Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue from operations increased to INR 1,20,859 crores, indicating strong financial performance.
- Market share and sales volumes reached their highest levels ever for any quarter.
- Refining throughput improved despite a shutdown in the Mumbai refinery, showcasing operational resilience.
- Major projects, including refinery expansions and LNG terminal commissioning, are on track for completion by the end of the calendar year.
- The company is actively enhancing its lubricant business, aiming for significant value unlocking and operational efficiency improvements.
Negative Points
- Gross Refining Margins (GRMs) were suppressed due to low Singapore GRMs and volatile crude prices.
- Significant under-recoveries in LPG margins impacted financial performance.
- The company faced challenges with crude cost increases and the need to manage a higher percentage of Russian crude.
- Inventory losses were reported in both refining and marketing segments, affecting overall profitability.
- The company has substantial debt levels, with INR 32,000 crores in debt for the Rajasthan refinery project alone.
Q & A Highlights
Q: Can you explain how the LPG subsidy is accounted for?
A: Rajneesh Narang, Director - Finance: The LPG subsidy is accounted for based on whether there is an over-recovery or under-recovery. Over-recovery goes into a buffer account and is not included in the P&L, while under-recovery is accounted for in the P&L. This quarter, we had an under-recovery of INR2,400 crores.
Q: What percentage of crude is sourced from Russia, and what is the outlook for the rest of the year?
A: Pushp Kumar Joshi, Chairman & Managing Director: Currently, 35-40% of our crude is sourced from Russia, up from 25% last year. We expect this percentage to remain stable for the rest of the year.
Q: Can you provide an update on the commissioning of the Vizag refinery and its impact on throughput?
A: Pushp Kumar Joshi, Chairman & Managing Director: The Vizag refinery has stabilized, and we expect throughput to increase to 3.5-4 million metric tons per quarter. This will significantly enhance our GRMs.
Q: What is the expected impact of the new projects on GRMs and EBITDA?
A: Pushp Kumar Joshi, Chairman & Managing Director: The new projects, including the Vizag refinery upgrade and the LNG terminal, are expected to add more than $3 per barrel to our GRMs. We aim to achieve an EBITDA of INR40,000 crores by FY 27-28.
Q: What is the status of the Chhara LNG terminal and its impact on gas sourcing?
A: Pushp Kumar Joshi, Chairman & Managing Director: The Chhara LNG terminal is expected to be commissioned by November or December. It has a capacity of 5 million metric tons, and we are in discussions for long-term gas sourcing agreements.
Q: What is the outlook for refining margins (GRMs) in the next six to nine months?
A: Pushp Kumar Joshi, Chairman & Managing Director: We expect GRMs to be in the range of $5 to $8 per barrel, supported by softening crude prices and improving product cracks.
Q: Can you provide details on the Rajasthan refinery project and its expected commissioning timeline?
A: Pushp Kumar Joshi, Chairman & Managing Director: The Rajasthan refinery is progressing well, with 92% physical progress on process units. We expect to commission the refining portion by the end of this financial year and the petrochemical portion within the next two quarters.
Q: What are the plans for green hydrogen production, and what percentage of total hydrogen will be green by FY 28?
A: Rajneesh Narang, Director - Finance: We have commissioned India's first green hydrogen plant and plan to produce 17,000 tonnes per annum by FY 28, which will be about 10% of our total hydrogen requirement.
Q: How will the new PNGRB tariff regulations impact your pipeline business?
A: Pushp Kumar Joshi, Chairman & Managing Director: The new PNGRB tariff regulations will increase pipeline tariffs, but the impact will depend on whether these costs can be passed on to end consumers. We are still evaluating the full implications.
Q: What is the current debt level, and how do you plan to manage it going forward?
A: Pushp Kumar Joshi, Chairman & Managing Director: Our current debt level is around INR50,000 crores. We plan to fund future investments through internal accruals, aiming to maintain or reduce the current debt level while improving our debt-to-equity ratio.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
