BPCL Q1 FY26 profit surges on stronger marketing spreads and E&P turnaround despite lower GRMs

Mumbai: Bharat Petroleum Corporation Ltd (BPCL) reported robust first-quarter results, with profits rising sharply on both consolidated and standalone bases even as refining margins softened. The company also cut debt materially during the quarter, improving finance costs and balance-sheet ratios. The Board approved the unaudited results on August 13.

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Consolidated profit up 140% YoY, 56% QoQ; margins improve

Consolidated revenue from operations stood at Rs 1,29,614.69 crore. Profit after tax rose to Rs 6,839.02 crore, up 140 percent year-on-year from Rs 2,841.55 crore and 56 percent sequentially from Rs 4,391.83 crore. Net profit margin improved to 5.28 percent (Q1 FY25: 2.22 percent; Q4 FY25: 3.46 percent). Operating margin (defined by the company) rose to 6.32 percent (Q1 FY25: 2.68 percent; Q4 FY25: 4.09 percent).

Two moving parts stood out in the quarter: a turnaround in the Exploration & Production (E&P) segment and healthier marketing economics in the downstream business. Share of profit from equity-accounted investees contributed Rs 1,158.10 crore. Exceptional expense of Rs 67.38 crore related to force majeure-linked costs at a subsidiary did not derail the overall momentum.

Standalone: Profit more than doubles YoY; costs, debt track lower

Standalone revenue from operations was Rs 1,29,577.89 crore. Standalone profit after tax reached Rs 6,123.93 crore — up 103 percent YoY (Rs 3,014.77 crore) and up 90 percent QoQ (Rs 3,214.06 crore). Net profit margin rose to 4.73 percent (Q1 FY25: 2.35 percent; Q4 FY25: 2.53 percent), while operating margin improved to 5.72 percent (Q1 FY25: 2.73 percent; Q4 FY25: 4.13 percent).

BPCL’s debt (ex-lease liabilities) reduced sharply to Rs 10,709 crore as of June 30 from Rs 23,278 crore as of March 31, aiding finance costs; interest expense was Rs 374 crore versus Rs 547 crore in Q4, while interest income was Rs 390 crore. The company also recorded a small forex gain of Rs 20 crore (versus a Rs 45 crore loss in Q4 FY25). These line items, alongside operating improvements, helped deliver the earnings step-up despite a marketing inventory loss of Rs 835 crore this quarter.

Refining: GRMs soften, but throughput holds; spreads likely firmer

Average gross refining margin (GRM) fell to USD 4.88/bbl from USD 7.86/bbl a year ago and USD 9.20/bbl in Q4 FY25, reflecting narrower crack spreads. Group refineries processed 10.42 MMT in Q1 (Q1 FY25: 10.11 MMT; Q4 FY25: 10.58 MMT). Despite lower GRMs and a marketing inventory loss, overall profitability rose, implying firmer underlying marketing spreads and a better sales mix during the quarter.

Marketing and volumes: Sales trend resilient

Total product sales were 14.03 MMT, with domestic sales at 13.58 MMT; retail categories such as MS and ATF posted steady prints while HSD volumes were resilient. These operational trends supported downstream earnings even as accounting for inventory led to a negative swing.

Segment comparison: Downstream drives revenue; E&P swings to profit

BPCL’s consolidated segment revenue remained overwhelmingly downstream: Rs 1,29,577.89 crore from Refining & Marketing and Rs 36.80 crore from E&P. On profitability (segment results before finance costs and other unallocables), downstream delivered Rs 8,060.47 crore versus Rs 4,255.73 crore a year ago and Rs 6,145.89 crore in Q4 — an 89 percent YoY and 31 percent QoQ rise. E&P swung to a profit of Rs 819.24 crore from a loss of Rs 78.37 crore in Q1 FY25 and a loss of Rs 135.18 crore in Q4 FY25, providing an incremental boost to consolidated earnings.

LPG accounting buffer and pending compensation

On LPG, the Ministry had earlier directed OMCs to maintain a buffer when market prices fall below effective customer cost. BPCL’s cumulative net negative buffer stood at Rs 12,522.58 crore as of June 30 (Rs 10,446.38 crore at March 31). While the Union Cabinet has approved Rs 30,000 crore compensation for the three PSU OMCs (announced August 8), BPCL has not yet recognised its share, pending modalities from MoPNG. This stance partially suppresses reported LPG revenue for the quarter and could become a future earnings lever once finalised.

Balance sheet and coverage ratios strengthen

Lower debt helped lift coverage and leverage metrics. On a standalone basis, debt-equity improved to 0.12 (from 0.29 at March 31); interest-service coverage jumped to 49.22x (Q4: 16.25x). Consolidated debt-equity improved to 0.44 (from 0.63), with interest-service coverage at 18.75x (Q4: 10.92x). Current ratios also nudged higher quarter-on-quarter.

Risks and one-offs

Force-majeure related costs at the Mozambique project were expensed (Rs 67.38 crore this quarter), and interest capitalisation remains suspended there, with Rs 176.38 crore charged to finance costs. While not material to the quarter’s trajectory, these remain watch-items for BPCL’s upstream footprint.

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