HINDPETRO Q1 FY27 earnings call.
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Revenue
₹1,40,584 Cr
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What the record says.
HPCL reported a severely impacted Q1 FY27 with PAT turning negative due to unprecedented crude price volatility (dropping $25 in two weeks), inventory write-downs exceeding Rs 5,000 crore, and significant under-recoveries of ~Rs 26,000 crore on administered prices (MS, HSD ~Rs 20,000 crore + LPG ~Rs 6,000 crore). The Vizag refinery faced technological challenges with its hydrocracker unit, while LPG losses averaged Rs 510/cylinder for the quarter. On a positive note, HRL (Rajasthan refinery) achieved Scheduled Commercial Operation on June 22, ramping to 60% CDU utilization with full capacity expected by Q3 FY27. Management outlined a seven-pronged response strategy: balance sheet improvement, capex control (targeting below Rs 9,700 crore annual), interest cost reduction through ECB refinancing, profitability improvement via Samriti 2.0 (Rs 1,500 crore run-rate target), retail growth (Abu 2.0 at 4,900 outlets), refinery optimization, and digital initiatives. Debt rose to Rs 72,000 crore (D/E ~1.5). The near-term outlook remains uncertain given crude price volatility, but management expressed confidence in structural improvement once HRL stabilizes and inventory normalizes.
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Guidance to track
- CDU currently at 60% utilization; targeting 85-90% by October and full capacity by Q4 FY27 with all units including SRU and PSFU operational.
- Q1 spend was Rs 1,700 crore; given current environment and cash conservation priorities, full-year capex will be below the agreed Rs 9,700 crore target with discretionary spends deferred.
- With HRL at full capacity and HRL's Vizak unit stabilized, HPCL expects to source only ~10% of MS externally vs current 24%, with ~56% from own refineries and 40% from JVs.
- Despite Q1 disruptions, management reinitiated the cost program with 100+ ideas; targeting Rs 1,500 crore annualized savings through cost takeouts, energy efficiency (Rs 2,000+ crore annual spend), and intermediate stream optimization.
Risks flagged
- HPCL carried abnormally high crude inventory into June 30 due to geopolitical uncertainty, which then suffered significant write-downs when Brent dropped $25 in two weeks. The reverse could occur if crude spikes again.
- The high-pressure hydrocracker unit (380 bar, 400°C) continues to face technical challenges. While management hopes for stabilization within 1-2 quarters, this is described as an 'engineering problem' that requires learning a complex new technology for a unit of this scale.
- Q1 under-recovery of Rs 26,000 crore (MS/HSD ~Rs 20,000 crore + LPG ~Rs 6,000 crore) represents a structural issue for OMCs. While government compensation mechanisms exist, timing and adequacy remain uncertain.
- Analyst asked about consistent GRM underperformance vs IOC/BPCL over 20 quarters and requested details on inventory impact on reported GRM. Management declined to provide peer comparison or quantify inventory loss impact beyond 'five-digit number by a good margin'.
Key quotes
- My GRM was impacted because of inventory loss. It's 2,635 crores. That is after factoring the inventory losses.
- One year later you should ask me the same question on the same call and you will have an HPCL asset which will have the highest margin. See the margins are generated by the assets we have.
- We are very bullish about the future. Yes, there is a short-term hiccup, but we are very bullish about the future because there are dozens and dozens of those things which we are doing. We have a very charged up team.
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