Hindustan Petroleum Corporation Limited (HINDPETRO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Hindustan Petroleum Corporation Limited Q4 FY '21 Earnings Conference Call hosted by Macquarie. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aditya Suresh, Head of Research India at Macquarie. Thank you, and over to you, sir.

Thank you, and welcome to this post results earnings call with HPCL hosted by Macquarie. HPCL management team is hosted by Chairman and Managing Director, Mr. Surana; Director of Finance, Mr. R. Kesavan; ED, Corporate Finance, Mr. R. Narang. The conference call would run for about 1 hour. Management has prepared remarks, and we'll follow that up with Q&A. With that, I'll hand the call over to you, sir.

Thank you, Aditya. This is Surana here, and good afternoon to everybody who has joined the call. Thanks for taking time in and for your continuous support and interest in HPCL as a company. And we do value our relationship with all our investors for being continuously so positively inclined to us and supportive of it. We'll start with the last year had been quite an eventful year, where we saw at one end the outbreak of the global pandemic, which led to demand destruction -- demand contraction, I will put it, because we can't tell it is a destruction yet. And then it was followed by smart recovery. The year ended with an aggregate demand being 91% of what it was there in the previous year. And then after that, in the April month, again, we had a second wave. As far as the prices were concerned, crude prices were volatile mainly because of the overhang of inventory, efforts by some of the major producing countries to cut down the production. And there was a demand contraction, which saw some sharp price fluctuations during the year. It did change the way the business is being done. It did pose certain challenges on the supply chain management and some concerns for the health and safety of the people. And we made every effort to ensure that while we take care of the safety of the workforce, we ensure that the commodities in which we deal and which are essential commodities in the country are supplied to these consumers uninterruptedly. And at the same time, we ensure that the company continues to perform robustly both on physical and financial fronts. And it is in this background that the performance of the company and the results of the company are more remarkable because by no means it was a very challengeable year. So as you are aware, HPCL posted an all-time high profit after tax of INR 10,664 crores, which was higher than any point of time earlier with the highest ever, before this was INR 6,356 crores and the EBITDA was INR 18,714 crores. The GRM for the year was $3.86. Normalizing for the inventory, it was $1.87. And in this -- when we come to Q4, Q4, we had a profit of INR 3,018 crores, that's PAT. EBITDA was INR 5,211 crores. The GRM was INR 8.11 crores. Normalizing for the inventory of $4.61 per barrel, it was $3.50 per barrel -- GRM was $8.11 per barrel, I'm sorry. With the normalizing for inventory for $4.61 per barrel, it was $3.50 per barrel. On the business, the overall revenue was INR 2,69,243 crores. And the Q4 revenue was INR 84,905 crores. During the year, our refineries ran at 104% of their capacity. And that is quite commendable in the sense that the industry, almost all the other companies ran below 100% capacity. The industry average was 89.7% versus that HPCL operated its refinery at 104%. I think I did share with you that in the earlier part of the year also, where the demand has contracted to 50% to 60%, also we have maintained the refinery throughput. And the company -- that was a calculated call, and the company did get the benefit of it because we could process some of the lower-priced crude and get the product available to us so that we are not required to procure it later because HPCL sells more than what it produces on its own. And that call did play well for the company and is also reflected in the overall performance. On the marketing front, while the overall industry degrowth because of the lockdown, et cetera, was in the range of 9%, HPCL degrowth was only 6.6%. So to that extent, we did get the market share in various products during the period. Even on industrial products also, company concentrated on the value-added products more, which might not be reflective in the volumes, but it is definitely reflective in the margins. And we made the efforts since last 2 years to shift our product base towards more and more value-added products especially on the loop segment so that we get better realization per liter of product which we sell. I may also add that during the year, even in spite of all the things, we added 2,158 new retail outlets. And this is so far the highest in a year, which takes our retail outlet to 18,634 . We also added 102 new LPG distributors, which makes it to 6,192. In this period, we added CNG dispensing facility to 203 more retail outlets. So as of date, we are dispensing CNG at 674 outlets. And we also made arrangement to provide EV charging facilities at 84 retail outlets. We have also commissioned 387 mobile dispenser to deliver diesel at the doorstep of the selected customers. And that was a new arrangement which has started last year, and that is working well for the company. You may also be aware that HPCL acquired the balance 50% stake in the Chhara LNG Reclassification Port, which was being constructed by a joint venture company in which HPCL had 50% partnership. And effective 30th of March, it has become 100% company subsidiary of HPCL. And that is -- that will provide us new opportunities in the value chain of natural gas business. On the project front total, we made a CapEx of around INR 14,036 crores during the year. And barring the lockdown for 1.5 months, we picked up the LPG site -- all our project sites quickly. And all the projects are progressing. Our Mumbai refinery expansion project is likely to be completed in this quarter, and we will be commissioning it in the first month of the next quarter. Our Visakh refinery expansion projects, all the units are under advanced stage of construction, and we are hopeful of completion in this financial year '21, '22. Our bottom upgradation, that is recede upgradation facilities for Visakh are also likely to be completed in the calendar year 2022. Our pipeline projects, that is Vijayawada-Dharmapuri, Hassan-Cherlapally LPG pipeline and Barmer-Palanpur pipeline, are either on schedule or ahead of schedule. During the year, we have added infrastructure facilities to add further LPG bottling capacity to the extent of around 2,000 -- 270,000 metric tonnes per annum. We have commissioned new depot in Hisar. And we have also provided the railway wagon facility at Madurai, apart from various projects which we are doing. Our CGD, that is City Gas Distribution projects, which we are doing in 20 geographical areas across 9 states in the country, are progressing well. And at many places, we already commissioned the CNG stations of our own in those areas. And the PNG connections are being provided. CNG is a new business area which we are very aggressively pursuing. Apart from that, as I mentioned to you earlier, we are looking at the biofuels very keenly. HPCL has got 2 mills which already produces ethanol from sugarcane. We are also investing under further projects which will produce ethanol from grains and agri waste. And we have also issued around 158 LOIs to private entrepreneurs, where they will be setting up the facility for biogas, city biogas and compressed biogas. And HPCL will offtake that for selling under the CGD. Our 101-megawatt wind mills are operational in 2 states, in Maharashtra and in Rajasthan. I'm also happy to share that our Bengaluru R&D, we have got a big research and development center at Bengaluru, where we do the R&D and develop new products and technologies. And during the year, we got 44 patents for various process and technologies. And one important thing is we use hydrogen for various process in its pilot plant development of the processes there. And recently, we have commissioned a green hydrogen plant there wherein the hydrogen which will be used in our R&D setup will be only green hydrogen produced through electrolysis and using the renewable energy. Going forward, currently in the country, there was some contraction in the demand because of the second wave of corona April onwards, which saw some of the demand contraction, and various states did have the localized lockdowns. If we compare to 2019 May because 2020 May was a lockdown situation but little bit which was just opening up, compared to May '20, May '21 is more. It means the demand right now compared to the last year May is more. In petrol, which is almost around 25% more; in diesel around 6.5% more. But as I mentioned that last May was under the lockdown period, if you compare to May '19, then the current year May, May '21, the demand is around 30% lesser on petrol and diesel. But there is a difference between the lockdown this time and the lockdown earlier. The last year, the lockdown was complete. The interstate movement was not allowed. Industries were closed. The offices were also closed. There was a lot of migration of the labor, and the people were mostly at home. This time, there is no countrywide lockdown. There is no restriction on the interstate travel. There is no restriction on movement of goods. There is no restriction on the operation of the factories or the industries. And the movement of the migration labor has also not been seen much. And the offices are also operating, of course, following all the protocols which have been given by the concerned authorities. And therefore, to that extent, this time, the -- as soon as the things improve, the recovery is expected to be sharper. Now there are already signs of improvement in the ground situation both in the states which were infected more severely and in the number of -- based on the number of infections. The aggressive vaccination will further help in improving the situation. The lockdowns, which were declared by various states were initially declared until around 15th or 17th of May. But that has been extended by some states, let's say, up to end of May, so we expect the demand to start recovering from June. And in the second quarter, it should be definitely better than what it is. As far as refinery GRMs are concerned, last year, the petrol and diesel cracks were in the range of $2 to $3, which has improved subsequently as the demand picked up in U.S. and Europe and some of the Asian countries. And the current -- if you see today's spot tracks for petrol and diesel, it is around $8 plus, which has resulted into improvement in the Singapore GRMs. And Singapore GRMs, which were minus $0.90 in Q1 of the last year, improved to around $1.78 in the Q4 with an average of $0.53 for the whole year. Currently, the spot today is Singapore GRM in the range of $2.18. And we -- the projections are that it should improve further from there. And because some of the inventories has already got exhausted, the demand is picking up. In spite of the current second wave and the scare, it's likely that the demand should pick up sooner because there is also a learning from the previous time. And so our expectation is that the GRM should improve from here, and the demand should recover in the Q2 starting June. On the crude price, there had been an up and down movement from -- in last 4 days, let me put it this way, between $70 to $65 depending on the discussions which are happening related to Iran. And any positive movement on that should keep the crude prices on the lower side, which is helpful to refining and marketing industries because it reduces the cost of the fuel which we bought, which helps in GRM. And it reduces the margin on the -- pressure on the marketing margins for the consumer bearing states. And any lack of development on this site, I think, has already got factored in earlier, so we do not see much of an upside from -- on the crude price beyond $70. Maybe some momentary spikes may be there. So I may also mention one thing that while HPCL went through a CapEx cycle, we are pitching our projects which are now moving towards completion and commissioning at a time when the GRMs are improving. And that should auger well for the company in the sense that we could do the CapEx at a time where the interest rates were benign, and we are completing the projects when the margins are looking up. I'm also happy to share that HPCL completed its buyback program which we had announced on 4th of November 2020, and we acquired INR 10.52 crores equity shares at a total cost of something around INR 2,400 crores. With including the taxation part, it comes to INR 2,954 crores. So while we could achieve the targets for acquiring as many shares as possible at a very optimum price because we went through the market transaction manner. And I think we are the only PSU or maybe the first or only one who followed that, unlike other PSUs. And our cost of acquisition had been somewhere lesser than INR 227, somewhere around INR 227 per share. We were left with around INR 100 crores to be more, but the share price went about INR 250 in the last few days, and so we couldn't exhaust that money. But I think it has been a very successful program. And I'm sure that it will add value to all our esteemed shareholders and stakeholders, which was the original objective of this. HPCL has also announced a dividend of INR 22.75 per share for the year 2021. And I think that should bring some shares to all the investors. So this is for me from the opening comments, and I'm open to the questions.

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

Sir, congratulations on a very good set of numbers. One question and one small request. You have been helpful enough to highlight the core margin net of inventory. And I believe you have also mentioned the overall inventory number, which translates to, I think, like somewhere around INR 4,000 crores of total impact, of which we have seen in GRMs today...

The EBITDA level, yes.

Yes, sir, on the EBITDA level. So one request was like in previous iterations, if this number can be put in the information pack shared with analysts, that will be very helpful if it is feasible. You have been gracious enough in sharing it, but if you can give it beforehand it will be helpful.

Yes. I just wish to, while we will be happy to provide as much information as possible to all of you, the only one thing which I wanted to mention was that this inventory gain, loss figures had created a lot of confusion in the mind of the analysts because that's the way you try to look at it as if that this is not an operational thing. Now I would like to put this, especially in the context of this year, that while you can have inventory gain by default just because you are required to have certain amount of inventory in process, but you can also take an operational and technical call to have the inventory. If you see the way this year has moved, in the beginning of the year, you had a choice to consult the crude cargoes. You had a choice not to process the -- to cut down the refinery throughput rates and ramp it up at the latter. Now that is a call which the management has to take that whether they wish to take the opportunity of the lower-priced crude to buy, converting to products, store the products or just buy the crude, store the crude, or do not buy the crude and cut the throughputs or which type of crude to buy. Now different companies have taken different calls on that depending on the way their refineries is set up, their marketing setup or their ratio of refinery to marketing and the risk perception which they hold. And when you try to hold the inventory, you also run the risk of downward pressure if the prices go down. And you also have a reward if the prices go up. What happens is over a period, because, of course, we did not see the situation and people -- because we are used to a particular way of operations and the thinking, we always tend to assume that inventory gain and loss is as if it is just a default mode, which is not the case. And therefore, now the set of numbers which HPCL has generated yesterday, and you would have seen somebody else's numbers and you will see other companies' number also, and you would have been seeing the differences in the numbers over a period of time. And if you really see this year, quarter-after-quarter, we have produced the numbers which are -- in my opinion, are better than the industry. And that would not be have been happening by default. So this is a call the management has taken. Yes, I do agree that there are possibilities of a risk, but that is what the management is to take, and it has given us the reward. We had worked out various cases in terms of how the demand will pick up or not pick up. And I'm happy to share that the projection which we had internally are quite close to the way it has played out ultimately. And we spent a lot of days and time initially in the month of April to work out those scenarios and possibilities and probabilities and all that, and we have worked out various models on that. And based on that, we took the call that where we produce how much -- and of course, HPCL infrastructure and agility did help on that. But -- so that's one reason. So there has been some confusion. And I think I will just submit to all of you that should be kept in mind.

Absolutely. No, I appreciate the very detailed explanation of how that's played out.

Second point is in GRMs also. We assume that we reduced the inventory gains or loss on the gross GRM to get the adjusted GRM, et cetera. But I think I have mentioned earlier also that there is a time lag between the way the product prices and the crude prices move. And therefore, there are certain compensating factors between inventory gains and the cracks. So what happens is we just assume that inventory gain should be reduced and inventory loss should be added, but it is not that simple either. But nevertheless, the figure for our total inventory gain in the quarter was 4,051 crores just for your -- if you wish to know that, I'm happy to share that. But I just wish you people to take care of that mind.

As I said, sir, I truly appreciate you taking the effort to still disclose it. It is more about having a clear comparison between past periods since that's the way we have been looking at it. But I appreciate the perspective of how one should actually look at it in a realistic manner.

Yes. I just wanted that perspective to be in mind. As far as we are concerned, we had been very transparent and open. And to the extent it can be shared, we don't mind sharing it. But we don't want to create confusion unnecessarily in this.

Sure. Thanks for the clarity. One -- sir, second small question was with respect to the CapEx that you mentioned about INR 14,000-odd crores, FY '22, you mentioned about the various projects. But what is the broad CapEx on an overall level that we are looking to do?

INR 14,500 crores.

INR 14,500 crores. Would that -- and this does not include the project CapEx on the Rajasthan, if I may be correct?

It includes the equity potion which I have to give to them.

But that would be a relatively smaller portion, sir.

Yes. So total equity which we are supposed to give is INR 10,000 crores for the Rajasthan refinery project. Some part we already given, some part we'll be giving over the next 2 years. So basically, what happens the projects which are on our balance sheet, the whole CapEx is included. So when the CapEx is on the subsidiary or joint venture company where we have not given any guarantees or anything, then we include only the equity portion of it.

Yes, I got that. So on the Rajasthan refinery, what is the time line right now for completion in the current environment, sir?

See we are hoping to complete in the financial year '23, '24.

'23, '24 completion.

Yes, maybe 6 months here or there.

All right, sir. I have taken up a lot of time. I'll come back if I have more. Thank you so much.

Right. Thank you.

The next question is from the line of Mayank Maheshwari from Morgan Stanley.

A few questions from my side. First sir, was more related to HMEL and lubricants side. If you can just highlight of how the lubricants business has done especially this quarter and how are you kind of thinking about that. And on HMEL, can you just help us with the profitability? Because this quarter, when you look at fourth quarter, the difference between consolidated profit and stand-alone profit was not much, so I just wanted to get a sense of what's happening on that front as well.

So as far as lube business is concerned, HPCL has got a market leadership in lube business, and we continue to maintain that leadership even this year. So we are the largest selling and largest producing lubricant company in the country, and we maintain -- we are maintaining that position. The second part is over a period, we have made certain shift in the product mix in the sense that earlier, we -- the total lubricant base oil which we produce, we used to convert a substantial part of it into the finished goods and sell it as our brands. And we were also providing the base oil to some of our competitors as a base oil. Since last few years, we are making an attempt to convert maximum amount of base oil which we produce to finished goods so that there is a benefit of margin on the finished good. And that shift we had been making and we had been successful. And that is the reason that we have got a better profitability last year and in this year coming from the lube business compared to the previous year because of the better realization per liter of lubricants which we are selling. It was in line of this that we also started exporting the finished goods because earlier, when we were not exporting lubricants, to the extent we are able to market the finished goods we were doing, and other things was selling as a base oil. But in this, not only we have increased the catchment area for the finished goods, we expanded the geographies where we have got a catchment for the finished goods. And our Dubai subsidiary had been doing their job. And we have exported around 15,000 tonne of lubricant there in various countries, around 14 countries we have given with a good realization of that. The third part of it is that, especially during the last year, our lubricant SBU had been able to position and keep in touch with the market and had been very agile. And so when the recovery started, we were able to position the products quicker. And that is why you would have seen in the earlier quarters our pickup was much faster than that. I can also mention that as far as our B2B business is concerned, what we call is the direct sales business, where we Bitumen, whether we sell diesel to direct industries. And some of the other products, MTO, Hexane, FO, VLSFO, that as we also did extremely well during this period in terms of profitability. Now coming back to HMEL, HMEL had a positive margin in this year, and they have generated a positive number because that is not a listed company and that is a joint venture company with a foreign partner. So I won't be revealing the number right now, but I can confirm to you that HMEL has made profit Q4 as well as that they have been in profit for the overall year also. The consolidated numbers may look different because we did have a loss in MRPL on a -- while Q4 MRPL did make some profit, but overall year wise they were in loss. As far as GRM is concerned, HMEL still continue to maintain best in class GRM.

And sir, any details around the time line on project completion in HMEL as well?

We are expecting that also to be getting completed in calendar year '22.

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

Sorry, sorry, calendar year '21. HMEL's petchem project will get completed in this year.

Mr. Rustagi, you may please proceed with your question now.

Okay. Sir, first of all, congratulations for accepting the shareholders' request for a successful buyback and also had some dividends being -- were given from the company. And I think this will really, I think, the stakeholders as well. So now coming to -- I have 2 questions. One, with respect to the refining CapEx as a whole, so if we look at the last 2 years, we have been doing a lot of refining CapEx and modernization, upgradation and maybe administrative CapEx as well. So what do you think is that after completion of these projects because we are now very close, Mumbai refinery expansion is already nearby. And the Visakh, you mentioned about 2022. What is the outlook on refining CapEx after this? Do we put a break over here and focus on your marketing? And so what's the outlook on this side?

So currently, after completing the Mumbai refinery, Visakh refinery and recede upgradation project, these 3 are already there, which you are aware, and I already mentioned about it. And also, I mentioned time lines for completion of that. The only other thing which we are working on the refining side is something on the lube side. And we are working on a DFR on that. But that is not going to be that big a project. It may be, let's say, in the range of INR 1,500 crores or so. But we will time it depending on when, but we are working on a DFR of that because that is additional value addition as far as Mumbai refinery is concerned. In Visakh refinery, as far as refining side is concerned, I think we would have saturated that as far as the capacity is concerned, unless we want to do something in later, but we are not thinking on that right now. Bottom upgradation project will definitely bring a lot of value to Visakh refinery. We are expecting their GRM to be in the double digit from there after the bottom upgradation facilities are completed. And then if we want to do something, it will be more towards petchem side on both the refineries. That's what -- but right now, we have not approved any additional projects for the refining except the normal regular some CapEx for the smaller size, which comes for the being in the business type of projects. But I can also tell that HPCL as a company, maybe traditionally because of our intelligence also, we always do some smaller debottlenecking, some improvement, some innovation, which may be bringing some sense at a very low cost. And I can share that we have set up an idea management process, wherein any employee can generate idea and which is taken through a full 5-stage process until it fructifies. And that is monitored that the benefit of that are realized for 18 months before we consider it as a part of the system. And that is called Idea Junction. And I think we may be one of the few companies who have got that systemic process to promote the idea generation within the company. And the last year, the benefit realization because of the idea generated in the range of INR 200 crores. And in that, 32% of the employees participated, that at least 32% of the management employees has given some or the other idea. And we've got a method of rewarding the employees for giving the idea. The person who gave the idea, he gets some rewards, a team which implements does get reward. And that is in line with the benefit of the company generated. So going forward, those type of things will keep on coming, and that is they're low cost, good value things. But otherwise, on the refining side, the Rajasthan refinery will be the one which we'll be completing. And in the Rajasthan refinery, after completing the project which is already approved, there are opportunities on the petrochemical side, downstream of that.

Okay, sir. Got it. So broadly you're saying that as of now, refining CapEx will get concluded in this financial year? And after that, maybe the efforts which are...

These are next, maybe because payments are normally will be there after that also, some license payments, PPGs, some of the other things. But yes.

And sir, we have actually accelerated our retail fuel expansion with really highest ever addition of retail outlets in this financial year and despite the challenges on the ground. So what's the outlook? Does it help us in gaining the market share from the peers on the private sector? And what is the outlook for the next few years for the retail outlets addition, if you can look forward to?

See with the growing demand of the fuels, definitely, we need to capture the areas. And additional retail outlets definitely helps us to bring that additional volume to us. Now there are possibilities that some of the volumes will be after -- is getting cannibalized from somebody else. But the increasing pie has to be captured by all, and that is where a little bit of aggression is required. And that is true for any consumer business. So to that extent, definitely, additional outlets bring volume. And when we put up an outlet, we do that whole study of the catchment area, of the vehicle density in those areas, the other available competitors' outlet. All those things are done, the growth potential, the type of the vehicles come and all those studies are done. So there are 2 parts. One thing is the tonnage, the volume, scales which are coming, that comes with the additional outlets. And the second thing is the percentage market share that depends on out of the additional volume, who is capturing what. So HPCL had been capturing or gaining the market share year-after-year over a period of time at least among the PSU industry. And when a new person comes like private industry, because if the 100% was with the PSU, if some part will go to them, to that extent, if you consider the total industry, there will be some percent is going there. But if you see within the PSU industry, we have been able to get the market share in almost last 8 or 10 years consistently. And going forward also, we will be putting up more. In fact, we had a plan to put 2,000 more retail outlets in this year. And now the outlets which are coming have got additional facilities for CNG dispensing, et cetera.

The next question is from the line of Avdhut Sabnis from InCred Capital.

Yes. Sir, first of all, many thanks for holding this call. This has been useful to us. Sir, I need a clarification, if you -- depending upon the inventory figure for refining the reason for fourth quarter, I have broadly estimated that the full year ex-GRM inventory -- inventory GRM is around $1.13. Whereas if I recall it correctly, you mentioned $1.87 for the full year. So has there been some restating in the -- of the prior quarter? Or is there a mistake at my end?

For the full year, it is $1.87 after adjusting for the inventory gains, loss. $1.99 is the total inventory gain, loss for the year, $1.99 per barrel. $3.86 per barrel is a GRM. $1.99 is the inventory gain, so $1.87 is the adjusted GRM.

I get that is at least on the fourth quarter number that you have given. And if I look at the first 3 quarters that we already disclosed, then the inventory GRM works out to be lower, which is $1.13. So that's why I asked is there some restatement of what was sort of disclosed in the first 3 quarters.

Okay. Okay. No, no, no, let me clarify that part. See, the last year had been in very abnormal year. So normally, from quarter-to-quarter or within the quarter or within a month, you don't have the changes which are drastically different. Or even if it is there within the year they get registered. Last year, the April month, there was a -- March month, there was a sharp drop. It almost came to $19, $15 that is picked up. Now what happens is in the refining, the RTPs which we have is on a 15 days lag time. So the 15 days cycle which is considered for the purpose of calculating the RTPs which will go on the revenue side or the refinery GRMs will be of a different period set and the crude price which is considered for the current period set. So for the comparison purposes, that 15 days lag normally doesn't make much of a difference. It continues to be -- it will be hardly anything, so we don't make any changes. But the last year, we realized it for the first time, and I believe that other companies had already been adjusting it. We have not been doing that. So we have brought the crude pricing and the product pricing in line of the period which we are considering so that it is reflective of the true picture and comparable to the benchmark. It also helps that while the reported GRM or the profit and loss of the company will continue to be the same, there is no difference to that. But when we -- this inventory gain which I mentioned to earlier that because we have got a tendency to just deduct if there is inventory gain, loss, so it is to give quite wide fluctuation between the actual GRM or reported GRM and the core GRM, but which is not the reality. So this makes the things slightly more true to the reality, wherein we are considering the crude price for the same month and the product price for the same month. And that is why your -- in the Q4, we brought that change in the system. And that is why you might be just adding up, might not be adding it up to it. But this will be the true reflection. And going forward, this is the way it will be reported. But to say again, it doesn't make any change to the financial account. It is only the representation for the analysis part of it. And that's why you may not be getting the sum total of that.

Understood, sir. Then some bookkeeping questions, just some numbers...

No, you understood that I think for all also reported. So let not anybody be in doubt on this issue. And going forward, we will be reporting like this only. And I believe that both IS and BPs had been doing that earlier also. So to that extent, there were more fluctuation. And normally, it doesn't make a difference because the fluctuation never used to be so great. But the last year was the first time and we also realized that there is something which we need to start factoring in because the timing -- the period bucket should be the same. Yes.

Yes. So just some bookkeeping questions basically related to the financials. Firstly, on the interest costs, how much was capitalized in FY '21? And what was the ForEx scheme for the full year? Can I just run through the questions or do you want to take it one by one?

No, no, you can tell all the questions, so that I can answer.

First is interest capitalized. Second is ForEx gain, both in interest expense. Third is the lease liability impact, if it could sort of give the ForEx -- keep the total debt to lease liability because that is actually comparable to your fuel goods and subsidy dues as of March. And lastly, if you could throw some light on why the staff costs went down quarter-on-quarter from INR 883 crores to INR 435 crores.

No, what is the last question?

The staff cost went down from INR 883 crores in third quarter to INR 435 crores in fourth quarter, as to whether there is any sort of commentary relating to that.

Okay. So let's say the -- first start with the subsidy due, I suppose. That would be the easiest to -- yes. So subsidy outstanding from the government is at 31/3/2020 was INR 6,299 crores, which has come down to INR 304 crores as of 31st March 2021. So there is substantial reduction in the outstanding from the government. As far as the kerosene subsidy is concerned, it was 0 and as of 31st March 2021, which was INR 281 crores as of 31/3/2020. Then as far as the foreign exchange fluctuation, for the quarter, it is INR 141 crores is the foreign exchange gain for the quarter and INR 1,011 crores for the full year. Then the capitalized interest is INR 781 crores. And last year, it was INR 709 crores. Lease liability? Lease liability figure I will get you.

When I talk about ForEx, I was referring to the ForEx item in the interest expense. The ForEx gain in the interest expense.

Foreign exchange gains in the interest.

INR 7 crores, this year. INR 7 crores. Last year INR 340 crores.

In the capital, please.

In the borrowing costs.

In the borrowing it is INR 7 crores. INR 7 crores this year. Yes, INR 7 crores. And last year, it was INR 340 crores.

The next question is from the line of Love Sharma from Lombard Odier.

I just wanted to understand one thing regarding the JV project HMEL. You mentioned the project is likely to be completed within this calendar year. In terms of the debt burden and the leverage there, it seems to be increasing because of the CapEx needs and some of the details due to this CapEx. Is there any plan to support the JV through equity or some of the means?

No. As of today, there is no plan for any additional equity infusion in the HMEL. So they will be able to...

Any kind of support needed from...

No, there is no such request also. And as of now, there is no proposal also like that.

Okay. Understood, sir. And I believe there is no issue in terms of the liquidity side.

No, no. Rest assured, if HPCL subsidiaries or joint ventures, if they've got the liquidity issues, we will be looking at it. But as of today, there is none.

The next question is from the line of Varatharajan Sivasankaran from Antique Stockbroking.

I had 2 questions here. Segment-wise, CapEx done in FY '21 and plans for FY '22, if you can give the same breakup as well.

So in 2021, as I mentioned to you, we did around INR 14,036 crores. Out of that, around INR 6,000 crores was on the refining side. Approximately similar on the marketing side, let's say, INR 5,700 crores and around INR 2,300 crores on the JV side for equity investment in that. As far as '21, '22 is concerned, that is also almost the similar breakup with a little bit here and there, INR 300 crores, INR 400 crores here or there.

In the context of the Chhara acquisition, what would be the current use of cash capital? And how do you see that number moving over the next few years given the CGDs plus the new refineries which are going to be get connected?

You are thinking in terms of the gas usage?

Yes, capital within HPCL.

So HPCL right now will have a requirement of almost 2 million tonnes of gas. This LNG terminal is around 5 million tonnes capacity. So the current requirement itself, we may have around 2 million tonnes. So that is for the existing refineries. And we got some expansion projects plus some of the things which we don't use the gas currently like for generation of hydrogen also, but we can always leverage for doing that. Instead of naphtha, we can use the hydrogen for generating -- we can use the natural gas for generating hydrogen in the refinery. And the CGD projects plus the Rajasthan refinery will be the additional items, which will be the gas. And in Rajasthan refinery, we can also use something for the petrochem.

Fair enough, sir. Just to clarify that the 2 million tonnes is currently we are using it. It is not the potential, but we are currently using the 2 million tonnes.

So currently, no, in Mumbai, we are using. In Visakh, we are not using. In Mumbai, we get the Mumbai high gas or we do make an arrangement through other sources. In Mumbai, we are using to a certain extent already, may not be the full extent but we are sing. Second thing is we also look at the economics -- relative economics of naphtha versus gas, and we use that gas. But we are not the facility and we are doing it right now.

So what would be the current usage in terms of volume?

I can give you. Right now, I don't have off hand, but I can provide you that.

No problem, sir.

What is your name, you said?

Varatharajan, sir.

Varatharajan from Antique, right? Yes, we can provide that.

From Antique, sir. And also you didn't answer the question of approach regarding the staff cost decline. If you can clarify that, sir.

The staff cost decline is basically some of the...

Staff cost is the provision, right?

So certain provision which we have made last year which were not required to be paid related to LTS, et cetera, so that was reversed back. Yes. So we have got the LTS which we decided over 10 years period. So...

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

First of all, congratulations for a very good set of results. Sir, I just wanted to -- I mean a small question on the marketing margin front, if you can just help me with what was the marketing margin in this quarter. And going forward, how do you see the marketing margin trends? This is my first question. And the second question, I don't know whether you answered this or not, it's so on the inventory gains, the breakup between marketing and refining, if you can help us out in that.

Actually, if you ask me, my first instinct will be not to answer both the questions. But in the spirit of the theme, I would to the extent best I can. First part is that it is not company's practice to reveal the segmental margins, so we don't do that. And therefore, I won't be able to give you the marketing margin. But I can say that on a yearly basis, marketing margin were better than the last year. That's what I can tell you. That is one part. So every year, we get some improvement on our marketing margin. And whatever the annual increment which we normally realize, that we realized this year also. Now there may be differences between quarter-to-quarter, day-to-day, week-to-week, month-to-month, depending on various aspects, sensitivities and the situation and our perception on the way the prices are going to move. So that's the first part of it. Now the second part of it is that the inventory gains or losses, the -- in the quarter, you can say that refining and marketing inventory gain, losses would have made 1/3, 2/3 of the debt.

Okay. Refining, 1/3; and marketing was 2/3 in the quarter on that?

Yes, that's right.

Okay. That was very helpful. And sir, just one question, if I may ask. I see there is throughput...

Sorry, 1/3, 2/3 -- sorry, 1/4, 3/4.

1/4 and 3/4.

Directionally.

Okay. Yes. And sir, just wanted to know, so throughput if you see, it has declined Y-o-Y. However, the current capacity utilization was around 104% in this quarter. It's not -- yes, it was around 104% -- 113%?

104%. 115%, yes.

Yes, during the quarter. Could you please help, I mean, obviously, last year, the capacity utilization would be -- would have been lower because of the lockdown announced during March 2020. But despite that, I mean just wanted to know as to how much -- if in case the lockdown wouldn't have been announced, so how much would have been the capacity utilization last year?

So first off is that, see, we have operated our refineries almost up to 119% of the design capacities. So there is a limit -- technical limit to which you can do. That's one thing. That is the best we have done in the past. So -- but we had been able to utilize to 104% last year. So that is one aspect of it. As far as Q4 is concerned, we utilized 114%. Maybe that it is slightly lesser from the PBF because if I remember correctly, in Q4 of 2019, we had gone up to 117%. So that may be the difference you are seeing in lesser throughput, but still 115% utilization in Q4.

Okay. Basically, the utilization despite the lockdown, utilization was higher in Q4 '20 as compared to Q4 '21.

Yes, because the lockdown happened only in the last 10 days. 23rd of March was the lockdown, if I remember correctly. Okay. And -- but to tell you, frankly, even in April and May month also, when there was a complete lockdown also, we have run the refinery to 100% capacity.

Okay. And sir, currently, I mean, could you help us what is the refinery run rate in April 2021 and March?

So we are running our Visakh refinery and HMEL refinery to 100% capacity or more than 100% capacity. And Mumbai refinery for regular maintenance, we did take a shutdown, which was also to align with completion of Mumbai refinery expansion project. So in Mumbai refinery, we have got 2 trains. So 1 train -- both the trains we took a shutdown. And the first train is already getting started might be -- the product will be out today or tomorrow. So we already that completed the maintenance because in every 3 or 4 years, we take a normal maintenance shutdown. So last year, we were to take intake because of the corona thing. And then we have taken on April 1. So the first train is starting. The second train will start with the revamp completed. And with that, the Mumbai refinery would have increased their capacity by 2 million metric tonnes. And that is likely to happen by June end or July mid.

Thank you. Ladies and gentlemen, that was the last question for the day. I now hand the conference back to the management for closing comments. Over to you, sir.

So thank you very much for all the questions, and that shows that probably you know our company better than we know, maybe that we had been too transparent on that. But HPCL believed that we should share as much information as possible being transparent in what we are doing. And that's what we had been trying to share with you from time to time. In this effort, you all have been very supportive to us in providing us various inputs which you think, and we are open to all the suggestions which comes to us. We do analyze it and try to implement it as much as we can. I can only mention that with the completion of this CapEx, the profile of the company is changing. We have reasonably bridged our gap between supplying by production and marketing capacity. But still, our marketing capacity will continue to be higher than our production capacity, and that is also part of the strategy so that we are not required to reduce our throughputs even if there is a market contraction, which we tested in the last year. We are changing our product mix by getting petrochemicals, CNG, biofuel and the renewable in the business, which provides more robustness to our business portfolio. It reduces our risk to that, and it adds to the margin. We are trying to increase the margins by bringing in more value to the molecules. So bottom upgradation facilities at Visakh is an effort towards that. We are trying to reduce the energy consumption in the refinery, which improves the efficiency, which reduces the OpEx. And it reduces the carbon footprint of the refinery. And that is where we -- in fact, I don't know how many of you may be aware that HPCL Mumbai refinery was the first refinery to go for open access power sourcing for refinery operation and by not operating our own GTGs because we found that to be more economical and better environmentally also. And we keep on looking at those options periodically. And various efforts which we take, let's say, ethanol blending, biodiesel blending, ethanol blending, we were the best in the country last year, where we have blended around 6.16% of ethanol in the petrol, which reduces the carbon footprint of the products which we sell. And we will continue to make efforts to change and improvise our product portfolios which are more profitable, which bring more value to our stakeholders. I did mention earlier that HPCL has been an investor-friendly company, and that is why we had been liberal with our dividends, with our bonuses, with our various steps which we take, including the buybacks which we did just concluded. And I hope that we continue to enjoy the confidence of the investors consistently, continuously. In this effort, we are also doing a lot of things for the country in this fight against corona, again to help the countrymen. We are setting up 10 PSA oxygen generation plant in the country at various places. We are setting up a facility for providing oxygen directly from the refinery in Bathinda, which can provide the piped oxygen to a nearby hospital. We have provided -- we have supported setting up of corona care centers at various parts of the country in providing oxygen, moving oxygen, moving health care and setting up the health care infrastructure, helping the migrants who are people in the country. And we'll continue to do that as our effort to the society. With this, thank you very much once again. Take care of your near dear ones and yourself. Stay safe.

Thank you. Ladies and gentlemen, on behalf of Macquarie, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.