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

Ladies and gentlemen, good day, and welcome to Hindustan Petroleum Corporation Limited Results Conference Call hosted by Antique Stockbroking. [Operator Instructions] Please note that this conference is being recorded. I now hand this conference over to Mr. Varatharajan Sivasankaran from Antique Stockbroking Limited. Thank you. And over to you, sir.

Thank you, Nikita. Good afternoon, everyone. It's my pleasure to extend a very warm welcome to all the participants and the management of HPCL, led by Mr. Rajneesh Narang, Director of Finance, and holding additional charge of CMD as of now; Mr. S. Bharathan, Director Refineries; K. Vinod, Executive Director, Corporate Finance and CFO; and his entire team. I would like to hand over the call to Mr. Rajneesh Narang for his opening remarks, and then we can move to the Q&A.

Yes. Good afternoon, Varatha, and all the participants who are attending this con call. A very good afternoon to all of you. We had our Board meeting in the first half of today. And it is a matter of pride for me to say that in this quarter, the HPCL had a good physical performance both in refineries as well as marketing. As regards to stand-alone revenue is concerned from -- the stand-alone revenue from operation is concerned, it is INR 108,216 crores vis-à-vis INR 102,618 crores in the corresponding previous period. In terms of the physical growth, we achieved 8.2% over the previous corresponding period. The stand-alone profit after tax during this quarter is INR 631 crores. The primary reason for lower PAT are the separate marketing margins on select petroleum products, reduced refining margins due to lower cracks and falling international crude and product prices. I'll just give a brief of what exactly these three -- what are the impacts of these three, like in terms of the suppressed marketing margin. In terms of LPG, we had an under-recovery of INR 4,400 crores during this entire half year. And we have to face only the quarter, that is Q2, it's almost INR 2,057 crores of under-recovery, which is sitting as a negative buffer in our book. And in terms of the reduced refining margin, the cracks have significantly come down. And if I have to give you a benchmark, the Singapore GRM during the corresponding period of the previous year, it was $10 a barrel, whereas in this quarter, it is $4 a barrel. So primarily, since the GRMs were significantly lower in this period for MS and HSD, there was an impact as regard to refining the GRMs are concerned. And third, during this quarter, the crude prices with respect to the previous quarter have come down by almost $5 a barrel. Now this reduction of $5 a barrel, both in terms of crude as well as the various finished products which we hold, has an impact of almost INR 1,400 crores in terms of inventory loss. Now if I had to talk about the GRMs. The GRMs during this quarter were $3.12 per barrel vis-à-vis $13.33 per barrel during the corresponding period. This reduction, as had already stated, is in line with the trend of international benchmarks and product cracks. Now coming to the physical performance. The refineries recorded crude thruput of 12.06 million metric tonnes. These refineries had operated 103.7% of the installed capacity. We're seeing an increase of almost 8.2% over the of thruput of 11.15 million metric tonnes during the corresponding period last year, April to September '23. If you take specifically the Q2, the thruput was 6.3 million metric tonnes, and the refineries had operated at capacity utilization of 107.7%. We have also added new crudes to our basket, two new crudes we have started processing at Visakh. And taking the total crude basket to almost 40.2, which we are having. In terms of the marketing sales, we recorded 24.25 million metric tonne. We're seeing a growth of 7.3% as against 32.59 million metric tonnes during the corresponding previous year. The company recorded sales volume of 11.62 million metric tonnes during second quarter, registering a growth of 8.2% as against 10.74 million metric tonne during the second quarter of the previous year. On the domestic front, HPCL achieved sales volume of 5.6% during the quarter as against PSU industry growth of 1.8%, registering a market share gain of 0.78%. In terms of the product-wise, motor fuels were growing at 4.5%. The aviation business has been growing at 19.6%. And in case of lubricants, we are growing at almost 5%. And even as regards the petrochemical where we are -- we have already entered the market a year back, we are doing almost 30.4 TMT. As regards to the pipelines are concerned, we had a thruput of 6.53 million metric tonnes vis-à-vis a growth of 6.5% over the previous financial year. In terms of our growth project, during this period, we invested INR 3,771 crores, to strengthen our refining and marketing infrastructure, including investment in joint venture and subsidiary companies. And the total CapEx during this half year is almost INR 6,590 crores. As regard our Rajasthan refinery, the construction of all process units are progressing in full swing. The current physical progress is concerned is almost 83%. And if I take the refining unit, it is more than 92%. The key process units, which is DHDT, the hydrogen generation unit, they are under pre-commissioning. And as regard the crude oil pipeline for both imported as well as domestic, the job is almost nearing completion. As of 30th September, the total commitment on the project is almost INR 70,872 crores. And as regards the CapEx outflow is concerned, is INR 50,570 crores. As regard our Vizag refinery modernization unit of -- residue upgradation facility that is the water mobilization facility, we have started the pre-commissioning of this unit, and we expect that -- in the last quarter, that is Q4 of this financial year, the unit would be commissioned. The moment this unit gets commissioned, we will be able to have a higher distillate yield whereby we -- should enable us to process or upgrade the bottoms to higher distillate products. This -- further this unit is one of the largest and most energy-efficient unit, which is -- and the technology is the one of this scale, which is being implemented by us. During the second quarter, we commissioned 353 retail outlets, taking the total number of outlets to 22,501. We also commissioned 6 new LPG distributors, taking the total count to almost 6,364. In terms of new business initiatives, we have started manufacturing Group III 500 neutral base oil in our Mumbai refinery. Our aviation business achieved a significant milestone by securing orders for developing and operating the Fuel Farm and Into-Plane services in the new airport, Greenfield International Airport, which is likely to come up in Bhogapuram in Vishakhapatnam. This airport is being set up by GMR, by name of GMR Vishakhapatnam International Airport Limited. There was a new feather in cap for our lubricant business, whereby we made the first ever export sales to U.S.A. that's increasing our footprint to more than 30 countries now. As regards to our plan of value unlocking in the lubricant business, we have already in line with the recommendations of the consultants. We have already started taking initiatives around supply chain, cost optimization, product mix spread and also rolled out customer engagement programs for improving our reach as well as improving the efficiency into this business line. As regard to our plan for the carve-out is concerned, we are actively pursuing the same with the appropriate authorities for seeking approval for going ahead on this. As regards to our HP R&D center, the total patents as on 30th September is 606, which we have filed, out of which 232 patents taken have already been granted to date. There have been various niche technologies, which we have developed there. One of them is the -- the technology which has reached the commercial scale is the wafer recovery plant based on HP-VRU technology, which we have already implemented in our Hassan Terminal. Further, we have developed the HP DRA, which is a drag-reducing additive for reducing pressure drop in product pipeline, and it has been successfully tested at a commercial scale in our VVSPL pipeline. The state-of-the-art catalyst additive and absorbent scale-up facility have been commissioned and made operational, thus empowering the scaling up of our R&D center's innovative catalysts and product for field level demonstration. With Visakh refinery, we have commissioned the first ever green hydrogen plant in any refinery. The plant's capacity is 370 TPA of green hydrogen using green power, and we have already started taking 3 megawatts green power through DISCOM for the sale. We have also floated another tender for TMT PA, per annum for green hydrogen, that is under the site 2 scheme of the government. Similarly, our newly formed wholly-owned subsidiary, HP Renewables and Green Energy Limited has -- is already working on plans -- on renewable on almost around 250 to 300-megawatt capacity at various places. We also signed a MOU with MAHAGENCO for cooperation and collaboration in the field of green hydrogen and its derivates. So these are primarily the main highlights of HPCL during this quarter. I'm open to taking up any questions on this. Thank you.

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

I had a couple of questions. The first was with respect to this LPG under-recovery. Just to understand, this INR 2,000-odd crore loss that is actually sitting in our P&L. When you say that you are building it in a negative buffer, can you just make us understand a little bit on the accounting of this. Is the loss actually there in the marketing segment reported numbers? Or is it not part of it? It was not very clear on that.

It is part of the reported number. This loss has been considered in our book. If it is a positive buffer, we create a payable, and we don't take it in the -- our revenue, nor take it as a part of the income. But however, if it is a negative buffer, it goes as a part of our P&L.

So sir, is it reasonable to assume that this kind of a run rate will continue, given that not much has happened in terms of being compensated for this. Should we be building in this INR 2,000 crores every quarter now as of this point?

So I don't think that would be the right way of looking at it. Right now, yes, during this period, the LPG prices were higher. So that's the reason why the under-recovery also was there. And going forward, we'll have to see as to how the LPG prices behave. But anyway, if the under-recoveries are going to be there, definitely we have taken up with the government for necessary support on this aspect.

Understood, sir. The second question was, sir, you thankfully -- I appreciate that you mentioned the inventory loss number of INR 1,400 crores. Just wanted to understand, is it possible to split it between what was there in refining and what was there in marketing segment out of this?

Approximately INR 750 crores was in marketing and INR 650 crores in refining.

INR 650 crores was the refining and around INR 750 crores was in marketing. Right. Sir, just on -- lastly, and I'll come back, but one more question. With respect to refining, sir, against the last year number, where Singapore was at $10, but you reported about $13 because of various factors. Diesel sales being higher, perhaps Russian crude was a factor. Versus that in this quarter, we have actually now gone down to a discount versus the benchmark GRMs. Is it possible to sort of get a sense of why this has happened? Is it mostly because Vizag performance is impacted by the pre-commissioning activities and inventory? Or is there any other reason for it? Just if you can give us a sense there.

Yes, primarily, if you see, in the same period -- in the previous -- corresponding previous year. Instead of the loss of INR 645 crores, INR 650 crores, we had an inventory gain last year of INR 900-plus crores. So virtually, that INR 1,500 crores is the difference on account of inventory itself.

Right, right. And we are still getting around 35%, 40% from Russia, sir, in terms of our crude slate?

Yes, yes.

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

So I also see your net debt has gone up quite sharply in this quarter. So could you help to understand what are the factors behind that.

Yes, net debt has primarily gone up. One is the subsidy which we have to receive almost INR 1,700 crores from the government, that there is an increase there. Secondly, the inventory. Now with Visakh refinery coming into almost full level production, if you see during this quarter, we have almost purchased around 3.8 million metric tonnes of product. We had to hold higher inventory for crude as well as the higher inventory for the product. One more reason is that during this period, we had an inventory of almost -- additional inventory of almost INR 2,000 crores because we -- during this -- the month of August and September, there were rains, and on account of which the demand was also muted. But -- which has resulted in some increase in inventory in our books of accounts. So primarily around INR 2,000 crores, INR 3,000 crores has gone up because of the inventory and around INR 2,000 -- INR 1,500 crores to INR 2,000 crores is on account of amount receivable from government.

Understood. Also, what is the CapEx plan for this year now?

CapEx, we will be doing around INR 12,000 to INR 13,000 crore. Out of that, we have already done INR 7,500 crores.

Sorry, how much have you done?

INR 7,187 crores -- sorry, 6 months, INR 6,588 crore.

Okay. You're almost at the halfway mark. And also for the Rajasthan refinery, has there not been much progress in this quarter because even last quarter, I think you had mentioned similar numbers on completion, 92% for refining and 80% for overall?

Refining now, I think it is 94%.

92% plus, towards the end, since we are going to our pre-commissioning and commissioning, the percentage will not be same, but in actual progress towards commissioning, it will be very close.

And commissioning you think is Q4, and pet chem will be what, 1 year after that?

Maybe after 6 months after that.

Okay. And could you also share HMEL performance for the quarter?

You want the quarter number or the half year number?

Whichever is fine.

During the -- half year, they had processed around 6.54 million metric tonne of crude. Their GRM was around $9 a barrel. And they had a -- during the 6-month period, they had a loss of around INR 300 crores.

And EBITDA?

EBITDA is around INR 2,000 crore.

Sorry, how much?

Around INR 2,000 crores.

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

First question is on this Vizag, I think -- so you are basically in the process of commissioning the residue upgradation of [indiscernible]. And by Q4, you are saying the entire VRMP will be ready, right?

Right, yes.

And so in terms of volumes, you've already seeing the upside, but the GRMs, we will $2, $3 of incremental GRM, which you have been suggesting for that, you can assume from FY '26 onwards. Is that right?

Yes, that is right.

Okay, sir. And is it like fully -- I mean, in the books of accounts, is there any more capitalization left or like mostly capitalize it INR 27,000, INR 28,000 crores of CapEx?

No, for Visakh, around INR 11,000 crores is yet to be capitalized. That will get capitalized during the last quarter.

INR 11,000 crores for of additional CWIP will be basically net expense in Q4.

Yes.

So right now, I mean, just to get a sense of your overall marketing numbers. So I think petrol, diesel, you can see there's a change in pricing. So I think the margins are quite high. At the same time, LPG losses have further increased because it's winter. I think the prices of [indiscernible] LPG has also gone up. So if I look from a working capital point of view, not assuming -- you mean that some possibly come later down the line, but in terms of debt and working capital, are you in a comfortable position right now? Or can you see short-term debt going up further in the coming quarters?

No, no, no debt is not going to go.

Right now because of high auto fuel margins you were able to like reach up whatever like losses are there in LPG, is that right?

Yes.

Just a small follow-up. You said last year, the inventory gain was around INR 950 crores in refining, last year, Q2, right?

Yes.

At that time -- 900?

Around 900 I said.

Around INR 900 crores, and this time it is around INR 650 crores negative.

The next question is from the line of [ Sumeet Rohra from SmartSense ].

Sir, firstly, I mean, I would like to understand because numbers are crowded, too many inventory movement along with LPG, et cetera. So sir, your reported number is 650, and we have absorbed [indiscernible] crores of LPG losses and inventory loss of INR 1,400 crores, am I right?

Yes.

So effectively, I mean -- so if I understand correctly, sir, that if you add this back, we would technically be at somewhere around the INR 3,500 crore mark?

Yes, that would be the normalized profit. You are right.

Okay. And sir -- okay, if I see that in the fourth quarter, again, you were weighed down because of these concerns of LPG. So effectively, what I'm trying to understand, sir, because the matter of fact is that anyway, investors are quite shaken up because of the result, which is reported on the headline numbers. So if you can read through the numbers on the core performance of the company. Is my understanding correct that we are on -- like we have done about INR 5,500 crores of PAT in the first half. So effectively, what I'm trying to get at is that our core profitability had actually now substantially gone up from the past because of the projects and because the volume thruput coming. Is that correct, sir?

You're right. You're right. That way if you see, the core profitability will almost get doubled than what we used to do earlier. That was before the -- will more than double.

Okay. Sorry, effectively, I mean if I can put it in simple terms, is that our core profit should be about INR 5,000 crores, INR 5,500 crores for the first half, which means that without the residue upgradation project, we have actually come to this level, which means that with the residue upgradation of Vizag kicking in F '26, our profitability can be substantially in the 5-figure mark?

Yes, you are right.

Okay. And sir, my next question, sir, is on the lubricant -- yes?

With the current trend of the crude. Now crude if you see, primarily now it is ranging between 72 to 78. Now the current level and the crude remains range bound then that -- then the profitability which we are referring to is likely to mature in this quarter.

Okay. Understand, sir. Coming to my next question, sir, is on the value unlocking part of the lubricant. So if you can please help understand effectively because the thing is that today, our market cap of around INR 100,000 crore or INR sub-80,000 crores because of the market crash today. I don't know exactly what it is, but somewhere around there. It clearly -- I mean, it's not reflecting it from an investor angle, right? Because, I mean, on one side, you've got Barmer refinery. On the other side, you've got Vizag. On third side, you've got lubricant, which is the -- which is a 40% market share. So sir, if you can help understand in the lubricant part, where exactly are we today in terms of the demerger and value unlocking?

See, we would need -- since I'll be carving out the lubricant business, it would -- I'll add -- there's going to be a change as regards -- because I'll be forming another company out of the existing company. So we need the approval from the government of India for the same. We have already taken up with the government of India on -- as regards the demerger is concerned. So that approval, we are waiting because that would need an approval from the Ministry of Finance from DIPAM and NITI Aayog. So we're waiting for those approvals to come.

Understood, sir. And sir, just lastly before I end. Sir, I mean, we have a presentation, which we have given to the exchanges I think some time back, in which we are talking about an INR 40,000 crore EBITDA, which is basically once the projects are commissioned. So we actually think that, that could be beaten because of the quality of the projects what we have now?

Yes, yes. We stand by what presentation we had given. There's no doubt on that.

The next question is from the line of Kirtan Mehta from BOB Capital Markets.

Sir, a couple of clarification on the Vizag expansion. In terms of the expansion in the current environment in a like-to-like case, how much profitability or EBITDA is added because of the expansion? Will you be able to give us some color? And second part was for the RUF unit. If this environment continues, so what could be the margin upgradation instead of $2 to $3 per barrel. Could you also provide some color under the current environment?

See, if I take the mid-cycle GRMs and calculate, the expansion of refineries from 8.33 million to 15 million tonnes and bottoms upgradation to rough, that was to add almost INR 4,500 crores to the profitability of Visakh. Now out of that, around INR 2,000 crores to INR 2,500 crores is because of the capacity expansion. The balance is on account of the bottoms upgradation.

Understood, sir. Second question was about the Bathinda. Could you also share the current petrochemical utilization and its contribution at the gross margin level?

They are operating today at more than 90%. That's what I can say in regard the operation of the plant is concerned. What exactly you wanted of Bathinda?

Contribution at the gross margin level, petrochemical contribution at gross margin or EBITDA level?

I don't have it right now. We'll share it separately.

Sure. And the last question was about the Chhara LNG Terminal. When do we expect it to start operating?

Before this financial year.

And what is the current bottleneck, which is -- which we need to resolve to operate it?

Right now, we will shortly be coming in the market to book the commissioning cargo. Last time in April, we had brought a cargo, but we could not commission because the sea conditions became rough and all. After that, the monsoon season had started. So effective October only, the fair weather season, we could bring the cargo. So that cargo we'll be bringing it in December or January and then commissioning the cargo. Otherwise, we have got all the port approvals, [indiscernible] and all, everything is in place. There is no issue. Only thing is we'll have to bring the cargo and commissioning it.

And what could be the utilization over the first couple of years in terms of the 1 million tonnes thruput. We had said previously that our own demand could be of the order of 2 million tonnes also.

Correct. For HPCL, our Mumbai refinery, going forward, even HMEL and our Rajasthan Refinery, the gas would be moving from there only because from Chhara, we are connected to the national grid, it will go from their itself to all the places. The moment Vizag is connected to -- through pipeline, right now that Srikakulam-Visakhapatnam pipeline is half laid and yet to be completed. The moment that, that also gets completed, even Visakh [indiscernible]. So that can go from here. So if I see my in-house consumption itself is more than 1.5 million to 1.7 million metric tonnes amongst these 3 units. Plus I have my own GAs where I can send, plus, now LNG trucking is picking up gradually. So we are already set up four LNG outlets. We have plans to scale up that facility also. A lot of new demand is coming up from LNG trucking also. So -- and we see there's lot of potential as regard LNG is concerned. And definitely, the capacity utilization will also keep on improving as we go ahead.

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

So in refining, what do you expect to change that will get the industry moving back to normalized margins? Do you see capacity closures, or are you waiting for demand for petrol and diesel to improve over time? What are the variables you would expect to change that will see some visible improvement in GRMs going forward?

Compared to the August and September, we are already seeing an uptick as regards to GRMs are concerned. The Singapore GRM, if you're using the benchmark Singapore GRM, they had gone down to $3.2 a barrel. Today's morning number, if you see, it has already reached $4.7 a barrel. Now I'm sure with the winter season picking up and all, China demand and all, those are the factors which will scale it up, the GRMs are likely to improve only.

Yes. So I understand the short-term movement. What I'm trying to get it in terms of the structural outlook for refining as a business because there's a lot of excess capacity, there is a weak demand. So in terms of demand and supply, do you see supply reduction or capacity closures happening in the next 1, 2 years, which will give some structural improvement in the outlook for GRMs?

Yes, yes, that would continue to happen. Even now it is happening whereby few of the inefficient refineries, they closed down, and like fortunately for us, we have recently revamped our refineries. Our Rajasthan refinery, which is coming up is going to be a new refinery, most energy efficient refineries and all. So all those people who have old refineries or inefficient refineries, definitely, there is a case for them to shut down. And for us, it becomes an opportunity.

Okay. Now on the city gas distribution business and LNG, can you share some numbers in terms of when you see the commercial contribution from your stand-alone GAs in your P&L? And what are the kind of volume and, say, top line and EBITDA, again, look at per cubic meter or whatever you can share say over the next 2 years in CGD?

Even today, we are doing around 0.4 million, 0.5 million metric tonnes of natural gas and LNG, even today we're doing that. And once our terminal is commissioned, we will start bringing our own LNG cargoes, and we have planned to scale it up to 2.5 million in the next 2 years.

Yes. This is on LNG. On the city gas distribution volumes, can you give some color in terms of the progress on the network expansion, the CapEx and the volumes you expect to do? And some integrated in terms of how much it can add to your profitability on a stand-alone basis?

See, every year we are doing a CapEx of almost INR 1,800 crores to INR 2,000 plus crores in the CGD space. And we have already -- the network, which we have put, almost 100-odd -- more than 130-odd in these stations where we have our own -- in our own GAs, we have already started getting the revenue from them while they are not huge numbers, but they have already started contributing to our bottom line.

So just one last thought on that. So if you take a 3- to 5-year view once and you have a significant number of CGD GAs. What is the internal business plan throwing up in terms of volumes and revenue and EBITDA, to get a...

EBITDA, we aim around INR 1,000 crores from business in next 5 years.

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

The first question was more on the operational side. In terms of the Vizag, I think it got pushed about by a quarter or so in terms of the startup. Do you see any of the challenges in terms of further ramp-up on the Vizag side? Or you think you will be able to kind of deliver full volumes on the upgrade by the June quarter fully?

So Vizag if you see, in the latest quarter, we have already done 3.8 million metric tonnes, which is equivalent to the additional capacity, what we have installed. So the full volume is already realized. And with the completion of bottoms upgradation, even the value realization will be done.

So bottoms upgradation, we should be able to kind of see the full impact by March quarter? Or it more looks like a June quarter thing?

It should happen in the March quarter only.

Okay. And sir, the second thing was in terms of the Rajasthan Refinery, what would be the net debt sitting on the books at Rajasthan right now?

Could be around INR 35,000 crores to INR 37,000 crores.

Okay. Got it. And sir, the last thing was more related to the marketing side of the business. You have obviously done very well. I think you've kind of got some market share on the diesel side. Like can you just kind of think -- tell us about how you're doing some of these market share gains? And is there more scope for you to kind of grow market share in some of these spaces?

Yes. That's always our resolve to gain more market share, and Q3 consistently past four quarters, we have been gaining in terms of market share itself. Not only in the MS and HSD space, but also in our direct sales and the lubricant space also. Even LPG and ATF if you see, we are having good volumes and this market share growth in this business lines also.

And sir, just on this marketing point, sir, industrial side, how are you seeing competition? And like, can you give us a bit of a sense of objectivity as well, how's competition doing? How margins doing on the industrial side?

Industrial has always been quite competitive, both for diesel, bitumen and all. And as regards the competition is concerned, yes, in the industrial side, we have a market share of around 13% in that space. IOC is the major one, almost 70%. So that gives us an opportunity to increase our market share there. So that is one area where we are focusing as to how we can increase our penetration into bitumen, then HSD as well as the specialty products of Hexane, MTO and others.

The next question is from the line of Puneet Gulati from HSBC.

And my first question is on what is the LPG price that you need to reach 0 under-recovery?

It should be more increased by almost INR 200 per cylinder.

And in terms of Russian crude, what is the discount you're enjoying currently?

It varies every month.

Yes. On average, for example, last quarter?

Pardon?

Last quarter, what would it have been on an average or a range, if you can give?

It's around INR 170 to INR 180.

Sorry?

Around INR 170 to INR 180 per cylinder.

No, no. On the Russian crude, I'm asking, the discount on Russian.

Discount has come down significantly, but it's still cheaper than the other sources.

Any range that you can share in terms of discount, dollar per barrel?

No, no, I cannot.

Okay. And you talked about INR 4,500 crores as incremental profit from Vizag. What is the underlying GRM you assume for that?

Around $6 to $8 a barrel. For us, it will increase by another $2 to $3 -- $3.

And that's your GRM, not the Singapore bench GRMs?

Yes, yes, we have worked on our...

$6 to $8 and then $2 incremental for the refinery upgradation part.

Yes.

And lastly, if you can talk about any cost escalations you're seeing on the Rajasthan refinery side and the Vizag project side, revised cost numbers?

The revised number for Rajasthan is INR 73,000 crores. And that is -- since it's an EPC contract, most of -- I gave you the number, the total commitment is INR 70,872 as on date.

Okay. And Vizag?

Vizag is INR 30,000 crores is the total project cost.

Okay. And no change -- because now you should have a concrete view of this cost, right?

Yes, this is final, right.

The next question is from the line of Vishnu Kumar from Avendus Spark.

On the incremental GRM that you mentioned, the $6 to $8, this is an absolute or like we should consider 3 plus 4, which means the range is about 10 to 12?

No, the question there what was asked is what is the mid-cycle GRM concentrate. So there, I said, we consider around $6 to $8 a barrel. And post rough, we consider an increment of $2 to $3 a barrel.

Got it. Sir, the -- once we have the bottom upgradation completely done, can we increase the Russian intake of crude in Vizag? And is it possible? If possible, how much can we get to?

Already at around 40%, we are there. Depending on the opportunity, it can go by more than 10%, 15%.

So on a blend -- so this -- so we already reached 40, maybe we can go to 50 is what you are saying on Vizag?

Right.

Understood. Sir, in marketing business, if you could just help us understand what would be the per liter diesel and petrol margins this quarter, and also if possible for the last two quarters?

I can only give you the entire marketing margins, not product-wise margins.

The next question is from the line of Rituparna Ghosh from Argus Media.

My question is regarding what sort of long-term tenders you are seeing in terms of Chhara LNG terminal?

Can you just repeat your question, please?

Yes. What sort of long-term LNG contracts are you seeing from Chhara LNG terminal? And also...

Sourcing or what?

Sourcing, yes, sir, sourcing.

We'll be tying up for our requirements because this terminal is a 5 million metric tonne terminal. Like if I told you that we have a plan to reach 2.5 million metric tonnes in the next 2 years, so I need to source for contract that much quantity only then I can be there. So we'll be gradually phasing our procurement plans in line with our business plan to increase the LNG volumes.

Okay, sir, any timeline by which you will be closing the deal? Or what sort of response are you getting from the global market in terms of the sourcing?

We're already in markets as regards long-term sourcing is concerned. And the response has been quite good.

Okay. And sir, second question is regarding the building of breakwater facility at the terminal, how far has the work been reached?

For the LNG terminal, the breakwater, which is required is around 1,900 meters. Now out of that 1,900 meters, 1,050 meters have already been done. And the balance also, it has reached 4 meters below the water level. Up to that place, it has been done. Now with the fair weather season starting effective October, that the work will shortly start over there for building -- completing the balance part. We are hopeful that in this fair weather season, the same should be completed.

Sorry, sir, you're hopeful to complete the work by this fiscal year?

In this fair weather season.

And sir, lastly, to confirm what you already mentioned that you will be getting the commissioning cargo December and January, correct, sir?

Yes, December or January, we'll be getting the cargo.

The next question is from the line of Shivansh Sood from Desvelado Advisory.

Sir, the question was like, with the changing geopolitical dynamics in Russia, do you think the discount factor you're getting from Russia is going to increase or decrease in the coming near future?

See, one thing is there, I don't buy Russian crude just because it's a Russian crude. I buy because it makes value in my system. So long the Russian crude will make value in our system and it is better than processing other crude, we will be processing the Russian crude. So depending upon how the environment weighs or what is the level of discount and all, the same would be analyzed, and in case to case basis, and accordingly, the sourcing will be done.

The next question is from the line of Gagan Dixit from Elara Securities.

Sir, there is a 1 month back news that this -- your parent company, ONGC is planning the 12 million tonne refinery that in UP, Prayagraj. So Is there any possibility that HPCL will also be involved in the later stages because the parent company...

You should ask this question to the parent company because I'm not aware of this.

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

So you have the renewable subsidiary. So just like NTPC is planning to do a float, when you think you can reach a commercial scale to think of a listing like NTPC? Any thoughts on that?

Maybe maximum 2 years, we should be reaching that stage.

Okay. And any numbers you can share in terms of what is the scale in terms of megawatts of power, some sense in terms of investment. Can you share some numbers over the next 2 years?

Right now, we are doing around 200-plus megawatts of renewables there. We have plans to set up more CBG plans also under that business. And maybe by end of the year, we may tie up another 200-odd megawatts. And in the next 2 years, we want to be touching around 2, 2.5 gigawatts as well.

And what will be the size of the balance sheet or investment over the next 2 years?

It would be around INR 20,000 crores is what we had anticipated depending on the renewables as well as the biofuels.

Okay. So on MRPL, there has been a lot of backing and sourcing on the merger proposal, given the kind of challenges pure refiners are facing. Do you think you will again take that issue? Is there any progress likely on the MRPL merger?

Currently, there is no much discussion. As and when it comes, we'll definitely review and let you know.

The next question is from the line of Vimal Sampath, an individual investor.

My question is pertaining to the lubricant business. By when do you think we will be able to demerge?

The moment we get the approval, it may take another 6 to 8 months after that for the entire process to complete.

We are planning to manufacture some products for Chevron. Can you please give some more clarity on that?

We are already manufacturing the same in our plant.

Okay. So is it a kind of technical tie-up or only job work we are doing, what is it?

That is both.

Okay. And then we will marketing jointly or they will do it in their name only or how -- or through our network, we will do it?

They are directly marketing, but they can use our network also.

Okay. And second thing now in next 2, 3 years, with our lubricant business and green this thing, all will be demerged. So I mean -- and our refineries also, we have joint ventures. So we will be a very large conglomerate. I mean what -- how are you looking at it?

[ HP R&D ] is already is a separate company. It is not demerged. This is already a separate company. Then we have the gas HP LNG, that is a separate company. Right now, we are talking about lubricants only.

Only lubricants. And this -- because gas also will be a very significant contributor to our...

Definitely.

So in future, you may demerge gas also?

Gas is a separate company only today.

Okay. Gas in totally...

LNG terminal is a separate company.

No, I'm talking about this CGD and this biogas, what CBG, what you're going to do?

We will evaluate that as and when it -- once GST and all is implemented, we will see at that point in time.

The next question is from the line of [ Omer Farooq from CRISIL ].

So the question is regarding as we have seen drop in crude oil prices. So what are we expecting for the upcoming quarter to be like in regards with marketing margins? If you can show some -- shed some light on that.

Can you just repeat the question, please, a bit louder?

So with the crude oil prices declining, and if you expect crude oil prices to remain, as you have said, to around $72 to $78 per barrel. So what are we expecting for quarter 3 of this fiscal regarding the marketing margins?

That we gave you a number that, normative in case we get our normative margins and all, the numbers where we will be. In the initial questions, we had covered that. And in case the prices of the crude are going to be around the level at which they are. Then in this case, there will be no incidents of any inventory loss or gain.

Understood. So my second question would be, the center has been pushing so much on ethanol blending to reach 20% by either '25, '26. The ethanol production capacity also increased to 1,623 liters as ChiniMandi has recently reported. So by when do we -- can we expect, if not blending to reach 20% of targeted blending. Is it possible that we achieve it by next fiscal? Or do we have to wait further?

Even today, the ethanol blending is almost 15.9%, which is being done. And what I've said is by '25, '26, the ethanol supply year, ESY, the 20% target is to be achieved, and it will be done by that time. And today, there is no problem as regard availability of ethanol in this country. So gradually, this percentage, you will see that it will keep on increasing and the target of 20% in ESY '25, '26 will be achieved.

Okay. So I had this issue -- question because very recently, ethanol producers have a complaint -- have raised issues OMCs are not procuring enough ethanol. So that was leading to excess supply in the market. So was there any problem or are thje OMCs are facing any issues in regards to procuring ethanol? Maybe if you procure more from producers, that 15% what we are at, now could be 16% or 17% if...

If the availability is higher, we'll go for higher percentage.

The next question is from the line of [ Meet ], an individual investor.

My question was the $6 to $8 GRM that you mentioned, mid-cycle GRM. So is this for the company? Or is this in reference to the Singapore GRM?

Company.

Okay. And this leads to -- you are saying at this level, it leads to a PAT addition of INR 4,500 crores in Visakh for 15 million metric tonnes of capacity, right?

I referred with respect to the pre-expansion and the mid-three investment period.

So this is an addition or the total?

This is not addition. This is -- when the refinery was at 8.33, by doing all these investments, it would have resulted in an increase of INR 4,500 crores.

Right. And my second question is regarding HRRL. So we -- in the presentation, we had mentioned a $20 mid-cycle blended GRM. So is that still valid? Or like what do you expect the blended GRM to be for HRRL?

Those are the numbers at which the financial appraisals have been done. Now if you calculate it today, maybe the number would be different. But these numbers will keep on changing. This project, which is coming up is, going to come up for the next 20, 25 years. So things will keep on changing over a period of time. At a particular moment of time, you will say -- you will see that sometimes it will be better or sometimes it will be less. But over a period of time, this is the number which the refinery will be realized. If you take a case, last year, there was a period where the GRMs used to be in double digits, 13, 14 on MS HSD processing only. But today, the GRMs are lower. So these things -- these cycles will keep on coming and going. But when you evaluate a project, you evaluate considering a particular level or a particular period what the GRMs are likely to be. So the numbers which we have said -- we have considered for HRRL is the number which you are referring to.

So for INR 8,000 crores EBITDA, we will require something like a $12 -- per $12 GRM from HRRL?

I don't have the numbers right now, we will share it separately.

As there are no further questions, I would now like to hand the conference over to Mr. Varatharajan Sivasankaran for closing comment.

Thank you, Nikita. Sir, if you have any closing comments to make, please?

We have already said what we thought was relevant. Regards this quarter is concerned, would only take this opportunity on my personal behalf and on behalf of our Director Refineries, Mr. Vinod and all, our HPCL staff and employees, we wish each and every participant a very happy Diwali, and to them as well as to you, Varatha. And all the best to you all. Thank you.

Thanks a lot for your wishes, and thank all the participants and the management for taking time out and discussing in great detail. Wish you all happy Diwali. Have a nice day.

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