LPG under-recovery on cylinders narrowed to Rs 490 in July from Rs 680 in June: HPCL CMD

New Delhi: Hindustan Petroleum Corporation Ltd's (HPCL) under-recovery on domestic LPG cylinders narrowed to Rs 490 a cylinder in July from Rs 680 in June, Chairman and Managing Director (CMD) Vikas Kaushal said on the company's Q1 FY27 earnings call on July 23, a transcript of the call released on Wednesday showed. The loss averaged Rs 510 a cylinder over the April-June quarter, according to HPCL's management.

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Kaushal attributed the narrowing to a fall of about USD 200 per tonne in the Saudi contract price, a key LPG marker, and to a diversification of sourcing away from the Strait of Hormuz — a market in which, he said, the industry was "once bitten twice shy." HPCL had been close to 90 percent dependent on LPG cargoes routed through Hormuz before the West Asia crisis and is now using Indian time-chartered vessels to lift cargoes from the United States (US), "which never happened in the past," he said.

Rajasthan refinery ramp-up

HPCL set out a ramp-up schedule for its Rajasthan refinery (HRRL), which began commercial operations in June. Its crude distillation unit is running at 60 percent capacity, and Kaushal guided to about 50 percent utilisation this quarter, 80 to 85 percent from October, and close to full utilisation on the refining section by the fourth quarter.

A full run, including petrochemicals, is expected in FY28. The pet fluid catalytic cracking unit (PFCCU), which Kaushal called a "money-spinner," was hours from commissioning at the time of the call. "It's a matter of hours by which we will be able to commission it," he said. The sulphur recovery unit is the last block, expected by the end of the quarter. The refinery has begun producing motor spirit and LPG, Director (Refineries) S Bharathan said, and HPCL has stationed 150 staff from its Vizag and Mumbai refineries at the site.

Cutting third-party fuel purchases

Kaushal laid out a shift away from buying fuel from third parties to meet HPCL's marketing demand, a dependence he said had hit the company during the quarter. Taking diesel as an example, HPCL sourced about 50 percent from its own refineries in the first quarter, 27 percent through the HMEL joint venture and bought out 24 percent. By next year, he expects 56 percent from its own units, including the Vizag residue upgradation facility, 40 percent from joint ventures as HRRL comes on stream, and only the balance from third parties, leaving HPCL "almost self-sufficient, maybe surplus on some products." He said the change would "structurally alter our numbers" from the third quarter.

Vizag residue unit still stabilising

The residue upgradation facility (RUF) at Vizag is still in its stabilisation phase after what Kaushal described as unexpected technological challenges. "Even Lummus as a technology provider has not run," he said, adding it was the first time the licensor had run a unit this large. He expects the unit to stabilise next quarter and lift the refinery's distillate yields into the 80s.

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HP Navya premium LPG piloted

HPCL has launched HP Navya, an on-demand premium LPG product it is piloting through Swiggy in Bengaluru and its own channel in Mumbai. Kaushal said the product, launched on July 15, would be extended to 200 to 250 cities by Diwali.

HRRL refinancing, JV accounting

Director (Finance) Srividya Venkataraman said HPCL would refinance HRRL's high-cost rupee term loans using the RBI's fully hedged external commercial borrowing (ECB) window, worth a saving of at least 1.5 percent, and reprice bank debt now that the refinery is commissioned. At the parent level, interest cost was "not a concern," she said, with the focus on reducing the size of the debt itself. She said HRRL would be accounted for as a joint venture, reflected as a share of profit rather than consolidated. Full-year capex, guided at up to Rs 9,700 crore, is likely to come in lower as the company conserves cash, Kaushal said.

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