Bharat Petroleum Corporation Limited (BPCL) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Bharat Petroleum Corporation Ltd. Q2 FY27 Earnings Conference Call, hosted by Antique Stock Broking Ltd. 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 touchstone phone. Please note, this conference is being recorded. I now hand the conference over to Mr. Varadha Rajan. Thank you and over to you, sir.

Thank you, Nazeer. Very good morning, ladies and gentlemen. It is my pleasure to welcome all the participants on the call and the BTCL management to the 2QFL27 call of BTCL. We have with us Mr. V. R. K. Gupta, Director of Finance, Mr. Pankaj Kumar, UD Corporate Finance, Mr. Ashit Uwe, CGM Corporate Treasury, Thank you, Mr. Vargarajan.

Good morning, and on behalf of the BPCL team, I welcome you all to this post-Q2 research concord. Before we begin, I would like to mention that some of the statements that we'd be making during this concord are based on our assessments of the matter, and we believe that these statements are reasonable. However, their nature involves a number of risks and uncertainties that may lead to different results. Since this is a quarterly result review, please restrict your questions to the future results. I now request our Director of Finance, Mr. V. R. K. Gupta, who is leading the BPCR team for this call to make his opening remarks. Thank you, and over to you, sir.

Good morning, everyone, and thank you for joining us today. As you are aware, our quarter tour results were announced. In the quarter in context, particularly how the operating environment evolved since we last spoke. When we met in July, the energy markets were under significant stress due to the escalation of the West Asia crisis, which had a considerable impact on our quarter one performance. As tensions showed, some signs of freezing at the time, we were hopeful that the opening environment would gradually stabilize. However, quarter two unfolded quite differently. The quarter began on a relatively calm note with Brent crude at around $70 per barrel from mid-July. However, geopolitical tension intensified, pushing crude prices above $90 per barrel by August. The situation escalated further in September following attacks on Saudi export infrastructure and tankers, with Brent averaging around $116 per barrel during this month. Tension surrounds the Strait of Armos, and the Red Sea also remained elevated. While we continue to secure supplies without disruption, the escalation kept crude premiums and flight costs at elevated levels. Again, at this challenging backdrop, strong diesel and ATF cracks supported refining economics, while lower LPG under-recoveries provided some relief to marketing margin during the quarter. At the same time, the rupee remained under pressure, averaging around 95.6 against U.S. dollar, adding to the cost of our dollar-denominated imports. Through all this volatility, our priorities remained clear. We stayed focused on our four things, securing supplies, serving our customers without disruption, protecting shareholder value, and maintaining momentum on our growth program. Let me start with sourcing. Our spark crude share remained at around 67% in Q2, while Russian grades accounted for approximately 37% of our total crude procurement, both broadly in line with previous quarter. As flows from Middle East improved, we progressively restored sourcing from the region, while retaining the flexibility and diversification we had built during Q1. I am also pleased to share that our efforts to strengthen our international crude sourcing capabilities have begun to yield results. BPCL became the first in the industry to leverage sourcing opportunities from inside the state of farmers at a price advantage. This was issued through our international crude desk in Singapore, which commenced operations in September 2026. This marks an important step in strengthening our global sourcing capabilities and improving our ability to respond quickly to opportunities in an increasingly dynamic crude market. As of 30th September, we held around 22 days of crude inventory, and importantly, our crude sourcing requirements are tied up through December 2026. Moving to LPG, despite disruption to traditional supply routes, we maintained domestic availability through a more diversified import portfolio. Supplies from the Arab Gulf improved during the quarter, while U.S. origin cargoes accounted for around 48% of our total LPG imports in Q2. Currently, we are holding 32 days of LPG inventory, including in transit. On LNG, disruptions to our long-term supply contracts required us to actively diversify our sourcing. We secured ordinary spot supplies from the U.S., Oman, and West Africa, supported by flexible logistics arrangement to bridge supply gaps despite elevated market prices. Coming to refining, our refinery has continued to deliver a superlative operational performance during the quarter. We achieved a throughput of 10.4 million metric tons in Q2, with overall capacity utilization at 117%. Our gross refining margin stood at $32.53 per barrel, and after adjusting SAED, the GRM was around $14 per barrel. Distillate yield remained strong at 84.38%. Moving to marketing, our domestic sales volume stood at 13.47 million metric tons in Q2 compared to 13.62 mmT in Q1. We continued to strengthen our retail network, taking the number of outlets to 25,592 compared with 25,485 at the end of Q1. At the same time, we continued to build our premium fuel and non-fuel portfolio. Speed 97 conversion stood at 5.21% during the quarter. Speed 100 is now available at 162 outlets, and our BKFA network has expanded to 234 locations. On LPG, we commissioned our Mathia LPG plant in Golapura, Assam, our first LPG bottom plant in the state, with a capacity of 30 TMT per annum. This is an important step towards strengthening our LPG infrastructure and product availability in that region. We are also pleased to share that our premium composite cylinder Bharat gas light jib is now available across India and can be conveniently booked through the Hello BPCL app. I am proud to share with you that BPCL has recently launched extreme weather grade diesel, developed entirely in-house to keep military vehicles operating reliably in extreme winters and at high altitudes. The first rake was dispatched from BINA in August. For us, this is more than just a new product. It demonstrates what we can achieve when innovation and technological capabilities come together in support of national priorities. Our gas business maintained strong growth momentum. Bulk gas achieved a record H1 sales performance of 979 TMT, registering 53% year-on-year growth, while CGD sales reached 177 TMT, growing 65% year-on-year. The recently announced GoBuddan scheme has made CBG projects increasingly attractive, and we are actively pursuing these opportunities through both our own plans and joint ventures. Additionally, our CBG blending reached 6.5% in H1, more than double the mandated target of 3%. Coming to LPG compensation, the softening of Southeast CP prices during Q2 provided some relief for under-recoveries. Average under-recoveries declined to around Rs.290 per cylinder in Q2 compared to Rs.507 per cylinder in Q1. As of 30 September, the cumulative buffer stood at Rs.17,334 crore after adjusting for Rs.3,796 crore of compensation received during the first half. For future, we remain hopeful of the government's continued support to OMC towards domestic LPG compensation. Let me now brief on our growth program. Our CAPEX program remains on track, and since we last spoke, our key projects have continued to make steady progress. As of September 26, our Bainab Petrochemicals and Refines Expansion project has reached 40.2% progress, while the polypropylene project at Kochi has reached 55%. The PRSCC project at Mumbai is also progressing. We have also taken an important step in our sustainable aviation fuel journey. In October, we signed India's first co-processing licensing agreement for our SAF project at Mumbai Refinery. Phase 1 involves revamping the existing kerosene hydro-treator unit and is targeted for commissioning by January 2027. This positions as well for India's SAF branding requirement for international flights, beginning at 1% in 2027 and progressively increasing to 5% by 2030. On the Adana Pradesh Refinery and Petrochemical Complex, I am pleased to share that on Friday, our Board approved the incorporation of a wholly owned subsidiary as a dedicated project company, with an initial average share capital of up to 4,900 crores, subject to requisite approvals. The dedicated project company will facilitate swift due diligence, lender engagement, and development of the financing and partnership structures. The detailed feasibility reports are in their final stages, following which the financial investment decision will be taken shortly. Moving to our upstream portfolio, the Mozambique project continues to progress steadily, reaching 47% completion as of September 2026, with gas production expected by mid-2028. In Brazil, following the award of the FPSO tender in May 2026, the BMC-11 project is also progressing in line with plan timelines. Overall, against our FI 2627 capex target of 25,000 crores, we have incurred 13,749 crores during the swasta, including 9,300 crores in Q2. Now, coming to our financial performance, revenue from operations for the quarter stood at 1.5 lakh crore, with a standalone profit after tax of 4,993 crore. For the first half, standalone profit after tax stood at 1,031 crore. On a consolidated basis, profit after tax for Q2 stood at 4,863 crore, while profit for the first half was 2,993 crore. Despite the challenging operating environment, our Q2 performance demonstrates the resilience of our integrated business model. The quarter benefited from our agile sourcing strategy, robust refining performance, and a reduction in marketing and LPG under-recoveries. Our balance sheet also remained strong. Stand-alone gross borrowings reduced to 15,246 crore as of 30 September, compared with 17,386 crore at the end of June. The stand-alone debt equity ratio improved to 0.16 from 0.19 in Q1. Our borrowings, net of short-term investments, stood at 7106 crores, as again at 4800 crores in Q1. As we enter the second half of the year, the external environment continues to remain uncertain. However, our performance in Q2 demonstrates our ability to adapt quickly and operate with resilience through periods of significant turbulence. We remain confident in BPCL's ability to navigate near-term volatility while building long-term value. With that, I will conclude my brief on our Q2 performance and will be happy to take your questions. Thank you.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Probel Sainz from ICICI Securities. Please go ahead.

Thank you for the opportunity, sir, and congratulations on a good set of numbers. A few questions. You talked about the proof sourcing mix for the second quarter. I just wanted to get a sense, given that Middle East group closer have improved, as you mentioned, have we seen any material change in that mix in the month of October so far? And how are we looking at the mix till December, when you said you already have to tie down, till at least the end of December?

Let me give, in terms of the brief numbers, this Saudi side, Parchan Gulf, compared to Q1, definitely has improved in Q2. Even October, November also, we are expecting the similar lines of higher volume from Middle East. Mainly after Yanbu pipeline correction by Saudi, they have started increasing their volumes, and certain cargos are coming from Adenok also. So, only cargoes from Iraq and Kuwait still not coming in full-fledged, but otherwise, good amount of volume is coming from Middle Eastern side. October, our requirement from Russia has slightly come down, but in the month of November, the cargoes from Russia significantly have reduced due to the commercial viability of Russian cargoes, mainly the increase in the freight. We are not getting good offers from Russia. Now, for December cargo, slightly it has improved, whatever they were expecting, a good amount of premium for Russian cargo. Now, the premiums, slightly they have reduced. Maybe it is now comparable with other Persian Gulf grades, Russian Uras. Maybe for December, some couple of cargoes we can take Russian. November will be definitely low in terms of Russian availability. Not availability, Russian cargoes, what we have procured.

Right, sir. So, just to follow up on that, if I remember correctly, sir, I think you had mentioned that at the Q1 briefing that blended crew cost was somewhere around Indian benchmark plus minus about $12 to $15. Has that number changed in terms of delivered crew price to us in terms of actual cost?

Till the freight rates are high, the insurance rates are slightly higher. Till benchmark plus $10 to $12, it depends on which side you are taking the price. For example, if it is from Fujira, definitely it will be lesser, but if it is from Mianbu, the freight rates will be higher. But from benchmark, we can take an average. The landing level is $10 to $12.

The second question was with respect to the LPG. Now, sir, obviously, you mentioned, I think, 290 odd rupees a cylinder for 2-2. Now, we have seen Asia LPG prices spike quite a bit in October. So, if we can get a sense month-wise, what was the per cylinder under recovery in October, and what was it in September, and what are you looking at in November at this point of time?

If you see the numbers, July it was 490, August 179, September 199. We are expecting October will be 245 and it is going up in the month of November. November expecting it 328 per cylinder.

Okay, okay. And one last question, sir, if I may, in terms of the marketing margins, is there any discussion at all in terms of looking at the pricing, given how starkly product spreads and prices have increased? I know you can't answer in terms of timeline, but just wanted your stance on how you're looking to navigate the stronger retail, I mean, higher retail marketing losses, which I'm sure you are encountering at least in October. How are you looking at the situation?

We cannot command at this price, because supplies are there, supplies are there, production is there, only thing in this route is the disturbing thing, and this Red Sea side volumes are coming, Yanbu said, even there are certain Houthi attacks on the Saudi side, but still good amount of volumes are coming from the Red Sea, but once the SOH route is resolved, we are hopeful, crude can come back to the regionable levels, but some more time, we have to wait and see. We are reviewing every month on month what is the under-recoveries, how long this will continue, but there is no further discussions on any improvement on the marketing margins at this point of time.

Understood. Thank you so much for your detailed answers. I will come back.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. Next question is from the line of Vivekanand from Ambit Private Limited. Please go ahead.

Yeah, hi. Thanks for the opportunity. Just two questions. Number one is on the Mozambique asset. You said that the construction is, I think, 40%, 40%, I guess, is what, 47% is what you said. Can you refresh us on the targets that are there in terms of by when should this project come on stream and first gas and what will be your share of gas in, let's say, F530 from this asset? That's number one. The second one is in terms of your APEX outlook. Any change versus the guidance given? I believe it was around 25,000 crore in the past. Any change on the annual target for FY27 and FY28, along with maybe a key update on the Bina expansion, if you could talk about that. Thank you.

Let me explain on Mozambique part because the project is progressing very well. 47% project progress has achieved. We are expecting mid of 2028, either June or July, the commission date. They have declared June 20th the first gas we can see. As of date, there is no change in the schedule dates. Based on the current progress of the project, we are hopeful mid of 20th we can see the gas. That is one. In terms of the gas flows, size of the gas, the first phase development is for 13 million metric ton of two trains development, out of which BPCL is having a 10% share. That means our share out will be around 1.3 million metric ton of gas. This is only phase one development, and subsequently, based on the reserves, we can develop two more trains. Once this particular project is completed, then other trains, we can plan it. So, the total size will be around, BPL share will be, BPL share will be around 4.2, roughly, 4.2 to 4.5 million meter ton of gas. The past three trends are developed. And the second question, in terms of the CAPEX program, our financial year, FI 2526, the target, 2627, the target is 25,000 crore. In the six-month period, we have already reached around 13,000 crores. We are keeping the same target, but in case if any good progress on the project side, slightly it may go up beyond 25,000. Depends on the project progress, even certain activities. If the progress is good, maybe this CAPEX program can go up slightly.

Right, sir. Thanks for the follow. Thanks for the answers. Just one follow. So, any plans on tying up the Mozambique gas to get to Indian customers, given that now you have visibility of completion of the project by mid of 30 years?

Mozambique, we have already tied up SPA for 1 million metric ton of gas to bring it to India. Out of 1 million metric ton, already we have started marketing in Q2. Q2 itself, we have started marketing, and certain customers already we have tied up, but small volumes. We have started marketing of the gases.

Right. By when can we expect this gas for you to get tied up, the whole 1mm TPA, and do you have plans to bring the entire on point Q?

We have started in Q2 on the sales side. On the sales side, we have started marketing of this gas in Q2. Maybe next to two, three quarters, we can complete 1mm TPA.

Right. Thank you very much.

Thank you. Next question is from the line of Sartak from DSP Asset Managers. Please go ahead.

Hi, thank you for the opportunity. Sir, just a couple of questions on the Mozambique side as well. So, if you see the balance sheet on the intangibles and the development, can you please split as to how much of the 19,000-odd intangibles as well as under the equity method of 29,000 would be pertaining to Mozambique, and how much have we spent post the force measure, and what can we expect as an incremental spending on the Mozambique side?

Yeah, Mozambique, as of date, cumulative basis, we have spent around $2.8 billion. It's almost around 27,461 crore. And the future capex commitments based on the current approved project cost is $1.8 billion in the next coming couple of years we have to spend. The total investment in this project will become 2.8 plus 1.8, around 4.5, 4.6 billion dollars of investment, including the exploration activity, everything.

And this will be up till the gas will be started, so that is till 2028, right?

2028, mid of 2028.

And how much incremental interest cost is there? Is there any uptick on the interest cost for this project?

For this project, this project development is happening under the project cost, project financing. There are consortium of around eight or nine bankers consortium at project level. The interest cost will be varying, actually. It starts from 6% to 8.5%, 9% based on the current interest rate. So, different lenders, different terms and conditions, this project financing has been concluded.

Fair. This was very clear. So, thank you. And one last thing, the delta that we see in the balance sheet of intangibles, that is mostly pertaining to Mozambique. Is my understanding correct? So, 16,000 crores has increased to 19,700 crores, the intangibles under development, and a similar increase has been there on the investment under equity method as well.

Yeah, investment under equity method is mainly due to particular project, Mozambique project earlier, it was under PA holding. PA holding means whatever CAPEX is used to come under the CAPEX program. But subsequently, in the last two quarters, there was a development. All the assets and development has been moved to asset co. That means, instead of CAPEX, you will see in the investments. At project level, all the assets and the working programs have moved to equity under asset co. So that this CAPEX program, whatever incurred the CAPEX program in the development, it has moved to equity.

Thank you. Next question is from the line of Yogesh Patal from Dalat Capital. Please go ahead.

Thanks for taking my question, sir, and congrats for the set of numbers. BPCS GRM has dropped the quarter-on-quarter closer to $32 per barrel compared to the Q1. What's causing this decline in BPCS GRM? Because most of the independent refiners actually saw their GRM jump on a sequential degree. Do you walk us through what's behind this quarter-on-quarter in our recorded GRM, and was there any crude inventory gains during the Q2?

Crude inventory gains generally we don't calculate because our average inventory is around 22 to 25 days, So there won't be any big impact on the crude inventories. If any inventory gains are there, to the extent of intermediaries, if you are holding a very big amount of intermediaries, then there may be an impact. Otherwise, compared to Q1, the GRM reduction is mainly two reasons. One is slightly, the GRMs are, more or less, GRMs are in the same levels, Q1 and Q2. Q1 average gas oil spreads are $55, now it is $55 in Q2. Gas oil is also $24 and $24. There is no big change in the spread. But two important things have happened in the crude procurement. One is the crude freight costs have significantly increased compared to Q1. The Q2 freight costs are very high. And second is, Q1, at least most of the period, we need to get Russian crude either at benchmark to discount or around the benchmark. But in Q2, certain cargoes, we don't get any discounts on the Russian crude. We have to buy either at the premium of benchmarks or benchmarks. So, these two have impacted mostly on the high sulfur grade, impacted the refining GRMs, compared to Q1. Otherwise, if you compare the Singapore benchmark GRMs, still our GRMs are much higher.

But, sir, the freight cost has gone up for every independent refiner. So, why in other cases, the crude costs matter into the GRM calculation?

I don't know other industries. What is the impact of crude inventory gain or intermediary inventory gain? What is the carry forward from Q1 to Q2? We don't have any such information. We generally track what is your performance compared to the trend of the spread? What is the crude procurement compared to the market trends? As long as we are better than the market trends, we can conclude our refinery performance is better.

One of the reasons is the freight cost that has gone up and that is impacting on our GRM. That's the correct understanding?

And Russian, Russian side discounts are not there in Q2. Like, for example, earlier, most of the total procurement, around 37% of Russian procurement. So, if Russian procurement is not available at discount, particular refineries, whoever is using the high sulfur grades, definitely the margins are compared to Q1, it is on the lower side.

Okay, my next question, sir, on again a GRM side, the freight cost has already gone up perfectly. So, here I am trying to figure out are those higher freight costs or expenses actually negatively impacting to our GRM, that's one thing, and are you, because are you passing those extra choice product prices when you set up the RTP? Our understanding on the RTP side is that it is a combination of import plus export parity side. And the import is making up the bigger thing out of that RTP. That freight cost is also a part of that. So, considering all these equations, the question is very simple that the freight rates are impacting on a GRM or not.

Look, RTP is for the product pricing formula. Product pricing formula, product to freight is one component. Like my procurement of crude, crude freight is another component. If both the freights are in tandem, if it is moving, there won't be any impact. Sometimes if the crude freight component is going up, whereas freight component is not going up, there is a squeezing on the refining margins. On the other side, for example, product freight costs are going up and crude freight costs are going up, there is an advantage. So these are the market trends. There is no change in the formula. But this time, whatever the freight cost of crude has gone up, similar extent the product freight is not gone up.

Okay, sir. Thanks a lot for this clarity.

Thank you. Next question is from the line of Mayank Maheshwari from Morgan Stanley. Please go ahead.

Hi, sir. Just an extension idea about how September got off the crude sourcing was and what you are doing for the current month and the next few months since you are loading, I suppose, for November and December as well, what's going on and how you have seen premium shift, freight, your kind of address partly, that what's going on in the crude market and what you are seeing on your cost side. Thank you.

Let me explain on the Q2 side. In terms of the volume, 37% of volumes come from Russia, and 17% is coming from Abu Dhabi, and 19% coming from Saudi, Q2, and around 6% from Oman, and 9% from U.S., and other countries are only 4 to 2%, 1%. Broadly in Q2, our term contrast for Saudi and Abu Dhabi, majority of the volumes are coming from the term side. These two countries a little bit gone to the spot, but Russian still we have maintained at 32%. Coming to October and November, in terms of the percentage more or less same, but in terms of the November, Russian volumes have come down compared to PG grades. PG grade is actually more commercially viable compared to Russian grade. That is the reason November Russian will be lesser. But December completely we have not concluded. Maybe another couple of cargo still is pending. Maybe another one week or ten days we can conclude on the December side also. And overall we are getting the full volume, but there are challenges. Certain cargoes, unplanned receipt, for example, cancellation of the cargoes, immediately you have to replace with some other cargoes. There were challenges, but during the quarter, we have come across all the challenges. We have addressed all the challenges. We are getting the full volumes, and our throughput is clear. In terms of the market pricing, we're completely volatile. I can say certain period of time, crude is available at a discount, certain period of time, crude is available at a premium. For example, certain cargos, we are the first one. We have taken one cargo for Sumo, crossing the SQH. Earlier, we never tried, but this time, we have tried with a good amount of distance. We got the Sumo Cargo. But the second cargo, again, there are certain issues. So, there are some challenges of getting crude at discount, getting crude at a premium. So, it's a mix. So, daily, it varies. So, there is no clear trend, whether crude is on premium side or discount side. But volumes, we are sure volumes we will get.

I think that's pretty helpful. And I think the second question was more related to the Andhra refinery. Can you just give us a sense of the steps now going forward and what will be the timelines around FID, etc.?

Yeah, one is in the last board meeting, our board has approved for creation of a separate subsidiary company, initially with 100%, and whenever the potential partners are ready to join or subsequently, the dilutions will happen. So, further, the first step, we have approved for creation of the W.S., and it will go to the DEPOM, M.O.P.N.G., after M.O.P.N.G. recommendation, the incorporation of the company will happen. In terms of the D.F.R., we are almost at final stages. The numbers have been frozen. Just reviews are going on. Maybe another couple of weeks, we will conclude on the number. Broadly, we are looking at a configuration of 10 million metric tons of refinery with a high intensity of petrochemicals, around 32-33% of petrochemicals. And the cost numbers, once we are finalizing and take it to the board, at that time, we can share full details. In the scheduled timelines, we are expecting maybe next to 2-3 weeks, we will take it to the board for a final investment decision subject to financial closure and subject to CCA approves. Because this investment is happening through subsidiary company, it requires, based on the Maharatna powers, it has to go to the ministry and CC approvals. We are expecting maybe once board is approving, another two, three months, the CC approvals will come. But parallel activities, pre-project activities and licensure selection and other things are going on. Parallelly, the selection of licensures and CC approvals, the notes will move. Maybe three, four months, we are hopeful the entire approvals will be completed. In terms of environmental clearance, the discussions are completed. The minutes have been recommended by the committee to the EC authorities. We are expecting shortly the EC clearance also. Once it is there, maybe we can short the actual physical work on the site. In terms of the land procurement, around 4700 lakhs of land has been registered in the name of Bharath Petroleum. So, that is sufficient for initial work for refinery, but another 1400 crore, which is required mainly for Greenbelt and other things, we are expecting by November, the entire 600 lakhs requirement of land will be fulfilled to the AP government. So, this is the status of here.

Sir, is there an equity level you are comfortable with in terms of a minimum that you want to have in this project?

We are planning either 70-30 or 65-30 debt equity, and we are keen to dilute at least 30% of equity dilution when the project is in progress because discussions are still going on. Once the temps are agreed, then the partners will join with us. So with this, we are comfortable in terms of the investment. Even earlier also, we have discussed our peak debt equity on standalone basis. Our target debt equity around 1. It should not cross beyond 1 in a significant way. At the project peak capex, once the projects are commissioned, again, we'll come back to 0.3, 0.4 level of debt equity. That is what we are projecting. When we take any CapEx projects, similar trend we follow at the peak CapEx, we take a dedicated 1.1 level of leveraging. And once projects are commissioned, we are hopeful it can come back to 0.4, 0.5 of dedicated. That is where we are comfortable and stand-alone business.

Very clear, sir. Thank you.

Thank you. Next question is from the line of Nitin Tiwari from Phillip Capital, India. Please go ahead.

Hi, sir. Good morning. Thanks for the opportunity. Thank you. So just for the sake of summarizing, if you can give us a summary of all your ongoing and planned KPEX projects, the large ones, and also our guidance for FY28 and 29 KPEX numbers.

Yeah, major projects, I can say one is Bina Petrochemical Complex. Bina is now scheduled completion is around 40%. The total approved project cost for Bina is 43,367 crore. This is excluding taxes, ITC. Cumulative capex till date is 7,566, already incurred, and progress is 40%. Scheduled commissioning is mid of 28. We are hopeful BINAH project will be completed after the schedule line. There is no revision at this point of time. The next major project is PPE at Kutsi Refinery, polypropylene project at Kutsi Refinery. The total approved capacity is 4,850 crore. Till September 2026, we have incurred around 1,178 crore. And most of the commitments are done, like, for example, tendering activity and prices have been frozen. And actual progress 55.10% and scheduled completion date is October 27th. This is on polypropylene at Hochi. And third project we have recently approved is PRFCC at Mumbai Refinery. The total project cost is 13,626. As of date, the initial activity started. The capacity due to we have incurred only 130 crore. And planned capex for this year is around 1,500 crore, and actual progress 9.2% completed, and scheduled completion date is September 29th. This is the project. And other major projects are, small projects compared to this, all are 1,000 crore and 1,500 crore projects. All projects are going well, including the IDPF. There is one pipeline project. It's almost delayed by 7-8 years. That also has taken a good momentum in Q2. We are expecting the project will be completed by December, January.

And the guidance for F28 and F29 for the CAPEX?

28, 29, we are expecting 40,000 crores plus. It depends on the project program. It's 40,000 to 45,000 crores. And 26, 27,000, 25,000 crores target. Maybe slightly it will go up because the projects are in full swing. Projects are actually progressing very well. Maybe this 25,000 crores, it may go up maybe 5 to 10 percent.

Right. So 25,000 in 27 and then like about 30-35,000 is what we can expect in FY28.

Yeah, FY27, FY28, 40,000 crores you can expect, 40 to 45. You have to find a major project anyhow, the planned project beginning of the year, generally we review. But other than 40,000 crores as per our cash flow projection, 40,000 crores we have taken. And this is...

Sorry, and this $40,000 includes your TPEX in Andhra as well?

No, Andhra will be an addition. Once FID is approved, then Andhra will be an addition. My equity commitments, whatever equity commitments, Andhra will be an addition.

Understood, sir. Understood. And last piece, I just like, you know, a sort of clarification question again. So what's our dependence on basically petrol and diesel when it comes to taking it from other refinings as a percentage of our say?

Yeah, yeah, our dependence, this year we are expecting around 6 million metric ton of products we may take by end of this year, because earlier the growth is very high. Our own requirement, 89.27%, it is coming from own refinery for MS, and HSD we are expecting 79.34% comes from our own refinery.

So, 6 million in total, I mean, both MS and HRT, is what you are going to take?

We are expecting it by end-up.

Thanks, sir. That's very helpful. I'll get back in next time.

Thank you. Next question is from the line of Beneet Banka from Namura. Please go ahead.

Hi, sir. Thanks for the opportunity. On throughput, I think the number has been very strong over the last few quarters. So, this quarter was 118% and it has been consistently over 110%. So, can we expect similar unrest in future as well and if there is a refinery turnaround over the next year quarter?

Yeah, this year there are 10 rounds. Mumbai refinery Q3, we have certain plans, shutdowns around 30 days for Mumbai refinery. And Bina, a small shutdown of 4 and a half days. And Kochi refinery will be around 30 days, 30-40 days. Because three units are going for a shutdown. It's a regular maintenance. Maybe slightly Q3, Q4, we may not be at 118%. So, if you remove the adjustment from the shutdown, definitely our refining throughput will continue similar lines.

Okay, and on a follow-up question on Andhra Pradesh, can you share the IRR at mid-cycle crack, not at the current level of crack, maybe around $15-$20 per barrel of diesel, gasoline crack, what will be the IRR from the project?

Generally, we take any projections. When we take a large project, we take a 10-year average. We cannot deploy any capital based on the short-term trend. We will share the numbers very shortly. Once FIID is clear, we can share. But otherwise, when we take the assumptions, any crude assumptions or price assumptions, we take a 10-year price trend.

Lastly, one more on the LPG compensation. The buffer has continued to go up. And because the under-recovering is higher than what you have been recovering from the government. So are there any discussions going on regarding the change from the government side? How do we go about it?

LPG already, industry, we have submitted our representation to ministry for support. As precedents earlier also, whenever LPG under-recovering, ministry is always helpful and they give the support. But it's a process. There is a process of getting budgetary support. After that, the announcements will happen. Otherwise, we are in consultation with the ministry for LPG subsidy.

Okay, sir. Thank you.

Thank you. Next question is from the line of Amit Murarka from Access Capital. Please go ahead.

Yeah, hi. Thanks for the opportunity. So, I missed if you have already shared the number on the call, but what was the GRM net of SAED in the quarter?

$14.

$14. Okay, okay. And ballpark inventory gain, if you could give like last quarter, I remember you had mentioned $3 to $4 as inventory loss. So, this quarter ballpark number, if you could share.

Very difficult to calculate inventory gain losses because the crude procurement is so volatile. The freight components are so volatile. Earlier, when the prices are stable now, maybe one can calculate what is the inventory gain losses. Today, very difficult. How we are doing the valuation, there are different principles. The crude cost itself is one cargo to another cargo. The cost differential is around $20 to $25 due to the freight and other things. So, we stopped calculating what is the inventory gain loss, because our average inventory is around 25 days only. If you are bringing any cost efficiency in the crude procurement, that is an efficiency. It is not an inventory gain loss. So, it is not right to calculate as an inventory gain loss in terms of the crude.

Sure. Got it. And just a question on other expenses. So, it seems to have gone up quite a bit in the quarter, Even if I exclude the FX loss of about 400-odd crores, even then it's like 9,000-odd crores, usually it's a number of close to 7,000. So could you highlight what are the specific reasons for this jump?

Yeah, yeah, there are certain one-time items, there are certain regular items. Mainly the transportation, because of the increase of the diesel cost, the transportation cost has gone up. Slightly on account of volume, that is around 150 crore for Q2, increased compared to earlier quarters. And the second impact is like normal increase of off-line taxes around 150,000. Forex, anyhow, you said you are aware. The one-time impact is generally as a risk management policy to cover my refining operating expenses. Every year, certain percentage of volumes, we sell the spreads in advance. Those spreads, whatever we have sold in advance for the next 12 months requirement, again, after my refining throughput, certain percentage of spreads, we sell it. But due to this very high spread, there is a MTM losses, a significant amount of MTM losses during this quarter. These are the major things. Maybe in case if the spreads are normalized, in the next six months, this MTM reversal can happen. That is a one-time hit because this particular period, the spreads are very high.

Could you give that number? What is MTM, no?

MTM will be, MTM will be other than MTM derivatives, around 1217.

Got it. So, that's the bulk of the movement. Sure. And generally, like, you mentioned a lot about the crude sourcing already, but if I have to kind of just understand the whole and the movement around the various And the discount premium. So I believe you were getting a meaningful advantage from high Russian crude sourcing, which was coming at a discount and which is gone now. So to that extent, is it fair to say that the premium over Singapore, which was like being high, would probably now moderate now to more normal level, let's say, as we have been seeing for other refiners in the prior years for you?

The Russian discount definitely helps a lot in terms of availability of the crude and commercial margins for the refineries. In fact, if you see the trend, in the month of October, Russian crude is at a premium of $12 to $13. Now, recent numbers, I can say it is only $1 to $2. Maybe in the next month, if the Russian is available at a benchmark or discount, maybe we are much better than Singapore. If it is at a premium, definitely we may not be at the Singapore level, but as for the refining performance, efficiency side, definitely our efficiency is much higher than Singapore side. One is our distillate yield is 83-84%. In fact, 84% plus only. In fact, last couple of quarters, we are ensuring 84% plus distillate yield. And second is our swing between gas oil and gasoline. So, these are the unique advantages for our refinery. So, most of the times, our GRMs, even there is no Russian discount, so our margins will be better than Singapore.

And just a last question on CAPEX. You mentioned 40,000-45,000 crore for next year. Does this include the planned spends on Mozambique as well?

Yeah, yeah, yeah. Mozambique, Brazil already factored. Only AP refinery were not factored in our CAPEX program. Maybe once the board is approved for the AP refinery, accordingly we will rework our CAPEX program. And we can share the revision numbers.

Sure. And these are all committed, Kipigra, irrespective of the cash flow situation next year?

Almost, maybe a little bit, percentage we don't commit because as and when requirement, like, for example, maintenance or upgradations. During the year we plan it, there won't be any commitment. I think maybe 15-20% non-committed. Every year we have to plan it, and during the year we commit it.

Sure. That's all for me. Thank you.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions From all the participants, please limit your questions to two per participant. Next question is from the line of Sumit Rora from SmartSync Capital. Please go ahead.

Yeah, hi, sir. Good morning to you. Sir, just two questions for me. One is on the LPG. So, last year, sir, what was approved for us, I think, what a quarter, I mean, the monthly payments till November or something of that sort, sir. Can I explain? So, if my understanding is correct, that means, sir, for the last tranche, we will get paid in November, and then we will not get paid further, or what is my understanding? Can you just explain on that, sir? Sir, second me, is that you... Yeah, please go ahead. Yeah, sir, and my second question is, sir, you know, on the Brent, you know, see, today, the matter of fact is that, you know, a dated Brent paid at about 127, 130, And Brent futures trade at about 115. So, sir, basically, what is more relevant for us, the physical oil when you buy is, you know, we should look at the 127, 130 level or should we look at the 115 level, which is, you know, the Brent futures which trades every month. Because, sir, you know, I mean, if my understanding is correct, you know, we are benchmarked about $95, you know, and beyond that, you know, then our marketing side starts, you know, kind of losing money. So I just want to understand, like, you know, what's the thought process? Because, you know, the war is absolutely an unknown, right? I mean, nobody knows it. It may finish today, it may finish after two years after President Trump leaves. So we don't, nobody knows anything. So we are dealing with a very big unknown. So, sir, just wanted your thoughts on how are you looking at the scenario, you know, and what's the timeline of saying that, okay, it will make a decision if prices, you know, kind of, you know, stay longer for a higher period. So, I mean, I just want to understand your thought process on evaluating, you know, the crude, you know, I mean, on the marketing side of our business. Thank you.

One is an LPG, last time whatever subsidy support government has announced, that is for 12 months, that will be ending in the month of October. Around 6.32 crore per month for BPCL, it will be ending in the month of October. Any new support, if it comes in this quarter or maybe next quarter, we are not sure what form, what amount the support will come. Then accordingly, that will be an addition. But otherwise, lost subsidy mechanism, it will be ending in the month of October. And comes to crude sourcing, yes, I agree. There is a big gap created between the ice brand and dated brand. What we see in the TV channels is only ice brand. The dated brand, yes, presently it is hovering around 125, 127. Most of our contracts, I can say, significant contracts are linked to ice brand, dated brand, not to ice brand. And certain cargoes may be Dubai-based, it happens, but most of the cargoes are dated brand. As long as the dated Brent is on a higher side, our cost of crude will be definitely on the higher side. Most of the times, if you see the trends, I know recently I have not seen that much of gap between the ice Brent and dated Brent, but last two months is due to certain issues of war issues, so the dated Brent is on a higher side. So the cost of crude procurement will be on dated Brent, definitely our cost of crude will be on a higher side.

Sure, sir. And, sir, I mean, if I just make very quickly ask you one thing, sir, with, you know, as you mentioned that October, we will see the end of the whatever money we were getting on the LPG account. And, sir, the matter of fact is that if I heard correctly, you highlighted that the LPG under-recoveries are going up to 300 plus in November. And October also has been very high. Plus, you know, we are seeing, you know, dated Brent or normal Brent or whatever being at such high level. So, sir, you know, I mean, my question more to you is as an investor. So, how do we look at it? Because, you know, we are losing money on practically every product we sell today. And, you know, so, I mean, it's definitely not a very exciting environment. So, what's the thought process, you know, on pricing, etc.? I mean, can we look at some pricing method changing going ahead?

No, LPG, definitely LPG controlled product. We don't have any control over the price declarations of LPG. It's completely under control. And only the under recovery support mechanism government will support some point of time. So there are some precedences. It is not the first time. Otherwise, we don't have any control over the LPG pricing. Because there are periods, for example, September, the LPG under recovery is only 199 rupees. Maybe July it was 490. November we are expecting 328. So, all the things will move, what decisions will be taken, maybe ministry will take appropriately on the LPG and the recovery. In terms of MSCHD, one should not see on the short-term basis. So, one has to see, everyone is hoping the war will resolve. In case if it is continuing for a longer period of time, again, we have to review, but at this point of time, we are not hoping this war will continue for a longer period of time. Once the war is resolved, crude is available. It is not that crude is shorted. Only the transit is the issue. Otherwise, crude is available. Sufficient production is there everywhere. Only refining side, there are production losses because there are production facilities has been hit. Refining spreads will continue. So on the refining side, definitely we are hoping the higher refining cycle will continue. In terms of the crude, we are expecting that if it war resolves, there won't be any higher level of crude. It will come back to the reasonable levels. So that is what we are expecting.

Sure, sir. Okay, sir. Thank you so much, and wish you all the best and good luck.

Thank you. Next question is from the line of Achal Shah from Access Capital. Please go ahead.

Hi, sir. Am I audible?

Yeah, yeah. We can hear you.

Sir, just wanted to know, so could you quantify the incentives available for the AP refinery project with respect to GST or power concessions? Broadly, what could be the ballpark figure as a percentage of total CAPEX or absolute number?

No, there are good incentives. Still, we are under discussion earlier. Government of AP is approved based on our earlier estimations of CAPEX. Roughly in a couple of elements, maybe tax refunds or GST and CAPEX refunds during the work in progress. Yes, there are certain incentives, but roughly I can say it is like a percentage of capital what we have invested. For example, if we are investing some 50,000 crore or 1,000,000 crore, principally, AP government initially, they have indicated 75% of capital what we have invested in the assets. They may reimburse over a period of 15 or 18 or 20 years. But otherwise, the subsidy support will come from the AP government. We are expecting the same principle of 75% of capital subsidies over a period of 15 or 20 years or in between, maybe in the discussion, sir, we will finalize with the AP government.

Got it. And, sir, second is a more structural question. So, sir, how do you see the medium to long-term demand outlook for MS-HSD in India? So, specifically, where I am coming from is, like, factors such as increasing EV and CNG penetration impacting MS growth. And then changes in transportation and industrial activity affecting HSE demands. So any on that, near to medium term, and even now?

No. Yeah, we can forecast a little bit, medium term, maybe three to five years, because India is growing at a 700% growth level. And the exports also slowly, slowly, if there is no tariff impact of U.S. and most of the FTS we are signing with various countries, It will help a lot in terms of the export of manufactured goods. So with this background, definitely diesel will grow. Initially, we thought 2% or 2.5% growth in diesel. Now, based on the current trend, when we see that diesel growth can go up to 3% or 4%. And MS, even earlier years, also almost 5% to 6% growth we are witnessing. We are expecting a similar level of growth for MS also. So, even there is a little bit improvement in the EV penetration, but in terms of the numbers, still the volumes are coming for MSCHD.

So, is there any sense of where VPCL could end up with respect to the number of outlets from the current level, next 5 years, 10 years?

In the last advertisement, we have almost 4,000 to 5,000 retail outlets, but every year we are taking 1,000, 1,000 outlets. Three years, maybe one can add maybe 3,000. It depends on the land availability, mainly issue of land. Getting land in the proper locations market, that is more important. Otherwise, every year we are planning in the capex for 1,000 hours, we are planning for capex.

I understand.

Thank you. Next question is from the line of Saurav Jain from HSBC. Please go ahead.

Thank you for the opportunity. Sorry, I'm going back to the point that has been discussed a lot in this call. Is it possible to give a sense in terms of your overall procurement of crude? What could be the, you know, premium that you would have paid over the benchmark Brent? Some sense of that number can be helpful for us.

Very difficult to how much premium because different temps, some cargoes are on FOB, some cargoes are on DAIS, some are, for example, through HTS, means, for example, in the in-route, maybe some portion of the distance they will incur, some portion of the distance we will incur. So, terms are completely different. So, one has to see what is the cost of procurement. One should not see what is the premium discount. Certain cargos, for example, Iraqi cargos, who got a $20 discount. But finally, after the freight, if you are adding, maybe it is a benchmark or $5, $6 benefit. So, various components are involved. So, very difficult to say how much premium from the benchmark. Even someone is calculating, it is not a representative figure of market trends. One has to see what is the cost of landing cost of the crude and what is the value the crude is giving. The differential is the GRM only, this particular period of time, when both are volatile. The spreads are also volatile, the crude is volatile, the freight is volatile. So it won't give any representation if I say even it is available at a benchmark, it is available at a discount or premium.

Okay, no worries. You also made a comment that the Russian crude is now available at only a premium of $1 to $2. But then you also mentioned sometime back that you are still preferring the Middle East crude. Does it imply the Middle East grosses are actually available at a discount to the benchmark?

Russian cargo, Russian cargo is preferable than Middle Eastern cargo for December month, because November month already we have concluded.

Okay. And what's your sourcing for Middle East? Is it on a delivered basis or, you know, how is the arrangement?

Term contracts are an FOB, Middle East, but spot basis may, cargo to cargo, it varies. Some traders, if the cargo is available, if the cargo is on the float, then they may offer it on a delivered basis. Otherwise, if the cargo is available to the tanks, the supply point, they offer at FOB. If the vessel ideal from their side, they may offer desks, I mean delivered. So different combinations. There is no standard combination whether delivered or FOB.

Okay. Separately, Aramco sometime back had, you know, announced that they will not ship cargoes to India. So I am a bit confused. Is it into place? Is it into effect?

Nothing, nothing, nothing. There is no such communication. I think we have not received anything from Aramco. I don't know which news article you are referring.

Okay, maybe some wrong news that we are looking at. Lastly, is it possible to also share the refining margins by the refinery?

Refining margins are shared already.

Individual refinery when you want? Refinery when you want? We will share separately. Okay, okay, no worries. Thank you so much and all the best.

Thank you. The last question for today is from the line of Aman Sharma from AS Capitals. Please go ahead.

Okay, am I on the phone?

Yeah, we can hear you.

Thank you for this opportunity. So, basically, as you have mentioned, after SAE, the DRM is $14 per value, right?

Right, right.

So, basically, I want to understand, when you transfer the refinery products from your refinery to marketing app, how do you calculate this refinery transfer price? Is it after taking the SAID adjustment?

Yes, when we purchase products from any of other private refineries, it is after SAID. Similar principles we apply for transfer pricing between our refinery to marketing.

But if I am not wrong, the SAID is only on the export volumes, right?

Yes, even when you purchase from private refinery, we will pay only after SAD.

Okay, and my second question is again on the inventory gain calculation. So, I understand you are not calculating the gain loss this time, but could you clarify like how you usually do the inventory gain or loss calculation?

Inventory gain losses, we have to calculate in long back, for crude. For finished goods, we calculate, because inventory gain, generally, when any refinery is holding a crude of around 20 days, my monthly pricing is for 30 days monthly pricing. So, it won't give any inventory gain loss. Only, for example, in the processing side, some old batches, if you're not processing, keep it in the inventory tank, it will have an impact. But otherwise, we have a continuous process. Mostly first-in, first-out, a lot cargo process. After that, a new cargo will come and replace it. So, in that scenario, generally, we don't calculate any inventory gain losses. Whatever refining margin is, based on the current market rate, that is a refining layer generated.

Okay. Okay. That's all.

Thank you.

Thank you. As that was the last question for today, I now hand the concerns over to Mr. Vartarajan, sir, for closing comments.

Sir, if you have any closing comments, please go ahead.

The family is a very happy and prosperous Diwali in advance. Thank you.

Thank you. I want to thank all the participants and the management for engaging in this call and spending time answering all the questions. And wish you all an advance Diwali official. Thank you. Thank you.

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