BPCL net soars despite decline in income on robust margin

MUMBAI: State run-Bharat Petroleum Corporation’s net profit soared to Rs 2,376.16 crore in the first quarter of 2015-16 from Rs 1,216.26 crore a year ago despite a decline in revenue due to robust margins and a gain on inventory.

The company’s total income in the June quarter was Rs 51,966.07 crore crore as against Rs 66,749.65 crore a year ago, primarily due to fall in crude prices.

“Our gross refining margin in the quarter has been very strong at $8.55 a barrel as cracks spread were good in petrol as well as diesel and are marketing margins have also been good. The cracks spread has already started narrowing and we expect the GRMs average at $4-$6,” P Balasubramanian, director-finance, told ET.

GRM is the difference between total value of petroleum products and price of crude, and is the key profit indicator for crude oil refiners. While private refiners like Reliance Industries and Essar Oil have upgraded their refineries and enjoy high GRMs, the public sector refiners continue to report modest GRMs.

Crude prices have fallen over $10 a barrel in the last one month alone, causing analysts to worry that refiners may incur inventory loss in the second quarter of 2015-16.

“We made a gain of Rs 200 crore on our inventory in the first quarter that may not be there in the next quarter given how the crude prices have fallen,” Balasubramanian said.

BPCL has plans to invest over Rs 30,000 crore over the next four years, of which around Rs 10,000 crore would be spent in the current fiscal. The capex for the current year would be primarily on the expansion of its Kochi refinery to 15.5mtpa from the current 9.5mtpa at a cost of around Rs 16,500 crore.