Bharat Petroleum Corporation Limited (BPCL) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Bharat Petroleum Corporation Limited Q1 FY '26 Earnings Conference Call hosted by Antique Stockbroking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Varatharajan from Antique Stockbroking Limited. Thank you, and over to you, sir.

Thank you, Neeti. A very good morning to everyone. I'd like to welcome all the participants and the BPCL senior management team for this call. We have with us Mr. V.R.K Gupta, Director Finance; Mr. Pankaj Kumar, ED, Corporate Finance; Mr. Srividya, ED, Corporate Treasury; Mr. Chanda Nedi, GM Pricing and Insurance; and Mr. Balagirish, Senior Management Finance. I'll let hand over the call over to Bala for the disclosure and an opening remarks by the team.

Thank you, Sivasankaran. Good morning, everyone. On behalf of the BPCL team, I welcome you all to this post-Q1 results con call. Before we begin, I would like to mention that some of the statements that we will be making during this con call are based on our assessments of the matter, and we believe that these statements are reasonable. However, the 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 Q1 results. I now request our Director Finance, Mr. V.R.K. Gupta, who is leading the BPCL team for this call to make his opening remarks. Thank you, and over to you, sir.

Good morning, everyone. Welcome to the fourth Q1 results con call. Thank you for joining us today. I hope you were able to go through our results for the quarter. On the macro side, global growth prospects have strengthened with the IMF in July 2025, upgrading its 2025 forecast to 3% and India's FY '25, [indiscernible] outlook to 6.4%, reflecting resilient trade activity, robust domestic demand and sustained reforms. By the recent August 2024 U.S. tariff measures introduced a degree of uncertainty, the underlying momentum in consumption and investments continue to support a positive medium-term outlook. RBI has retained GDP growth forecast at 6.5% for the current fiscal in its latest MPC meeting, citing strong domestic demand economic resilience. Despite risk posed by recent U.S. tariffs it express the confidence that ongoing trade negotiations will help ease these pressures. In Q1 FY '25, '26, the rupee appreciated 1.2% quarter-on-quarter to INR 86.62 in Q4, driven by strong foreign inflows, a weaker USD and easing geopolitical tensions. However, it now trades near historical lows amid U.S. India tariff concern and sustained FPA outflows. After weakening to INR 87.7 in USD in August, it recovered slightly on a softer USD ahead of U.S.- Russia talks. IEA forecast global oil demand to increase by 2.5 million barrels per day between 2024 and 2030 with the demand expected to reach 105.6 million barrel per day by '29, followed by a slight decline in 2030. Within this context, India is projected to be the largest contributor to demand growth with its oil consumption rising by 1 million barrels per day at an average annual rate of around 2.8%, outpacing all other countries during this period. Oil prices have remained volatile, amid the recent tariff announcement and a series of OPEC+ production hikes, as per IEAs latest projection Brent is likely to be $67 to $68 barrels in 2025. Domestic petroleum product demand grew in Q1 with petrol by 7.1%, diesel 2.6% and ATF up by 3.9% as for PPAC. Coming to the performance in Q1 of '25, '26, on operations side, our refineries processed 10.42 million metric ton of crude, achieving 118% of nameplate capacity. We have achieved a distillate yield of 84.96% consistently above benchmark going to our complex refinery configuration and strong operational efficiencies. Product cracks for gasoline was 9.88 barrel and for gas oil 15.81 barrels for Q1 during this period. Accordingly, our refineries recorded a GRM of $4.88 per barrel in the current quarter as compared to $7.86 per barrel in Q1 of '24, '25. BPCL has always been evaluating crude grades from across global geographies selecting those that maximize value in line with refinery configuration and product demand. In the current environment of narrowing discounts for Russian crude, the company's agile resourcing strategy has enabled procurement of alternative grades from Brazil, the U.S., West Africa and other regions guided by economics and market conditions and maintaining a competitive edge improved selection. On the marketing side, our domestic market sales grew by 3.19% on year-on-year during this quarter to 13.58 MMT. Further, as compared to Q4 of '24, '25, we recorded a growth of 6.6% in MS and 3.2% in HID in Q1. During the quarter, we commissioned 317 NROs and 99 CNG stations, taking total RO network to 23,958 and CNG stations network to 2,607 stations. We aim to expand our RO network to 25,000 by the end of this current financial year. We maintained our leadership in throughput per RO at 153 KL per month for Q1 '25, '26, outperforming the PSU average, driven by strategic market access and a strong highway presence. In a positive development for OMCs the government has announced a INR 30,000 crore compensation towards the under-recovery and sale of domestic LPG, which is expected to be paid in different tranches, with further details provided on the payout, BPCL total negative buffer before the impact of asset compensation is INR 12,523 crores as of June '25, '26. We have not accounted anything again at this particular compensation announced. Through our industry first digital initiative of a QR code basis payment mechanism at our RO UFill, which embodies our commitment to transparency and convenience. We have covered 15,000-plus retail outlets with a daily 6 lakh transactions valued at INR 30 crores per day. AI-driven IRIS platform is an intelligent system that enables us to remotely manage retail outlet operations, safeguarding both quality and quantity at the outlet. IRIS is activated at 19,000 retail outlets across businesses, BPCL is advancing digital transformation using real-time data under several initiatives to streamline operations, reducing turnaround time and enhancing customer experience. In line with government's energy security agenda and efforts to reduce import dependence through biofuels, ethanol blending level of BPCL for Q1, '25, '26 stood at 19.6%. On the gas business, we have achieved a total sales volume of 338 TMT, 9% on crude quarter-on-quarter basis during the year, for CNG, PNG and bulk sales in our own GS. Further through our retail channels, we have sold 269 TMT in Q1 '25, '26. We also received our first cargo, another long-term supply agreement with ADNOC linked to Henry Hub index in Q1 '25, '26, diversifying our long-term sourcing strategy beyond Brent linked term contracts. We added 839 EV charging stations during Q1, taking total network to 7,402 of EV charging stations. Updates on new projects, Bina petrochemical and refinery petrol expansion project has made steady progress, achieving overall progress of around 14% as against a schedule of 15.9%. We have incurred estimate of approximately INR 800 crores with overall commitment of INR 6,800 crores. Our technology licenses and consultants are onboarded and process packages for all units issued and front-end engineering design has been completed. Detailed engineering and procurement are underway with tender for critical equipment and EPC packages floated and key long-term items such ECU compressor and furnace packages have been awarded. Site enabling works are also nearing completion. Further, as a step towards digitization, we launched [indiscernible], an industry first digital platforms of the project, enabling real-time progress monitoring and enhance the transparency. In our polypropylene project at Kochi, we have achieved a fiscal progress of 12.2% as again a schedule of 16%, with an expenditure of INR 260 crores and overall commitment of INR 1,200 crores. License selection and basic design engineering activities have been completed. Order for 6 major long-lead items have been placed, by EPC tender, which is a major activity, for the PP unit is underway. The Board has also recently approved the petro residue fluid catalytic cracking units and associated facilities at Mumbai Refinery at a gross capital cost of INR 14,200 crores with expected mechanical completion by May 2029. The project will replace the world CCU and FCC units at our Mumbai refinery, which are almost 40 years old. This will help MR achieve residual upgradation, increased transportation fuel production, provide flexibility of processing higher proportional high sulfur crudes and reduced environmental impact, thus also increasing overall yields of BPCL group refineries. During the last year, the Board had approved INR 6,100 crores towards pre-project activities, including land identification and acquisition, feasibility studies and environmental assessment for greenfield refinery chemical complex in Andhra Pradesh, detailed feasibility study of the project is in progress. Land acquisition is also in progress. On green energy, BPCL has awarded contracts for setting up 100 megawatts of wind farm project, 50 megawatts each in Madhya Pradesh and Maharashtra as part of its strategy to transition to renewable energy and reduce reliance on imported fossil power. The LOIs have been issued to Suzlon Energy Limited and Integrum Energy Limited with completion and commission targeted within 2 years. As informed to you earlier, based on the approval from the previous quarter, BPCL has constituted joint ventures, new end energy, green energy with Sembcorp Green Hydrogen Private Limited for setting up renewable energy and green hydrogen assets. 2 projects, ground-mounted solar project at Prayagraj, and integrated green hydrogen plant and hydrogen refueling taken in Kochi are expected to be commissioned during the next 2, 3 months. We have prioritized setting up our 26 CBG plant, out of which 10 in direct investment, the location has been identified and activities have commenced. Further 16 CBG plant are proposed to be set up through our joint venture Bharat GPS Bioenergy Private Limited and the proposed JV with Praj Industries. Let me now guide you through the financial highlights for the quarter. The revenue from operations stood at INR 129,578 crores the stand-alone profit after tax stood at INR 6,124 crores and the consolidated profit after tax was INR 6,839 crores. Against an estimated CapEx of INR 20,000 crores during this financial year, we have spent about INR 2,382 crores during Q1. Our stand-alone network as of 30th June 2025 is INR 87,377 crore, the earnings per share for the quarter is INR 14.33 per share. As of June '25, the debt equity at stand-alone gross borrowing level is 0.12. Overall stand-alone gross borrowing is INR 10,709 crores as on 30 June 2025. Against which we have current investments, including surplus funds in IL bonds of about INR 17,580 crores, placing us at a net surplus on a stand-alone basis. At group level, debt to equity is 0.44 with gross borrowings of INR 39,452 crores debt-equity ratio net of current investments at group level will be 0.25. This concludes my comments, and we'll be happy to take your questions now. Thank you.

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

Just to clarify the last bit that you just mentioned, on the group debt level, you said the group debt equity ratio on gross is 0.4%. And what was the debt level at group level, sir? I didn't catch the number.

INR 39,452 crores at group level debt.

INR 39,452 crores. And on a net level, it's around 0.25. That's what you said, sir?

Yes, we have surplus funds invested around INR 17,580 crores.

So I had a few questions. First was, sir, you mentioned that due to the uneconomic nature of Russian crude we have procured from other sources. So can you just quantify what the Russian crude percentage was in this quarter and also the inventory impact, if any, if you can quantify for this quarter in the GRM?

This quarter, Russian crude procurement is around 34% for April, May, June quarter. In terms of inventory levels, like we have kept a little bit more inventories in the month of March, April because of geopolitical issues and concerns. So our inventory are slightly -- as I said, March 2025, our total quantity, crude oil and internationally, 2.9 MMT, whereas generally, we keep around 2.3, 2.4 MMT. But this quarter March and as well as June also, our inventories are around 2.9 to 3 MMT levels of crude.

And what was that -- what does that translate to, sir, in terms of -- in terms of dollars per barrel impact in this quarter, GRM?

Per barrel impact, we generally don't calculate, generally normal standard inventory is around 22%, 25% extra inventory we have.

The other question I had, sir, was if we look at this quarter numbers, despite the decline in Q -- I'm talking about on a sequential basis versus Q4, your GRMs have obviously declined quite sharply. And while retail fuel margins were fairly strong, even then the marketing earnings seem to be very, very robust in this quarter, given the inventory loss also that was there. Just wanted to understand, is the strength only from retail fuels or other product margins have also seen some strength in this quarter?

Mainly retail fuels only, mainly retail fuels only. Other products, marketing margins are at standard, normally same level. There is no big change in terms of our marketing margin, but retail fuels definitely on account of low crude prices and there is no change in the RFP, our margins are better.

The lower LPG losses would have -- sir, LPG on a per cylinder basis, what is the kind of loss we've seen? Last quarter and right now, if you can just let us now.

For the month of July, it's around INR 100 per cylinder and going forward -- July, August and going forward, August September is around INR 30.

And what was it in Q1, ma'am?

Q1, is around INR 150 per cylinder.

Last question, if I can squeeze, any -- if you can give us the CapEx guidance for FY '26 and FY '27, broken up into segments.

FY '26, our estimated capacity INR 20,000 crores, till June, we have spent around INR 2,300 crores. The progress is going on well, by end of this year, we achieved this INR 20,000 crores. And phasing-wise in next year, we are expecting around INR 20,000 crore to INR 25,000 crores. We are not firmed up with the numbers, but we are estimating around somewhere INR 22,000 crores to INR 25,000 crores.

The next question is from the line of Yash Nandwani from IIFL Capital.

Sir, the Bina Refinery reported GRM of only $4.5 per barrel in this quarter, which is notably lower than its usual trend of outperforming the Kochi Refinery. So is it just because of lower Russian crude and inventory losses? Or are there any specific reasons for the same?

Major reason is our inventory buildup has happened during this month due to the geopolitical issues. So definitely, there will be impact of high inventory carrying cost in the subsequent months processing. That is the major reason. Otherwise, the Russian crude in terms of the percentage of Russian crude production, there is no big change, maybe every quarter-on-quarter, maybe 2%, 3% here and there, it happened, but otherwise similar trends. And discounted -- Russian crude discount compared to earlier quarters, it has come down to almost $1.5 level, maybe these are the couple of reasons. But major impact is on account of inventory buildup, nothing else.

And sir, now crude price is now trending below $70 per barrel and OMC is also getting the compensation for LPG. Are there any discussions underway regarding a cut in the order-fill prices?

No. At this point of time, there is no discussion, Yash, if you see still the geopolitical tensions are still it is uncertain. We don't know how the trend will change suddenly. We have to wait and see for some more time.

And lastly on the -- with respect to Mozambique asset, could you just walk us through the expected time line for the restart?

We are expecting this quarter, definitely, there should be some positive news because whatever the revised project cost, we are requesting the Mozambique government to consider the revised project cost for allowing the expenditure. That audit work is going on, maybe by end of this month or next month we are expecting certain positive news.

The next question is from the line of Yogesh Patil from Dolat Capital.

Sir, what is your understanding on LPG compensation, which will be in 12 tranches? Is it at 12 months or some other time period? My second question is how much share of LPG compensation you will account in FY '26 and FY '27? If you give some kind of clarity on this matter.

Whatever information available through PIB, OMCs got INR 30 billion crore grant. We are awaiting the operating modalities, how the compensation mechanism happen. If we are awaiting any communication on the MOP&NG, we have not received any communication, whether it is over a period of 12 months, over a period of 24 months, exactly, those details are not available at this point of time. Once we receive the details, then accordingly, we can share what is the impact of that. Otherwise, market share point of view, BPCL, we are expecting at least 25% to 26% since we have the market share. So our compensation should be within the same level of market share percentage. That is what we are expecting for BPCL.

Sir, my second question is, again, on the debt side, a sharp decline in the gross debt. Considering the EBITDA of this quarter INR 9,600 crores and the CapEx lineup of INR 20,000 crores and the next year is a little bit higher, any particular net debt to EBITDA or debt to equity level we are targeting for the next few years, considering our CapEx is on the rising mode?

We are not expecting any significant rise of debt equity, even when we are seeing the peak CapEx is going to happen in FY '27, '28 and '28, '29. Our expected debt equity will be around 1 because that is those years where your cash inflow is lesser than your cash outflow in terms of CapEx investments. But once the projects are commissioned, then subsequently years, maybe new cash flows will come. Again, we are comfortable at 0.4, 0.5 level of debt equity. So maybe subsequent to the project commissioning, we will come back to that 0.4, 0.5 level of debt. That is where actually we are comfortable. Additionally this year and next year -- yes, this year and next year, since our CapEx is reasonably at INR 20,000 crores to INR 22,000 crore level. So we are not foreseeing any good improvement in the debt equity. Same level of debt equity, we can maintain, 0.1, 0.2 levels.

And the last one from my side. What was the Russian crude share during the Q1, sorry, I missed that part. And are we facing any issues on the financials -- are we facing any issues on the financial payments related to Russian import?

No, no. At this point of time, since the prices are low, only below the threshold price. So there is no issue in terms of the payment side. And our crude procurement from Russia said is around 34% during the first quarter. Only slightly it has reduced in the last month, but we are expecting again the flows will come back at normal level of 30%, 35%.

So it is expected that it will remain in the range of 30%, 35% for the remaining period of FY '25?

That is what we are expecting, as long as there is no new sanctions -- as there is no new sanctions on Russian oil, so our procurement strategy will be around 30% to 35% of Russian crude.

[Operator Instructions] The next question is from the line of Vivekanand from Ambit Capital.

I have 2 questions. So the first one, the impairment of INR 1,773 crore, that has brought down your carrying value in BPRL to around INR 4,500 crores. Is that how one should infer it? Or was there any other subsidiary or joint venture where there was an impairment? That is question one. The second question is on your gas SBU. So some of the other players in the gas space, they are consolidating their gas assets. If I look at your gas vertical, you have the erstwhile BGRL now being part of BPCL as an SBU. And then you have shareholding in several large CGD entities, which are -- some of which are also carrying out investment. So I just want to understand, from your perspective, you are going to invest a lot of money in the gas vertical. But let's say, to shine some spotlight on that and perhaps for investors to get more comfort on the value creation that is happening, what are the steps you are taking? Because we understand there are 3 listed entities, right? There is Petronet, there is IGL, these are -- I mean, these are 2 prominent gas entities, but there are several others that are in varying stages and perhaps investors view gas more positively than oil companies, so valuation is higher there. Is there any concerted effort for you to look at the gas vertical any differently than the current structure and your broad thoughts there will help.

Rightly, you said our focus in gas is significantly higher as compared to other fuel stations. And we have a very good amount of capital allocation for gas, mainly our first strategy to complete our minimum work program in terms of completing the CNG stations and PNG connections and whatever minimum kilometer length pipeline infrastructure, we have to create. That is where our first focus. In terms of certain JV investments, already second companies we have listed. And some of the couple of companies which has reached the stage where we can look for listing of those particular JV companies. So that is where, actually, initially, we are thinking now, one of the JV MNGL. There we have given initial approval for the listing of this particular company and submitted our proposal to the Ministry and DIPAM, we are awaiting for that. In terms of consolidation, we are not at that particular stage at this point of time. We have to reach a particular scale and we can look at it as a consolidation. We are also looking at it. There are some small JV companies, instead of keeping the small JV companies, maybe consolidation is the right choice. We are working on it, but we have not yet concluded anything on this, but the exercise is going on. Yes, on BPRL impairment, whatever impairment we have done in March '25, only this quarter, there is no further impairment but in our entire impairment, the major portion is BPRL only, other JV company investments impairment is very small, maybe INR 10 crores, INR 15 crores where certain JV companies, we are in the process of liquidation. But other than that majority portion of our impairment is mainly on account of BPRL.

Okay. So the current state is that you still are quite confident of the carrying value of -- sorry, INR 60 billion, I was -- I said wrongly initially. It was around INR 6,000 crores. So you are confident of that value remaining intact given the continuous delays in Mozambique?

I'll tell you. Every year, we do the testing, impairment testing. Whatever is required based on the circumstances on the particular reporting date, whatever additional impairment is required, every year we are providing. As of March '25, as per the impairment working that is what is valid.

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

So I have 2 broad questions. One is in your consolidated accounts, the JV share of earnings have gone up. So what has driven that? And if you look at the segment results, there is a huge increase in the profits, in fact, there's a turnaround from loss to profit of INR 819 crores in the E&P business. So what is the reason for that? And then I have a few questions on the CNG business. So if you can address these 2 thoughts, and I'll go to the CNG question.

So this time our group has given an incremental profit after tax of around INR 800 crores, mainly it is coming from Bharat PetroResources around INR 450 crores they have contributed in the group. The main profit after tax generation in BPRL is mainly on account of currency fluctuations. This particular quarter, the ruble against rupee has significantly appreciated, where some of our funds are pared to rubles only because we could not in a position to take the money as dividend move to India due to some taxation issues and certain controls. So that was the reason on account of ruble appreciation against dollar. This quarter, significant currency fluctuations have happened. Positively, BPRL has generated a good amount of profit.

And all other JV companies...

JV companies have performed well.

Okay. So on the CNG business, in terms of the stand-alone numbers you shared, can you give us a number of CNG stations operating in the stand-alone GAs. And what was the number for the volume of CNG sales in the stand-alone stations for fourth quarter '25 and first quarter '25?

Yes. Total CNG -- total stations, 2,464 of CNG stations in our network, which they are selling the CNG and whereas the volumes, we have 339 TMT in our own GA plus through our retail outlet, we are selling at 269 around 600 TMT, we have sold CNG from our own GA as well as through our retail network.

Yes. So can you give the corresponding number for the stand-alone GAs in last year, 1Q and fourth quarter '25, just to understand the progress?

That we will share separately.

So if you look at the numbers, there seems to be some traction in terms of positive EBITDA. So are we right in assuming that on this kind of run rate we're already achieving some profits in your results, in your stand-alone number?

Not clear, can you repeat?

No, EBITDA contribution from the CNG GA.

EBITDA generation is in the expected lines only. Once our infrastructure investments are completed, full volumes we are expecting, otherwise, till date, only we are getting money every year, maybe 120, 130 TMT of sales through our CNG network. Once the entire CNG commissioning happens and a good amount of volumes will come. Otherwise, EBITDA margins are at expected lines only from the gas.

So on the depreciation run rate, you've increased about INR 200 crores this quarter. So in terms of the capitalization, the CNG sale, what would be the total assets capitalized as on date on the CG side of gas ?

As on date, it will be around INR 7,900 crores in the entire gas business we have invested.

Next question is from the line of Hardik Solanki from ICICI Securities.

So just want to know, as you said, that we have process 34% of the Russian crude. But still if I look at the high sulfur percentages of the total crude, it has gone 200 basis down, points out. So can you just explain what has dropped the high sulfur crude processing?

No, there is no specific reason because based on the product demand, we may take a little bit low sulfur grades. So WTA grades are a little bit more on the consumption side. That is a 1% down in terms of high sulfur consumption. Last quarter, it was 77%, whereas this quarter, it is 76%, small change. Quarter-on-quarter, it may vary around 1% or 2% here or there.

The next question is from the line of Siddhesh Jain from Axis Capital.

So I wanted to know how the unit economics work at the charging stations? And how much EBITDA level it will be contributing in FY '27?

If you ask me in terms of financial contribution, very, very insignificant. So investments also around INR 250 crores to INR 300 crores, our total capital outlay in terms of this infrastructure creation because we have received a good amount of subsidy from the government of India also. So the investment size is around INR 300 crores. We are not expecting a very big EBITDA from this EV charging station. But only it gives a convenience to the customers whoever is coming to our forecourt, whatever fuels they want, including the charging station, it is available at the retail outlet. If you ask me the total, maybe we can expect INR 10 crores or INR 15 crores of EBITDA from EV charging stations.

Also on the unit economics sense, is there something -- how much...

Unit economics, if you ask me in terms of the numbers today, we are having a 2% capacity utilization. So there is no profit generating from this particular thing now, because we have to wait and see because we have to create infrastructure first, then once the vehicle population goes up, maybe in the subsequent next 2, 3 years onwards, maybe there may be some good volume. Otherwise, today, it is only 2% of capacity utilization.