Bharat Petroleum Corporation Limited analyst Q&A

The first question is from the line of Probal Sen from ICICI Securities.

Firstly, on the refining performance. I just wanted to understand the components of this $3 plus premium that we have done. Is it fair to assume that there is some inventory gain that was there in the quarter? And the second part of this question is, did we have -- if we can just tell us what kind of Russian crude percentage was there even in fourth quarter in terms of overall crude sourcing? That was my first question.

Yes. From the refining side, we don't generally calculate what will be the inventory gains because our average inventory is less than 1 month only. Generally, in the same month we procure and we -- our throughput will be completed in the same month. So, we don't calculate inventory gains separately. But however, yes, definitely, the impact is mainly on account of Russian crude and better refining margins. For Q4 we have processed Russian crude of 24% out of the total throughput. Because in Q4, the availability of Russian cargo was restricted due to the new sanctions. However, we are positive of getting sufficient cargoes in the current quarter.

So that number has basically gone up in Q1? Right?

Yes, Right, right.

Sir, the second question was about the expansion projects. In terms of the thought process behind setting up yet another greenfield refinery, can we just get a little bit of sense of what the configuration could look like? What is the -- what kind of crude sources will be there for the refinery and what sort of timelines we are looking at for commissioning for the Andhra Pradesh greenfield project?

Let me clarify this Andhra Pradesh project is refinery cum petrochemical. It is not only greenfield refinery. Refinery with petrochemicals with large petrochemical intensity. We are working 2 configurations, either 9 MMT or 12 MMT 2 trains, we are working on it and DFR studies are going on. With 40% petrochemical intensity we are planning broadly with 4 or 4.5 refinery products and around 3.4 to 3.8 petrochemicals. That's the basic configuration at 9 MMT train, we are planning. And parallelly, we are working for 12 MMT train also. Based on the final detailed feasibility reports, we will take a call by the 9 MMT or 12 MMT. So still the work is going on.

One, and one last...Timelines ?

Yes, timelines we are working 48 months from the date of FID.

48 months from FID as and when it will be done?

FID we are expecting maybe end of '25, maybe in the month of December or November.

Okay. Okay. One last question, if I may, sir. With respect to Mozambique, thank you for sharing that there is progress, and there is forward movement, but we have also taken an INR 17 billion impairment. Can we just understand which projects this impairment relates to in this quarter?

Every year, we do the impairment testing against our investments. Generally, if there is any project delay expected because, in fact, we were expecting the removal of the force majeure in the last year itself. But due to various reasons, the operator could not uplift the force majeure. So due to which actually, there will be slight impairment in the cash flows and valuation of mainly for Mozambique only, and a little bit from Brazil also. This has resulted into impairment.

That is what even in the recent announcement by TotalEnergy's CEO also, they were expecting in the month of June - July, we are expecting because all contractors are onboarded, they have agreed for continuing of the project financing and there are no hurdles now. And local level, particularly situation is much improved. So, any time the work can restart.

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

Congratulations on a good set of numbers. So just a bit more on the refining margin side. So, we could understand, I mean, you have less than 1 month of inventories. But is it the same across all the refineries or for Bina it is higher? Because I think Bina reported GRM was close to $15. And if I look into the various cracks and all, so sequentially, it has come down only. And OSPs have also expanded. Russian discounts have also fallen to 24% like you have said, Russian crude share. So, it's the same impact across all 3 refineries or there could be like something related to inventory, especially on Bina?

No, no. Actually, 3 refineries configurations are totally different. Like, for example, if you take Bina, Bina can take more high sulphur crude and more Russian crude. Whereas in terms of Mumbai refinery, Mumbai refinery, we cannot take more than 15% of Russian crude. So that all depends on the refinery configuration. So that is the reason always our Bina refinery GRMs are higher as compared to our Mumbai refinery. That is one reason. And second is even the yields, if you see the Bina diesel yield is more in terms of percentage compared to other refineries. So, this always results into higher GRMs for Bina. And it is an inland refinery. Inland refinery if you see the structure - RTP structure, the realization will be slightly higher in Bina, as compared to Mumbai refinery.

Right, sir. So, in terms of refining margin guidance, so if we consider these Q4 yields to, say, sustain over the next 1 year. So, are we seeing like $9 GRM or you think it could be like some other range, I mean some guidance on the GRM based on the current cracks?

It depends on various factors. One is definitely the crude prices and spreads. Even if we assume the spreads will continue at the same level, one can safely assume $7 to $9 range of GRMs. If the spreads are continuing like this, if the Russian crude is available at 34% with a discount of $3 to $4, which are the basic parameters, then definitely one can safely assume refining margins will be on a better side.

Right. And $3 to $4 is the current discount of Russia? Or is it like...

$3, around $3, around $3 you can, you can take $3.1, $2.8 around. Every month, it varies. In the recent month, it is coming around $3.

Kochi refinery, no but definitely, it will have a good impact on Mumbai refinery. Kochi, we take more Russian crudes only.

Okay. So, in Mumbai refinery, we'll see some benefit from increasing OPEC production.

Yes, yes, right, right.

Right. And just one small question on the marketing side. So, you mentioned INR 170 is the current under recovery. And I think LPG prices have also been quite sticky. It's not fallen to the extent crude has fallen. So how do you see the overall cash flow scenario given that you'll be doing INR20,000 crores number? And of course, now you're making exceptional margins in petrol diesel. But any sense on - are we at a comfortable level? Or do we see debt going up or anything of that sort?

No, even if we see for '24, '25, even after absorbing of LPG under recoveries, our cash flow will be how much, around INR 22,000 crores is the gross cash inflow and INR 4,000 crores, we have distributed as dividends. INR 18,000 crores in cash flow and our capex is almost INR17, 000 crores. So, a similar level, even we have a good capex number for next year of INR 20,000 crores. We are hopeful there won't be any pressure on incremental borrowings, maybe INR 1,000 crores, INR 2,000 crores here and there, there may be incremental borrowings. And at least this year, we are very hopeful there should be some mechanism in terms of LPG recoveries.

Right. Some extent you are expecting in terms of LPG, right? Okay.

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

Congratulations on your results. Sir, if you go back to the question on gross refining margins, sequentially, the GRMs have improved across all the 3 refineries. So, is it a function of the yields? Or is there some benefit from the secondary processing units or the crude slate? What exactly explains that increase in the Q4 margins compared to Q3 of FY '25?

Yes, a couple of things. One is, if you see Q4, our refinery throughput is almost 10.5. This is the highest ever throughput we have done. The plant reliability is much better as compared to Q3. There is no shutdown issues. There is no reliability issues. Our throughput is much, much better compared to any of the quarter. And second is, even the yield is on the lower side, but overall, due to the spreads, good spreads, and good diesel output in the entire product portfolio, we could generate good GRMs during this year. And Russian -- definitely, Russian discounts have helped in GRMs.

Okay. So if you look ahead to FY '26 based on the current retail spreads and the current refining margins, is there any other lever you have in terms of growth in your EBITDA and profitability for FY '26 as you look at the portfolio, including the industrial products other than petrol and diesel?

No, FY '25, '26, everything depends on the crude prices, how it moves at least in the short term, 3 months or 6 months period, we are hoping the crude will be hovering at these levels only. There is no reason to increase the crude prices much beyond 70 levels, maybe 65 to 70 range or 60 to 65 range, it will continue. As long as crude reaches this particular range, definitely, the margin side, it is helpful for the OMCs.

Okay. So, on the CGD business, can you give us some sense in terms of what are the assets capitalized and how do you see the P&L for the CGD business moving on your standalone GAs over the next 1 to 2 years?

So our total capex - expected capex for all the 26 GAs put together is, total commitment is INR 47,000 crores. But this is over a period of 8 years. But already till date, we have spent around INR7,600 crores. And this year, for '25, '26, approximate INR2,000 crores we have capex for CGD business. One good thing is that in the CGD, the volume growth is very good. In the current year itself with '24,'25 the CNG sales itself is 81% increase, in terms of the volume. So this is one particular segment, the volumes are growing, and our capex is also continuously as per the plan, Minimum Work Program, we are achieving at least in terms of CNG and industrial customers. We are a little bit behind in terms of PNG connection. But, however, the overall, we are expecting good volumes and good expansion going to happen in CGD.

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

Two questions from my end. One was related to fuel marketing. If you look at over the last year or so, you have seen a bit of a decline in your market share on retail fuel market, especially on diesel and gasoline and even on industrial side as well, I suppose you have lost some market share. How are you kind of thinking about from a strategy perspective in terms of the next few years on the market share? And where do you think you kind of settle it on the transportation side, specifically in terms of market share for fuel, sir?

Yes. In terms of market share, on a short term we have lost a little bit market share in the last couple of quarters. But if you see in the last 5 years, continuously our market share is growing because we are not competing in terms of offering discounts. We want to provide good service to the customers and our objective and our strategy in expansion of the market share is mainly network expansion. And what better services we can give to the customer. That is the reason in the highways, mainly, we are focusing on the network expansion. And recently, we have acquired almost 100 WSA sites, wayside amenities. It is a very large site where we can give good customer services and that is where actually our focus. We are sure definitely the market share will come back and we'll get our market share expansion going to happen. Because if you see in the earlier year, maybe 2 years back, the private sector participation was not there when the margins are not there. Today, since the margins are very good, all private sellers are grabbing a little bit of market share. But our strategy, the long-term strategy is to expand our network and provide good customer services and take digital initiatives. And slowly, we will increase our market share.

And the second question was in terms of Kochi refinery on the petrochemical side. Can you just give us details around how much EBITDA and earnings you made on the Kochi side on petrochemicals?

So PDPP, the production during '24,'25 is 251 TMT. It's almost 76% of capacity utilization. Last year, it was only 233 TMT, almost 10% increase in terms of the PDPP production side. And gross production margins for petchem was around INR579 crores means it is the additional $0.55 per barrel. PDPP petrochemicals unit has contributed $0.55 per barrel for the refinery for full year.

The next question is from the line of Sumeet Rohra from Smartsun Capital.

And sir, I would like to start by telling you that it's been a commendable performance especially if you look at the LPG under recovery what you absorbed. Sir, I have a question very clearly, as an investor on this point. I mean, if you see in FY '24, we reported a profit after tax of about INR24,000 crores, INR25,000 crores. And in this financial year, you've reported INR13,000 crores after absorbing about INR10,500 crores. So sir, is my understanding correct that how profitability including LPG because obviously, it's a control product so government will compensate you? It's just a matter of time. So can we say that now our profits have reset to a new standard, and we can assume that the profits which we reported over the last 2 years have sustainable profits over the next couple of years sir? That's my first question.

Let me clarify for FY '23, '24. The profits are high mainly because of the spreads. That year, if we saw the GRM of around $14 per barrel. That time during the particular year, the Russian discounts are around $8 per barrel and the spreads were very high. I don't think that, that particular ecosystem will continue for a longer period of time. But this year is moderated. In terms of spreads also, it has come to the closure to the last 10 years average spreads it has come to that. And reasonably, the Russian discounts have come down to $3 per barrel. If these 2 parameters continue, definitely the refining margins will be better and the profitability we can say it has been maybe somewhere around a better level compared to the earlier years.

We are hopeful some mechanism definitely because after increase of INR 50, now the under recovery has come down every month, we are expecting around INR 650 crores to INR 700 crores per month for BPCL. And we are hopeful some mechanism will be put in place so that maybe on a quarterly basis, we can get the reimbursement, whatever under recovery.

And sir, there is just one small point. When the Honourable Oil Minister had the press conference at that point of time, he said that the LPG prices will be looked at on a monthly basis. So can we assume that we are going towards a period where LPG prices would actually be controlled once its market aligned?

No such communication at this point.

The next question is from the line of Somaiah from Avendus Spark Institutional Equities.

So first question is on the capex. Can you help us with the run rate? You said this year, it is INR 20,000 crores. How would it kind of move in the next 2, 3 years? And also, in terms of projects, if you can give a broad split? Bina, where -- how much have we spent so far? How much is remaining? And for the greenfield, when will the capex start ramping up?

This year, our target for capex is around INR20,000 crores, maybe around INR17,200 crores is the direct investments, around INR2,700 crores is equity investment through our JV. Current year run rate, we are expecting around INR20,000 for Capex. But next year for '26-'27, we are expecting the capex will be INR25,000 crores. And in the subsequent year, we are expecting around INR30,000 crore. So from there actually the peak capex for Bina refinery will happen. In other words, this year INR20,000 crores, next year INR25,000 crores and subsequently it will reach INR 30,000 crores. Broadly, the major capex investment will go for CGD and our Mozambique expansion and Brazil expansion and for expansion & petrochemicals. These 3 are major areas our capex allocation is going to happen. And current year out of INR20,000 crores capex, we have allocated around INR5,900 crores for refineries and pipelines around INR2,400 crores. And marketing INR5,600 crores we have allocated, out of which INR 2,500 crores is for RO expansion. This is the broad capital allocation for this year.

Sir, one question. So this INR20,000 crores, INR25,000 crore and INR30,000 crores, within this, are we including anything for the greenfield or greenfield will come at a later stage?

AP refinery we've not yet included anything because once FID approved by the Board, then we will have the scheduled capex plan. But otherwise, whatever numbers we are giving, this is excluding the AP refinery project.

Q3, Russian was 34% and Q4 it is 24% and from Saudi Q3 19% and Q4 is 21%, slightly 2% increase. And Abu Dhabi 18% to 16%, 2% down. And Iraq is around 10%. And Oman Q3 is 1% and Q4 is 7%. And US WTI Q3, it was 13%, whereas Q4, it is only 5% because this percentage varies every quarter on quarter depends on what is commercially viable and which crude is available. For example, if the Russian crude discounts are better and more crude is available, we would be taking more Russian crude. If WTI discounts are available commercially, which is feasible for the refinery and which gives more value to the refinery accordingly, we take those sources. These sources varies every quarter-on-quarter.

Sure sir. The detailed breakup is quite helpful, sir. Just one small clarification on the petchem margin, gross margins that you said at EBITDA level would be positive, sir? At gross margin, you said INR579 crores. At the EBITDA level would it be positive ?

EBITDA level positive EBITDA level definitely positive.

The next question is from the line of Vikash Jain from CLSA.

Sir, I have 2 of them. Firstly, on Mozambique, now that the project is possibly looking like it's coming back to life. What -- assuming that the July time line holds in terms of work starting? Could you please kind of give a sense of how things are likely to progress in terms of timeline? We're looking at how many trains by when they are likely to come? Also, we have to find fresh contracts or the old MOUs are still relevant valid plus very broad guess on how much is the cost escalation gone for the project?

Most of the contracts in the project side, it is valid as on date. And every contractor they have agreed and the major contractor, they have given notices to the subcontractor to restart the work any point of time. So, on the project side, the contracts are valid. On the sales side, all SPAs are valid. Certain SPAs have been revised, but some quantities, the operator has taken the commitment. So on the SPA side also, there is no issue. On the project financing side, the major lender has also agreed US EXIM Bank. They have initially committed $4.7 billion. In the month of March, US EXIM Bank also, they have agreed for continuation of the project finance. So all the 3 are intact now any time they can restart the work. And project timelines, the operator is still committed. Operator is confirming they can complete the project by July 28. That was the original schedule in the recent days what they have announced. Maybe we'll have to wait and see after the restart of the project, they may give the revised schedules if any changes are there.

Initial project is approved at $15.4 billion. But after that, 1 year back, operator has indicated the revised costing will be around $19.4 billion. That was the latest estimation they have given.

That's for how many trains; that's 10 million tons?

2 trains, 2 trains.

9.6 million tons, right?

13.1, 6.5 and 6.5 each.

Sorry, okay. 6.1 and 6.1, that's 12…?

6.5, 6.5, 13.1 million tons.

13 million tons, okay. And sir, just on this -- you're currently at about -- on Russian crude, you said about 24% is where you are. Now with crude prices themselves at $60 or so, the Russian crude price is now well below the cap and all of that. How does that really change pricing over there? Does that automatically since it is below the cap, it can be sold more freely without -- with less of trouble and less of the worries on insurance, et cetera? Does that typically impact the discount on Russian crude? I mean does it take it down, I mean over this period?

If the Russian crude is available less than the price cap, then there will be more buyers. So definitely, what we are expecting, there may be a reduction in the discount. But as on date, still discounts are there, $3 discounts are there. But definitely, new buyers are coming for Russian crude, even in fact, recently that Turkey is buying more Russian crude and Syria is buying more crude from Russia. So the availability for Indian buyers slightly, it has reduced. That was the reason in the last quarter, it was 24%. But slightly this quarter, it has improved. We are expecting out of total throughput, maybe 30% to 32% Russian crude, we will be able to process in the coming months.

And sir, just last thing on -- and I'm cognizant of the fact that you do not -- you do not calculate inventory losses separately. But just for our understanding, since GRMs have been and the premium to Singapore has also been so volatile in the last few quarters, you clocked about $9 this time. In the current market environment, how should we -- I mean, are you in that ballpark even today in terms of how things have changed? Because we are a little surprised from $5.6, how things have jumped to $9 where Singapore hasn't really changed that much. So I mean, just to kind of get a sense, is the current kind of margins tracking something similar? Or of course, there could be an element of inventory loss, which would have come up in April, but yes.

Reasonably, the spreads are good. Even today also, the spreads are hovering at good level and Russian product is available. Only everything depends on Russian discount. If Russian discounts are still continued at $3, $3.5, refining margins will be better because our throughput of Russian is almost 34%. Other than that, everything is same. Our yield is around 84%, the diesel volume weightage is higher. Everything is same. No major changes. Just inventory, there may be some cargoes of old inventory may come into this particular quarter, 1 or 2 cargoes. I don't know exactly what would be the impact. Otherwise, things are normal only.

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

So in terms of the impact of the increase in excise duty, which has been absorbed by the industry, how would it impact your marketing inventory accounting? And secondly, if you look at the CGD business once again, is it possible to tell us what will be the delta in terms of EBITDA over FY '26, '27? Will it be meaningful or will it be more like FY '28 in terms of the forward estimates?

So this revision which happened on the excise duty was post 31st of March. And hence, it will not have any impact -- at least it did not have any impact on the results of the 31st of March. So this is only a post-April event, and hence, that does not have any impact.

No, I was asking more about the current quarter or for FY '26.

Because the sales price is the same, whatever excise duty additional excise duty we have absorbed to the extent the margins will be lower.

And on the CGD business?

CGD business, what was your question on the CGD business?

So we just wanted to get an idea in terms of what is the delta in terms of EBITDA for the company from the stand-alone GAs in FY '26 and '27? And when do you see that making a meaningful impact in terms of your results?

See. As of date, the EBITDA contribution from the gas business is not very significant because still we are in the capex mode and expansion mode. But we are getting volumes this year. So EBITDA contribution wise is not very significant. Only we have to wait and see maybe '27, '28, we are -- that is when we're expecting our entire MWP to be completed. And significant volumes will come so that we can have a significant EBITDA contribution from '27, '28 onwards. However, in terms of the volume, around 2.3 million metric ton of business we have carried out either directly in our GAs or in our retail outlets of other GAs, including the bulk sales. Not significant this year.

After the write-off, what are the carrying value for the Mozambique project in our books? And what is the capex that we will have to contribute after the project start? Could you also remind on that?

For Mozambique, the total investment already, we have made $2.3 billion, somewhat INR 19,000 crores we have invested. And we have to invest around another $2.1 billion for the next couple of years. Majorly, the investment comes through project financing mode. So with this, the total investment in Mozambique will be $4.1 billion. Our impairment is against our investments. These investments are in various locations, not only Mozambique, it will be Brazil, Mozambique, Russian and UAE, 4 major investments. Against investments put together, there will be impairment. Individual investment wise carrying value we will share it separately.

Sure, sir. And could you also update on the project status of the Brazilian project? When is the FDP likely to get approved? And what are the activities which has happened there?

Tender, they have floated, but tender is still not yet completed. Maybe June, July, they are expecting the tender will be opened. After that, maybe the FID will be approved.

The next follow-up question is from the line of Sabri Hazarika from Emkay Global Financial Services.

So 2 questions. Firstly, on Mozambique, like you mentioned $2.1 billion. So that is the gross capex of which there will be a debt component, right? So that would be like around 70%. So from your side, the equity will be like, say, 25%, 30% of debt, right?

Right, right.

Okay. And regarding your LPG losses, so Q3 to Q4, the losses that you've reported is not that significant, given the fact that Q4, the contract prices have gone up seasonally. So did the company do some strategy in terms of like optimizing LPG sales volume, something of that sort because it's coming INR3,100 crores, INR3,200 crores only for both the quarters. Have you done something to restrict the losses or something of that sort?

No, no, similar trend, similar trend. Maybe it depends on the volumes, maybe more or less volume would be there but otherwise, formula is same only.

Because one of your peers, I think they have reported much higher almost 20%, 25% increase in LPG losses Q-o-Q.

It depends on the volume only. Maybe I don't know exactly others volumes, but it depends on the volume only. Otherwise, same CP based formula only. Sale price is same across the industry and the CP based landing is same for across the company.

And there is no big window for LPG for any optimization, doing any optimization.

Got it. And given the fact that oil has corrected to 60. We have seen LPG held up quite strong, even the June contract prices are now just down $5. And there has been reports that because of the US tariffs and all, there's a big like readjustment, which is happening on the LPG flows. So what is your assessment in terms of Arab Gulf, LPG versus US LPG and in order to like reduce your own cost of buying LPG and thereby reducing your under-recoveries?

Most of the LPG is on term contract, maybe AG based only, Arab Gulf based only. Yes, we are seeing a little bit opportunity in terms of US LPG. We are expecting a $20, $30 per metric ton opportunity in case if we can do any optimization from AG to US. We are exploring certain cargoes where we can do the optimization. Wherever it is possible, we are reporting the suppliers and do the optimization. So we are trying to do some cargoes under this optimization, shifting AG cargoes to the US based cargoes. So it will be share of $20, $30.

$20, $30 net benefit, including freight and everything you are getting?

Right. Right.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Varatharajan Sivasankara from Antique Stock Broking for closing comments.

You mentioned 340 outlets added during the year. So as of now, like, what will be the net number in terms of our own CGDs based like CNG stations and the total like CNG stations, including the other GAs as well?

So we have total 2,370 CNG stations as on 31st March '25. So about 840 are in our own GAs and about 1,530 are in the retail outlets in other GAs - other companies.

This 800-odd number, what you're referring to is like 20-odd GAs that we have.

That's correct.

Fair enough. So I would like to thank the management and the participants for taking time out to join today's call. Always a pleasure to have you. Thanks again, and have a nice day.

Thank you.

Thank you.

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