State-run oil retailer Bharat Petroleum Corporation ( BPCL ) has turned profitable with the third quarter net profit at Rs 551 crore against loss of Rs 1,089 crore in same quarter last fiscal. Higher other income and lower finance cost boosted profitability.
Discussing the earnings, P Balasubramanian, Director – Finance, BPCL said the government subsidy for Q3 was at Rs 1,080 crore. The company expects gross refining margin (GRM) of around USD 3-4 per barrel for Q4.
Below is verbatim transcript of the interview:
Q: Can you help us with some details about the inventory losses, the gross refining margins as well as what the subsidy was this quarter?
A: The combined GRMs for the current quarter are around 1.54 per barrel as compared to 1.76 per barrel in the corresponding period earlier.
Q: The subsidy?
A: It is 100 percent. If you want the subsidy amount, subsidy for the quarter is Rs 1,080 crore.
Q: You provided for Rs 1,080 crore of subsidy this quarter?
A: Yes. That is accounted for.
Q: Is this just for this quarter only?
A: Yes.
Q: Can you tell us about any sort of inventory losses that you recorded this quarter?
A: We have an inventory loss of almost around Rs 1,600 crore on a marketing side and the refinery side is taken care of by the GRMs.
Q: We are already a month and a half into this quarter. What is the outlook on the subsidy going ahead because there were some noises on the street, what we were also learning from the sources is about perhaps a new subsidy sharing mechanism, any clarity on that, what can we expect going ahead?
A: The subsidies have come down and on an average BPCL is having almost around Rs 500 crore per subsidy per month both on kerosene and LPG put together.
Q: What is your expectation of possible subsidy in Q4 and how much have you already accounted for the entire fiscal including Rs 1,080 crore that you alluded to for this quarter?
A: The gross under-recovery for the April-December period has been Rs 15,188 crore. After taking an upstream discount of almost Rs 9,694 crore on government of India subsidy of Rs 4,999 crore, we still have an absorbed subsidy for the nine months period of around Rs 494 crore. This along with the subsidy for Q4 we are confident that we will be getting it from the subsidy mechanism during the next quarter.
Q: What would your assumption for Q4 then be?
A: Roughly around Rs 500 crore is a subsidy for BPCL per month.
Q: That would Rs 1,500 crore that you would record in Q4?
A: Yes, assuming the prices are constant at these levels.
Q: How much has been the Budgetary support from the government in terms of discount from the upstream last quarter?
A: Last quarter governmental subsidy has been Rs 1,080 crore for us. Overall I think it is Rs 5,085 crore for the industry.
Q: What would your outlook be on your GRMs as well, you said it came in at USD 1.54?
A: GRMs are fairly good in this current period, if the GRMs remains at this level, we will be making between USD 3 and USD 4 for this quarter.
Q: What is the outlook on marketing profits as well as marketing margins?
A: Margins are more or less at the mark-to-market levels today so I don't think there will be any dent in the margins as of now.
Q: Is there any clarity whether the government will introduce a new subsidy sharing mechanism where below USD 60 per barrel companies will not have to bear any subsidy and going beyond that - there will be a split. So is there any clarity on that and is that something that the government is thinking?
A: We have to wait for the policy from the government in this regard. Petroleum ministry should be taking it up with the government.
Q: Have you heard anything in terms of the new subsidy mechanism, what might be the likely formula?
A: My news is what you people report in the media.
Q: What would be the outlook in terms of the inventory losses for the coming quarter if that would be the case, you recorded Rs 1,600 crore in terms of inventory losses this quarter?
A: The inventory losses should not be higher in this current quarter because the prices are now moving up, crude prices have almost come to USD 50 per barrel levels and now it is moving to almost to USD 60 per barrel levels now. So we don't expect any inventory losses at this point in time.
Q: You are expecting no inventory losses in Q4 as opposed to Rs 1,600 in Q3, is that a fair takeaway?
A: If the prices are on the upward direction, if it again goes to the downward direction, it will be different. Almost 50 percent of Q4 is over. So almost another half is left depending on how the prices move. However, the downside is less now as compared to the earlier quarters.
Q: In one of your earlier answers, you have indicated that the company is making the normal profit of about Rs 1.8 per litre on petrol and diesel, is it on both and each or is that only on diesel or only on petrol?
A: Diesel will be around Rs 1,400, petrol will be around Rs 1,800.
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