Hindustan Petroleum Corporation Ltd (HINDPETRO) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator: Ladies and gentlemen, good day, and welcome to Hindustan Petroleum Corporation Limited Q2 FY27 earnings conference call, hosted by Antique Stock Broking Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Varatharajan sir from Antique Stock Broking Limited. Thank you, and over to you, sir.
Varatharajan Sivasankaran (Antique Stock Broking Limited): Thank you, Aman. Very good morning to ladies and gentlemen, and it's my pleasure to welcome all of you to the 2Q FY27 earnings call of HPCL. We have with us Mr. Vikas Kaushal, Chairman and Managing Director; Mrs. Srividya Venkataramanan, Director Finance; Mr. S. Bharathan, Director Refineries; and Mr. K. Vinod, ED Corporate Finance. I'd like to hand over the call to Mr. Vikas Kaushal for his opening remarks. Floor is yours, sir.
Vikas Kaushal (Hindustan Petroleum Corporation Ltd): Thank you, Mr. Varatharajan, and good morning, everyone. Pleasure talking to you again on our quarterly analyst call. Since the introductions are already done, I'll get on with the agenda. We'll do the same as we've done in the last few calls, maybe speak for about 5-7 minutes, 10 minutes giving our perspective on the situation. Numbers you already have and some of you have already commented or written about the numbers, and then we will keep the floor open for questions. just to start off with the business overview, we all know the challenging time times continue. If you see today's crude price, you will know where it is. It keeps on fluctuating widely and currently it's quite high. In this whole crisis which is now gone on for over 8 months, our teams have been resilient and agile and basically kept the wheels in motion. As the management team, our whole
Vikas Kaushal (Hindustan Petroleum Corporation Ltd): has been on me first of all to meet our customer expectations to the lakhs and crores who depend on us for mobility and cooking fuels. That has been the primary objective and I am sure we have lived up to the expectations in their trying times. Obviously, running the assets in an optimized manner is the precursor to that. Trying our best to manage the financial situation with the quarter one we had, we had a challenging financial situation. But in all of this, we are not losing focus on what we need to do to prepare for the future and how do we want to transform ourselves in the future. We will touch upon all of these elements in the opening comments. You all know we had a tough quarter one with significant losses both on standalone and consolidated basis. Q2 clearly was a bounce back which all of us are very proud of. Numbers you've already seen, but I will talk of a few things. If you look at one of the pivotal numbers, the EBITDA numbers, against the loss of 14,816 in quarter one, we posted 9,822 crores of profit in EBITDA in quarter two. This is a swing of 24,681. As a management team that's a swing too much, but at least the positive side is we are able to swing it. Obviously, the question you'll have is what drove it? I think three or four factors. One, a very strong physical performance both on refining and sales. And I am not talking just about headline numbers which get published, but as we peer between the layers, there was very strong performance on both these aspects. Our refinery GRMs in quarter two were, I think we have declared the number at 32.15 pre-SAED. I'm sure there'll be questions on this, we will answer them later. That is significantly higher than what it was in quarter one and our refineries performed quite strongly. The marketing margins were decent as compared to significant under recovery in quarter one. Small help from inventory gains though not very significant. A lot of it is operational performance and very tight cost and working capital, and even capex control helped it. The PBT for the quarter was 6,768 versus 17,446 negative last quarter. Again a difference of swing of 24,214 crores. Resulted in a PAT of 3,438. Probably the PAT is a bit subdued on account of tax treatments, but nevertheless if you look at PBT, the number at 6,700-odd crores was a good one. As a result of this improved performance, we were able to recover some balance sheet strength. Those of you have been on calls last year would recall that as a management team we have been very focused on deleveraging. We managed to get it down from 1.4-odd at the beginning of last financial year to 1, to 0.8. Then it jumped to 1.52. We're happy that it's back at 1.38, though it is still at a higher level than where we are comfortable in terms of our standalone leverage. Our consolidated numbers also had a lift off primarily on account of strong performance of both our refinery joint ventures. HMEL turned in a solid quarter with it, if I recall, it's one of the best H1s or probably the best ever, at least in a long time and MRPL also contributed strongly in that process. So, just to recap, our consolidated PAT last quarter was 12,265 negative and this time consolidate is 3,625 crores, a swing of about 15,890 crores. I'm sure you will have some questions on it. We can answer them and then there are a lot of technical details then Director Finance and Vinod can get into the details. I'll cover some of the other aspects which you'll be keen to understand. I'm sure you want to know what's happening in Rajasthan. You've been asking questions and we have told them that at the right time we will come out with the right information. We are now at a stage where we can share a lot more details. As you know the refinery was Scheduled Commercial Operation Date was declared on 22nd June. We gave a guidance that it will run at around 55%, 60% percent utilization. It has been running at that utilization. Of course being a new asset there are periods in between when you have to take a shut down or do some minor tweaking, but even as we speak it runs at around 60% utilization. Almost all secondary units in the refinery are working in hot sync. Only two secondary units are left for hot sync. One is
Vikas Kaushal (Hindustan Petroleum Corporation Ltd): there is another one which probably is in the final stages and gets hook up before Diwali. Post that, we will be doing completing our sulfur recovery unit and taking up it to full capacity. We had given a guidance of quarter 3 that towards end of quarter 3, we will run on that. Give or take a week or two, we are holding on to that guidance. Sometime towards end of quarter 3, sometime in December, we will touch the refinery, we're hoping to touch the refinery throughput at a run rate of 8 to 9 MMTPA. The GRMs for the quarter was $12 for quarter 2, but that's again a lot of stop and start. In the current month, they are 16. These are net of SAD because for HRRL RTP matters. It's currently 16% 16 plus, plus and we are still running on low sulfur. Moment we move on to high sulfur crudes, which the refinery is capable of, we With the current level of assumptions, this will be 20-plus in Q4. Petchem is on track as per later guidelines with first of the units starting to come on stream towards quarter 4 of this year. There has been another major development on HRRL. Post the commissioning, we have significantly altered the debt structure of the company. We have refinanced the entire debt of HPCL, INR 45, 50,000 crores. All agreements were signed end of September and from October 3rd, it has taken place. So the entire debt has been restructured, and we are probably about 105 basis points lower than what the original rate of. It will give in an annual benefit of about 470 to 5 500 crores. And actually the benefits start flowing in from October 3rd itself when the revised rates got applicable. The second part has third part has been equity infusions. We have been further capitalizing and infusing equity. Government of Rajasthan infused INR 1,500 crores of equity in this quarter, its share. Correspondingly HPCL converted 4,300 odd crores of the subordinate loans into equity. This itself will lower the interest burden about 350 crores. We are expecting to make further equity calls in the next 1 or 2 quarters and getting the total debt burden down. An apple-to-apple comparison would say that we'll probably get the debt burden down by 1,000 odd crores in the next, sorry interest, not the debt burden. I stand corrected. Thank you, Sridhar. The interest lower 1,000 crores, which is a significant improvement over last year. In terms of working capital, we got three working capital limits revised. Now that it's an operational refinery, the rates lowered. We've also got the the state is committed for about INR 1,100 crores of interest-free loan per annum for, I think, 15-year period or something. That money has started flowing in. Already, we received the first tranche. They're giving it in three tranches every year. We received the first tranche of INR 375 crores, and the next one is due next month. So a lot of effort has gone into restructuring the financials, now that the refinery is in operation and getting it leaner, so that we can turn towards more profitable operations or quickly come to profit. Overall, we are working on both physically and financially making it making the asset work for our shareholders. We are very excited on Rajasthan, we are very bullish on it. All of us monitor it on a daily basis. Just for context, yesterday, 15 TMT of product actually was shipped out of that refinery. Three months ago, nothing was being shipped out. In October, we will ship out over 400 TMT. Translate that into revenue, we expect that will produce a revenue of over INR 4,000 crores in month of October itself. And if the luck holds it, again, I'm not I'm just saying it as an sharing our excitement rather than as a guidance, just in month of October, we expect to be PBT positive on the refinery. This is not a guidance because it's in early stages, the numbers change month-on-month depending on which crude we are running. But we're very excited to see an asset of this scale can turn in a PBT-positive month so early in its cycle. Bodes well for how we've been planning about it. Moving on to the other big asset, RUFF, it's working steadily. As you all know, we've had challenges in adjusting to the technology. It's the first unit of this technology globally. Even the licensor is finding it difficult to fully stabilize it, but we are getting there.
Vikas Kaushal (Hindustan Petroleum Corporation Ltd): and be able to consistently run it at 60-70% capacity. And we are gradually improving our understanding of the asset and how to take it into the sweet spot zone. With all the efforts we have done, I think we are getting there. You will have a logical question. Is it giving the $2 to $3 uplift? No, not as yet. But we would get there. There are periods when it's touched close to a dollar per barrel uplift. In October, we are expecting 0.65, $0.70 per barrel uplift and translating to a GRM of about 500 crores. It's starting to spin off money, not as much as we want, but we will get there. Two focus areas: needing to increase the utilization, gradually upping it, and making it more consistent so that we can have longer runs in the sweet spot zone. Tough asset, but we are very, very confident that it's going to give us moment we are able to get it into the sweet spot and run it consistently well. It's going to spin off a lot of money. A third major thing I wanted to highlight was on Samriddhi. We have always declared this in all of analysts call. This year we delayed the start to second quarter. In the results we have already declared that there is 327 crores of accrued number translating to about $0.18 per barrel. On a run rate basis, we have locked in about 600, 700 crores because I'm sure you would have a question that are we going to meet our numbers. So, we think we will get to the guidances we have given. This year we are addressing some of the more fundamental things. Just to give you two examples, how do we aggregate all of our metals buying across, we're doing the initiative on that. Can we buy catalysts differently looking at precious metal, all of this which are fundamental steps in trying to improve the operations. We have also, as part of Samriddhi, also done some interesting initiatives of moving intermediates around to release capacities in our refineries. The fourth major update I wanted to give you was on the digital progress. There is very strong progress on that. We are just launching out implementing a new supply chain tool, which will upgrade all our supply chain optimization capabilities and make it AI-enabled. That exercise is underway. We have, in the last few months, upgraded our crude buying platform. Multiple AI use cases are being used across businesses. And we are also saturating digital/automation tools across our PUs. For example, using RTO APCs across all our refineries, whichever unit we want to do it, we will complete it this year. Similarly, all our LPG bottling plants are being automated and by end of this year we will have very smooth we will have smoother operations on those. Just to give you how prevalent this is, we just ran a hackathon across our organization, a digital hackathon. We had 1,600 participants, which is 1/5th of our organization's, from the youngest to the most tenured and most aged people, all participated in it. There are 30 such ideas which were the finalists and of which 25 are actually being implemented by our teams internally. Let me move on to few highlights on marketing. As you know, we have been doing a retail transformation. We call it Project Abhyudaya. 2.0 is undergo underway. The TPO targets, we are actually ahead of the targets. Though this year we are not measuring ourselves on TPO targets because given the high the market situations, a lot of the private sector volume has shifted to OMC's, but nevertheless, the foundational steps are going on. There are some other very interesting initiatives which are underway. On non-fuel retail, I'm happy to share that about 10% of our pan-India retail outlets have non-fuel retail activity. This is up from 5.5% at the beginning of the year. So, there is significant movement in each of these initiatives and they are revenue accretive, and some of it will start showing up regularly. On branded fuels, we remain the market leader in branded MS and also pushing some, for last two quarters we are the market leader for branded MS. And last time we had talked about new product on LPG, Navya, which we had launched, it's a composite LPG cylinder. All three OMCs have launched it, but right from the day one of the launch till today, HPCL is the market leader on that. It's a different way we are marketing that. And I will also do a sales pitch. It's booked to cook in 90 minutes. Some of you can order it for your homes. I'm sure you will enjoy that premium experience. We are on track to target about 1 lakh primary sales on Navya by Diwali. The other initiative on marketing I wanted to talk about was Chhara. We have increased the flow of cargoes. I think the terminal now works about 10 months a year. There is still a bit of mechanical
Vikas Kaushal (Hindustan Petroleum Corporation Ltd): done in terms of aligning breakwaters, etcetera, because the waves are unpredictable there. But we are now starting to unload cargoes In the H2, we are expecting 5 to 6 cargoes depending on market, how the market would be. It would give us about 15% to 20% utilization in H2. Interestingly, we have also figured out how to make better use of this asset and of late, we have been picking up opportunity cargos backing the asset. So, moment, just if I club our Chhara and bulk gas purchase, which Chhara allows us, we are expecting to be cash positive for this whole year. Not the terminal, but the terminal plus gas buying which we are doing. Which actually we wouldn't have done if we didn't have the terminal. So it's a positive sign and hopefully Chhara itself will turn around fully next year. Touching on the sixth topic on new energies, after our assets got completed last year, the big ones, we have focused, we have increased the focus on our solar and the green portfolio, but we are only doing it for internal use. We are not doing any third party renewable at least the solar or wind. We now have a line of sight of a gigawatt-plus of portfolio over the next 2 years. 275 megawatts is actually running. This components of wind and solar. Another 270 megawatts, if I remember correctly is of solar plus BESS is under construction. Another 500 is under development and I again re-trade this is all for captive use. We are not doing third party renewable. On CBG, we already have a couple of plants. We have been trying to get our act together in terms of higher utilizations there. Under the GOBARdhan scheme, we have, if I remember correctly, about 10 or 11 plants we have filed of which five are under construction, next six are also likely to go. CBG is one area where we are clear that we are going to be doing We are going to be building a platform around it. We've also been focusing a bit on EV charging. And the first effort we are trying to get our infrastructure of 5,500 odd retail EV chargers to be much more effective. And I'll just throw out one indicative number. From beginning of the year to now, our weekly revenues from our charging have gone up 3x. It's still a very very small number. It will not move your Excel sheets, but it is exciting for us that from an asset which we had put in place we have increased the weekly revenue. We are also continuing our push on CNG. The last point I wanted to touch is a very interesting development we had. As you all know, we have HP Pay, which the platform which we have been using for essentially sort of a wallet for our payments. Some of you might be using it. Those who don't, please use it. It's a good platform. We have now got TPAP status on that. We become became the first PSU and OMC to achieve the TPAP status. This allows us to offer seamless UPI payment service and opens up new avenues for customer acquisition and engagement, strengthening our digital ecosystem. There are many who have struggled in this business for creating the platforms, etcetera. We now have a platform, HP Pay, which is TPAP enabled and we will start deploying it much more widely. Our vision is to transform HP Pay from just a fuel-centric application into a broader digital payment and lifestyle platform around our businesses. We are not going to do esoteric things, but around our businesses, we will use lot more given that we have a TPAP status now. So, that was a quick summary of where we are. We do have short-term challenges. Crude I just checked on the TV screen in my room before coming in was at $114. That's a you know Brent was $114, abnormally high number. We have challenges. We are fighting them. But in parallel, as you could see from some of the narratives here, we are getting HPCL ready for the future. We are absolutely committed to transforming ourselves and creating a stronger HPCL and creating greater value for our shareholders. I'll stop here. Thank you for your continued interest in HPCL and look forward to all your questions. And those of you who have put in your flash reports on the performance, I received some of them, have gone through some of them. So thank you for your quick judgments on our results. Thank you. Padmaraj, back to you.
Moderator: Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question.
Moderator: Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Probal Sen from ICICI Securities. Please go ahead.
Probal Sen (ICICI Securities): Yeah. Thank you for the opportunity. Very good morning, sir, and congrats on a strong set of numbers. Just wanted to understand two things. Firstly, as far as the crude sourcing is concerned today, not just the mix, I just wanted to understand what is the effective cost that we are basically sourcing crude at, in the sense that is there a I mean, how much of a inherent premium is now built in if you assume Brent as a benchmark? Brent plus how much dollars a barrel are we having to pay as Indian companies? Any any range you can share, that will be very useful.
Vikas Kaushal (Hindustan Petroleum Corporation Ltd): Okay, that was one. And you said two things.
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