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Hindustan Petroleum Corporation Ltd.

BSE: 500104 Sector: Oil & Gas
NSE: HINDPETRO ISIN Code: INE094A01015
BSE 16:01 | 24 Sep 248.40 -9.15
(-3.55%)
OPEN

256.00

HIGH

264.00

LOW

245.85

NSE 15:57 | 24 Sep 248.15 -9.85
(-3.82%)
OPEN

256.00

HIGH

264.35

LOW

245.45

OPEN 256.00
PREVIOUS CLOSE 257.55
VOLUME 562533
52-Week high 483.75
52-Week low 233.50
P/E 5.29
Mkt Cap.(Rs cr) 37,852
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 256.00
CLOSE 257.55
VOLUME 562533
52-Week high 483.75
52-Week low 233.50
P/E 5.29
Mkt Cap.(Rs cr) 37,852
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Hindustan Petroleum Corporation Ltd. (HINDPETRO) - Chairman Speech

Company chairman speech

Dear Shareholder

It gives me great pleasure and immense pride to present to you the 66th Annual Reporton the performance of your Company for the year 2017-18.

The year 2017-18 saw HPCL scale new heights and record its best ever performancesignificantly surpassing the highest ever profit and sales recorded during the previousyear to delivering physical and financial performance that was the best since formationyour Company achieved several best-ever milestones in various spheres of business. YourCompany exceeded previous year's financial performance by achieving the highest everprofit after tax of` 6357 crore on standalone basis and surpassed ` 6000 crore mark forthe second consecutive year.

Outstanding performance of 2017-18 was built on the solid physical and financialperformances by both refining and marketing divisions. HPCL's refineries at Mumbai andVisakhapatnam achieved the highest ever combined refining throughput of 18.3 MillionMetric Tonnes (MMT) with a capacity utilization of 116% and recorded the highest evercombined GRM of US$ 7.40/bbl. during the year. Your Company continued to deliver a stellarmarketing performance with highest ever market sales of 36.9 MMT (including exports) in2017-18 with a robust growth of 4.7% over previous year. The outstanding performance wasacknowledged by way of many recognitions and awards received by HPCL at various nationaland international forums including ‘Oil Marketing Company of the Year' award byFederation of Indian Petroleum Industry (FIPI) for the second consecutive year.

Your Company's strong performance record was acknowledged by financial markets and HPCLwas included in NSE's benchmark ‘Nifty 50' index during the year. Marketcapitalization of your Company has recorded a multi-fold growth during last 4 years andtouched ` 74415 crore mark on 31st August 2017. The Board of your Company has proposedthe payment of a final dividend of ` 2.50 per share in addition to an interim dividend of` 14.50 per share paid in February 2018 which would result in a total dividend payout of` 17 per share for the financial year 2017-18.

The performance of HPCL has been achieved against the backdrop of rising crude oilprices and also against the backdrop of increasing competition. Production cuts by OPECand 10 non-OPEC countries led by Russia coupled with strong oil demand reduced excessinventories and thereby pushing the prices up in 2017-18. Crude oil prices haveconsistently been on an upward trajectory reaching a new three-and-a-half-year peak inApril 2018 when Brent exceeded US$ 74/bbl. mark. Indian crude basket price also went up byabout 19% in 2017-18 averaging over US$ 56 /bbl. vis--vis about US$ 48/bbl. in 2016-17.India's economic growth was robust during the year due to In addition high consumptiongrowth and government spending. With an estimated GDP growth of 6.7% in 2017-18 Indianeconomy continues to be one of the fastest growing major economies in the world. Thestrong performance of the economy is attributable to solid performance of service andindustrial sectors and various pro-investment initiatives undertaken by the Government ofIndia. Robust economic growth and increased per capita disposable income continued todrive demand growth for petroleum products in India during 2017-18.

India continues to be the world's third largest oil consumer and a key driver of globaloil demand growth. During 2017-18 petroleum product consumption in India increased withan annual growth of 5.3% to reach about 205 MMT. All major products recorded a strong andpositive consumption growth during the year except for Kerosene Naphtha and Fuel Oil (FO)which recorded de-growth. Diesel continues to be mainstay of oil demand and recorded aconsumption growth of 6.6% during 2017-18 on the back of strong growth in commercialvehicle sales increased manufacturing and construction activities and enhanced usage ofpublic transport. Petrol consumption recorded a double digit growth of 10.1% which wasdriven by robust growth in sales of passenger vehicles & two wheelers along withimproved road connectivity in rural areas. FO witnessed a de-growth of over 5% mainly dueto decreased consumption in various industrial sub-sectors and environmental restrictionsfor usage in Delhi Uttar Pradesh Rajasthan and Haryana. LPG consumption increased with agrowth of 8% due to implementation of various Government schemes such as Pradhan MantriUjjwala Yojana (PMUY) aimed at enhancing LPG penetration across the country. ATFconsumption recorded a growth of 8.9% on the back of strong growth in domestic passengertraffic facilitated by various government initiatives for enhancing aviationinfrastructure air travel affordability and connectivity. Bitumen recorded a consumptiongrowth of 1.2% due to increased road network expansion activities in the country. Keroseneregistered the highest ever de-growth of 29% mainly because of the government's efforts toenhance clean fuel penetration in country leading to reduced allocation & voluntarysurrender of PDS quota by some states/UTs.

In tandem with the increased oil demand HPCL's refineries at Mumbai and Visakhapatnammaximized the crude processing and recorded highest ever crude throughput on individualbasis with highest ever combined production of Petrol Diesel & Lube Oil Base Stockduring the year. A number of energy efficiency initiatives were implemented at refinerieswhich resulted in lowest ever Specific Energy Consumption (SEC) on combined basis. Boththe refineries successfully completed the planned turnaround cycles within the scheduledtimelines enhancing reliability and ensuring product availability. A number of projectsincluding Tail Gas Treating Unit (TGTU) at Mumbai Refinery Revamp of Solvent ExtractionUnit -II Furnace at Mumbai Refinery Slop Processing at Fluid Catalytic Cracking Unit(FCCU)-II at Visakh Refinery etc. were commissioned during the year leading to enhancedyield profitability energy efficiency and reduction in emissions.

During 2017-18 your Company continued to augment the marketing infrastructure withstrategic expansion of pipeline network establishment of new depots/terminals LPGPlants Aviation Service Stations along with augmentation of facilities at existingnetwork. To enhance the customer reach marketing channel network was further strengthenedwith commissioning of new dealerships / distributorships across India.

Your Company recorded strong growth across all segments of marketing during 2017-18. Inmotor fuel sales (Petrol & Diesel) your Company registered an impressive growth of5.8% against the backdrop of increased competition in fuel retailing market. In LPG salesyour Company continued to be the second largest marketer in India with a sales growth of8.5% and also maintained the market leadership position in non-domestic bulk LPG segmentwith over 48% market share. Consistent focus on key institutional customers and SMEsegment helped the Company record over 1 MMT sales volume in three major industrialproducts of Fuel oil Consumer Diesel and Bitumen respectively for the third consecutiveyear. In the highly competitive lubricants business your Company continued to be India'slargest lube marketer for 5th consecutive year with a growth of 1.6% in total lubricantsales. In aviation fuel sales your Company strengthened its position by registering agrowth of 5.4% on the back of aviation fuel infrastructure augmentation and expansion ofcustomer portfolio.

To enhance cost efficiency safety and environmental responsibility in transportationof petroleum products your Company is continuously strengthening its pipeline network andexcelling in every aspect of pipeline operations. During 2017-18 your Company recordedthe highest ever pipeline throughput of 20.4

MMT and also expanded capacity of Ramanmandi Bathinda pipeline from 1.13 MMTPA to 2.1MMTPA.

Supply network for liquid products was further strengthened with commissioning of newPOL depot at Nalagarh (Himachal Pradesh) oil storage facilities at Leh for Indian Armyand augmentation of facilities at Jabalpur Loni Akola Manmad Viskah Chennai SagarGwalior & Bahadurgarh locations. LPG infrastructure was augmented with commissioningof one of India's largest LPG plant at Panagarh in West Bengal with bottling capacity of250 TMTPA along with capacity augmentation of 60 TMTPA each at Unnao and Purnea LPGplants. Aviation fuel infrastructure was expanded with commissioning of New AviationService Facilities (ASFs) at Srinagar Tirupati & Patna airports along with new ASFsat Vijaynagar Jalgaon & Mundra airports where flight operations were commenced underRegional Connectivity Scheme (RCS) of Government of India.

Your Company is continuously expanding presence in clean energy verticals of NaturalGas & Renewables. During 2017-18 consortium of HPCL and OIL has been authorized byPNGRB for setting up City Gas Distribution networks in Ambala - Kurukshetra districts ofHaryana and Kolhapur district of Maharashtra. Renewable power capacity of your Company wasfurther increased with commissioning of a grid interactive captive Solar PV plant of 750KWp at Bahadurgarh terminal in Haryana. Your Company is focused to leverage R&D andtechnological innovations to build global competitive capabilities and has demonstrated atotal of fourteen products / technologies through HP Green R&D Centre Bengaluru whichwill help HPCL to achieve significant cost advantages and efficiency improvements. YourCompany's R&D efforts were recognized with grant of 4 US patents during 2017-18.

To enhance operational efficiency and customer value your Company is extensivelyleveraging the digital technologies across all facets of business activities. As of March2018 over 96% of retail outlet network has been enabled with at least 3 digital paymentmodes. Unique technology driven initiatives viz Aadhar enabled e-KYC for LPG customersonline sales of lubricants Customer Relationship Management system for key accounts etc.have helped your Company to enhance value proposition and experience for individual andinstitutional customers. Your Company has also collaborated with Six (6) Technology-basedstartups under first phase of ‘HPCL Startup India' scheme to support projects withsignificant value potential and create mutual value through effective implementation ofthese projects.

Your Company conducts business with commitment to sustainable development and withutmost importance to safety. During 2017-18 a number of sustainable development projectswere completed in the area of emission reduction energy efficiency water conservationwaste management and renewable energy. The efforts of the Company in this direction werealso recognized with SCOPE Meritorious Award for Environmental Excellence and SustainableDevelopment. Safety continues to be an integral element of our strategy and achievement ofover 21 million safe man-hours by Mumbai Refinery as of Mar'18 is a our commitment tosafety.

Your Company has been in the forefront to drive various pro-growth policies andnational development programs to enable the country to achieve its growth objectives andrealize the aspirations of New India. As of Mar'18 HPCL has provided over 96 lakh LPGconnections to people from low income households facilitating a clean cooking environmentfor them and helping them raise the standard of living. HPCL has also conducted 886Pradhan Mantri LPG Panchayats across the country sensitizing over 85000 people about safeand sustainable usage of LPG. Under Swachh Bharat Abhiyaan HPCL has constructed over1700 new school toilets and has provided toilet facilities at ~100% of active RetailOutlet network. During 2017-18 HPCL has delivered happiness in the lives of thousands ofpeople though various CSR schemes with an overall CSR expenditure of ` 157 crore Tostrengthen the technologically competent workforce and promote research activities inenergy sector Indian Institute of Petroleum & Energy (IIPE) was set up in 2016-17 atVisakhapatnam. Your Company is assisting IIPE Visakhapatnam in development of theinfrastructure for the institute. During 2017-18 IIPE Visakhapatnam was recognized as anInstitute of National Importance through IIPE act 2017.

With respect to the Memorandum of Understanding (MOU) signed with the Government ofIndia for the year 2016-17 your Company achieved ‘Excellent' rating for the 10thconsecutive year with a score of 95.00. I am happy to share that this is the best MoUScore amongst all Navratna / Maharatna PSUs under MoP&NG.

During 2017-18 your Company has embarked on implementing the short term strategicRefinery Expansion Project (MREP) for enhancingplan ‘T20' with a structuredgovernance and monitoring system to ensure implementation of the identified strategicinitiatives and realization of T20 targets for growth profitability and customer value.Strategic initiatives of Integrated Margin Management (IMM) and centralization ofprocurement have also been effectively institutionalized and have yielded substantialvalue for the Company. Your Company is also focused on creating a roadmap for leveragingthe emerging digital technologies and upgrade processes to be future ready. All thesubsidiaries and joint venture companies continued to perform well in 2017-18 and recordedrobust physical and financial growth in their respective business spheres. This helpedHPCL to achieve consolidated net profit ` 7000 crore for the second consecutive year.Capacity of HMEL refinery at Bathinda was expanded to 11.3 MMTPA during the year andtestimony to the refinery is operating at enhanced capacity and production slate. Toexpand overseas footprints in lubricants business your Company has formed a new whollyowned subsidiary Company ‘HPCL Middle East FZCO' in UAE for catering to lube marketsin the Middle East and Africa.

The backbone of our outstanding performance is over 10000 competent employees of theCompany committed to achieve excellence in performance. Your Company has undertaken anumber of innovative human resource initiatives to nurture this talent pool and willcontinue to invest in the human capital to develop a future ready workforce and create adifferentiated advantage in future business environment.

Global economic growth continues to be strong and at 3.8% which is the highest GDPgrowth since 2011. Growth momentum is expected to continue in 2018 with global GDP growthprojected to be around 3.9%. Strong economic growth is driven by projected pick-up ingrowth in emerging and developing economies and resilient growth in advanced economies.This should provide a boost for exports and could be biggest source of upside potentialfor India's GDP growth in 2018-19. Indian economy is projected to grow at about 7.4% in2018-19 on back of healthy consumption and pick up in investment activity. With economygrowing oil demand is also expected to grow in line with trend.

To leverage the high demand potential and capitalize on the growth opportunities inhydrocarbon sector your Company has planned large scale investments for enhancing therefining capacities and build marketing infrastructure. Both the ongoing refineryexpansion projects viz Visakh Refinery Modernization Project (VRMP) for enhancing therefinery capacity to 15 andMumbai refining capacity to 9.5 MMTPA are progressing as perschedule.

On the marketing front project activities for expansion of Mundra Delhi Pipeline(MDPL) Visakh Vijayawada Secunderabad Pipeline (VVSPL) Ramanmandi Bahadurgarh Pipeline(RBPL) and new extension Pipeline from Palanpur to Vadodara with associated terminalfacilities new Vijayawada Dharmapuri Pipeline are on track. In addition Uran Chakan LPGPipeline is in advanced stage of completion. A number of new POL Depots LPG Plants ASFsand Lube Blending Plants have also been planned.

To cater the growing demand of petrochemicals HPCL is participating in greenfieldrefinery and petrochemical complex projects. HPCL and Government of Rajasthan have formeda JV

Company by the name HPCL Rajasthan Refinery Ltd (HRRL) to set up a greenfield refinerycum petrochemical complex in Barmer district of Rajasthan. The work commencement ceremonyof the 9 MMTPA Rajasthan Refinery was carried out at the hands of Honourable PrimeMinister of India on 16th January 2018. In the span of last four decades your Companyhas enhanced its competitiveness in downstream oil industry by consistently addressing thevarying customer needs and extending its product reach across all parts of India. HPCL hasbeen able to set benchmarks through its efficient refining and marketing operationsstreamlined supply logistics technological excellence and innovative marketing practices.Going forward your Company is well poised to meet the business challenges and deliverconsistent growth and excellence across all spheres of business.

Our employees customers business associates and shareholders have always been asource of strength and I thank them for their support. I am also thankful to the Ministryof Petroleum & Natural Gas for their guidance and support in all our efforts. We lookforward to their continued support in future.

We look forward to your continued support in all our endeavors in delivering happinessin the lives of millions of people and continuing towards our journey of shared success.

Thank you

Mukesh Kumar Surana