Strong refining growth masked by LPG losses and margin compression

Revenue +27.1% YoY, but PAT collapsed ₹6.8k Cr to loss due to geopolitical margin compression

Confirmed: ₹15k Cr gain on finished goods; ₹3–4/bbl loss on crude; net helped offset operational weakness

$15.59 reported, but SAED-adjusted $36/bbl; price controls suppressed earnings by ~$20/bbl

Panipat 94% done (Dec 26), Gujarat 90% (Nov 26), Barauni 92% (Dec 26), PX-PTA 95% (next month); timelines credible

June ₹665/cyl → July ₹475/cyl → Q2 expected ₹250/cyl; trend positive but losses remain severe and geopolitical-dependent

Detailed 5-project schedule (₹90k Cr, 94–95% complete) with timelines: Panipat Dec 26, Gujarat Nov 26, Barauni Dec 26, PX-PTA Sept, polybutadiene Dec 26. Throughput targets: FY27 77, FY28 85, FY29 90 MMTPA. New from this call.

Explicit 5–6 year plan to raise petchem from 6.5% to 15% revenue intensity; ₹100k Cr capex; projects on LAB, PX-PTA, others. Multi-year strategic shift, not incremental.

Terra Clean Ltd. target 18 GW in 3–4 years; 4–5 GW in progress; land allotted (423 acres UP, Gujarat wind 100 MW). Concrete expansion roadmap versus prior aspirational tone.

Month-wise LPG under-recovery revealed: June ₹665/cyl, July ₹475, Q2 expected ₹250. Shows improvement trend and sensitivity to Saudi CP (790→592→632). New quantified visibility.

Spot sourcing jumped 50% → 84% due to ME disruption. Diversification to Russia (50–54%), Brazil, Africa, USA executed. Procurement cost $10/bbl premium at peak, now $2–3. Hedging geopolitical exposure vs prior quarter.

Capex remains 30–40k Cr/yr next 2–3 yrs. Petchem ₹100k Cr over 5–6 yrs (6.5%→15% intensity), renewables 18 GW in 3–4 yrs, biofuels, shipping, battery swapping. Not exclusively renewables; diversified.

SAED-inclusive GRM ~$36/bbl. Difference $20+/bbl is suppression due to price controls.

June ₹665/cyl, July ₹475, August declining due to Saudi CP fall (796→592). Q2 expected ₹250 avg, assuming Saudi CP stabilizes. Geopolitical dependent; trend improving but uncertain.

Crude side: $3–4/bbl loss. Finished goods: ₹15k Cr gain (large inventory base). Gains offset losses this quarter. Confirms margin suppression without inventory support.

Q3 FY26–27 commissioning. GRM will depend on crude/product price play; cannot predict. New units produce more value-added products, which will boost margins, but no specific number given.

Cannot give specific number, but new modern units enable higher value-added product processing; returns 'definitely going to go up.' No quantified target.

Situation very dynamic, day-to-day. Engaged with authorities. Hopeful on LPG government support based on past practice; timing/quantum uncertain. Other products depend on multiple factors (crude, spreads, forex, insurance, inventory). No commitments.

Pre-war: Brent -$1/2. War peak: $10/bbl premium. July: $2–3. All-inclusive (shipping/logistics). Overall impact $10/bbl on portfolio. Ongoing volatility.

MoU signed Sept 19 (non-binding). IOC to explore 4 MR vessels as starter in JV. Tenders already out. Diversification achieved: ME main source, but significantly increased Russia, West Africa, Venezuela, Brazil, USA spot. Strategy working—managed cost despite disruption.

20% blending target achieved, in line with other OMCs. Different ethanol types priced independently; basket-based on MS blend. Not flexible on government target; collective decision across 3 OMCs. 20% achieved; whatever new target given, achievable.

Excise duty reduction, multiple price tranches, June price decline (initial estimate April), all 3 OMCs had inventory gains. Factors combined to mitigate.

Borrowings up ₹31k Cr (March ₹110.7k → June ₹141.5k). Not distressed; banking arrangements in place at competitive rates. Debt-equity 0.71, net 0.51. Strong balance sheet. Interest cost did rise vs pre-war, but manageable.

Comparison on Ind-AS marked-to-market basis. Inventory $87 March 31 → $83 June 30 = marginal loss. Finished goods had gains due to product price rises. [Discrepancy noted but not fully resolved.]

IOC energy basket share 9–10%; must maintain via investment. All capex project-evaluated on profitability. Refining gave extraordinary returns 4–5 yrs; petchem will too. Renewables will be major next 3–4 yrs. No target capex; each deal on merits. 30–40k Cr/yr is expected range, not cut.

SPR capacity 5.33 MMT (Vizag, Mangalore, Padur), target 11.83 MMT. Not IOC-specific; sector-wide. IOC under discussion for participation if commercially viable. No formal directive; all evaluated on commercial terms.

Distillate yield, fuel & loss depend on crude type. New units improving both. Fuel & loss only 8% this quarter (lowest post-BS-VI). SPRINT targets quartile-1 in Solomon study. Value-added products will increase margins; no specific quantification.

No airlines used PSF (prices fell before activation). International pricing passed to airlines. Domestic negotiated pricing ongoing. Current domestic scheduled airline pricing ₹115/liter (dynamic, recent cycle ₹110; previous ₹115). Market-linked.

Panipat 15→25 MMTPA (₹38k Cr, 94% done, Dec 26). Gujarat 13.7→18 MMTPA (₹19k Cr, 90%, Nov 26). Barauni 6→9 MMTPA (₹18k Cr, 92%, Dec 26). PX-PTA (95%, next ~1 mo). Polybutadiene ₹3k Cr (Dec 26). Total 5 projects ₹90k Cr (~$10B). FY27: 77 MMTPA, FY28: 85 MMTPA, FY29: 90 MMTPA.

Enhance petchem capacity +5 MMTPA (LAB, PX-PTA, others). Cost ₹100k Cr over 5–6 yrs. Intensity 6.5%→15%. All projects start/complete by March 30 (some 5–6 mo variance). Open to gas-based, naphtha-based inputs.

Not flexible on government target; collective decision with 3 OMCs. Cannot give futuristic statements. Whatever target given (now 20%), we achieve comfortably.

All capex passes hurdle rate. Petchem cyclical; 1–2 good years in any cycle recover costs. Demand huge in India (imports). Natural integration with refining. Long-term strategy; IOC scale advantage. Refining returns extraordinary; expect petchem to deliver similarly.

Pre-war: 50/50 spot/term. Now: 84% spot (ME disruption). Spot from non-ME regions. Dynamic daily. Pricing month-to-month; no single premium/discount. Managed cost well even at peak war; still higher than pre-war.

SPRINT saved ₹2k Cr FY26. SPRINT 2 expecting ₹2–2.5k Cr FY27. Not just cost; covers efficiency, market share, logistics, opex. On track despite war. Tracking each opex/capex to optimize.

Bill passed Senate, not yet law. Must clear House, be signed by President. Not yet implemented. Tracking developments; will mitigate once implemented.

Based on 5 projects 90–95% complete, commissioned Q4 CY26 (Nov–Dec 26). Panipat +10, Gujarat +4.3, Barauni +3 MMTPA adds ~17 MMTA. Sequential build credible on current trajectory.

Long-term strategic shift. Projects at various approval stages. 5 MMTPA capacity addition planned. Cyclical petchem market; management confident 1–2 good years recover cost, but execution risk on timing/ROI.

2.65 GW transmission approval received; 4–5 GW in progress; 100 MW wind (Gujarat), ~100 MW solar (UP 423 acres). Greenfield expansion; depends on project approvals, capex execution.

Management declined to quantify GRM escalation post-projects. Refining margin benefit depends on external commodity prices. SAED discount ~$20/bbl; extent of relief unclear.

Trend improving (June→July→Aug decline), but government compensation timing/quantum uncertain. Geopolitical sensitive (Saudi CP movements, Red Sea disruption). ₹250 assumes stable Saudi CP.

Management expects higher distillate yield and lower fuel & loss post-projects, driven by value-added product capacity. No quantified yield target beyond 'mid-80s possible' (analyst suggestion, not committed).

Q1 FY27 capex ₹6,461 Cr (on pace). Breakdown: ₹38k Cr Panipat, ₹19k Cr Gujarat, ₹18k Cr Barauni, ₹3k Cr polybutadiene, plus petchem ₹100k Cr over 5–6 yrs, renewables 18 GW (cost TBD).

Crude landed cost $10/bbl premium at peak war. SAED suppresses GRM ~$20/bbl. Spot sourcing 84% exposes to daily commodity volatility. Red Sea/Strait disruption ongoing.

LPG loss ₹665/cyl (June), declining to ₹250 expected (Q2). Depends on government compensation timing/quantum. No formal commitment. Absorption into PAT material (~₹700 Cr per month per analyst estimate).

5 projects ₹90k Cr (₹10B) targeted Q4 CY26: Panipat (Dec 26, 94% done), Gujarat (Nov 26, 90%), Barauni (Dec 26, 92%), PX-PTA (~1 mo, 95%), polybutadiene (Dec 26). 2–3 month slip delays margin recovery by a quarter.

FQ finished goods inventory gain ₹15k Cr (price revaluation). Crude inventory marked $83/bbl June 30 (vs Bloomberg $70—discrepancy unresolved). If prices fall sharply, reversal of ₹15k Cr gain + new losses possible.

Petchem capex ₹100k Cr over 5–6 yrs to lift intensity 6.5%→15%. Current cycle weak; analyst (Bineet Banka, Nomura) noted naphtha-based plants have 'subpar economics.' Expansion timed at cycle bottom (favorable), but 2–3 year cycle recovery uncertain.