<div>R.K. Singh retired as chairman and managing director (CMD) of Bharat Petroleum Corporation (BPCL) towards the end of FY 2013, after notching up the highest ever profit after tax (PAT) in a financial year. His successor, S. Varadarajan, bettered the performance in his very first year, with an all-time high net profit of Rs 4,052.98 crore — a growth of 109.33 per cent over the previous year. Not just profit; BPCL’s overall performance helped it retain its position in BW’s Real 500 rankings for 2014.<br /><br />In FY 2014, BPCL recorded a total income of Rs 2,65,806.39 crore, a growth of 8.99 per cent over the previous year. During the year, its operating profits grew 31.18 per cent, to Rs 10,758.74 crore.<br /><br />BPCL’s refineries at Mumbai and Kochi recorded a gross refining margin (GRM) of $4.33 per barrel, the highest among public sector oil marketing companies. These refineries achieved a crude throughput of 23.35 metric million tonnes (mmt) for the year, as against 23.21 mmt in the previous year. <br /><br />Marketing of petroleum products has been a strength of BPCL’s, which has a market share of 23.48 per cent among state-run oil marketing companies. Its retail sales went up 5 per cent over the previous year. In fact, it achieved the highest throughput from its retail outlets, at 185 kilolitres per month. The company added 882 new retail outlets to its network during the year. <br /><br />BPCL’s industrial and commercial business segment, however, saw a decline in sales of various products due to sluggish market conditions and high energy costs. On the other hand, logistics optimisation and strategic network expansion helped aviation fuel sales gain their highest ever market share of 25 per cent during the year.<br /><br />BPCL’s gross under-recoveries stood at Rs 34,500 crore, of which upstream compensated to the extent of Rs 15,600 crore (45 per cent), the government Rs 18,400 crore (53 per cent) and the rest had to be borne by BPCL. “The lower subsidy burden and the timely release of compensation by the government have helped ensure better working capital management, leading to lower borrowings and interest outgo during the year,” says Varadarajan. <br /><br />A recent Motilal Oswal research report says BPCL is going to benefit as overall under-recovery on diesel, kerosene, LPG and petrol is set to reduce 50 per cent by 2015-16 and the de-regulated era will increase marketing profitability. Further, the company is going to benefit from lower interest costs in the coming years. <br /><br />Industry observers believe that the expansion plans and investments being made by the company, mainly in upstream exploration and production (E&P), are going to take BPCL to a new level. “We have drawn up ambitious investment plans across the entire value chain — from E&P to refining and marketing operations and capital expenditure — totalling Rs 10,000 crore per annum,” says the CMD. The total refining capacity is set to increase from the current 30.5 mmt to 47.5 mmt by 2017. BPCL is expanding the capacity of the Kochi refinery from 9.5 mmtpa to 15.5 mmtpa, and modernising its processing facilities to produce auto fuels conforming to Euro IV and V norms. The integrated complex, with a capital outlay of over Rs 16,500 crore, is expected to be completed by May 2016. The Mumbai refinery is also being modernised and an expansion is planned at the Bina refinery in Madhya Pradesh.<br /><br />The company is also investing on improving its marketing infrastructure — setting up cross-country pipelines to transport fuels and ramping up automation of retail outlets. <br /><br />With these initiatives, BPCL is geared to meet the challenges of the future, says the CMD. Investors seem to be thinking along the same lines if the stock price is anything to go by. <br /><br />(This story was published in BW | Businessworld Issue Dated 17-11-2014)</div>
