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

Ladies and gentlemen, good day, and welcome to Bharat Petroleum Corporation Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Varatharajan Sivasankaran. Thank you, and over to you, sir.

Thank you. Very good afternoon to everyone. I'd like to extend a very warm welcome to all the participants on the call as well as the senior management team of BPCL. We have with us Mr. V.R.K. Gupta, Director of Finance; Mr. Pankaj Kumar, ED, Corporate Finance; Mr. Ashish Goyal, CGM, Corporate Treasury; Ms. Anuya Vatsal Thakar, DGM Finance, Pricing and Insurance; Mr. Balagirish, Senior Manager, Pricing and Insurance. I'd like to hand over the call to Mr. Balagirish for his statutory disclosure.

Thank you, Mr. Varatharajan. On behalf of BPCL team, I welcome you all to this post Q1 results con call. Before we begin, I would like to mention that some of the statements that we would be making today during this con call are based on our assessment of the matter, and we believe that these statements are reasonable. However, their nature involves a number of risks and uncertainties that may lead to different results. Since this is a quarterly result review, please restrict your questions to the Q1 results. I now request our Director of Finance, Mr. V.R.K. Gupta, who is leading the BPCL team for this call. to make his opening remarks. Thank you, and over to you, sir.

Good morning, everyone. A warm welcome to the participants of today's investor call. Our Q1 '26-'27 results were released on the exchanges yesterday. I hope you had an opportunity to go through the same. The first quarter of FY '27 unfolded against the backdrop of a rapidly evolving geopolitical environment. Persistent tensions in West Asia created uncertainty across energy markets, influencing crude and gas sourcing, price economics and supply chains. Although markets witnessed a brief period of stability during June, the latest geopolitical development has reminded us how quickly it can reshape the operating landscape. As we had indicated during our previous interaction, we expected the first quarter to be a challenging one, and it certainly was. However, instead of just weathering the storm, BPCL has focused on operational resilience and supply chain agility. With customer centricity as one of our core values, we stood steadfast in our commitment to serve the energy needs of our customers in all times. Throughout this period, our priorities remained unchanged. First, to ensure uninterrupted supplies of transportation fuels and LPG to our customers across the country; second, to safeguard the interest of our stakeholders while managing costs responsibly; and third, to adhere to our long-term growth agenda while navigating through short-term volatilities. I'm pleased to say that our teams across refineries, marketing and logistics work together with remarkable agility to ensure continuity of operations throughout the quarter. The experience has also strengthened many of our internal capabilities. Let me cover the sourcing strategy first. Due to disruptions in tied up term crude volumes, we proactively optimized our crude sourcing by significantly increasing spot crude purchases with the spot percentage rising to almost 69% in quarter 1 FY '27 from 44% in the corresponding previous year. We diversified our crude sourcing outside of the Strait of Hormuz, exploring multiple geographies, including increasing the Russian crude grades to 38% of our total procurement during this quarter. We also procured 2 new crude grades from Venezuela and Angola. The procurement strategy was achieved by overcoming multiple hurdles, including vessel availability, placement of freight, insurance, et cetera. Further, I would like to reassure our stakeholders that we had already tied up our August volumes and are in the process of sourcing for September '26, providing us with adequate availability even as the geopolitical situation remains fluid. With respect to LPG, we ensured uninterrupted domestic supplies by diversifying LPG imports during Q1 '27 as well as by maximizing indigenous production from our refineries. Further, various mitigative measures were implemented under the government's direction to effectively manage the demand-supply balance. Our gas business also demonstrated agility amid disruptions in global LNG markets. Despite force majeure under 2 major LNG long-term contracts, we ensured uninterrupted supply to all our bulk, CNG and PNG customers by procuring from the spot markets. Coming to refinery. Our refineries operated reliably throughout the quarter, supported by the flexible crude sourcing strategy. By maintaining stable refinery operations, we were able to navigate the dynamic operating environment effectively. During the quarter, our throughput was 10.15 MMT, our gross refining margin for the quarter stood at $41.41 per barrel before factoring the impact of export duty and RAC. On the marketing front, demand was healthy across our key products with the domestic sales volume at 13.62 million metric tonnes during the quarter. Across our retail network, petrol and diesel supplies remained largely uninterrupted throughout the quarter. Our retail network continued to deliver industry-leading productivity with an average throughput of 157 KL per retail outlet per month. We also strengthened our customer reach by expanding our network to 25,485 retail outlets, while our CNG network grew to 2,700 stations, reinforcing our leadership in CNG penetration. We also strengthened our premium fuels portfolio, achieving a 3.88% conversion to Speed 97, while expanding Speed 100 availability across 53 retail outlets. We proudly launched our first stand-alone BeCafe at Srinagar Airport, marking our entry into commercial locations other than our retail outlets and expanding our BeCafe network to 220 outlets across India by the end of this quarter. I'm also happy to share that we recently launched Bharatgas Lite ZIP in Mumbai, a lightweight 10 kg composite cylinder offering instant new connection, express delivery, enhancing customer convenience and safety. We have plans to expand the offering to 100 additional cities across 24 states by 15th August 2026. In our gas business, over Q1 of last year, bulk gas sales registered a growth of 3%, while gas sales across our geographical areas grew by 60% to 85 TMT, reflecting the strengthened momentum in this important growth segment. In line with our go-to-market strategy for petrochemicals, we recently launched our brand BEPOLY for high-performance polymers. This reinforces our long-term objective of increasing petrochemical intensity and creating higher-value product streams from our refining business. Now let me touch upon certain milestones in our inorganic growth journey. While navigating near-term challenges, we are firmly committed to our long-term growth agenda and our strategic priorities remain firmly on track during the quarter. We completed the acquisition of the remaining stake of 39.14% in IBV Brazil from Videocon Energy Brazil Limited, making it a wholly owned subsidiary of BPRL. This strengthens our upstream portfolio and provides greater flexibility in developing overseas energy assets, mainly the assets are in Brazil. We announced our strategic partnership with Tiki Tar and Shell India Private Limited through a 40% investment in the value-added bitumen venture at a value of INR 85 crores. This marks our entry into a growing specialty business aligned with India's infrastructure ambitions while combining Shell's technology, Tiki Tar's manufacturing capabilities and BPCL's nationwide market reach. Coming to renewables, we advanced our initiatives in cleaner fuels and energy transition. We secured a capacity of 100 megawatts at an estimated CapEx of INR 860 crores in a wind utility tender in Madhya Pradesh with project development expected to commence shortly. On CapEx front, despite the challenging external environment, we made steady progress across our major planned capital projects under Project Aspire. Majorly at Bina Petrochemical and Refinery expansion project, we achieved a cumulative progress of 30.7% with INR 5,900 crores incurred and INR 30,000 crores already committed. The geopolitical situation has impacted the supply chain, procurement and execution of the project, but there is no significant impact on the critical line items. However, major long lead equipment have already been ordered, and we continue to work closely with our contractors and suppliers to minimize the impact on the overall project schedule. Other major projects, including the PRFCC project at Mumbai refinery, which has completed 7% and scheduled commissioning date is September 29. The polypropylene project at Kochi, the scheduled commissioning date is May 28. The project is completed 40% as on date. And the POL and LOB since signing are also progressing in line with the plan. During the quarter, capital expenditure stood at INR 4,433 crores, while project expenditure is expected to accelerate over the course of the year in line with the execution milestones, our full year CapEx guidance is INR 25,000 crores remains unchanged. Our proposed Andhra refinery project has also progressed through key developments, including licensor tender evaluation. Land registration process for around 3,082 hectares has been completed. Environmental clearance is expected from MoEFCC by Q2 '26-'27 and final approval is expected shortly. Reflecting on our financial performance, I would like to mention that while the external environment may influence the performance of an individual quarter, it does not alter our long-term direction. Our focus is on building a resilient, financially disciplined and future-ready organization while responding swiftly to changing market conditions. Against this backdrop, our financial performance for the quarter was primarily shaped by developments in the global energy markets. Despite underlying operations remaining strong, elevated international product prices during a large part of the quarter resulted in adverse marketing margins. In response, we undertook calibrated retail price revision of approximately INR 7.5 per liter across motor spirit and high-speed diesel, which helped mitigate the marketing losses to some extent during the latter part of the quarter. Due to the sharp increase in the international LPG prices, as of 30th June 2026, the cumulative LPG compensation buffer stood at INR 15,804 crores after adjusting for the installments received against the already announced LPG compensation of INR 7,594 crores. We continue to work with the Government of India on the compensation mechanism and remain confident of their continued support for the domestic LPG business. As you would have seen from our results for the current quarter, the revenue from operations stood at INR 1,59,479 crores and a loss of INR 3,962 crores on a stand-alone basis. Further, the debt equity at stand-alone gross borrowings level is at 0.19 with borrowings of INR 17,396 crores as on 30th June 2026. As the global geopolitical scenario evolves, our priorities are clear: operational excellence, disciplined growth and sustainable value creation. We are closely monitoring global market developments and responding with prudent commercial decisions. That's all from our side. I will now be happy to take your questions. Thank you.

[Operator Instructions] The first question comes from the line of Probal Sen from ICICI Securities.

First question was more of a housekeeping one. You mentioned about the GRM being basically a gross number, excluding the SAD and other sales. Is it possible to share the net number?

Yes, net number...

After SAD, you can roughly take around $17.

That number would have been closer to about $17.

$17 per barrel, if you remove the SAD component.

Understood, sir. And sir, one thing in the details shared post the results is that marketing division has actually seen a positive inventory impact. If you can kindly make us understand a little bit, given that prices for crude also dropped a bit by the end of the quarter. Just wanted to understand how the -- sorry.

Yes, what we have communicated only marketing trading gains means every fortnight when we see the RTP movement, the RTP differential multiply with what is the inventory we have, that we call it as advances gain losses that we separately disclose. That is the marketing. Because if you compare with starting from 1st April, in the first 2, 2.5 months, the price is increasing trend. Only in the Feb -- and June only the price decreasing has happened. So the majority of the reason is on the price increasing then. That was the reason for the quarter, it is recognized as an advances gains of around INR 3,000 crores.

So is it fair to then say, sir, that in this quarter then, given that it has gone the opposite way, there could be then a negative inventory impact in the marketing segment?

We don't know how it ends up by September because we thought the same thing in the beginning of the July. Now things have changed. We are not sure how the things will move. But this is the way we calculate. Every fortnight, what is the RTP differential and what is the inventory we hold it, then accordingly, the differential we calculate and disclose as the advances gain losses.

Got it, sir. And the other question was again regarding basically crude sourcing. Just wanted to understand in terms of numbers, what -- how many days of crude have we actually already tied up if we look ahead at the next couple of months. Obviously, I understand there's a lot of uncertainty in terms of pricing and everything. But in terms of absolute volumes, how are we placed for the next couple of months from a crude supply perspective?

Broadly, I can explain the numbers. For example, if we are processing around 39 million or 40 million metric tonnes of crude, around 3 MMT we source domestically from Mumbai. That means balance requirement around 36 million to 37 million metric tonnes. Every month, we need to import around 3 MMT, 3 or 3.2. To give you the numbers, as on June '26, we have inventory of around 3.8 MMT of crude. That means around 35 days of crude already we have 30th June. And we have already concluded the contracts for the month of July and August. We are hopeful whatever contracts we have committed, every contract, they will be delivering. But based on the recent issues in terms of this Red Sea route, there may be certain issues in terms of a couple of cargoes. So maybe we may not take the cargoes or they may not be in a position to supply. But otherwise, still 31st August, whatever crude requirements, it is sufficient and by maintaining around 30 days of crude also. And for September, just now the window is opened for concluding the deals. A couple of cargoes already we have concluded. Maybe in the next 1 week or 10 days, whatever September requirement also, we can complete it. So that is -- that I can give up to September only the visibility. Beyond September, we have not started any contracting on the spot volumes. We have to wait and see some more time.

That is very useful. Sir, one last question, if I may. What was the -- earlier, you had been guiding to what was the sort of crude cost effectively with respect to the benchmark, plus/minus whatever premium was it was available. Is it possible to share the effective crude cost for Q1?

I cannot share. I can give you directionally. In fact, the pre-war situation, the India basket benchmark and landing will be maybe $4, $5 loading, okay, the benchmark and landing, excluding the discounts of Russian Urals. Sometimes the discount will be $2, $3 -- if I remove the Russian, the benchmark and landing will be $4 to $5. But this quarter, April to June, if you ask me, the benchmark and landing will be more than $15...

[Operator Instructions] The next question comes from the line of Rishab Shiv Kumar from Motilal Oswal Financial Services Limited.

This is Abhishek from Motilal Oswal. Sir, just there was some issue with the sound. April to June, you said the crude premium will be -- the landing premium will be about $15 or so, right, 1-5?

Benchmark, when I say benchmark, that is the Indian basket. Indian basket means it's a combination of all oil companies procurement. It is not only for BPCL. When you say that benchmark, the differential of BPCL landing and benchmark will be around $13 to $15, you can take. That is directionally.

Okay. Okay. And that has come down now to about $4 to $5, right?

No, no. I'm saying pre-war. Pre-war it was around $4 to $5. Postwar, it is around $13 to $15. Now we have to wait for the second quarter how it evolves.

How it evolves. Okay. Fair enough. But I'm seeing shipping rates come off quite sharply. So are you seeing lower rates?

I can give you the benchmarks for prewar. For example, pre-war scale was hovering around $55 to $60 war scale. That is a benchmark. It went up to the peak level of $600, the war scale. It came down to around $300. Now it is hovering around $380 to $400. So that is the current benchmark indices for freight.

Okay. Perfect. And sir, just last question on the overseas E&P assets, what progress happening over there, if you can update us on that?

Yes. Actually, we have achieved a great milestones in the last quarter, April to June quarter. One is, let me talk about Mozambique. Mozambique, we have already announced the physical progress is 42% have been completed. Earlier quarters only, they have removed the force majeure and work is in full swing and entire manpower is deployed there, work is in full swing. In terms of the project finance, project finance, the lenders have agreed for continuing the project finance. And all sales purchase agreements are continuing almost majority of quantity, whatever sales purchase quantities have been signed, they are honoring. In terms of that is what Mozambique. In terms of project completion, we are expecting the first gas we are expecting in financial year '28, '29. That is for the Mozambique project. The first project is only for 2 trains. The potential development is almost 16 trains. That means we are -- in the first phase, we are developing a 13.2 million metric tonne of gas production, out of which BPRL, one of our subsidiary is having 10% of the stake. That means our stake of molecule that is around 1.3 MMT in the first phase of development. In the subsequent developments, whenever it happens, additional volumes will come. That is on Mozambique. In terms of the Brazil, we have earlier 40% stake through one of our JV in the particular project. Out of that 40% stake, we have a 61% stake by BPRL and 39% by Videocon. During the insolvency proceedings, we have submitted our bid and we are successful. And the entire transaction has been concluded. The entire stake has been transferred to BPRL. Now we are having a 100% stake in 40% of the project PI. So this project milestone is during this quarter, the operator has signed the FPSO contract and the work will be starting very shortly. The projected completion of the project will be '30, '31, the first oil will come, '31, '32, the first gas will come from Brazil. The expected reserve size is around 88,000 barrels per day, out of which BPRL have a 40% stake. So this is these 2 major projects. And other projects are small compared to these 2. We have certain project development in Lower Zakum. One is in producing block we have along with IOC and one is in Indonesia. Indonesia, we have submitted the FDP, but not started any work on that. These 4 other major working projects.

The next question comes from the line of Amit Murarka from Axis Capital. Sorry to interrupt, sir, your voice is not clear. Can you please use the handset?

Yes. Is it better?

Yes, sir, better. Please go ahead.

Yes. So I was saying that in terms of diesel and petrol, what was your own sourcing and how much would have been purchased, if you could give a percentage split of the 2?

Do you have already the numbers? Approximately, I can give our sales requirement around 80% our sourcing only. Maybe 10% to 15% we procure on month-on-month basis. It may vary. Otherwise, indicated will be 10% to 15%.

Is it the same for both MS, HSD. Or are you giving a broader source.

MS will be lesser. Diesel will be higher, but it depends on the realization. For example, if you feel diesel realization more than MS, optimization point of view, produce more diesel and lesser MS in those quarters, it slightly changes. 5% to 6% is slightly changing. We have a swing of around 10% in one of the refinery. So we can take MS more or HSD more depending on the product realizations.

Okay. So broadly 15% is purchased in that. And secondly, on the crude inventory gains, you've shared the marketing gains. Could you give a ballpark number on the crude gains as well?

No, earlier also many times we have clarified, generally, we keep around 30 days of crude on an average. So we don't generally calculate because our monthly -- our procurement price is monthly average, we keep around 30 days inventory. So we have stopped calculating what would be the inventory gains on crude separately.

Sure. But fair to share that losses would have been minimal in the quarter as in for crude?

I don't -- we have not calculated. Maybe you can say that minimal -- most probably minimal, maybe $3, $4 or something. It depends on the price movement, how the price is moving. I can give you some rough number because our average crude value at 31st March is around $99. Now it is $95 or $96, maybe $3, $4 impact.

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

First and foremost, I had a question around the refining side. You had some pretty good numbers around margins. Would you kind of try to highlight where these margins came from even if you take the SAD impact out, how did you kind of manage that? If you can kind of give us a bit more subjective view around which refineries, Bina, Kochi, et cetera? What were the things that you did that you think can be sustainable and durable here in terms of the volatility in oil that we are going through now. So in that context, if you can give us some perspective, that would be very useful.

A couple of reasons. One is definitely the cracks are high compared to any of the earlier years, mainly diesel cracks and ATF cracks are very high. And second, our distillate yield also, we have maintained at the same level around 84%, all 3 refineries put together. But if you see individual refinery wise, Bina is at 87%, better performance and Kochi also better performance, 85%, beyond 84%, 85% range compared to the refinery performance. In respect of GRMs individual refinery wise, Bina will be definitely higher. Bina will be around $57 per barrel at a gross level, means before special duty -- export duty. And MR is at $34 and KR is $39. Bina mainly due to -- they can process majority of the crude of high sulfur. So high sulfur comparatively, it is cheaper than low sulfur. That was the reason Bina has contributed a lot.

Okay. And sir, in terms of the crude sourcing, you said Venezuela has come in the mix. Where do you think Venezuela now kind of continues? Do you think you can get to a certain percentage in terms of Venezuela.

Two things. Let me clarify. Venezuela, one is technically can our refineries can process or not? Yes, technically, we can process, but it cannot take it directly. We have to take a blend and do it. So technically, whenever commercially if the Venezuelan crude is available, we can very well take. But certain point of time, while there is no continuity of Venezuelan crude procurement because certain point of time, certain months, the offers what they are giving it commercially is not viable. In particular months, they are -- commercially, they are providing a good offer. Those particular months, we are taking the cargoes. That was the reason we are not in a position to take any term contracts for a continuity. As and when in a particular month, if the original crude is comparably cheaper in terms of the crude value, then accordingly, we take Veneuerude.

Got it, sir. And sir, the last question I had was more in terms of marketing. You had, had in terms of non-retail, which is basically the industrial side on fuel marketing, what have you seen in terms of the market after the quarter like in the last few months? Have you seen any types of discounting kind of go away now in the market because of where refining cracks sit and the SAD?

No, discounting on what, marketing margins? I'm not clear.

Marketing volumes for the industrial side.