to mention that some of the statements that we would make during this con call are being the assessment of the matter, and we believe these statements are reasonable. However, their nature involves a number of risks and uncertainties that will lead to different results. Since this is a quarterly result review, please restrict your questions to the Q2 results. I now request our Director Finance, Mr.V.R.K. Gupta, who is leading the BPCL team conference call, to make his opening remarks. Thank you, and over to you, sir.

Good morning. Seasons greetings to one and all. Welcome to the quarter 2 post conference call. I hope you were able to go through our results for the quarter gone by. We would like to highlight a few points relating to the past quarter. Indian economy is assumed to register a growth of 9.5% in '21, '22, in which agricultural and allied equities industry and service sector are likely to register a growth of 3%, 12.3% and 11.4% respectively, due to the base effect of last year. As the country recovered from the impact of second wave of COVID, BPCL recorded the highest change growth in MS at 15% for quarter 2 when compared to year-on-year basis in the PSU space. BPCL had gained market share both in the urban and highway sector, where we are traditionally strong and on the rural market through strategic network expansion and for [ facilities ]. With the commitment of the MSBP unit expertise, we are well placed to cater to the increased MS demand without resorting to any imports. Similarly for HSD also, we stood [ first amount of ] PSU by growing at a rate of 8% as compared to the Q2 of the previous year. Price transport will continue to be dominated by HSD in the field in the foreseeable future. As on 30th September 2021, BPCL had the second highest number of outlets at 19,251 number, and continues to have the highest throughput per outlet among the PSU [indiscernible]. Further, we have improved our market share almost 40% -- 30% for MS and HSD in the retail space at the end of quarter 2 of the current past fiscal year. BPCL are actively adopting emerging technologies to leverage opportunities. I would like to spell out a few initiatives that have been taken by us in the retail space to further improve share of business. During the year, we proposed to expand [ CNG's ] network from 687,000 for year end. And in the EV space, we are already have 7 battery charging stations and 42 public charging stations in 11 cities. For 54 charging stations patient in [indiscernible], work is still in progress. And we also propose to make our retail outlets [ as energy ] stations almost around total [ 18 ] total retail offers we want to make these energy stations in the near term. This will cater to all forms of energy needs of a customer, be it MS, HSD, CNG or EV. BPCL has been launched in 60 facilities so far to give the control of building the field in the hands of the customers through a digital experience. BPCL has migrated from conventional point-of-sale machine to and [indiscernible] fuel that is well integrated with [ MTVs ] for [indiscernible] building and ensuring right quantity. We have covered all the major ROs almost 97.12% of our own network uses a [ POS ] machines that is [indiscernible] this POS machines. Going to other major products. In LPG, BPCL grew by 4% as compared to Q2 of the previous year. In case of ATF, we grew by 24% as compared to Q2 of the previous year, as we are primarily focused on the international sector, ATF sales had to pick up as fuel international operators are still not allowed to operate. With global gasoline demand [indiscernible] pre pandemic level, to tight global supply with revealed exports from China have led the improvements in MS crack to average of $9.7 per barrel in Q2 from an average $8.04 per barrel in Q1 of FY '21 '22. In case of HSD, steep increase in LNG prices, coupled with winter heating demand led to deliver their crack in HSD at $8.13 per barrel in Q2 from $6.9 barrel in Q1 of current year. When we compare Q2 to Q1 of current financial year, the Indian market of crude oil has increased to $72 per barrel from $67 per barrel of Q1, and the rupee has been hovering around 74 per dollar. BPCL [indiscernible] have improved to $6.04 per barrel in Q2 as compared to $4.12 per barrel in Q1 of the current fiscal. So [indiscernible] throughput was at 104% of the nameplate capacity in Q2 as compared to 82% for Q2 in the last year. The throughput for both the refined [ throughput ] 7.16 MMT for the quarter ended 30 September as compared to 5.63 MMT in Q2 of previous year. The refining throughput has considerably improved due to the increase in demand for second wave of COVID. The distillate yield in Q2 of current year is 86.43% as compared to 87.62% for Q2 of the previous year. For Q2, the revenue from operations stood at INR 101,632 crores as compared to INR 63,912 crores for Q2 mainly by increasing the volumes annualized increase in the prices. The profit after tax at INR 2,694 crores as compared to INR 2,248 crore in Q2 of previous year. During quarter 2, BPCL acquired 2.69 crores share warrants of the overall head of the government of medical use of [ INR 72.68 crores ] paving the way of merger of the company with BPCL. Further, the Board in its meeting held at 25 October has approved amalgamation of BORL with BPCL subject to [ liquidity clause ]. Again, at the CapEx target of INR 10 billion crores of [indiscernible] a year, we have almost spent INR 67,554 crores, during the 6-month period. This includes BORL [ arrangement ] of INR 2,472 crores. Our borrowing sale on 20 September has significantly reduced from INR 26,315 crores level as of 25 March to INR 21,000 crore. We are excluding the lease obligation amount around [ INR 7,900 crores ]. The debt to EBITDA ratio as of 30 September at the end of Q2 is at 5.44 and again at 6.74 at end of Q2 previous financial year and 0.3 at the end of Q '21. As of September 2021, we have only around INR 120 crore outstanding, which is receivable from government of India. The [ remaining ] under our SKO PDS and only marginal subsidiary in LPG during the current quarter gone by. I now invite for questions and for any clarification. Thank you.

[Operator Instructions] The first question is from the line of Probal Sen from Centrum Broking.

I just have 2 questions. One is that if we look at refining throughput, obviously, it has definitely improved from Q1 of this year and as well as from the very low levels hit in H2 -- of H1 of last year, rather. Any time lines that you can see where refining people will get back to the 8.3 million, 8.4 million tonne kind of trajectory that were consistently doing with over 2Q through to 4Q of FY '20? By when do you see demand strengthening to that point where we can achieve those kinds of throughputs? That's my first question.

Yes, okay, yes. If we see our peak throughput we have issued in '19, '20, which is almost 31 MMT per year, that means some of [ that point ] almost [ historically to 8 ] MMT per quarter. So this quarter, we have 7.16. And the current amount based on the current trend, we'll be crossing beyond 100% of my nameplate capacity. What we are expecting Q3 will be around 7.5, 7.6 MMT. If the demand continuously growing at this level and growth comes back to the positive level, most probably for Q4, we may reach the pre-pandemic level of throughput.

Okay. So for FY '23, we can safely assume that everything going well, no other setback, we should be getting back consistently to more than 8 million tonnes, right?

Right. It -- everything depends on the HSD respective growth. Still, we are not gating to cross the pre-pandemic level of HSD growth September '19 levels. We are expecting in case everything normalizes, the growth will come back by end of this year. If that happens, definitely, our throughput will come back to the normal amount.

Got it, sir. And the second question, and I know that you don't comment on specific marketing margins. But if I were to derive that number based on the refining data and all the other segments, the blended marketing margins seem to have actually strengthened quite a bit in this quarter compared to the last quarter in Q1. Any specific reasons for that? Or it is a function of improving demand that has sort of driven this?

I think there is no specific reason. You have to see the margins over a longer period. You cannot compare only on quarter-on-quarter and month on month basis.

Sure, sure.

See, the same trend we are taking on a longer-term basis, we'll be in a position to return our margins.

So is it fair to say, sir, the average blended margin, let's say, for H1, what is in there -- we can expect broadly a replication over H2 as well since it's going -- everything is going normal?

Hopefully, if the crude prices are stabilizing at certain levels, are experiencing improvement -- in the crude prices means that I'm positive the [ government is directing ] the crude prices, maybe definitely on a longer-term basis, we can return the margins. There will be no further increases.

Got it. So 1 last question, if I may. Any clarity from SEBI in terms of the open offer or not for the listed investments as part of the divestment process? Anything you can share with us?

No. There is no development happened in this particular aspect during this quarter 2. Our intention is to continue our stake in [ IIFL ] [indiscernible] because we have a strategic investment. So we are still working on with the government of India to ensure, to continue our stakes in these companies and how do we have to open up a level, but there is no development happen in this Q2.

There's no regulatory clarity as of now is what you're saying?

There is no [ development on that ]. Thank you.

[Operator Instructions] The next question is from the line of S. Ramesh from Nirmal Bang.

[indiscernible]

Ramesh, sorry to disturb you. Your voice is not coming clear.

[indiscernible] Can you hear me now?

Yes, please.

Yes.

Mr. Gupta, congratulations on your winning [ as ] Director Finance and good morning team. I just have a couple of thoughts on the operating performance. Could you see there a divergence in the margin -- refining margins in Mumbai and Kochi, if you compare it with the year ago levels? So how do you explain the increase in the Mumbai versus the decline in Kochi? That's the first question. And then how do we read this increase in the high sulfur crude as a percentage of the normal crude processed?

For Q2, you see the refining margins for the refineries put together, average is 6.04. Kochi was at 5.54; and [ Mumbai ] was at 6.54. Definitely, Mumbai refinery their final margin, generally will be higher as compared with Kochi refinery. Mainly, we have some value-added units in Mumbai referring mainly last another products. And otherwise, Kochi refinery even we have a trend to buy a different around 1.83, which would be favorable for Kochi refinery. But at the same time, the Saudi Aramco OSPs were higher waiting to setting up the gain what we now in terms of rent to differential mainly for high sulfur. Otherwise, Kochi would have been better than [indiscernible] Mumbai refinery. But whatever brand differential we have seen in Q2, but it is partly offset with setting out with Saudi Aramco OSPs were higher, the premiums.

Okay. And the second thought is in terms of your expenses, there's a sharp decline in staff costs. So how do we see the trend for staff cost going forward? Will it be keeping in line with the second quarter numbers? Or will it keep changing depending on the extent of the VRS?

If you compare Q2 of -- to previous year, definitely, last year, Q2 was a very exceptional expenditure, mainly related to our VRS. So after manpower go out and our VRS today, our number of manpower is very lean, and we are expecting at this level it will become a new normal for employee cost to -- per quarter, more or less, it will be in the similar line. And we don't have any plans for any new recruitment and the manpower will be in the similar range only.

Okay. And in terms of the CapEx plans now, you have done the petrochemical start-up. So when do you see the commercial results of the petrochemical project in Kochi?

PDPP out of 3 units, 2 units already we have commissioned, but only in 1 unit, after some commissioning, after running a couple of days, there are some technical glitches we are facing. But it is on the stabilization period. We are expecting by mid of November 15, we can tackle the technical problem. Maybe end of November or December, we are expecting the 3 units can come back to the normal operations. Maybe in Q4, we can see a good performance in terms of PDPP output. That is what we are looking at it.

Yes. If I may just squeeze in one last part. On the merged accounts you have published for the half year, does it now show the 100% integration of the Numaligarh Refinery after the merger?

In stand-alone, there is no impact of the merger of the overall in standalone account. But definitely, in consolidated accounts, since we become 100% subsidiary company, the consolidation happen on line-by-line basis, it reflects in consolidated accounts.

The next question is from the line of Kirtan Mehta from [ BOB Caps ]. Sorry, Kirtan Mehta from BOB Capital.

Thank you for the opportunity. Just to sort of understand further on the petrochemical projects that has been previously discussed. What is the incremental margin addition that you have observed in the Q2?

Q2, the margins if you asked because the products are not very significant, very small quantity only per product has come out, around [ 29 to 30 ] MMT products had come out. If you ask us, in terms of the margins, the prices are very good, but the only thing the product availability is not good in Q2. So the margins may not be very significant in terms of total contribution in EBITDA from petrochemicals.

Do you still consider it to be adding around $1 margin that you have been guiding earlier...

Yes, yes, yes.

For the average refining margin of the Kochi refinery, sir?

That is what we were expecting, even assuming another peak prices of petrochemicals even in the long-term average of petrochemical prices, if all 3 units run all together or definitely that around $1 in terms of the GRM. But however, after redoing the expenses and other things, maybe lesser than GRM levels. But however, we are expecting a GRM level of $1 issues there.

Understood. And would you be able to share further updates on the divestment of the state by government, what are the events which has happened during the quarter? And what are the next steps from here?

Once again, let me clarify, the investment processes is handled the government of India by Department of Public Investment and Asset Management. BPCL is only facilitating the completion of the formalities. We have already opened the data room and we're continuously providing whatever data requirements are coming from the transaction adviser. And some of the clarifications, the transaction advisory is sending some of the clarifications. We are regularly replying for those clarifications. So you see the process, it is going up. Beyond that, we cannot comment anything on this. Then the government of India, the time and again mentioned in the public also the reinvestment decision shall be completed by March '22.

Given in the last call, you had mentioned that the meeting for the bidders with the management of BPCL was the next step. So has that been completed yet?

Nothing has moved in that direction, at least in this quarter, Q2. Nothing has happened.

And do you still see the Q4 time line being adhered to? Or do you see a risk to the time line? I know it's arrangement managed by the government, but your interpretation of the time line?

We are hopeful. We are hopeful.

As I think mentioned by Mr. Gupta, the process is being run by government of India. Our role is largely to assist the government and the transaction advisers in facilitating the responses in the data which has to be provided to the prospective bidder. So I think that's what it is there from our side.

The next question is from the line of Amit Murarka from Axis Capital.

So just wanted to check, do you know operational and financial details for 1H?

[indiscernible]?

In July, the profit after tax was INR 213-odd crores, and the GRM was 6.2. That is Q2.

Okay. And by when you think the merger should get completed?

Generally, the merger process takes place around 6 to 9 months after submission of our application. Within the time line, it should happen. Let us see how the regulatory format is moved.

Sure. And on PDPP, if I got it right, did you say that in 4Q FY '22, you would expect like normal operations and maybe that $1 GRM benefit getting realized? Or will it be more in FY '23?

I think we are hoping because mid of November or end of November, whatever technical issues we are facing now with one of the units that we can resolve. After that, maybe in Q4, maybe all the 3 units we can run. If that happens, if the price is at peak level, the VRS will be much -- more than $1. At prices, if there is any further softening of the prices of petrochemicals, maybe we can keep around $1 GRM.

[Operator Instructions] The next question is from the line of Mayank Maheshwari from Morgan Stanley.

Just a couple of questions. First of all, on the marketing side, if you can just share with us in terms of your market shares around diesel gasoline and some of the other key products on the industrial side?

So for April to September, BPCL in MS retail, we have 28.96% market share; HSD, it is 29.37%; industrial and commercial, it is 18.61%. I'm talking about half year, okay? And LPG it is 26.7%. In case of quarter. MS is 29.22%; HSD, it is at 29.91%; I&C it is 18%; and LPG is 26.98%. Overall, we have a market share of 24.32% for the quarter.

And ma'am, can you just talk a bit about in terms of your strategy now going forward considering the focus that you were talking about on highways, et cetera. Can you just talk about how you're kind of trying to integrate the new energy side of the business, along with the stations and what are the plans around that? And how are you kind of thinking about deploying CapEx around it?

Yes. One is in the market stage. Actually, broadly 2, 3 things we are focusing. One is making some of the major retail outlets have energy stations. So this will cater the needs of MS, HSD as well as CNG plus the new alternative fuel equipment mainly for energy stations, mainly for charging points. Beyond that -- in a large scale, we are putting a good amount of investments in the digital. There is a complete changeover of customer experience. Maybe some of the initiatives recently we have asked that you feel where the customer can make the payments through QR code and they can go to the retail outlet. Yes, they can scan the QR code and they can take the product and it will ensure the correct quantity and the value products. So these are the digital initiatives we are taking. And beyond that, we are refocusing again on the putting more investment in the convenience stores, and mainly of our retailing at retail core store. So these are the broader themes that we are focusing in retail. Charging stations, putting more gas facilities in the CNG or LNG at highways and less consumer retailing for convenience stores. Broadly in retail, we are doing this.

During this year, I will... [Audio Gap] And second thing, your discussions with the management, not had happened in Q2, and we don't know what is the schedule of that another thing. So beyond that, we cannot comment anything in the process. And second thing, the [indiscernible] side, the retail outlet expansion, we have -- current quarter, we have commissioned around 485 Q2 and around 130 outlets we have commissioned in Q1. Maybe another 400 or 500 outlets we are going to commission in this year. How many -- by mid of next year, we may closer to the network expansion. Another initiative we will focus to improve our market share.

Okay. And sir, I mean on the LPG side?

LPG, what are your question, please?

No, no. Sorry, if I heard correctly, you said that the total outstanding is only INR 120 crore. That's all the outstanding from government?

Yes.

Right. Right. So from government of India, the total [ record ] are only INR 120 crores because whatever small subsidy, consummation of the [indiscernible] they are continuously they are making payment. Otherwise, there is no major options. We are at INR 120 crores.

The next question is from the line of Sabri from Emkay Global.

This is Sabri Hazarika of Emkay Global. So I have 3 questions. Firstly -- first one relates to LPG. So you mentioned that subsidized -- I mean LPG do not have any subsidy right now. But considering the sharp hike in global LPG prices over the last few months, are we making positive margins on nonsubsidized LPG? Or are you observing some?

Right. On margins, we cannot comment anything on the margins. But subsidies, yes, in some particular periods of time, there is a small subsidy in certain market. But overall, the subsidy comparably very small where government of India is reimbursing under the subsidy. Our margins so we cannot comment anything on.

Okay. Second question relates to your CapEx. So you said around INR 10,000 crores is that sets for FY '22. So FY '22, what would be the guidance?

As of date, we now have certain projects in our store, the feasibility studies are going on. But we have not concluded a stage what is the amount we have to commit for next year. Excluding those new projects, the normal capacity we are expecting around INR 10,000 crores for next year '22, '23. In case if anything, we conclude on the new projects, definitely these numbers will go up. But as of date, the next year [ normal ] CapEx we are expecting around INR 10,000 crores.

Do you consider particularly project price, I guess you have included the Polyols project in this or not?

Not for next year, not a big amount, but still, we are reworking on the total numbers for Polyols. So once we conclude accordingly, then we will included in the number.

Okay. And retail outlet addition annually will be around 1,500 to 2,000, that's right?

Next year, it may not be that much. Next year, it may not be that much.

This year, it will be 1,500?

Or maybe 1,000, 1,200. We have a target of around 1,500, but we may close around 1,200 to 1,300. [ It depends ].

Okay, sir. And sir, last question is related to again its clarification on this PDPP. So you've mentioned that $1 GRM acquisition will happen to Kochi refinery. So that is because of producing propylene versus LPG. Is that right?

Propylene versus LPG, plus propylene and petrochemical price differentials. So both put together. The final value addition at GRM level, 1 propylene to LPG that converts in whatever differential, [indiscernible] some propylene to come to the petrochemical whatever value addition, both companies put together differential in regard to $1, yes.

So you are saying that petchem segment, whatever profit comes, for example, the difference between say, [indiscernible] acrylate and with propylene, that difference is also captured in this one, right?

Right. Right. Assuming not at the current peak prices on a long-term [ overall basis ].

This, we are talking only at the refinery level. Further, they will be marketing...

Yes, we'll give you some small marketing margins.

And marketing margin will be on top of that. That will be based on the Indian demand conditions?

Right. Right. Right.

The next question is from the line of Manikantha Garre from Franklin Templeton.

Just on the chip on your revenue statement. You are saying that by middle of next year, our operation should help to maintain market share. Does that mean that after back your RO, your real outlet addition, [indiscernible] is that what you're relating to?

Not this year. Like for the last couple of years, we have made additions of around 2,000, 2,500 retail outlets for over a period of 2 years. So the expansion may not be that magnitude. That's what I'm trying to say. Maybe where our important markets are, that -- those important market we may add retail outlets. But not like every year addition of 1,000, 1,500 retail outlets.

Okay. So what would be those markets that will be focused on [indiscernible] is it?

Yes, right.

Understood. And my second question is on the digital side. Anything you are mentioning that a lot of investments are going into digital as well. I think you have highlighted retail. So what are the key digital initiatives that we have implemented for which are helping you, where you have seen a lot of traction? Can you just...

We are working on 3, 4 themes. One is your one customer and chat bot and in retail UFill and a new loyalty program. Many initiatives we are working on it. Whatever we have implemented, 2 important things we have implemented. 1 is UFill we have implemented, it is working well. And second one is migrate now for conventional point-of-sale to and [ android-based ] point-of-sale. These 2 initiatives already are completed. In some of the nonmarketing areas also, we have done some detailed initiatives, mainly command control at one particular single place we can see and cater all over India, what is going on like where is city [ port ] and where is retail outlet and including the refinery. There are many initiatives we are taking, but under a work in progress. Maybe by next quarter, we can come and explain what [ exactly ] initiatives, how the customer experience is changing.

Understood. So just on this point only, how do we quantify the benefits of the [ digital ] initiatives you are doing? Like is it more on the cost or customer retention or the revenues? How do we quantify this? How do you think about the content...

In terms of quantification, the basic object to is the customer experience. Definitely, it will add on the volumes, but we are not sure what extent actually has helped because the initiatives have started just now. Maybe after a couple of quarters we can work out what exactly there is a drop off on account of the digital initiatives in terms of the volumes. So definitely, there will be different customer experience.

Sure, sir, just one last question on this one. Again, I think you have started door delivery of this, I think special [indiscernible] from start-up.

Yes, [indiscernible].

How is that -- how is the traction there? And who are the customers who are declaring this predominantly?

We have 2 initiatives here. One is door delivery through [indiscernible]. And second one, we have recently launched the selling of diesel through jerrycans. It's 20-liters jerrycans so that from retail outlet to the field jerrycans, the product can reach to the customer. For example, [indiscernible] the consumers mainly for [ pump sales ] and [indiscernible] sales. If they want any diesel they need not come to the retail outlet, [indiscernible] jerrycans can reach to them. And in a big consumers mainly for any housing societies and any industries if they want large-scale diesel consumption, they can take this product through [indiscernible]. Today, presently, we are having a retail fee cut of around [ 537 ] numbers we are operating[indiscernible].

So on these, you earn more marketing margin?

The margins are everything same because this is the [ RSP ]. Whatever margin here you loaded with the customer, from there only the sharing will happen over the marketing margin will be more or less same way. It's only -- we are delivering the product at customer point instead of retail outlet.

Then that is an additional cost for you?

Yes, maybe dealer margin is also there. There will be some sharing from the dealer margin.

Yes. So there is delivery assistance scheme under which we recovered this call.

Recovered from dealers?

Yes.

The next question is from the line of Iqbal Khan from Edelweiss.

My question is answered.

You next question is from the line of Amit Rustagi from UBS Securities.

Yes, sir, could you clarify that the open offer required for IGL estimates And we've got some clarifications from SEBI. What did it be clear from them?

As already has clarified. There is no development happened during the quarter. So we -- once again, we are saying that have no intent in our stake. We want to continue stakes in these 2 companies because we have a strategic investment. But otherwise, there is no development happen in that open offer our sites came from or open offer during this quarter.

This means that the open offer is applicable for Petronet and IGL. Meaning SEBI has not given any resolution.

As update, SEBI is making their queries.

The next question is from the line of S. Ramesh from Nirmal Bang.

Yes.[indiscernible]...

Sir, your voice is not clear.

Sorry, can you hear me now?

Yes, but not...

From your background, a lot of sound coming.

Is it okay now?

Yes, better.

Yes. So I just wanted your thoughts on the future prospects for Bharat Oman based on the numbers you have there for the second quarter. Assuming we sell off margins, can we sell off of profits we sustained given that you also repaid some loans? How do we read the future performance of Bharat Oman from here?

Yes. So if you look at the refinery performance, I think the BORL has also done quite well in terms of physical performance as well as the financial performance. And since the loan has been repaid, so going forward, we see a very good refining margin coming from BORL.

Okay. And the second part is on the CGD business. With the rollout of the new [ GAs ] that give us, how many [ GAs ] you are going to roll out in the, say, next 2 or 3 years in your standalone balance sheet? And what is the kind of impact it will have on your P&L in terms of some rough indication or in terms of volumes? That would be great.

BPCL, along with BPRL, we have now 17 [ GAs ] of which we will be spending over INR 8,000 crores in the next coming 5 years. Indeed, 17 [ GAs ] already supply of CNG and PNG has come -- started in around 11. Price is just under construction balance. In all the 17 [ GAs ] construction is also fairly going on. On what would be the expected returns, we won't be able to share a number as of now.

Jus to add, however, the IRR is pretty good, and we have also technically commissioned some 64 number of retail outlets in these deals. And just to compare out of that INR 8,000 crores, CapEx is [indiscernible] some INR 200 crores CapEx we have already done.

Yes. So just to get a sense in terms of when we can see the commercial results is there any time line you can give? FY '23? '24?

If we see all the [ GAs ] that we are along [indiscernible] projects, maybe some projects we may have to complete within a period of 5 years, some within a period of 3 years. But in a phased manner, some benefits will accrue even starting from next year also some benefits may accrue. But what can be the benefit, we have to work out and see maybe next time we can explain.

The next question is from the line of Vinit Joshi from Goldman Sachs.

My first question is on the ethanol, I mean, can you help us understand how does this impact earnings? You are already at 10% and the target is to go to 20%. So would it mean additional cost or additional margins? How should we think about it?

So actually, ethanol blending, currently, the target of 10%. So we are on the way to achieve that target. With respect to the enhanced target of 20%, which we have to comply with in the future. So actually, there are various issues or unresolved issues, which are yet to be figured out because, first of all, the existing vehicles in market, they can only take in ethanol blended MS only up to 10% as on MS. So the automobile manufacturers have to comply with those new specifications. And other than that, there are also issues like at a retail outlet, there would certainly be old engines only because in a country like India, where a life cycle of a car is at least some 5 to 6 years. So the old vehicles also would be there, so whether any retro equipment would be there in the vehicles. So there are many unresolved issues which are yet to be figured out and which shall be dealt with jointly with the automobile manufacturers, government of India and on the [ OMC ] as well as refineries. So to chart out a way right now is difficult, but all of us are on the job to achieve the target of 20%.

I wanted to understand, is it margin accretive or margin dilutive? Because we have gone from like 2%, 3% to 10% commendably in the last 3, 4 years, right? So does it increase your margins? Or does it reduce your margins?

No. So there is no effect on the margins as such due to advanced lending.

It's only a timing difference.

Okay. Okay. All right. And sir, can you also help us understand the business model of EV charging? When you are, let's say, adding a EV charger to your station, is the CapEx done by a third-party where you're tying up with some third-party provider and you're making a fixed margin on each charge, which means it's an additional revenue opportunity for all the outlets? Or does it mean that you also have to incur CapEx to set up a station with EV chargers? So if you can just help us understand. I'm sure it will be evolving. But I mean how should we think about in future to model the earnings from this business?

And rightly, you said it is still evolving, right? But however, the rough estimation in a particular retail outlet, it depends on the charging clients we want to make it available. The CapEx requirement may be 3 lakh to 10 lakh a piece.. That is a range for putting the CapEx management. But as I said, wherever we now already around 40, 50 charging stations we started, we have the CapEx has been invested on [ diesel ] only. And we are looking at various options, maybe with I guess, with some of the service providers or -- we are not sure how do we go about it. Either we make our own investment that doesn't require any big amount of CapEx investments, even per retail outlet, an hour is INR 5 lakh, INR 6 lakh if we have to invest, even INR 100 if we want to make it, I don't think it will be much beyond INR 50 crore CapEx requirement. But revenue models, we are not very clear what numbers we can generate. What number of vehicles will come to the retail outlet are charging. What volumes for -- that, we are not that clear at this point of time. But otherwise yes, for giving a facility at our retail outlets, we are clear okay, at around 1,000 retail outlets that we want to make an EV charging station.

And this INR 3 lakh to INR 10 lakh that you mentioned, this seems like small. I mean how many charging points are you able to install? And what sort of charging points are you installing? Are you -- are these like fast chargers? Or super fast chargers? What is the charging time? If you can share anything in experience that you've had.

No, not yet clear because things are evolving. Some of the manufacturers are -- actually, if you ask me the charging points are not standardized rate, right? So whatever charging point, if I create -- maybe it may not be compatible for some of the vehicles. It may be compatible only for some of the vehicles. So this technology is still evolving as long as the standardization happens in the charging. We are not sure at what speed this charging can happen and which vehicles it is compatible.

Okay. And sir, my last question, I think you've been hearing that there could be some hydrogen purchase obligation at some point in India where refineries and fertilizer sector will have to use green hydrogen. So how are you preparing for that? If you can help us understand? Will it be like an additional cost to you in terms of meeting that regulation? Or do you see this as a business opportunity for you in the long run?

We don't have information readily. But however, we'll come back to you on it.

We will answer that offline. We'll take the details and come back to you.

On the topic, yes.

The next question is from the line of Vidyadhar from ICICI Securities.

So my question was on BORL. Just wanted to understand that with the amalgamation -- because of the amalgamation, are there going to be some tax benefits, some indirect taxes if BORL was [ pinned ] then it was a separate company and in which it won't have to pay now whereby the [ 3% equity ] benefits from that? Is there anything like that, that can be quantified?

Actually, we are foreseeing a couple of benefits after this merger. [Audio Gap] If analysts put together differently, there will be some good benefits. And inventory management also, it helps to reduce the inventory carrying cost. Yes, definitely, at the same time, after the merger, it becomes a BPCL refinery. So the product movement will happen across India without having any tax implications.

Are there any benefits going to the profit as well -- improving profitability because of that? Any number on that?

Number, we have to work out because these numbers are totally depends on the prices. Because if the number at crude is at $40 it is different. If the number at crude is at $80, there is difference. But definitely, whatever tax implication will be in the range of INR 500, INR 600 crore or much higher also at the current prices.

Is this [ CFC ] of 2%, which is the BORL benefit or what is it?

Yes, yes.

Okay. And secondly, did the BORL have any accumulated tax purpose losses which also you can benefit from?

In that case, I don't know but there are definitely -- there are some accumulated MAT credits and I don't know how many MAT credit is there and available losses [indiscernible] there and [indiscernible] depreciation is there. We have to work our tax point of view what exactly after the midyear, how many -- how much amount is available for passing on to BPCL and other thing that we need to work out the profit of this year.

And lastly, on the same BORL thing. So in terms of debt, has BORL entirely paid off the debt? Or once the merger happens, some debt will come to the merging CapEx? Any -- and what would be that amount?

Any updated, existing [indiscernible] loans have been settled with government of all other debt are still continuing with BORL. We are exploring how do we reduce the cost out for [indiscernible] debt because today, it becomes 100% subsidiary. And BORL the credit rating is also improved in line with the BPCL. So with this latest development, we are approaching the bankers to relook at the existing loan structure and loan infrastructure. Definitely, there will be a saving. Before the major merger, there may be some savings.

So what was the rate of BORL in end of September?

So the debt figure is around INR 9,300 crores.

[Operator Instructions] Next question is from the line of Saurabh Handa from Citigroup.

Sir, I have 2 questions. The first one, once again, was on LPG. Now the international price, the Aramco FOB price has gone up from around $660 to $800 per tonne. So that would require you to raise the retail price by almost INR 140 per cylinder. So if that were to not happen next week because we usually do it in the first week of the month, can we assume that we could see some under-recoveries subsidies coming back? And especially because this $800 number could even go higher given the winter tightness that we are seeing right now?

So we cannot comment anything on the expected price increases. We don't have any comments on this.

No, this is not an expected increase. This $800 per tonne is a published number. So we do know that the Aramco FOB price is $800 for November.

I agree. Obviously, we have to see after the price increase. After next couple of days, what is the price increase will happen? What is the government subsidy we will keep. Those things we will comment only after the [ merger happens ].

Okay, sir, fine. Sir, second question just to clarify on the PDPP you said. So the refining segment will basically capture both the uplift in margins from producing propylene instead of LPG as well as the petrochemical delta. So the product price minus the propylene price. Is that correct?

Yes. Yes.

So it's only the marketing margin on the sales of the products, which, if any, you will capture in your marketing segment?

Yes, that will be additional.

Okay. So there is no new like petrochemical division, which you will sort of create new segments? So it will just be a split between the existing refining?

Right. As of date, we have 1 separate SBU who are leading in the direct product, same business units which we were dealing with the [indiscernible].

The next question is from the line of Sabri Hazarika from Emkay Global.

So I have 2 questions. The first one is relating to this ethanol blending only. So is the private sector also into ethanol blending right now? Private sector is also doing it right now?

No [indiscernible] are doing. Private sector there are [indiscernible] in [indiscernible].

So they don't have any compulsion, right?

Correct.

Correct.

Okay. And secondly, any idea on the -- for the normalized GRM for the quarter?

We won't be able to give any numbers to the further...

Yes, we are stopped working on any of the other ways of working on the GRM. Whatever the declared GRM, that only gets calculated.

The next question is from the line of S. Ramesh from Nirmal Bang.

Can you repeat? There is some disturbance.

Yes. So I just wondered your thoughts on this compressed biogas, or bioCNG projects, which all the OECs are trying to encourage third parties to set up. So if you're buying that CNG at INR 46, how does the economics work? And how do you monetize that business in terms of at what price we'll sell? And when do you see that actually reflecting in your business?

So the monetization part and all that is yet to start. It is still in the nascent stage where we have floated expression of interest around 39 number of expression of interest we have floated so far. And some -- we are envisaging that expected CNG that production against the alloys would be around some 1,000 tonnes per day. So per se, we are still in the nascent stage of it. Once there is finality to the number of ROs and where we should be placing, it shall be going forward. So as of now, we won't be able to give any further details on this.

Yes. And the other question is, since there a guaranteed price for lifting the bioCNG from the manufacturer, the INR 46 a kg, how does it become competitive with the other CNG which you also are retailing? And how do you generate some margins from that? That is the -- so what is the thinking on that right now, assuming that the INR 46 is cast in stone?

That's what I'm saying that the further economics of it, we shall not be able to share it at this point of time.

Still we need to work out, one is the procurement price; second one is, how do we load in the pricing of petroleum product. And anyhow, this production may not come in this year. Even if we issue the LOAs and sign the agreement by Q4, there is a time lapse of committing up unit by another 1 year, maybe '23, '24 or end of '22, '23 you can see the production coming from these units. At that point of time, we can have a better idea.

Ladies and gentlemen, that will be the last question for today. I will now hand the conference over to the management for closing comments.

Yes. So I would like to thank Antique Stockbroking for organizing this call. And we look forward you all to meet in the next quarter results. Thank you.

Happy Diwali to all.

Happy Diwali.

Thank you very much. I now hand the conference over to Mr. Varadarajan for his closing comments.

Yes. Thanks, everyone, for taking out time to joining the call on a Saturday. Have a nice day, and Happy Diwali. Thanks everyone.

Thank you very much. On behalf of Antique Stockbroking Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.