H P C L

HPCL successfully commissioned its Residue Upgradation Facility (RUF) project in Visakh a few weeks prior to the call. This project is a significant technical advancement, being the first in the world to achieve 93% conversion of bottoms through LC-MAX technology. The company is targeting 100% utilization by March 2026, following a performance guarantee test, and anticipates financial results from this unit in the next full year. The RUF is expected to contribute an additional $2.5 per barrel to the GRM.

The Barmer refinery project is progressing well, with all four pipelines commissioned and crude/natural gas already in the refinery. The commissioning process for the CDU plant is underway, with the first tranche of products expected in February 2026. HPCL aims to ramp up the refinery to full capacity by Q1 FY27, with petchem operations following a quarter or so later. The total project cost is estimated to be roughly INR80,000 crores, with no further escalation anticipated.

HPCL reported a Q3 FY26 standalone PAT of INR4,072 crores, a 32.6% increase YoY, and a 9-month PAT of INR12,274 crores, up 206% YoY. This strong performance has enabled significant deleveraging, with the stand-alone leverage ratio improving to 0.86 in Q3 FY26 from 1.37 at the beginning of the year. This reduction in debt has led to a lower interest expense of INR250-300 crores in Q3 FY26 compared to the previous year.

The company's focus on operational efficiencies is yielding results, with opex as a percentage of turnover improving to 1.37% in Q3 FY26 from 1.60% in Q3 FY25. The Samriddhi 1.0 program has generated INR1,260 crores in benefits to date, comprising INR518 crores in recurring benefits and INR749 crores in one-time^📎 gains. HPCL is now initiating Samriddhi 2.0, with guidance for next year's targets to be provided in the upcoming analyst call.

HPCL is prioritizing several strategic areas for future growth, including a strong digital focus with a new acceleration roadmap, enhanced customer focus through renovated retail outlets and improved services like HP Pay, and the creation of a separate CGD vertical. The company is also expanding its lubes business with high-grade synthetic lubes, international partnerships, and increased R&D, alongside venturing deeper into green and alternate energies.

Overall sales grew by 3.1% in Q3 FY26, primarily driven by the retail segment. HPCL consciously avoided chasing bulk diesel volumes at significant discounts, which led to some market share loss in the bulk segment but maintained or improved retail market share. The Mumbai refinery incident and aggressive competitor pricing slightly dampened marketing margins during the quarter, though crack spreads have since normalized.

HPCL closed a 5 million ton, 10-year Brent-linked sales purchase agreement with ADNOC Gas, described as one of the most competitive deals in India. The company's LNG portfolio is in its infancy but is considered competitive, with current activities including selling LNG sourced from outside to gain better margins. The Chhara terminal is expected to become cash positive within a year or so, especially once the breakwater is completed, enabling all-weather port operations.

HMEL reported a PAT loss of INR94 crores in Q3 FY26 and INR18 crores for the 9-month period, primarily due to a turnaround during the quarter. The Mumbai refinery incident, involving B-80 crude, resulted in a $3.5/barrel impact on Mumbai's GRM and a $1/barrel impact on HPCL's overall GRM, with associated costs in R&M and extra transportation. Management confirmed the issue is 'fully behind us' and the asset is running at optimal GRMs.