Hindustan Petroleum Corporation: On A New Tack
The dynamics of downstream companies are changing in the oil and gas sector. As Urvisha H. Jagsheth, oil and gas expert at CARE Ratings, explains, “India is not only self-sufficient in refining capacity for its domestic consumption but also exports a sufficient quantity of petroleum products and ranks third when it comes to crude oil consumption.” She says, “with the Balmer refinery and the Saudi Aramco refinery being set up in India, we foresee the refining activities of the country increasing as well.”
The trend could explain the huge upswing in the performance of public sector oil and gas companies like Hindustan Petroleum Corporation Ltd. (HPCL). The year 2017-18 saw the Navaratna scale new heights and record its best performance ever, significantly surpassing the highest ever profit and sales recorded during the previous year. According to HPCL Chairman & Managing Director (CMD) Mukesh K. Surana, not only was the company’s physical and financial performance the best since inception, HPCL achieved several milestones in various spheres of business, as well.
On January 20, 2018, the Government of India entered into an agreement with ONGC for sale of 51.11 per cent of its equity shareholding in HPCL at a consideration of Rs 36,915 crore. Union Minister of Petroleum & Natural Gas, Dharmendra Pradhan said then, “This is in line with the Budget announcement 2017-18 to create oil majors in the country. This has completed the successful implementation of the Budget announcement in a time-bound manner.” Pradhan said the ONGC-HPCL integration was the first innovative vertical integration that would help leverage the strength of both the companies. Through this acquisition, ONGC became India’s first vertically integrated oil major.
Hindustan Petroleum’s net worth has increased significantly since FY 2017, when it was Rs 20, 347 crore to Rs 23,948 crore in FY 2018. Its crude throughput was 18.3 million tonnes in FY 2018. Sales of 36.9 million tonnes of petroleum products yielded a profit after tax (PAT) of Rs 6,357 crore. “Strong performance record was acknowledged by financial markets and HPCL was included in NSE’s benchmark ‘Nifty 50’ index during the year,” Surana said.
The Prabhudas Liladhar report for HPCL gives an insight into the company’s performance. “Core GRMs were lower than benchmark refining margins of $ 6.1/bbl due to lower light distillate spreads and higher fuel and oil losses from higher crude prices. However, global GRM’s are likely to remain stable as global demand outstrips net capacity addition over the next five years. In addition, OMCs with ~40% diesel product slate remain well placed to benefit from IMO2020 regulation which will increase diesel demand by greater than 1 million barrel per day (mbpd) if they are implemented without delays,” the report says.
Hindustan Petroleum has plans for large-scale investments for enhancing refining capacities and building marketing infrastructure. Both the ongoing refinery expansion projects, namely the Visakh Refinery Modernization Project (VRMP) for enhancing refinery capacity to 15 MMTPA and the Mumbai Refinery Expansion Project (MREP) for enhancing refining capacity to 9.5 MMTPA are progressing as per schedule.
The Navratna has modernised a thousand retail outlets. Its marketing strategies during the year included a customer awareness programme, ‘HP Hai Jahan Bharosa Hai Wahan’. Hindustan Petroleum launched its ‘Power 99’ in seven cities and set up an electric vehicle charging station in Nagpur. It also flagged off a home delivery scheme for petrol and diesel. Hindustan Petroleum’s international achievements during the year included launch of lubes in Myanmar and formation of a wholly- owned subsidiary, HPCL Middle East FZCO, in theUAE. Both were path breaking achievements for the company.
