BPCL sees growing foreign interest

Bharat Petroleum Corporation Ltd (BPCL) is paving the way for foreign investors to increase stake in the company. The PSU oil marketing company has sought shareholders’ nod for raising FII investment limit to 49 per cent from the current 24 per cent.

Speaking to Bloomberg TV India, BPCL Director - Finance P Balasubramanian, says gross refining margins may be sustained at double digits in FY17. Capacity expansion at Bina refinery from 6 million tonnes to 7.8 mt at a cost of ₹3,300 crore will be completed in 13 months.

The foreign investment limit of 24 per cent in the company was fixed when the sector cap for the sector was around 24 per cent. It has been subsequently increased to 49 per cent.

And in view of increasing the FII limit to that level, we have just taken the board’s approval.

And we have to get necessary approvals from the shareholders as well as from the authorities before we really implement it.

BPCL’s gross refining margins (GRMs) have been strong in the Q3. Do you see this sustainable going ahead? Or do you think the cyclicality will kick in now?

The GRMs has come down a bit from the Q3 level. The Q4 was slightly lower especially in February and March. Now, it is getting affected. The GRM for petrol is in double digits.

The diesel has been showing a bit down trend between below 10 per cent and about 10 per cent mark in March. But overall we feel that from Q1 (April-June) onwards, we will have GRMs above March level.

Can you share numbers as far as the product deltas on gasoline as well as diesel is concerned? In comparison to the previous quarter, what has been the kind of cooling off in terms of deltas specifically for gasoline and diesel?

Gasoline in Q3 was somewhere around $14 per barrel and diesel was somewhere around $11-12 per barrel, which has come somewhere around $10-12 for gasoline.

At one point in time it was around $8-9 a barrel. But with currency holding up, it is currently around $10.

How has the marketing margin been as far as the petrol and diesel are concerned?

Marketing margins are almost at the same level. It is around ₹1,800 per tonne for petrol and ₹1,500 for diesel.

Speaking of fuel price revisions, OMCs increased petrol prices at the pump level by ₹4 per litre, which was quite bold given that there are State elections on the anvil. How much of elbow room per litre do you see in terms of marketing margins at the pump level improving for petrol and diesel?

Marketing margin is a different aspect compared to the price revisions that has happened. In the last one-and-a-half years, we have been almost in the same levels of ₹1,500 per tonne and ₹1,800 as far as the marketing margins are concerned for petrol and diesel. These are almost at a very reasonable level and not at high level. I do not think that the margins will have any impact at this point in time.

Tell us about the Bina refinery. How is that really progressing?

Bina refinery has been doing well in the current year. They have almost done more than 100 per cent capacity implementation in the current year at almost around 6.4 million tonnes. This year, we are expecting Bina to turn the corner and come to profitability level. We have embarked upon keeping expansion at Bina from 6 mt to 7.8 mt with a capital expansion of almost around ₹3,300 crore, which will be completed in 13 months from today. We have just started commencing that expansion programme now.

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