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Fitch expects HPCL refining margin to fall by 1/3rd in FY20

In the backdrop of unstable crude prices, the refining margin of state-owned HPCL is on course to fall by one-third, said Fitch Ratings
New Delhi: In the backdrop of unstable crude prices, the refining margin of state-owned HPCL (Hindustan Petroleum Corporation Limited) is on course to fall by one-third during the current fiscal, according to a Fitch Ratings’ statement released on Monday. “Fitch expects HPCL’s standalone gross refining margins (GRM) to fall to $3.2 a barrel in FY20 from $5.0 a barrel in FY19. GRMs for HPCL’s refining segment fell to $1.9 per barrel during 1HFY20,” the statement said.

Fitch affirms HPCL ratings

Affirming  HPCL’s rating ‘BBB’ with a stable outlook, Fitch said: “The agency assesses HPCL’s standalone credit profile at ‘bb’ to reflect its position as one of India’s biggest oil-marketing companies, average-but-improving complexity of its refining assets and moderate financial profile.” Fitch believes HPCL will incur around Rs 60,000 crore in CAPEX over FY20-FY23 in the process of expanding its refineries and improving its retail mechanism. HPCL has the second-largest share of product pipelines in India with a pipeline network of more than 3,370 km for the transportation of petroleum products. It also makes up one-fourth share of India’s fuel market. The state-owned firm marketed about 19.5 million tonnes of fuel in the six months ended September 30, 2019, and refined 8.5 million tonnes. “We expect HPCL to maintain its leading position over the medium term in light of its expansion plans,” it said.

Expansion on cards

The capacity of Mumbai refinery will go up from 7.5 MTPA to 9.5 MTPA by end of January 2020, and at their Visakhapatnam refinery, the capacity is expected to rise from 8.3 MTPA to 15 MTPA by July 2020. “Fitch expects HPCL’s standalone gross refining margins (GRM) to fall to $3.2 a barrel in FY20 from $5.0 a barrel in FY19. GRMs for HPCL’s refining segment fell to $1.9 per barrel during 1HFY20,” the statement said.