Hindustan Petroleum Corporation Ltd (HPCL) is seeking to double its profits by 2024 coupled with a Rs 74,200 crore investment plan that focuses on earning higher margins in existing and new business.The future growth of HPCL, according to Chairman and Managing Director M K Surana, “is based on 3-5 tenets”.
Entering into new business
“We will stick to the core areas of refining and marketing, expanding our refineries with a focus on higher margins. That’s why we are making these dual units of bottom upgradation with higher complexity. On the marketing font, we are building more pipelines and have purchased LPG rakes for movement of products by rail instead of by road from ports to the bottling plants; we are building infrastructure in such a way that the secondary transportation cost reduces. So, we are trying to make more margin by reducing the cost in our core areas along with the expanded capacity. We are entering into new business of petrochemicals and expanding our footprint in natural gas which brings additional margins,” Surana said at a Press conference.
HPCL, Surana said, is also expanding its overseas presence. The company currently supply fuels such as lubes in 11 countries including Middle East and East Africa and has set up a wholly owned unit in Dubai.
Future growth
“Our future growth engines are based on better operational efficiency, better margins on existing business, expanding capacity, newer business of petrochemicals, natural gas, renewables and bio-fuels as well as additional territories/geographies. With this, we think that in the next 3-4 years, we expect a 17% increase in refining capacity, much higher marketing volumes and we hope that our profitability should be almost double of what we are today,” Surana added.
HPCL posted a net profit of Rs 6,029 crore in FY19, helping the refiner cross the Rs 6,000 crore net profit mark for the third time in a row. “This gives us the stability to grow further,” R Kesavan Chief Financial Officer said, adding that the “the Rs 74,200 crore capital expansion plan is going to be the key for the corporation”.
Of the Rs 74,200 crore capex, HPCL will invest Rs 42,000 crore from internal resources and Rs 32,000 crore as debt. In FY20, HPCL plans to spend Rs 14,900 crore in capex of which Rs 8000 crore will be borrowed from the market through rupee and dollar bonds, Kesavan said.
Refineries expansion
Much of the capex will be spend on expanding the refineries at Mumbai (Rs 5,000 crore) and Visakhapatnam (Rs 21,000 crore), building a Rs 43,000 crore, 9 mt capacity (includes a 2 mt petrochemicals plant) greenfield refinery and petrochemicals complex at Barmer in partnership with the Rajasthan government, a Rs 4,900 crore LNG regasification terminal at Chhara, Gujarat in partnership with the Shapoorji Pallonji Group, a Rs850 crore, 8,000 metric tonne LPG cavern facility at Mangalore and expanding the pipeline capacity from the existing 3,370 kms to 5,000 kms with an investment of Rs5,500 crore.
“Pipeline will be a game changer; it will significantly reduce our logistics costs,” said Kesavan. The refinery capacity expansion plans at Mumbai and Vizag, also involves building new units that improves the company’s capability to process a large variety of crude.
“With the bottom upgradation currently underway at the Vizag refinery, we can process dirtier crude with no bottoms. This unit which is coming up can convert bottoms into distillates – first time in the country – it will not produce any pet coke that has environmental concerns. But, the second more important point is, it is likely to generate around $3-4 additional gross refining margins (GRMs) to the refinery units on the expanded capacity,” Surana said. GRM is what a refiner earns by turning a barrel of crude oil into refined products.
HPCL has also started purchasing crude from the United States. “We have purchased three parcels at competitive prices. The only disadvantage with buying US crude is the freight but if you are bringing it on very large crude carriers, it is even advantageous,” Surana added.
Future growth
Refineries expansion