Speaker #1: Ladies and gentlemen, good day and welcome to the Bharat Petroleum Corporation Limited Q2 FY27 earnings conference call, hosted by Antique Stockbroking Limited. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity to ask questions after the presentation concludes.
Speaker #1: Should you need assistance during the conference call, please signal an operator by pressing star, then zero, on your touch-tone phone. Please note, this conference is being recorded.
Speaker #1: I now hand the conference over to Mr. Varatharajan. Thank you, and over to you, sir.
Speaker #2: Thank you, Nazim. Very good morning, ladies and gentlemen. It's my pleasure to welcome all the participants on the call and the BPCL management to the Q2 FY27 call of BPCL.
Speaker #2: We have with us Mr. V.R.K. Gupta, Director of Finance; Mr. Pankaj Kumar, UD Corporate Finance; Mr. Ashish Doyle, CGM Corporate Treasury; Ms. Anusya Vatsal Thakkar, DGM Finance; and Mr. Balagirish, Senior Manager Finance, Bharat Petroleum Corporation.
Speaker #2: I'd like to hand over to Mr. Balagirish for the disclaimer.
Speaker #3: Thank you, Mr. Varatharajan. Good morning, and on behalf of the BPCL team, I welcome you all to this post-Q2 results conference call. Before we begin, I would like to mention that some of the statements that will be made during this conference call are based on our assessment of the matter, and we believe that these statements are reasonable.
Speaker #3: 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 Q2 results.
Speaker #3: I now request our Director of 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.
Speaker #4: Good morning, everyone, and thank you for joining us today. As you are aware, our Q2 results were announced last Friday. Let me begin by putting the quarter in context, particularly how the operating environment evolved since we last spoke.
Speaker #4: 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 Q1 performance.
Speaker #4: As tensions showed some signs of easing at the time, we were hopeful that the opening environment would gradually stabilize. However, Q2 unfolded quite differently.
Speaker #4: 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.
Speaker #4: The situation escalated further in September, following attacks on Saudi export infrastructure and tankers, with Brent averaging around $116 per barrel during this month. Tensions around the Strait of Hormuz and the Red Sea also remained elevated. While we continued to secure supplies without disruption, the escalation kept crude premiums and freight costs at elevated levels.
Speaker #4: Again, in this challenging backdrop, strong diesel and ATF cracks supported refining economics, while lower LPG under-recoveries provided some relief to the marketing margin during the quarter.
Speaker #4: At the same time, the rupee remained under pressure, averaging around $95.60 against the US dollar, adding to the cost of our dollar-denominated imports. Through all this volatility, our priorities remained clear.
Speaker #4: We stayed focused on our four priorities: securing supplies, serving our customers without disruption, protecting shareholder value, and maintaining momentum on our growth program. Let me start with sourcing.
Speaker #4: Our spot 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 the previous quarter.
Speaker #4: As flows from the Middle East improved, we progressively resorted to sourcing from the region, while retaining the flexibility and diversification we had built during Q1.
Speaker #4: 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 itself, at a price advantage.
Speaker #4: This was achieved 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.
Speaker #4: As of September 30, we held around 22 days of crude inventory, and, importantly, our crude sourcing requirements are tied up through December 2026. Moving to LPG, despite disruptions to traditional supply routes, we maintained domestic availability through a more diversified import portfolio.
Speaker #4: Supplies from the Arab Gulf improved during the quarter, while US-origin cargo accounted for around 48% of our total LPG imports in Q2. Currently, we are holding 32 days of LPG inventory, including in transit.
Speaker #4: On LNG, disruptions to our long-term supply contracts required us to actively diversify our sourcing, which secured alternative spot supplies from the US, Oman, and West Africa, supported by flexible logistics arrangements to bridge supply gaps despite elevated market prices.
Speaker #4: Coming to refining, our refinery continued to deliver superlative operational performance during the quarter. We achieved a throughput of 10.4 million metric tons in Q2, with overall capacity utilization at 117%.
Speaker #4: Our gross refining margin stood at $32.53 per barrel, and after adjusting for SAED, the GRM was around $14 per barrel. Distillate yield remained strong at 84.38%.
Speaker #4: Moving to marketing, our domestic sales volume stood at 13.47 million metric tons in Q2, compared to 13.62 million metric tons in Q1. We continued to strengthen our retail network, increasing the number of outlets to 25,592, compared to 25,485 at the end of Q1.
Speaker #4: 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.
Speaker #4: On LPG, we commissioned our MATIA LPG plant in Golapura, Assam—our first LPG bottling plant in the state—with a capacity of 30,000 metric tons per annum.
Speaker #4: 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 Jeevan, is now available across India and can be conveniently booked through the Hello BPCL app.
Speaker #4: 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.
Speaker #4: The first rake was dispatched from Bina in August. Faraj, this is more than just a new product—it demonstrates what we can achieve when innovation and technological capability come together in support of national priorities.
Speaker #4: Our gas business maintains strong growth momentum. Bulk gas achieved record first half sales performance of 970 x 9 TMT, registering 53% year-on-year growth, while CGD sales reached 177 TMT, growing 65% year-on-year.
Speaker #4: The recently announced Gobardhan scheme has made CBG projects increasingly attractive, and we are actively pursuing this opportunity through both our own plants and joint ventures.
Speaker #4: 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. The average under recovery declined to around ₹290 per cylinder in Q2 compared to ₹507 per cylinder in Q1.
Speaker #4: As of 30 September, the cumulative buffer stood at ₹17,334 crore. After adjusting for ₹3,796 crore of compensation received during the first half, for the future, we remain hopeful that the government's continued support to OMCs toward domestic LPG compensation will continue.
Speaker #4: 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.
Speaker #4: As of September 26, our Bina Petrochemicals and Refined Expansion Project has reached 40.2% progress, while the Polypropylene Project at Kochi has reached 55%. The PRFCC Project at Mumbai is also progressing.
Speaker #4: 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 the Mumbai refinery.
Speaker #4: Phase 1 involves revamping the existing kerosene hydrotreater unit and is targeted for commissioning by January 2027. This position serves well for India's SAF blending requirement for international fleets, beginning at 1% in 2027 and progressively increasing to 5% by 2030.
Speaker #4: On the Andhra 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.
Speaker #4: With an initial authorized share capital of up to ₹4,900 crore, subject to requisite approvals. The dedicated project company will facilitate swift due diligence, lender engagement, and development of the financing and partnership structures.
Speaker #4: The detailed feasibility reports are in the 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.
Speaker #4: In Brazil, following the award of the FPSO tender in May 2026, the BMC-11 project is also progressing in line with planned timelines. Overall, against our FY26-27 CAPEX target of ₹25,000 crore, we have incurred ₹13,749 crore during the first half, including ₹9,300 crore in Q2.
Speaker #4: Now, coming to our final health performance: revenue from operations for the quarter stood at ₹1.5 lakh crore, with a standalone profit after tax of ₹4,993 crore.
Speaker #4: 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 ₹2,919 crore.
Speaker #4: 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.
Speaker #4: Our balance sheet also remains strong. Standalone gross borrowings reduced to ₹15,246 crore as of 30th September, compared with ₹17,396 crore at the end of June.
Speaker #4: The standalone debt-equity ratio improved to 0.16 from 0.19 in Q1. Our borrowings, net of short-term investment, stood at ₹7,106 crore as against ₹4,800 crore in Q1.
Speaker #4: 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.
Speaker #4: 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.
Speaker #4: Thank you.
Speaker #1: 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 touch-tone telephone.
Speaker #1: 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.
Speaker #1: Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Probil Sen from ICICI Securities.
Speaker #1: Please go ahead.
Speaker #2: Thank you for the opportunity, sir, and congratulations on a good set of numbers. I have a few questions. You talked about the crude sourcing mix for the second quarter.
Speaker #2: It's for crude at 67% and Russia at 37%. I just wanted to get a sense, given that Middle East crude's closer improved, as you mentioned.
Speaker #2: Have we seen any material change in that mix in the month of October so far? And how are we looking at the mix until December, when you said you already have crude tied up until at least the end of December?
Speaker #3: Let me give you the brief numbers. On the Southeast side, Persian Gulf, compared to Q1, it has definitely improved in Q2. Even in October-November, we are expecting similar levels of higher volume from the Middle East.
Speaker #3: Mainly after the Yanbu pipeline correction by Saudi, they have started increasing their volumes. Certain cargoes are coming from Adnak also. Only cargoes from Iraq and Kuwait are still not coming in full fledged.
Speaker #3: But otherwise, a good amount of volume is coming from the Middle Eastern side. In October, our requirement from Russia has slightly come down, but in the month of November, the cargoes from Russia have significantly reduced due to the commercial viability of Russian cargoes, mainly the increase in the freight.
Speaker #3: We are not getting good offers from Russia. Now, for December cargoes, it has slightly improved. Whatever they were expecting—a good amount of premium for Russian cargoes.
Speaker #3: Now, the premiums have slightly reduced. Maybe it is now comparable with other Persian Gulf grades, Russian or US. Maybe for December, we can take a couple of cargoes from Russia.
Speaker #3: November will definitely be low in terms of Russian availability—not availability, Russian cargoes, what we have procured.
Speaker #2: Right, sir. Just a follow-up on that. If I remember correctly, sir, I think you had mentioned at the Q1 briefing that blended crude cost was somewhere around the Indian benchmark, plus or minus about $12 to $15.
Speaker #2: Has that number changed in terms of delivered crude price to us, in terms of actual cost of crude?
Speaker #3: Still, 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 product.
Speaker #3: For example, if it is from Fujairah, definitely it will be less. But if it is from Yanbu, the freight rates will be higher. But as a benchmark, we can take, on average, the landing level is $10 to $12.
Speaker #2: Right, sir. The second question was with respect to LPG. Now, sir, obviously, you mentioned, I think, ₹290-odd per cylinder for Q2.
Speaker #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?
Speaker #2: And what was it in September? And what are you looking at in November at this point in time?
Speaker #3: See, if you look at the numbers: in 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. For November, we are expecting 328 per cylinder.
Speaker #2: Okay, okay. And one last question, sir, if I may. In terms of the marketing margins, is there any discussion at all about relooking at the pricing, given how sharply product spreads and prices have increased?
Speaker #2: I know you can't answer in terms of timeline, but I just wanted your sense 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.
Speaker #2: How are you looking at the situation right now?
Speaker #3: I mean, if you see the Q2 numbers, on the integrated side there is no big stress on the balance sheet and profitability. We are almost at a normal level of profitability for the quarter, slightly on the lower side, mainly due to the higher losses in the marketing under-recoveries.
Speaker #3: But we thought crude prices would stabilize, but still the war is continuing. There is no clarity on when things will actually improve. But one thing we are sure of: once this war resolves, crude cannot command these prices because the supplies are there.
Speaker #3: Supplies are there. Production is there. The only thing disturbing is this route. And these Red Sea side volumes are coming, Yanbu side.
Speaker #3: Even though there are certain Houthi attacks on the southeast side, a good amount of volumes are still coming from the Red Sea. Once the SOH route is resolved, we are hopeful crude can come back to reasonable levels.
Speaker #3: But for some more time, we have to wait and see. We are reviewing every month what the under-recoveries are, and how long this will continue.
Speaker #3: But there is no further discussion on any improvement in the marketing margins at this point in time.
Speaker #2: Understood, sir. Thank you so much for your detailed answers. I'll come back in the Q1.
Speaker #1: Thank you. Ladies and gentlemen, in order to ensure that management is able to address questions from all participants in the conference, please limit your questions to two per participant.
Speaker #1: Next question is from the line of Vivekanand from Ambit Private Limited. Please go ahead.
Speaker #2: 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%. Forty percent, I guess, is what?
Speaker #2: 47% is what you said. Can you refresh us on the targets that are there in terms of when this project should come on stream and when we can expect first gas? Also, what will be your share of gas from this asset in, let's say, FY30?
Speaker #2: That's number one. The second one is regarding your Capex outlook. Is there any change compared to the guidance previously given? I believe it was around ₹25,000 crore in the past.
Speaker #2: 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.
Speaker #2: Thank you.
Speaker #3: Yeah. Let me explain Mozambique first because the project is progressing very well. Forty-seven percent project progress has been achieved. We are expecting commissioning in mid-2028, either June or July.
Speaker #3: They have declared June 28 as the first gas we can see. As of date, there is no change in the scheduled dates. Based on the current progress of the project, we are hopeful that by mid-28 we can see the gas.
Speaker #3: That is one. In terms of the gas flows, size of the gas, the first two-phase development is for 13 million metric tons, with a two-train development.
Speaker #3: Out of which, BPCL is having a 10% share. That means our share will be around 1.3 million metric tons of gas. This is only Phase One development.
Speaker #3: And subsequently, based on the reserves, we can develop two more trains. Once this particular project is completed, then other trains we can plan.
Speaker #3: So the total size will be around—BPCL's share will be, BPR's share will be—around 4.2, roughly 4.2 to 4.5 million metric tons of gas.
Speaker #3: If all three trains are developed based on the reserves, and the second question is in terms of the Capex program. For our financial years FY25, FY26, the target for FY26-27 is ₹25,000 crore.
Speaker #3: In the six-month period, we have already reached around ₹13,000 crore. We are keeping the same target, but in case there is any good progress on the project side, it may slightly go up beyond ₹25,000 crore, depending on the project progress and certain activities.
Speaker #3: If the progress is good, maybe this Capex program can go up slightly.
Speaker #2: Right, sir. Thanks for the follow-up. Thanks for the answers. Just one follow-up: 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-2028?
Speaker #3: Mozambique — we have already tied up the SPA for 1 million metric tons of gas to bring to India. Out of the 1 million metric tons, we have already started marketing in Q2.
Speaker #3: In Q2 itself, we have started marketing, and with certain customers we have already tied up, but in small volumes. We have started marketing their gases.
Speaker #2: Right. By when can we expect this gas for you to get tied up, the whole 1 TPA? And do you have plans to bring the entire 1.3?
Speaker #3: We have started in Q2. On the sales side, we have started marketing of this gas in Q2. Maybe in the next two to three quarters, we can complete 1 T.
Speaker #2: Right. Thank you very much.
Speaker #1: Thank you. Next question is from the line of Sarthak from DSP Asset Managers. Please go ahead.
Speaker #2: Hi, thank you for the opportunity. Sir, just a couple of questions on the Mozambique side as well. So, if we see the balance sheet on the intangibles and the development, can you please split how much of the ₹19,000 crore intangibles as well as under the equity method, the ₹29,000 crore, would be pertaining to Mozambique? And how much have we spent post the first measure, and what can we expect either for incremental spending on the Mozambique asset?
Speaker #3: Yeah. Mozambique, as of date, on a cumulative basis, we have spent around $2.8 billion. That's almost about ₹27,461 crore. And the future capex commitments, based on the current approved project cost, are $1.8 billion, which we have to spend over the next couple of years.
Speaker #3: The total investment in this Mozambique project will become $2.8 plus $1.8, around $4.5 to $4.6 billion of investment, including the exploration activity and everything.
Speaker #2: Okay. And this will be up till the gas will be started. So that is till 2028, right?
Speaker #3: 2028, mid of 28.
Speaker #2: Okay. And how much incremental interest cost is there? Has there been any uptick in the interest cost for this project?
Speaker #3: For this project, the project development is happening under the project cost. Regarding project financing, there is a consortium of around eight or nine bankers at the project level.
Speaker #3: The interest cost will be varying, actually. It starts from 6% to 8.5%, 9%, based on the current interest rate. So, different lenders at different terms and conditions; this project financing has been concluded.
Speaker #2: Fair. This was very clear, so thank you. And one last thing: the delta that we see in the balance sheet of intangibles is mostly pertaining to Mozambique.
Speaker #2: Is my understanding correct? So ₹16,000 crore has increased to ₹19,700 crore—the intangibles under development. And a similar increase has been there on the investment under the equity method as well.
Speaker #3: Yeah, yeah. Investment under equity method is mainly due to a particular project, the Mozambique project. Earlier, it was under PA holding. PA holding means whatever Capex is, it straight away comes under the Capex program.
Speaker #3: But subsequently, in the last quarter, last two quarters, there was a development. All the assets under development have been moved to Asset Co. That means, instead of Capex, you will see it in the investments.
Speaker #3: At the project level, all the assets under work-in-progress have moved to equity under Asset Co. So, whatever capex program is incurred under development has moved to equity.
Speaker #2: Okay, got it. This was helpful. Yeah, that's it from my side. Thank you.
Speaker #1: Thank you. Next question is from the line of Yogesh Patel from Daulat Capital. Please go ahead.
Speaker #3: Thanks for taking my question, sir, and congrats on the good set of numbers. BPCL GRM has dropped quarter-on-quarter, closer to $32 per barrel compared to Q1.
Speaker #3: What's driving this decline in the BPCL GRM? Because most of the independent refiners actually saw their GRM jump on a sequential basis. Could you walk us through what's behind this quarter-on-quarter dip in our reported GRM?
Speaker #3: Was there any crude inventory gain during Q2? This is my question. Crude inventory gain is generally not calculated because our average inventory is around 22 to 25 days.
Speaker #3: So there won't be any big impact on the crude inventories. If any inventory gains are there, due to the election of intermediaries—if you are holding a very big amount of intermediaries—then there may be an impact.
Speaker #3: Otherwise, compared to Q1, the GRM reduction is mainly due to two reasons. One is that the GRMs are more or less at the same levels in Q1 and Q2.
Speaker #3: Q1 average gas oil spreads are $55. Now it is $56 in Q2. Gas oil and also $24 and $24. There is no big change in the spread.
Speaker #3: But two important things have happened in crude procurement. One is that crude freight costs have significantly increased compared to Q1. The Q2 freight costs are very high.
Speaker #3: And secondly, in Q1, at least for most of the period, we used to get Russian crude either at benchmark, at a discount, or around the benchmark. But in Q2, for certain cargoes, we don't get any discounts on the Russian crude.
Speaker #3: We have to buy either at the premium of benchmarks or at benchmarks. So, these two have mostly impacted the high sulfur grades and affected the refining GRMs compared to Q1.
Speaker #3: Otherwise, if you compare the Singapore benchmark GRM, still our GRMs are much higher.
Speaker #2: But sir, the freight cost has gone up for every independent refiner, so why in our case is the crude cost mattering to the GRM calculations?
Speaker #3: I don't know about other industries; what is the impact of crude inventory gain or intermediary inventory gain? What is the carry-forward from Q1 to Q2?
Speaker #3: We don't have any such information. We generally track our performance compared to the trend of the spread. What is the crude procurement compared to the market trends?
Speaker #3: As long as we are better than the market trends, we can conclude our refinery performance is better.
Speaker #2: So, one of the reasons is the freight cost that has gone up, and that is impacting our GRM. That's the correct understanding?
Speaker #3: And Russian. Russian side discounts are not there in Q2. For example, earlier most of our total procurement—around 37%—was from Russian procurement.
Speaker #3: If Russian procurement is not available at a discount, particularly, refineries that are using the high sulfur grades, definitely the margins compared to Q1 are on the lower side.
Speaker #2: Okay. My next question, sir, again on the GRM side: the freight cost has already gone up for crude. So here, I'm trying to figure out, are those higher freight costs or expenses actually negatively impacting our GRM?
Speaker #2: That's one thing. And are we—because are you passing those extra oil 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.
Speaker #2: And with the imports, it is making up the bigger cent out of that RTP. That freight cost is also a part of that. So considering all these equations, the question is very simple: are the freight rates impacting the GRM or not?
Speaker #3: देखिए, 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.
Speaker #3: 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 the other freight component is not going up, there is a squeezing on the refining margins.
Speaker #3: On our other side, for example, product freight costs are going up, and crude freight cost is not going up; there is an advantage.
Speaker #3: So, these are the market trends. There is no change in the formula. But this time, whatever the freight cost on crude has gone up, to a similar extent, the product freight has not gone up.
Speaker #2: Okay, sir. Thanks. Thanks. Thanks a lot for this clarity.
Speaker #1: Thank you. Next question is from the line of Mayank Maheshwari from Morgan Stanley. Please go ahead.
Speaker #4: Hi, sir. Just an extension of the previous question around crude sourcing. Can you give us a bit of an idea about how crude sourcing was for the September quarter, and what you are doing for the current months and the next few months, since you're loading, I suppose, for November and December as well?
Speaker #4: What's going on, and how have you seen premium shift? Freight, you have kind of addressed partly. But what's going on in the crude market and what you're seeing on your cost side?
Speaker #4: Thank you.
Speaker #3: Let me let me explain on the Q2 side. In terms of the volume, 37% of volumes are come from Russia. And 17% is coming from Abu Dhabi.
Speaker #3: And 19% coming from Saudi, Q2. And around 6% from Oman and 9% from the US. For other countries, it is only 4% to 2%, or 1%.
Speaker #3: Broadly, in Q2, Abu Dhabi, majority of the volumes are coming from the term side. These two countries have gone a little bit towards the spot.
Speaker #3: But Russian, still we have maintained at 32%. Coming to October and November, in terms of percentage, more or less the same. But in terms of November, Russian volumes have come down compared to PG grades.
Speaker #3: PG grades are actually more commercially viable compared to Russian grades. That is the reason November Russian will be lesser. But for December, we have not concluded completely.
Speaker #3: Maybe another couple of cargoes are still pending. Maybe in another one week or 10 days we can conclude on the December side also. And overall, we are getting the full volume.
Speaker #3: But there are challenges. Certain cargoes — unplanned receipt, for example — cancellation of the cargoes, and immediately you have to replace them with some other cargoes. There were challenges, but during the quarter we have come across all the challenges.
Speaker #3: We have addressed all the challenges. We are getting the full volumes, and our throughput is clear. In terms of the market pricing, it is completely volatile.
Speaker #3: I can say that for certain periods of time, crude is available at a discount. At other times, crude is available at a premium. For example, for certain cargoes, we are the first one.
Speaker #3: We have taken one cargo for Sumo, crossing the SOH. Earlier, we never tried, but this time we have tried with a good amount of discount.
Speaker #3: We got the Sumo cargo. But for the second cargo, again, there are certain issues. So there are some challenges. Getting crude is at a discount; getting crude is at a premium.
Speaker #3: So it's a mix. Daily, it varies. So there is no clear trend, whether crude is on the premium side or the discount side. But volumes, we are sure—volumes, we will get.
Speaker #2: Got it, sir. Very clear. I think that's very 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.?
Speaker #3: Yeah. One is in the last two 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, subsequently the dilutions will happen.
Speaker #3: So, for that, the first step we have approved for creation of the WS, and it will go to Deepam MOPNG. After MOPNG's recommendation, the incorporation of the company will happen.
Speaker #3: In terms of the DFR, we are almost at the final stages. The demos have been frozen; just reviews are going on. Maybe in another couple of weeks, we'll conclude on the number.
Speaker #3: Broadly, we are looking at a configuration of 10 million metric tons of refinery, with a high intensity of petrochemicals—around 32 to 33 percent of petrochemicals.
Speaker #3: And the cost numbers, once we are finalizing and take it to the board, at that time, we can share full details. Regarding the scheduled timelines, we are expecting maybe in the next two to three weeks, we will take it to the board for the final investment decision, subject to financial closure.
Speaker #3: And subject to CC approach. Because this investment is happening through the subsidiary company, it requires, based on the Maharatna powers, that it had to go to the ministry and CC approvals.
Speaker #3: We are expecting, maybe once the board is approving, another two to three months, the CC approvals will come. But parallel activities, pre-project activities, and license selection and other things are going on.
Speaker #3: Parallelly, the selection of licenses and CC approvals, the notes will move. Maybe three, four months we are hopeful the entire approvals will completed. In terms of environmental clearance, the discussions are completed.
Speaker #3: The minutes have been recommended by the committee to the EC authorities. We are expecting shortly that EC clearance also. Once it is there, maybe we can start the actual physical work in the site on the site.
Speaker #3: In terms of the land procurement, around 4,700 acres of land have been registered in the name of Bharat Petroleum. So, that is sufficient for the initial work for the refinery.
Speaker #3: But another ₹1,400 crore, which is required mainly for the green belt and other things. We are expecting that by November, the entire 6,000-acre requirement of land will be fulfilled by the AP government.
Speaker #3: So, this is the status here.
Speaker #4: And sir, is there an equity level you are comfortable with, in terms of a minimum that you want to have in this project?
Speaker #3: 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.
Speaker #3: Because discussions are still going on. Once the terms are agreed, then the partners will join with us. So with this, we are comfortable in terms of the investment.
Speaker #3: Even earlier, we have discussed our peak debt-to-equity and standalone basis. Our target debt-to-equity is around one. It should not cross beyond one in a significant way.
Speaker #3: At the project peak capex, once the projects are commissioned, we'll come back to the 0.3–0.4 level of debt equity. That is what we are projecting.
Speaker #3: When we take on any capex projects, a similar trend is followed. At the peak capex, we take a debt-to-equity ratio at the 1.1 level of leveraging. And once the projects are commissioned, we are hopeful it can come back to 0.4 or 0.5 debt-to-equity.
Speaker #3: That is where we are comfortable on a standalone basis.
Speaker #4: Very clear, sir. Thank you.
Speaker #1: Thank you. Next question is from the line of Nitin Tiwari from Philip Capital, India. Please go ahead.
Speaker #2: Hi, sir. Good morning. Thanks for the opportunity. Sir, just for the sake of summarizing, could you give us a summary of all your ongoing and planned capex projects, the large ones, and also guidance for FY28 and FY29 capex numbers?
Speaker #3: Yes. Major projects—I can say one is the Bina Petrochemical Complex. Bina is now scheduled; completion is around 40%. The total approved project cost for Bina is ₹43,367 crore.
Speaker #3: This is excluding taxes and ITC. Cumulative capex till date is ₹7,566 crore, already incurred, and progress is 40%. Scheduled commissioning is mid-2028. We are hopeful the Bena project will be completed as per the schedule line.
Speaker #3: There is no revision at this point in time. The next major project is the PP project at Kochi Refinery, the polypropylene project at Kochi Refinery. The total approved capex is ₹4,850 crore.
Speaker #3: Till September 2026, we have incurred around ₹1,178 crore. And most of the commitments are done. For example, the tendering activity and prices have been frozen.
Speaker #3: And actual progress is 55.10 percent, and the scheduled completion date is October 27. This is on polypropylene, at Kochi. And the third project we have recently approved is PRFCC at Mumbai refinery.
Speaker #3: The total project cost is ₹13,626 crore. As of date, the initial activity has started. For capex till Q2, we have incurred only ₹130 crore. The planned capex for this year is around ₹1,500 crore.
Speaker #3: And actual progress is 9.2% completed, and the scheduled completion date is September 29. This is the main project, and the other major projects are small compared to this.
Speaker #3: All are ₹1,000 crore and ₹1,500 crore projects. All projects are going well. Including the IDPL, there is one pipeline project; it's almost delayed by seven, eight years.
Speaker #3: That also, it has taken good momentum in Q2. We are expecting the project will be completed by December or January. Otherwise, all projects are in full swing.
Speaker #3: We are expecting that the scheduled projects will be completed.
Speaker #2: Right. And the guidance for FY28 and FY29 for the CapEx?
Speaker #3: 28, 29 capex. 28, 29, we are expecting 40,000 crore plus. It depends on the project progress. If 40 to 45,000 crore. And 26, 27, 25,000 crore our target project cost.
Speaker #3: Maybe, slightly, it will go up because the projects are in full swing. Projects are actually progressing very well. Maybe this ₹25,000 crore, it may go up maybe 5 to 10 percent.
Speaker #2: Right. So, 25,000 in '27, and then about 30,000 to 35,000 is what you can expect in FY28.
Speaker #3: Yeah. FY27, 28, 40,000 crore you can expect. 40 to 45. You have to find a major project anyhow. The plan we have. But other than major project, beginning of the year, generally we review.
Speaker #3: But otherwise, ₹40,000 crore—as per our cash flow projection, ₹40,000 crore—we have taken.
Speaker #2: And, sorry, this ₹40,000 crore includes your capex in Andhra as well, is that right?
Speaker #3: No, Andhra will be in addition. Once FYD is approved, then Andhra will be in addition. My equity commitments—whatever equity commitments are, Andhra will be in addition.
Speaker #2: Understood, sir. Understood. And lastly, sir, just like you know, sort of clarification question again. So what's our dependence on basically petrol and diesel when it comes to taking it from other refineries as a percentage of our sales?
Speaker #3: Yeah, yeah. Our dependence this year—we are expecting around 6 million metric tonnes of products we may take by end of this year, because this year the growth is very high.
Speaker #3: Our own requirement is 89.27 percent, which is coming from our own refineries for MS. And for HSD, we are expecting 79.34 percent to come from our own refineries.
Speaker #2: So, 6 million tonnes in total—I mean both MS and HSD is what you are going to take. Yeah.
Speaker #3: Yeah, we are expecting by end of.
Speaker #2: Thanks, sir. That's very helpful. I'll get back to you next week.
Speaker #1: Thank you. Next question is from the line of Bineet Banka from Nomura. Please go ahead.
Speaker #2: 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%.
Speaker #2: And it has been consistently over 110%. So can we expect similar rates in the future as well? And is there a refinery turnaround over the next few quarters?
Speaker #3: Yeah. This year, there are turnarounds. Mumbai refinery Q2, we have certain plans and shutdowns—around 30 days for Mumbai refinery. And Bena, a small shutdown of four and a half days.
Speaker #3: And Kochi Refinery will be around 30 to 40 days because three units are going for shutdown. It's regular maintenance. Maybe, slightly, in Q3 or Q4, we may not be at 118 percent.
Speaker #3: So, if you remove the adjustment for the shutdown, definitely our refining throughput will continue along similar lines.
Speaker #2: Okay. And as a follow-up question on Andhra Pradesh, can you share the IRR at mid-cycle cracks, not at the current level of cracks? Maybe around $15–$20 per barrel of diesel, gasoline crack.
Speaker #2: What will be the IRR from this project?
Speaker #3: Generally, when we take any projections for a large project, we use a 10-year average. We cannot deploy any capital based on short-term trends.
Speaker #3: We will share the numbers very shortly, once FYD 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.
Speaker #2: Okay, sir. Lastly, one more on the LPG compensation. The buffer has continued to go up, and because of the under-recovery, it is higher than what you have been recovering from the government.
Speaker #2: So, are there any discussions going on regarding the same from the government side? How do we go about it?
Speaker #3: Yeah. LPG, already in the industry, we have submitted our representation to the Ministry for support. As a precedence, earlier also, when our LPG under-recovery happened, the Ministry was always helpful.
Speaker #3: 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.
Speaker #2: Okay, sir. Thank you.
Speaker #1: Thank you. The next question is from the line of Amit Murarka from Axis Capital. Please go ahead.
Speaker #2: Yeah. Hi, thanks for the opportunity. I missed if you have already shared the number on the call, but what was the GRM net of SAED in the quarter?
Speaker #3: 14. 14 dollars.
Speaker #2: $14. Okay. And ballpark inventory gain, if you could give—like last quarter, I remember you had mentioned $3 to $4 as inventory loss.
Speaker #2: So, for this quarter, just a ballpark number, if you could share.
Speaker #3: It's very difficult to calculate inventory gains last year because crude procurement is so volatile, and the freight components are also so volatile. Earlier, when prices were stable, it was maybe easier to calculate what the inventory gains or losses are.
Speaker #3: Today, it's very difficult. The way we are doing the valuation, there are different principles. Maybe crude cost itself varies from one cargo to another cargo. The cost differential is around $20 to $25 due to the freight and other things.
Speaker #3: So we stopped calculating what is the inventory gain losses. Because our average inventory is 25 to around 25 days only. So if we are bringing any if you are bringing any cost efficiency in the crude procurement, that is an efficiency.
Speaker #3: It is not an inventory gain or loss, so it is not right to calculate it as an inventory gain or loss in terms of the crude.
Speaker #2: No, sir. Got it. And just a question on other expenses. It seems to have gone up quite a bit in the quarter. Even if I exclude the FX loss of about ₹400 crores, it's still around ₹9,000 crores.
Speaker #2: Usually, it's a number close to 7,000. So could you highlight what are the specific reasons for this jump?
Speaker #3: Yeah, there are certain one-time items. There are certain regular items—mainly the transportation. Because of the increase in diesel costs, the transportation cost has gone up.
Speaker #3: Slightly on account of volume. That is around ₹150 crore for Q2—an increase compared to earlier quarters. And the second impact is the normal increase of octroi and taxes, around ₹150 crore increase.
Speaker #3: 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 a certain percentage of volumes we sell the spreads in advance.
Speaker #3: Those spreads—whatever we have sold in advance—for the next 12 months' requirement. Again, as to my refinery throughput, a certain percentage of spreads we sell.
Speaker #3: But due to this very high spread, there are MTM losses. Significant amount of MTM losses during this quarter. These are the major things.
Speaker #3: Maybe, in case the spreads normalize in the next six months, this MTM reversal can happen. That is a one-time hit, because during this particular period, the spreads are very high.
Speaker #2: Sure. Could you give that number? What is the MTM loss?
Speaker #3: MTM will be 1,300. Other than MTM derivatives, around ₹1,213 crores—something MTM.
Speaker #2: Got it. So that's the bulk of the movement on Q2.
Speaker #3: Yeah. Yeah. That is.
Speaker #2: Sure. And generally, like you mentioned a lot about the crude sourcing already. But if I have to just understand, overall, the movement around the various crude and the discount or premium...
Speaker #2: 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.
Speaker #2: So to that extent, is it fair to say that the let's say the premium over Singapore which was like being high would probably now moderate now to more normal levels, let's say, as we have been seeing for other refineries or let's say in the prior years for you?
Speaker #3: Yeah, 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.
Speaker #3: 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 discounts, maybe we are much better than Singapore.
Speaker #3: If it is at a premium, definitely we may not be at the Singapore level. But as for the refining performance and efficiency side, definitely our efficiency is much higher than the Singapore side.
Speaker #3: Our distillate yield is 83–84 percent. In fact, it is over 84 percent. Over the last couple of quarters, we have been ensuring a distillate yield of more than 84 percent.
Speaker #3: And second is our swing between gas oil and gasoline. These are the unique advantages for our refineries. Most of the time, our GRMs—even when there are no Russian discounts—our margins will be better than Singapore.
Speaker #2: Sure. And just a last question on KPX. You mentioned ₹40,000–₹45,000 crores for next year. Does this include the planned spends on Mozambique as well?
Speaker #3: Yeah, yeah, yeah. Mozambique and Brazil are already factored in. Only the AP refinery is not factored into our capex program. Maybe, once the board approves the AP refinery, we will rework our capex program accordingly, and we can share the revenue numbers.
Speaker #2: Sure. And these are all committed capex, right? Irrespective of, like, the cash flow situation next year or something?
Speaker #3: Almost. Maybe a little bit, percentage-wise. We don't commit because it's as and when required, like for example, maintenance or upgradations. During the year, we plan it.
Speaker #3: There won't be any commitment to it. Maybe 15 to 20 percent is non-committed every year; we have to plan for it. And during the year, we commit it.
Speaker #2: Sure, that's all from me. Thank you.
Speaker #1: 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.
Speaker #1: The next question is from the line of Sumeet Rora from SmartSync Capital. Please go ahead.
Speaker #4: Yeah. Hi, sir. Good morning to you. Sir, just two questions from me. One is on LPG. So, last year, sir, what was approved for us?
Speaker #4: I think, for the quarter—I mean, the monthly payment is still in November or something of that sort, sir. Can you explain, sir, if my understanding is correct? That means, for the last tranche, we will get paid in November and then we will not get paid further?
Speaker #4: Or what is my understanding? Can you just explain on that, sir? Secondly, is that you, yeah.
Speaker #3: Yeah. Please go ahead.
Speaker #4: Yeah, sir, and my second question is, sir, you know, on the brand, you know, see, today, the matter of fact is that, you know, dated Brent says that about 127, 130.
Speaker #4: And brand future stated about 115. So, sir, basically, what is more relevant for us, the physical oil when you buy is, you know, to we should look at the 127, 130 level or should we look at the 115 level which is, you know, the brand futures which trades every month?
Speaker #4: Because, sir, you know, I mean, if my understanding is correct, you know, we are benchmarked to about 90, 95 dollars, you know, and beyond that, you know, then our marketing side starts, you know, kind of losing money.
Speaker #4: So, I just want to understand, you know, what's the thought process? Because, you know, the war is absolutely an unknown, right? I mean, nobody knows it.
Speaker #4: It may finish today. It may finish after two years, after President Trump leaves. Nobody knows anything. So we are dealing with a very big unknown.
Speaker #4: So, sir, just wanted your thoughts on how you are looking at the scenario, you know, and what's the timeline for saying that, okay, we'll make a decision if prices, you know, kind of, you know, stay higher for longer periods.
Speaker #4: 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, sir.
Speaker #4: Thank you.
Speaker #3: Yeah. One is on LPG. Last time, whatever subsidy support the government has announced, that is for 12 months. That will be ending in the month of October.
Speaker #3: Around ₹632 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 in what form or what amount the support will come.
Speaker #3: Then accordingly, that will be an addition. But otherwise, the last subsidy mechanism will be ending in the month of October. And, as for crude sourcing, yes, I agree.
Speaker #3: There is a big gap created between the ICE brand and the dated brand. What we see on the TV channels is only the ICE brand. The dated brand, yes, presently, it is hovering around 125, 127.
Speaker #3: Most of our contracts, I can say significant contracts, are linked to ICE Brent. Dated Brent, not to ICE Brent. And certain cargos, maybe Dubai-based, it happens, but most of the cargos are dated Brent.
Speaker #3: As long as the Dated Brent is on the higher side, our cost of crude will definitely be on the higher side. Most of the time, if you see the trends, I know recently I have not seen that much of a gap between the ICE Brent and Dated Brent.
Speaker #3: But in the last two months, due to certain issues of war, the dated Brent is on the higher side. So the cost of crude procurement will be on dated Brent.
Speaker #3: We’ll definitely have the cost of crude on the higher side.
Speaker #4: 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.
Speaker #4: 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.
Speaker #4: 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 levels.
Speaker #4: 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.
Speaker #4: And, you know, so, I mean, it's definitely not a very exciting environment. So, what's the thought process on pricing, et cetera? I mean, can we look at some pricing method changes going ahead?
Speaker #3: No, LPG—definitely LPG is a controlled product. We don't have any control over the price declarations of LPG; it's completely under control. And the only under-recovery support mechanism is that the government will support at some point in time.
Speaker #3: So, there are some precedents. It is not the first time. Otherwise, we don't have any control over the LPG pricing, because there are periods – for example, in September, the LPG under-recovery is only ₹199.
Speaker #3: Maybe July, it was 490. In November, we are expecting 328. So, all the things will move. What decisions will be taken, maybe the ministry will take appropriately.
Speaker #3: On the LPG under-recovery, in terms of MSCHD, one should not look at it in the short term, basically. So one has to see—everyone is hoping the war will resolve.
Speaker #3: In case it continues for a longer period of time, we will have to review it again. But at this point in time, we are not expecting this war to continue for a longer period.
Speaker #3: Once the war is resolved, crude is available. It is not that crude is in shortage. Only the transit is the issue. Otherwise, crude is available.
Speaker #3: Sufficient production is there everywhere. Only on the refining side, there are production losses because the production facilities have been hit. Refining spreads will continue, so on the refining side, definitely we are hoping the higher refining cycle will continue.
Speaker #3: In terms of crude, we are expecting that if the war is resolved, there won’t be any further increase in crude prices. It will come back to reasonable levels.
Speaker #3: So, that is what we are expecting.
Speaker #4: Sure, sir. Okay, sir. Thank you so much, and wish you all the best and good luck, sir.
Speaker #1: Thank you. Next question is from the line of Aachal Shah from Axis Capital. Please go ahead.
Speaker #4: Hi, sir. Am I audible?
Speaker #3: Yeah, yeah. We can hear you.
Speaker #4: Sir, just wanted to know, could you quantify the incentives available for the AP Refinery project with respect to GST or power concessions, broadly?
Speaker #4: What could be the ballpark figure, as a percentage of total CAPEX, or an absolute number?
Speaker #3: No, there are good incentives. Still, we are under discussion. Earlier, the government of AP approved based on our earlier estimations of CAPEX. Roughly, in a couple of elements, maybe tax refinance or GST on CAPEX refinance during the work in progress.
Speaker #3: There are certain incentives, but roughly I can say it is like a percentage of CAPEX that we have invested. For example, if we are investing some ₹50,000 crore or ₹1 lakh crore, principally, the AP government initially indicated that 75 percent of the capital we have invested in the asset may be reimbursed over a period of 15, 18, or 20 years.
Speaker #3: Okay. But otherwise, the subsidy support will come from the AP government. We are expecting the same principle of 75 percent of capital subsidies over a period of 15 or 20 years, or in between. Maybe in the discussions, we'll finalize with the AP government.
Speaker #4: Got it, sir. And, sir, the second is a more structural question. So, sir, how do you see the medium- to long-term demand outlook for MSHSD in India?
Speaker #4: So, specifically, where I am coming from is factors such as increasing EV and CNG penetration impacting MS growth, and then changes in transportation and industrial activity affecting HSD demand.
Speaker #4: So, any on that near to medium term? Anyone long term?
Speaker #3: No, yeah, at least we can forecast a little bit medium term, maybe three to five years, because India is growing at a 7 to 7.5 percent growth level.
Speaker #3: And the exports also, slowly, slowly, if there is no tariff impact from the US, and most of the FTS we are signing with various countries, it will help a lot in terms of the export of manufactured goods.
Speaker #3: So with this background, definitely diesel will grow. Initially, we thought 2 percent or 2 and a half percent growth diesel. Now, based on the current trend, when we see the diesel growth can go up to 3 and a half to 4 percent.
Speaker #3: And MS, yes, even in earlier years also, almost 5 to 6 percent growth we are witnessing. We are expecting a similar level of growth for MS also.
Speaker #3: Even though there is a little bit of improvement in EV penetration, in terms of numbers, still the volumes are coming from MS and HSD.
Speaker #4: Got it. So, sir, any sense of where BPCL could end up with respect to the number of fuel outlets from the current level? Maybe 5 years, 10 years?
Speaker #3: In the last advertisement, we have almost advertised 4,000 to 5,000 retail outlets. But every year we are taking 1,000, 1,000 outlets. Maybe in the next 3 years, one can add maybe 3,000, 3,000.
Speaker #3: It depends on the land availability—mainly the issue of land. Getting land in proper locations, near the market, that is more important. Otherwise, every year we are planning in the CAPEX for 1,000 ROS; we are planning for CAPEX.
Speaker #4: Understood. A lot, sir.
Speaker #1: Thank you. Next question is from the line of Saurabh Jain from HSBC. Please go ahead.
Speaker #5: Sir, 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?
Speaker #5: What could be the, you know, premium that you would have paid over the benchmark brand? Some sense of that number can be helpful for us.
Speaker #3: very difficult how much premium because different terms. Some cargoes are on FOB, some cargoes on DAS. Some are, for example, through FTS. Means, for example, in the en route, maybe some portion of the distance, they will incur.
Speaker #3: Some portion of the distance, we will incur. So terms are completely different. One has to see what is the cost of procurement. One should not see what is the premium at this point.
Speaker #3: Certain cargoes, for example, Iraqi cargoes, we got a $20 discount. But finally, after the freight, if you are adding, maybe it is at benchmark or a $5–6 benefit.
Speaker #3: So, various components are involved, so it's very difficult to say how much premium from the benchmark. Even if someone is calculating it, it is not a representative figure of market trends.
Speaker #3: One has to see what is the landing cost of the crude, and what is the value the crude is giving. The differential is the GRM only.
Speaker #3: 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 if it is available at a benchmark, it is available at a discount or premium.
Speaker #5: Okay, no worries. You also made a comment that Russian crude is now available at only a premium of $1 to $2. But you also mentioned sometime back that you are still preferring Middle East crude.
Speaker #5: So, does it imply that Middle East crude is actually available at a discount to the benchmark?
Speaker #3: No, no, no, no, no, no, no. I'm talking November. In November, the trend is Russian is available at $10 to $12. Okay, compared to the $10 to $12 benchmark, then PG said it is commercially viable.
Speaker #3: Now, for the month of December, there are certain offers from Russia. $1 to $2 premium over the benchmark—that is for the delivered product.
Speaker #3: When freight rates are very high—maybe, today, if anyone is offering Russian cargo—Russian cargo is preferable to Middle Eastern cargo for the December month.
Speaker #3: Because the month of November has already been concluded.
Speaker #5: Okay. And what's your sourcing for the Middle East? Is it on a delivered basis, or, you know, how is the arrangement?
Speaker #3: Term contracts are on FOB, Middle East, but on a spot basis, it may vary cargo to cargo. Some traders, if the cargo is available, if the cargo is on the float, then they may offer at a delivered basis.
Speaker #3: Otherwise, if the cargo is available, the tanks and the supply point, they offer at FOB. If the vessel is idle from their side, they may offer DAS, which means delivered.
Speaker #3: So, different combinations. There is no standard combination, whether delivered or FOB.
Speaker #5: Okay. Separately, RMCO some time back had, you know, announced that they will not ship cargoes to India. So I'm a bit confused. Is it still in place?
Speaker #5: Is it in effect? Or are you easily getting crude from RMCO?
Speaker #3: Nothing, nothing. There is nothing, nothing. There is no such communication; at least, we have not received anything from RMCO. I don't know which news article you are referring to.
Speaker #5: Okay, maybe we're looking at some wrong news. Lastly, is it possible to also share the refining margins by the refinery?
Speaker #3: Refining margin we have shared already. Individual refinery where you want? Refinery where you want? We will share separately.
Speaker #5: Okay, okay. No worries, sir. Thank you so much, and all the best.
Speaker #3: Thank you.
Speaker #1: Thank you. The last question for today is from the line of Aman Sharma from AS Capital. Please go ahead.
Speaker #4: Okay, am I audible?
Speaker #3: Yeah, we can hear you.
Speaker #4: Thank you for this opportunity. So basically, as I've mentioned, the after SAB GRM is $14 per barrel, right?
Speaker #3: Right, right.
Speaker #4: So, basically, I want to understand: when you transfer the refined products from your refinery arm to the marketing arm, how do you calculate the refinery transfer price?
Speaker #4: Is it after taking the SAB adjustment?
Speaker #3: When we purchase product from any of the other private refineries, it is after SAB. Similar principles we apply for transfer pricing between our refinery and marketing.
Speaker #4: But if I'm not wrong, the SAB is only on the export volumes, right? Even then, you pass on the benefits to the marketing arm.
Speaker #3: Yes, yes. Even when we purchase from private refineries, we will pay only after SAB.
Speaker #4: Sure. Okay. And my second question is again about the inventory gain calculation. So I understand you are not calculating the gain/loss this time.
Speaker #4: But could you clarify, like, how you usually do the inventory gain or loss calculation?
Speaker #3: Inventory gain and losses, we have talked about calculating long back for crude. For finished crudes, 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.
Speaker #3: So, it won't give any inventory gain or loss. Only, for example, in the processing side, some old batches—if you are not processing—keep it in the inventory tank.
Speaker #3: It will have an impact. But otherwise, you have a continuous process. Mostly, 14 first-order, last-cargo process. After that, a new cargo will come and replace it.
Speaker #3: So in that scenario, generally we don't calculate any inventory gain or losses. Whatever refining margin, based on the current market trend, that is what the refinery has generated.
Speaker #4: sure. Okay, okay. That's awesome.
Speaker #3: Thank you.
Speaker #1: Thank you. As that was the last question for today, I now hand the conference over to Mr. Varatharajan, Sir, for closing comments.
Speaker #5: I can attend. Sir, if you have any closing comments, please go ahead.
Speaker #3: Yeah, thank you for your questions and for your engagement on today's call. Above all, we sincerely appreciate the trust and confidence you continue to place in BPCL.
Speaker #3: It motivates us to keep delivering and creating sustainable, long-term value. Should you wish to discuss any aspect of the quarterly results further, our Investor Relations team will be happy to assist.
Speaker #3: I look forward to speaking with you again. Thank you once again, and let me take this opportunity to wish you and your family a very happy and prosperous Diwali in advance.
Speaker #3: Thank you.
Speaker #5: Thank you, sir. Thanks to all the participants and the management for engaging in this call and spending time answering all the questions. I wish you all advanced Diwali wishes.
Speaker #5: Thank you.
Speaker #3: Thank you.
Speaker #1: Thank you so much. On behalf of Antiques Stockbroking Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
