H P C L — Q3 FY26 earnings call

Call held 22 Jan 2026

Management summary

HPCL delivered strong financial results in Q3 FY26, driven by operational efficiencies and deleveraging. Key projects like Visakh RUF and Barmer refinery are progressing well, with commissioning milestones achieved. While the Mumbai refinery incident impacted GRM, the company's strategic focus on retail sales and competitive LNG deals positions it for future growth, alongside initiatives in digital transformation and green energy.

Highlights

  • Standalone PAT for Q3 FY26 was INR4,072 crores, up 32.6% YoY, and 9M FY26 PAT was INR12,274 crores, up 206%.

  • The Visakh RUF project was commissioned, targeting 100% utilization by March 2026 and expected to add $2.5/barrel to GRM.

  • Barmer refinery commissioning is progressing, with first products expected in February 2026 and full capacity by Q1 FY27.

  • Leverage significantly reduced to 0.86 in Q3 FY26 from 1.37 at the beginning of the year, leading to INR250-300 crores lower interest expense.

  • Operational efficiency improved, with Opex to turnover at 1.37% in Q3 FY26 (vs 1.60% in Q3 FY25) and Opex per metric ton down 13% YoY.

Concerns

  • Mumbai refinery GRM was impacted by $3.5/barrel due to the B-80 crude incident, reducing overall HPCL GRM by $1/barrel.

  • HMEL reported a PAT loss of INR94 crores in Q3 FY26 and INR18 crores for 9M FY26 due to a turnaround.

  • Marketing margins were slightly dampened in Q3 FY26 due to the Mumbai incident and strategic decision not to chase discounted bulk diesel volumes.

Key financials

4 periods

Headline

  • PAT
    ₹4,072 Cr
    YoY +32.6%
  • Refinery Throughput Utilization
    103%
  • Refinery GRM
    8.85 $/bbl

Q3 FY26

  • Opex to Turnover
    1.4%
  • LPG Under-recovery
    ₹503 Cr
  • HMEL PAT
    ₹-94 Cr

9M

  • PAT
    ₹12,274 Cr
    YoY +206%

9M FY26

  • Opex to Turnover
    1.4%
  • HMEL PAT
    ₹-18 Cr
  • HMEL EBITDA
    ₹4,000 Cr

What they filed

Q1 FY27: revenue up 26.9%, net profit down 398.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue99,957 1,10,608 1,09,633 1,10,825 1,00,856 +1%1,15,153 +4%1,14,937 +5%1,40,584 +27%
EBITDA2,296 5,495 5,788 7,461 6,852 +198%6,998 +27%9,211 +59%-16,122 −316%
Net profit143 2,544 3,415 4,111 3,859 +2599%4,011 +58%6,065 +78%-12,265 −398%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

  • Capex ₹13,000 Cr Cut — running a high leverage, consciously picked and choose where we could look at investments
    • Wider spread across different assets, including increased marketing expenses, some new energy capital
    • Green side projects (CBG plants)
    • Refinery debottlenecking and small value addition projects

    Previously planned ₹15,000 Cr

    If I keep HRRL, overall, it might be INR13,000 crores, INR14,000 crores, if I remember, the budget number was INR15,000 crores or something. So it might be slightly low, tad lower than that, which is not bad for us because we were running a high leverage. We consciously picked and choose where we could look at investments. In terms of nature of investments, going forward, you can expect a wider spread because the last 5 years, the capex was very skewed towards refining. You would expect a wider spread across different assets, including increased marketing expenses, some new energy capital in the next 5 years. We will work out those and come out with the guidance at the right time. They will not be large -- and these are all -- of course, we have projects on green side. We have CBG plants, etcetera, etcetera, we will take those. But on the refinery side, there will be more of debottlenecking, some small value addition projects, etcetera, we are not envisaging a large capex.
  • Debt 0.9× EBITDA
    • Refinance Finance team has been very diligent in managing the debt levels. We have refinanced certain things.
    Beginning of the year, our stand-alone leverage was at 1.37. We had given a guidance of about 1.15 to 1.2 to the market. We are much below that. We are at 0.86 for this quarter. Having said that, I also want to caveat that this would be higher for Q4 because of the cyclical nature of our business and the year-end stuff, but we will end the year lower than our guidance of 1.15.
  • M&A ADNOC Gas Joint venture · Closed

    Securing 5 million tons of gas supply for 10 years, coming from Middle East, very competitive deal.

    Secures gas supply for 10 years, 0.5 MTPA, from Middle East, very competitive.

    You would have also read about the ADNOC Gas deal. We had done a heads-up agreement earlier, but earlier this week, we closed the sales purchase agreement for a 5 million ton 10-year deal with ADNOC.

Guidance & targets

Capacity

  • Visakh RUF Utilization Capacity · March 2026 · High confidence 100%
    We are targeting a performance guarantee test, which will mean 100% utilization somewhere in March.

    — Vikas Kaushal

  • Barmer Refinery Full Capacity Capacity · Q1 FY27 · High confidence Full capacity
    We are expecting the first tranche of the products to be out in February and ramping up the refinery to full capacity by quarter 1 of the next financial year.

    — Vikas Kaushal

  • Visakh Distillate Yield Capacity · High confidence 82%

    From early 70s, mid-70s today

    So 82% distillate yield. We were Visakh, if you recall a few years ago, was in early 70s, mid-70s. We've done 2 parts of it, the capacity expansion, the BS VI, etcetera, we have done and then subsequently, we have once the -- this is 82% is the full guidance we have given, and we are confident we'll come to that level.

    — Vikas Kaushal

Profitability

  • Visakh RUF GRM Impact Profitability · Medium confidence $2.5 per barrel
    If we just do the analysis with RUF, without RUF, we are easily getting on paper, $2.5 per barrel kind of guidance which we had given to the stock market.

    — Vikas Kaushal

  • HPCL LNG Terminal Cash Positive Profitability · Within a year or so · Medium confidence Cash positive
    But to be cash positive, it may be a year or so.

    — Rajneesh Narang

  • HPCL LNG Combined Business Cash Positive Profitability · Very quickly (once breakwater completed in next couple of months) · Medium confidence Cash positive
    Our first endeavor is to get can we leverage Chhara to make more money on the gas side. So on the combined sourcing of gas plus Chhara, can we get EBITDA and cash positive very quickly? Our endeavor is to get there very, very quickly. Maybe once the there's a breakwater to be completed there, which is going to be completed hopefully in the next couple of months. Once it becomes an all-weather port, the utilization as Rajneesh ji mentioned, will go up. And hopefully, we'll get to breakeven on the terminal itself and the cash positive on combined business.

    — Vikas Kaushal

Debt

  • Leverage Ratio Debt · Year-end FY26 · High confidence Lower than 1.15

    From 1.37 (beginning of year) today

    Beginning of the year, our stand-alone leverage was at 1.37. We had given a guidance of about 1.15 to 1.2 to the market. We are much below that. We are at 0.86 for this quarter. Having said that, I also want to caveat that this would be higher for Q4 because of the cyclical nature of our business and the year-end stuff, but we will end the year lower than our guidance of 1.15.

    — Vikas Kaushal

Efficiency

  • Samriddhi 1.0 Benefits (Recurring) Efficiency · Till date · High confidence INR518 crores
    Samriddhi 1.0 has till date given as INR1,260 crores of benefit, of which INR518 crores is onetime or other way around, I repeat it's a -- I will give you the details but there's 67 sorry, INR519 crores is recurring, I got the numbers wrong on my sheet and INR749 crores is onetime.

    — Vikas Kaushal

  • Samriddhi 1.0 Benefits (One-time) Efficiency · Till date · High confidence INR749 crores

    — Vikas Kaushal

LPG Under-recovery

  • LPG Under-recovery (Jan 2026) LPG Under-recovery · January 2026 · High confidence INR95 per cylinder

    From INR35 per cylinder (Q3) today

    Okay. I'm sorry, I just stand corrected. INR95 in January and then INR120 thereafter.

    — K Vinod

  • LPG Under-recovery (Post-Jan 2026) LPG Under-recovery · Thereafter · High confidence INR120 per cylinder

    From INR35 per cylinder (Q3) today

    — K Vinod

Project Cost

  • Rajasthan Refinery Project Cost Project Cost · High confidence Roughly INR80,000 crores

    From INR79,000 crores (revised) today

    Yes, roughly in that direction. We will not be able to give you an exact number right now because there's some government approvals, which have been in the final stages. Once that comes out, we'll look at it, but there is no further increases from what has been discussed earlier. And give and take a few hundred crores here and they don't matter in that number. But broadly, it will be in that kind of a range.

    — Vikas Kaushal

What to watch in Q4 FY26

Visakh RUF 100% Utilization

March 2026
Current Commissioned, undergoing stabilization
Target 100% utilization

Why it matters

Key milestone for a major project, expected to significantly boost GRM.

We are targeting a performance guarantee test, which will mean 100% utilization somewhere in March.

Risks & concerns

  • Impact of B-80 Crude Incident

    medium

    Mumbai refinery GRM impacted by $3.5/barrel, leading to an overall HPCL GRM reduction of $1/barrel due to the incident.

    Management acknowledged

  • Petchem Margin Compression

    medium

    Analyst questions comfort with current low petchem margins. Management emphasizes focus on asset utilization and flexibility of integrated assets rather than short-term crack spreads.

    Analyst acknowledged

  • Excise Duty Changes

    medium

    Persistent analyst concern about potential government policy changes regarding excise duty. Management states they prepare for scenarios but will not comment on government policy.

    Analyst deflected

  • Delayed Projects (Historical)

    low

    Management acknowledges past concerns about delayed projects but states they are now 'coming to fruition,' citing Visakh RUF and Barmer progress.

    Management acknowledged

Q&A highlights

3 direct, 2 evasive
Market Valuation vs. Performance Evasive
I'm the CEO running the company, but if I was an investor, I would have taken a different decision knowing the strength of the company right now. It is a really strong company and up to you guys to make what value it should we figure out on it.

Analyst highlights HPCL's strong financial performance (28% ROE, 6% dividend yield, 0.2x sales valuation) but low market cap, questioning why the market isn't reflecting the value. Management deflects, stating their focus is on performance, not market valuation.

Asked by Sumeet Rohra

Impact of B-80 Crude Incident on GRM Partial
Mumbai refinery GRM for the quarter was impacted by $3.5 because of the total impact of it... overall, HPCL, we would have been instead of 8.8% or whatever that number was, we would have been 10.24%. So $1 plus kind of a per barrel impact for overall HPCL.

Analyst asks for quantification of the B-80 crude impact. Management provides a specific GRM impact for Mumbai ($3.5/barrel) and overall HPCL ($1/barrel), confirming a material negative effect on profitability for the quarter.

Asked by Sumeet Rohra

Fears of Excise Duty Changes Evasive
That's a great question. I also read about those reports and I'll opine on that. But see, it's not for me to comment on what government of India's policy on excise duties is. It is for Government of India to comment. So I will not delve into that topic.

Analyst raises persistent investor concern about potential excise duty changes. Management explicitly refuses to comment on government policy, emphasizing their focus on operational efficiency to prepare for any scenario, rather than speculating on policy.

Asked by Sumeet Rohra

ADNOC Gas Deal Pricing Framework Partial
This is a Brent-linked deal. Obviously, we will not give the pricing ranges here. But all I can tell you is one of the very competitive deals, which we have done, 0.5 MTPA for 10 years. The gas is going to come from Middle East.

Analyst seeks details on the pricing framework for the recently closed 5 MTPA ADNOC Gas deal. Management confirms it's Brent-linked and 'very competitive' but declines to provide specific pricing ranges, citing confidentiality.

Asked by Probal Sen

Rajasthan Refinery Full Capacity Timeline Direct
Yes, that's a fair assumption. Things can always go here and there, but that's a fair guidance we can give [full capacity alongside petchem conversion by FY28].

Analyst confirms the timeline for the Rajasthan refinery to reach full capacity, including petchem conversion, by FY28. This provides clarity on the long-term ramp-up of a major project.

Asked by Probal Sen

Opex Increase Q-o-Q Direct
In fact, in terms of expenses, there has been a net reduction. You recall the opening remarks of our Chairman, the opex per ton for the quarter 3 has come down by about 13%. And on a 9-month basis, it has come down by about 9%. This is on a per metric Ton basis.

Analyst observes a Q-o-Q increase in opex, but management clarifies that on a per-ton basis and as a percentage of turnover, opex has actually decreased significantly, highlighting improved operational efficiency.

Asked by Amit Murarka

Diesel Market Share Loss Direct
we actually have not lost share in the retail side. And bulk early if you were close to the market in the last quarter, you will realize that bulk diesel in India has been going at a discount... we did not run the bulk diesel race in the last quarter because of the discounts.

Analyst notes a loss in diesel market share. Management clarifies this was primarily in the bulk segment due to aggressive competitor pricing and their strategic decision not to chase volumes at discounts, while retail market share was maintained or improved.

Asked by Mayank Maheshwari

HPCL LNG Business Profitability Partial
But to be cash positive, it may be a year or so.

Analyst asks about the timeline for the overall HPCL LNG business to become EBITDA and PAT positive. Management indicates the terminal is already EBITDA positive and expects the overall business to be cash positive within a year or so, contingent on breakwater completion.

Asked by Ramesh S.

3 min read 8 chapters

Detailed narrative

Visakh RUF Project Commissioning

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.

Barmer Refinery Progress

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.

Strong Financial Performance & Deleveraging

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.

Operational Efficiencies & Samriddhi Program

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.

Strategic Focus Areas

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.

Marketing Performance & Diesel Strategy

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.

ADNOC Gas and LNG Portfolio

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 Performance and Mumbai Incident Impact

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.

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

More Oil, Gas & Consumable Fuels earnings calls