Skip to content

    H P C L Q1 FY27 earnings call

    HINDPETRO
    Oil, Gas & Consumable Fuels·23 Jul 2026
    Management Summary

    HPCL reported a challenging Q1 FY27 marked by significant marketing under-recoveries of INR26,000 crores and a Vizag refinery loss of INR2,635 crores, contributing to a rise in debt-to-equity to 1.5. Despite these financial headwinds, the company successfully commissioned the Rajasthan Refinery (HRRL) and launched the HP Navya LPG product. Management outlined a 7-pronged response strategy focusing on balance sheet improvement, capex control, and refinery optimization, expressing confidence in a stronger future.

    Highlights

    5

    • Rajasthan Refinery (HRRL) declared scheduled commercial operation on June 22, with the CDU currently running at 60% capacity and expected to reach full capacity by Q3 FY27.

    • Successfully launched HP Navya, a premium LPG product, on July 15, piloting in Bangalore and Mumbai, with plans to expand to 5 cities by July 31, 25 cities by August 31, and 200-250 cities pan-India by Diwali.

    • Reinitiated the Samriddhi 2.0 program after a 3-month hiatus, setting an aggressive target of INR1,500 crores on a run rate basis and aiming for INR1,000 crores in accruals.

    • Demonstrated strong team performance in managing supply chains during high uncertainty, ensuring continuous product supply despite significant demand spikes requiring 40% more product.

    • Advanced digital initiatives, including the launch of a supply chain optimization solution and a digital hackathon with 1,600 participants generating 499 improvement ideas.

    Concerns

    5

    • Reported significant marketing under-recoveries of INR26,000 crores for Q1 FY27, with INR20,000 crores attributed to MS and HSD.

    • Incurred an average loss of INR510 per LPG cylinder for the quarter due to under-recoveries.

    • The Vizag refinery recorded a loss of INR2,635 crores in Q1 FY27, after factoring in inventory losses.

    • Current gross debt stands at INR72,000 crores, with the debt-to-equity ratio rising to 1.5 from 0.8 at the end of the previous fiscal year.

    • Experienced substantial inventory write-downs due to extreme crude price volatility, with the loss described as being "on the other side of 5-digit number by a good margin."

    Key financials

    Metrics

    6

    Periods

    2

    Headline

    5
    • Marketing Under-recovery
      ₹26,000 Cr
    • LPG Loss per Cylinder
      ₹510
    • Vizag Refinery Loss (post-inventory)
      ₹2,635 Cr
    • Gross Debt
      ₹72,000 Cr
    • Debt to Equity Ratio
      1.5 ratio

    Q1 FY27

    1
    • Capex
      ₹1,700 Cr

    Capital allocation

    3
    high confidence
    CategoryHeadline
    Capex

    ₹1,700 crores this quarter · ₹9,700 crores (FY27) planned

    cut — conserve cash due to prevailing market situation and high uncertainty

    Debt

    Gross ₹72,000 crores

    Liquidity

    Liquidity disclosed

    Management is focused on conserving cash due to the current challenging environment.

    Guidance & targets

    12
    CategoryTargetPriority
    Capex
    FY27 Capex
    Lower than INR9,700 crores
    		Medium
    Capacity
    HRRL CDU Utilization
    Full capacity
    		High
    Capacity
    HRRL Refinery Section Utilization
    Full utilization
    		High
    Capacity
    HRRL Full Run
    Full run
    		High
    Product Launch
    HP Navya City Expansion
    200 to 250 cities
    		High
    Profitability Improvement
    Samriddhi 2.0 Accruals
    INR1,000 crores
    		High
    Refinery Sourcing
    Self-sufficiency/Reduced Third-Party Dependence
    Almost self-sufficient, maybe surplus on some products
    		Medium
    Refinery Sourcing
    Diesel Sourcing from Own/JV
    Hardly dependent on anybody else
    		High
    Refinery Sourcing
    MS Sourcing from Own/JV
    Lead only 10% MS from anybody else
    		High
    Refinery Sourcing
    Overall Sourcing from Own/JV
    56% from own, 40% from JVs
    		High
    Refinery Yield
    RUF Distillate Yields
    Up to 80s
    		Medium
    Refinery Efficiency
    RTOs and APCs Uplift in Yield
    0.4% to 0.5%
    		High

    What to watch in Q2 FY27

    5

    HRRL CDU Utilization

    Q3 FY27
    Current60%
    TargetFull capacity

    Why it matters

    Full utilization of the Rajasthan Refinery is key to improving refining margins and overall profitability.

    We are expecting the refinery to ramp up to the full capacity in quarter 3 and petchem by end of the financial year. But the refinery gains and running the CDU at full capacity would be at quarter 3.

    Risks & concerns

    5
    RiskSeverity

    Extreme crude and crack price volatility

    Crude prices fluctuated wildly (e.g., Brent $110-$115, drops $25, then up to $96) leading to significant inventory write-downs and making predictions difficult. — Management acknowledged

    high

    High marketing under-recoveries

    Q1 FY27 saw INR26,000 crores in under-recoveries, with INR20,000 crores on MS/HSD and INR510/cylinder loss on LPG, impacting profitability. — Management acknowledged

    high

    High debt levels and rising debt-to-equity ratio

    Gross debt reached INR72,000 crores, and the debt-to-equity ratio increased to 1.5 from 0.8, necessitating focus on balance sheet improvement and debt reduction. — Management acknowledged

    high

    Refinery stabilization challenges (Vizag RUF, HRRL CDU fire)

    Vizag RUF is a technically complex asset facing stabilization issues, and HRRL experienced a CDU fire, delaying full ramp-up and impacting Q1 performance. — Management acknowledged

    medium

    Geopolitical events impacting supply chains

    Events like the Strait of Hormuz issues and Red Sea Houthis create dynamic and uncertain supply conditions, affecting crude sourcing and pricing. — Management acknowledged

    medium

    Q&A highlights

    7

    “Yes. I think part of the statement is absolutely correct, Probal. We did have a significant amount of inventory. And also 2 things happened in this quarter. You should remember that it was very uncertain times to secure more inventory. At least we carried more than usual inventory with us. That was a conscious call we took because, as I said, we were first looking at keeping the throughputs going. So -- and also during the month end, some cargoes which were stuck in SOH, were landed.”

    Analyst probed for quantification of inventory losses, which management acknowledged as significant but avoided giving a precise number, highlighting the impact of extreme price volatility.

    asked by Probal Sen

    2 min read6 chapters

    Detailed Narrative

    01

    Q1 FY27 Performance Overview and Challenges

    HPCL faced a challenging Q1 FY27, characterized by extreme crude price volatility and significant financial setbacks. The company reported marketing under-recoveries of INR26,000 crores, with INR20,000 crores attributed to MS and HSD, and an average loss of INR510 per LPG cylinder. The Vizag refinery also contributed to the negative performance with a loss of INR2,635 crores after inventory adjustments. These factors led to a rise in gross debt to INR72,000 crores and a debt-to-equity ratio of 1.5, up from 0.8 at the end of the previous fiscal year.

    02

    Rajasthan Refinery (HRRL) Commissioning and Ramp-up

    The Rajasthan Refinery (HRRL) achieved scheduled commercial operation on June 22, despite an earlier incident involving a small fire in the CDU on April 20. The CDU is currently operating at 60% capacity, with expectations to reach full capacity by Q3 FY27. The PFCCU, a key money-spinner unit, is also slated to come online soon. The refinery section is projected to achieve 80-85% utilization from October onwards and full utilization by Q4 FY27, with a full run expected by FY28.

    03

    HP Navya LPG Product Launch and Expansion

    HPCL launched its new premium LPG product, HP Navya, on July 15. The product is currently being piloted in Bangalore (with Swiggy) and Mumbai (through HPCL's own channel). The company plans a rapid expansion, targeting 5 additional cities by July 31, 25 cities by August 31, and a pan-India presence in 200-250 urban-centric cities by Diwali. This initiative aims to offer a differentiated service for customers willing to pay a premium.

    04

    Strategic Response to Financial Headwinds

    In response to the challenging environment, HPCL has implemented a 7-pronged strategy. Key elements include improving the balance sheet by focusing on debt reduction, controlling capex (Q1 spend was INR1,700 crores against an annual target of INR9,700 crores, which is expected to be lower), and managing interest costs through avenues like the ECB window. The company also reinitiated its Samriddhi 2.0 program, targeting INR1,000 crores in accruals for FY27, to drive profitability improvement.

    05

    Refinery Operations and Optimization Initiatives

    HPCL is actively working on refinery improvement, aiming for increased self-sufficiency and reduced reliance on third-party product sourcing, expecting to be almost self-sufficient or even surplus on some products by year-end. Efforts are underway to stabilize RUF technology, which has faced unexpected challenges, and to optimize crude sourcing across its refineries and joint ventures. Digital initiatives, including a supply chain optimization solution, are being leveraged to enhance efficiency and movement of products.

    06

    Future Outlook and Confidence

    Despite the current negative financial performance, management expressed strong confidence in the future, citing foundational elements in place and ongoing strategic initiatives. They anticipate a turnaround, with Q2 results expected to be better. The company is focused on making its assets work more efficiently, with sharper turnarounds and a concerted effort to reduce energy costs, which currently amount to approximately INR2,000 crores annually across its two main refineries.

    This is an AI-generated summary of a publicly available earnings call transcript.