Hindustan Petroleum Corporation Limited Q1 FY27 Earnings Call Summary

Event Participants

Executives

4
S. Bharathan, Vikas Kaushal, Srividya Venkataraman, K. Vinod

Analysts

14
Abhishek Maheshwari, Abhishek Nigam, Amit Murarka, Gagan Dixit, Keshav Soni, Maulik Patel, Mayank Maheshwari, Nikhil Bhandari, Nitin Tiwari, Probal Sen, Puneet Gulati, Sumeet Rohra, Vikash Jain, Yogesh Patil

Financials & KPIs

Geographic & Segment Commentary

• Refining – Visakh (East Coast): Auditor-noted loss of ₹2,635 crore after inventory write-downs; RUF (380 bar/400°C, first-of-scale globally) stabilization ongoing with catalyst handling challenges; distillate yields expected into the 80s once stabilized; East Coast freight/crude premium and absence of natural gas remain structural cost drags.
• Refining – HRRL (Rajasthan): Commercial operations declared 22 June; CDU running at 60% and already tested at 100% for days; PFCCU commissioning imminent; petcoke was first commercial product; Q2 utilization ~50% guided, 80-85% from October, near-full by Q4; petchem by FY-end; 150 support staff deployed from Vizag/Mumbai.
• Marketing – Retail Fuels: Demand spikes of up to 40% above normal during crisis; Abhyuday 2.0 running at 4,900 outlets with +100-150 bps growth vs market; brand ranked top 20 in India across all sectors; non-fuel contribution targeted as incremental P&L line by March.
• Marketing – LPG: Q1 under-recovery of ₹510/cylinder (June ₹680, July ₹490); HP Navya premium on-demand LPG launched 15 July via Swiggy (Bengaluru, 5-km radius) and own channels (Mumbai); scaling to 25 cities by 31 August and 200-250 urban cities by Diwali.
• Sourcing & Supply Chain: Q1 term crude contracts largely inaccessible from Hormuz side; crude covered through end-August with September buying started; LPG mix diversified with US cargoes and Indian time charters, cooling spot premium; SPR Basrah crude drawn from ISPRL Vizag cavern at market price plus fee.

Company-Specific & Strategic Commentary

• Seven-Pronged Response Strategy: Management detailed a coordinated crisis response covering balance sheet repair, CapEx control, interest cost reduction, Samriddhi 2.0, retail wins, refinery optimization, and digital — aimed at emerging "stronger with a more balanced portfolio."
• Balance Sheet Deleveraging: Debt at ₹72,000 crore (debt-equity ~1.5x vs 0.8x at FY26 end) after adding ~₹1,900 crore/week over 13 weeks; management targets a faster correction than the three-year post-Ukraine recovery (2.33x → 0.8x).
• Samriddhi 2.0 Profitability Program: Reinitiated after three months of crisis focus; targeting ₹1,500 crore run-rate savings and ~₹1,000 crore FY27 accruals from 100+ ideas spanning cost take-outs and top-line improvement.
• Refinery Optimization & Self-sufficiency: Energy costs of ~₹2,000+ crore across balance-sheet refineries targeted; intermediate stream purchases (VGO, pygas), Mundra VLCC-to-Mumbai ship-to-ship transfers, and cross-refinery crude optimization; diesel self-sufficiency (own + JV) to reach ~96% by FY28.
• Digital & Analytics: Supply chain optimization solution launched; 1,600 employees participated in a digital hackathon generating 499 ideas; APC/RTU saturation yielding 0.4-0.5% yield uplift where deployed.
• Premium LPG Innovation (HP Navya): On-demand premium LPG sold through new channels (Swiggy pilot) with new cylinder and delivery formats; reframes LPG from commodity to service-differentiated product; 200-250 cities targeted by Diwali.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Crude Sourcing & Supply Security

• Question: Given the Hormuz flare-up, any fresh challenges in crude sourcing for Q3, with Rajasthan refinery now ramping? (Probal Sen, ICICI Securities)
• Answer: Fully covered for crude through end-August, with September buying started; Q1 term contracts were largely stranded but availability is not an issue; HRRL at full steam actually strengthens ability to process dirtier crudes. LPG sourcing has been diversified with US cargoes and Indian time charters — "muscle memory" from the crisis. (Vikas Kaushal)

Inventory Losses & Q2 Reversal

• Question: Is it fair to assume negative inventory impact in Q1 will reverse this quarter given the price spike? (Probal Sen)
• Answer: Yes; HPCL consciously carried more-than-usual crude to protect throughput, which was written down at June-end; reversal depends on crude trajectory — July is already running marked-down crude. (Vikas Kaushal)
• Question: Can you ballpark the inventory loss quantum? (Amit Murarka, Axis Capital)
• Answer: Net of inventory, the loss would have been "well on the other side of a five-digit number" — no finer number given. (Vikas Kaushal)

Marketing & LPG Under-recoveries

• Question: Is the refinery-to-marketing transfer adjusted for SAED? What was the LPG loss per cylinder? (Puneet Gulati, HSBC; Probal Sen)
• Answer: Transfers are net of SAED; Q1 marketing under-recovery was >₹26,000 crore (~₹20,000 crore on MS/HSD, balance LPG). LPG loss was ₹510/cylinder average for Q1; June ₹680, July improved to ₹490. (Vikas Kaushal; Srividya Venkataraman)

Refining Margin Performance vs Peers

• Question: BPCL reported far stronger refinery margins; HPCL has trailed peers for five years — what explains this? (Nitin Tiwari, PhillipCapital)
• Answer: Management declined peer comparison; cited structural asset differences (East Coast freight and crude premium at Visakh, no natural gas at Visakh, no delayed coker at Mumbai); "one year later ask the same question — you will have an HPCL asset with the highest margin" post RUF and HRRL. (Vikas Kaushal)

Vizag RUF Stabilization

• Question: When will the Vizag bottom unit stabilize and start contributing fully to margins? (Amit Murarka)
• Answer: First-of-scale technology (380 bar, 400°C, 25-cm reactor walls) with Lummus; "engineering problems get solved"; good run expected in the current quarter, fully stabilized by Q3 FY27. (Vikas Kaushal; S. Bharathan)

Government Support & FY27 Outlook

• Question: With ~₹36,000 crore of under-recoveries in three months, can the company expect substantial government support? What is the FY27 outlook? (Sumeet Rohra, Smartsun Capital)
• Answer: Not management's brief to comment on government support; government has acknowledged OMCs' role in keeping the nation's wheels moving and support has come in different forms historically. Management is "bullish about the future" and no team wants a red year; Q2 should be better. (Vikas Kaushal)

CapEx Control & SPR Mechanism

• Question: What is the FY27 CapEx expectation and which segments bear the cut? How does the SPR drawal mechanism work? (Yogesh Patil, Dolat Capital; Nikhil Bhandari, Goldman Sachs)
• Answer: Ceiling is ₹9,700 crore and it will be lower if stress persists; discretionary items (pump upgrades, admin infra) get deferred while critical spends are protected. SPR crude is drawn via requisition to ISPRL at market price plus fee — HPCL took Basrah from the Vizag cavern; process was quick. (Vikas Kaushal)

Interest Cost Reduction

• Question: How much room is there to lower interest costs on JV and total debt over the next year? (Mayank Maheshwari, Morgan Stanley)
• Answer: HRRL has high-cost rupee term loans; two-pronged approach — refinance a portion via the fully-hedged ECB window (minimum ~1.5% saving) and negotiate repricing with banks post-stabilization; at HPCL level, the focus is on shrinking debt size rather than cost alone. (Srividya Venkataraman)

HRRL Ramp-up & Learnings from Vizag

• Question: What operational learnings from Vizag are being applied to Rajasthan, and what are the commissioning timelines? (Nikhil Bhandari, Goldman Sachs)
• Answer: Four to five major blocks were commissioned within ~3 weeks in June; PFCCU is being commissioned within hours; 150 experts from Vizag/Mumbai are stationed at HRRL; SRU by end-Q2; refinery at 85-90% by October-end; petchem trailing by design, with LPG sales bridging until then. (Vikas Kaushal; S. Bharathan)

Debt Position & ATF Under-recovery

• Question: Is current debt much higher than quarter-end given the $20 crude move? What are ATF losses? (Vikash Jain, CLSA)
• Answer: Debt is roughly similar to quarter-end (±₹1,000-2,000 crore); "we are at the top of the mountain" if today's situation holds. ATF under-recovery is a bigger problem for two larger peers; HPCL has applied less attention given its smaller ATF market share. (Vikas Kaushal)

Key Takeaway

HPCL swung to a net loss in Q1 FY27 as marketing under-recoveries exceeded ₹26,000 crore (₹20,000 crore on auto fuels; LPG at ₹510/cylinder), inventory write-downs bit hard after the team deliberately carried elevated crude into the June price collapse, and the Visakh RUF remained in stabilization (₹2,635 crore refinery loss). Management framed the quarter as a "circle of life": the Rajasthan HRRL refinery was commercialized on 22 June and dedicated to the nation on 4 July after an April CDU fire, while FY26's ₹17,175 crore profit gave way to a red quarter. A seven-pronged response targets debt reduction from ₹72,000 crore (1.5x debt-equity), CapEx below ₹9,700 crore, Samriddhi 2.0 savings of ₹1,500 crore run-rate, and RUF stabilization by Q3 FY27. With HRRL and RUF ramping, HPCL expects ~96% diesel self-sufficiency by FY28. Crude volatility and Hormuz risk remain key watch items; management was "happier with July" but declined formal guidance.