BPCL Q2 FY27 Earnings Call: Posts Rs. 4,993 Cr PAT Amid Record Crude, AP Refinery FID Imminent

Strong Quarter Despite Record-High Crude and Rupee Pressure

• Revenue from operations of Rs.1.5 lakh crore — Q2 FY 2026-2027 standalone PAT of Rs.4,993 crore; consolidated PAT of Rs.4,863 crore (H1 FY 2026-2027 consolidated PAT: Rs.2,919 crore).
• GRM of $32.53/bbl reported, ~$14/bbl net of SAED — on throughput of 10.4 MMT at 117% capacity utilization; distillate yield at 84.38%.
• Domestic sales volume of 13.47 MMT — down from 13.62 MMT in Q1 FY 2026-2027; retail outlets at 25,592 vs 25,485 at end-Q1.
• Balance sheet strengthened — standalone gross borrowings reduced to Rs.15,246 crore from Rs.17,396 crore at end-Q1; debt-equity improved to 0.16 from 0.19; net borrowings at Rs.7,106 crore vs Rs.4,800 crore in Q1.
• Macro backdrop was severe — Brent rose from ~$70/bbl (mid-July) to above $90/bbl in August, averaging ~$116/bbl in September after attacks on Saudi export infrastructure; rupee averaged 95.6/USD. Strong diesel/ATF cracks and lower LPG under-recoveries partially offset.
• Other expenses ex-FX jumped to ~Rs.9,000 crore — vs a typical ~Rs.7,000 crore, driven by ~Rs.150 crore higher transportation cost, ~Rs.150 crore higher octroi/taxes, and large derivative MTM losses (FX loss ~Rs.400 crore).

GRM Dip Driven by Freight and Lost Russian Discounts, Not Spreads

• Sequential GRM decline attributed to procurement, not market spreads — gas oil spreads were $55/bbl in Q1 vs $56/bbl in Q2 FY 2026-2027 and gasoline flat at $24/bbl; headwinds were significantly higher crude freight and loss of Russian discounts (certain Q2 cargoes bought at benchmark or premium).
• Crude mix in Q2 FY 2026-2027 — Russia 37%, Saudi 19%, Abu Dhabi 17%, US 9%, Oman 6%, others 1-4%; spot crude at 67% of procurement; Saudi/Abu Dhabi predominantly term-based.
• November 2026 Russian cargoes significantly reduced — higher freight made them commercially unviable; December Urals premiums have eased to levels comparable with Persian Gulf grades and management may take a couple of Russian cargoes; December loading to be concluded within 7-10 days.
• Landed crude cost at benchmark +$10-12/bbl as of October 2026 — vs ±$12-15/bbl cited at the Q1 FY 2026-2027 briefing; freight and insurance rates remain high (cheaper from Fujairah, higher from Yanbu).
• Russian discount narrowed sharply — from $12-13 in October 2026 to $1-2 premium (delivered basis) in recent December numbers; management said GRMs could be much better than Singapore if Russian crude is available at benchmark/discount in Q3 FY 2026-2027, but may not match Singapore at a premium.
• MTM loss of ~Rs.1,200-1,300 crore on spread derivatives — sold in advance under the risk management policy hedging a percentage of next 12 months' throughput; management said the MTM can reverse if spreads normalize over H2 FY 2026-2027.
• Sourcing tied up through December 2026 — 22 days crude inventory as of 30 September 2026; BPCL became first in the industry to source from inside the state of Amodh at a price advantage via its Singapore crude desk (operational since September 2026). No communication received from Aramco about halting crude shipments to India, per management.

Subsidy Cliff in October 2026; Under-Recoveries Rising Again

• Government's 12-month LPG subsidy support of ~Rs.632 crore/month ends in October 2026 — any new support, if announced, may come in Q3 or Q4 FY 2026-2027, with form and amount uncertain; management noted LPG is fully controlled and under-recovery support is a government decision, with precedents of past support.
• Under-recovery per cylinder: Rs.490 (Jul), Rs.179 (Aug), Rs.199 (Sep) — quarter average ~Rs.290 vs Rs.507/cylinder in Q1 FY 2026-2027; management expects Rs.245 in October 2026 and Rs.328 in November 2026, i.e., rising month-on-month.
• Cumulative buffer at Rs.17,334 crore as of 30 September 2026 — after adjusting Rs.3,796 crore of H1 FY 2026-2027 compensation; under-recovery continues to exceed government compensation so the buffer keeps rising; the industry has submitted a representation to the ministry and management is in consultation with the ministry.
• Marketing profitability near normal in Q2 — slightly lower mainly due to higher marketing under-recoveries; no discussions underway on any improvement in marketing margins at this point.
• Analyst threshold not confirmed — Sumit Rora (SmartSync Capital) characterized the marketing side as starting to lose money above ~$90-95/bbl crude; management did not confirm this threshold.

AP Refinery FID Near; Mozambique on Track for Mid-2028 Gas

• AP refinery FID targeted at Board in next 2-3 weeks (FY 2026-2027) — DFR numbers frozen, conclusion expected in ~2 weeks; configuration of a 10 million tonne refinery with 32-33% petrochemical intensity; subject to financial closure and CCA approvals, expected within 2-3 months of Board approval; 4,700 acres registered, with the AP government expected to fulfill the full 6,000-acre requirement by November 2026.
• AP government incentives under discussion — the Government of AP has initially indicated reimbursement of "75% of capital invested, potentially over 15, 18 or 20 years" (illustratively on capex of Rs.50,000 crore to Rs.1 lakh crore); management is expecting the same 75% capital-subsidy principle; terms remain under discussion.
• Mozambique 47% complete; first gas declared for June 2028 — Phase 1 of 13 MMTPA across two trains; BPCL's 10% share equates to ~1.3 MMTPA from mid-2028; cumulative investment $2.8 billion (~Rs.27,461 crore) with a further $1.8 billion committed over FY 2027-2028–FY 2028-2029; total project investment to reach $4.5-4.6 billion; funded via project financing from 8-9 bankers at 6% to 8.5-9% interest.
• SPA tied up for 1 MMTPA of Mozambique gas to India — marketing commenced in Q2 FY 2026-2027 with small volumes; full 1 MMTPA tying-up expected over the next 2-3 quarters (through ~Q1 FY 2027-2028).
• H1 FY 2026-2027 capex of Rs.13,749 crore — (Q2: Rs.9,300 crore) against the FY 2026-2027 target of Rs.25,000 crore, which may rise 5-10%; Bina petrochemicals at 40.2% progress (approved cost Rs.43,367 crore, commissioning mid-2028), Kochi polypropylene at 55.10% (Rs.4,850 crore, completion October 2027), Mumbai PRFCC at 9.2% (Rs.13,626 crore, completion September 2029).
• FY 2027-2028 capex guidance of Rs.40,000-45,000 crore — (Rs.40,000 crore per cash flow projection) and FY 2028-2029 at Rs.40,000 crore plus; excludes the AP refinery, which will be additional once FID is approved; ~15-20% of the FY 2027-2028 program is non-committed.
• Board approved a wholly owned subsidiary for the AP complex — initial authorized share capital up to Rs.4,900 crore, subject to requisite approvals; funding planned at 70:30 or 65:30 debt-equity with at least 30% equity dilution to partners targeted during execution; standalone peak debt-equity targeted at ~1x (up to 1.1x), reverting to 0.3-0.5x post-commissioning.

Upgraded Diesel Growth View; 4,000-5,000 Outlets Advertised

• HSD demand growth expectation raised to 3.5-4% — management now expects this over the next 3-5 years (through ~FY 2031-2032), up from its earlier 2-2.5%, supported by India's 7-7.5% growth level (FY 2026-2027) and FTA-driven manufactured-goods exports, contingent on no US tariff impact.
• MS demand growth of ~5-6% expected over the medium term — next 3-5 years (through ~FY 2031-2032), in line with historical levels; despite improving EV penetration, MS/HSD volumes are still expected to come through.
• 4,000-5,000 retail outlets recently advertised — BPCL has been adding ~1,000 outlets per year with annual capex planned for 1,000 ROs; ~3,000 additions possible over the next 3 years (through ~FY 2029-2030), dependent on land availability in proper locations.
• Premium/fuel retail metrics — Speed 97 conversion at 5.21%, Speed 100 at 162 outlets, BK5 network at 234 locations in Q2 FY 2026-2027.
• Gas business record H1 FY 2026-2027 — bulk gas sales of 979 TMT (+53% YoY) and CGD sales of 177 TMT (+65% YoY); CBG blending at 6.5%, more than double the 3% mandated target; pursuing CBG opportunities following the recently announced Gobardhan scheme.
• SAF positioning via India's first co-processing licensing agreement — signed October 2026 for the Mumbai Refinery SAF project; Phase 1 kerosene hydrotreater revamp targeted for commissioning by January 2027, positioning for India's SAF blending requirement for international flights — "beginning at 1% in 2027 and progressively increasing to 5% by 2030."

War-Driven Crude Uncertainty Dominates H2 FY 2026-2027

• Q3-Q4 FY 2026-2027 throughput may not hold at 118% — turnarounds planned: Mumbai ~30 days shutdown in Q3, Bina a 4.5-day shutdown, Kochi ~30-40 days across 3 units; excluding shutdown adjustment, throughput expected on similar lines.
• Crude outlook hinges on war resolution — management believes crude cannot stay at current levels once the war resolves since supplies and production are available; the SOH route is the key disturbance; no timeline clarity on resolution; under-recoveries reviewed month on month.
• Dated Brent at $125-127/bbl as of the call (October 2026) — trading at a premium to ICE Brent for the last two months due to war issues, keeping crude procurement costs on the higher side; most contracts priced off ICE Dated Brent.
• Management advised against judging MS/HSD performance short-term — not expecting the war to continue for a longer period but will review if it persists; crude availability is not the constraint (only transit is), though refining facilities have been hit, causing production losses.
• Product sourcing gap in FY 2026-2027 — BPCL expects to source ~6 million metric tonnes of products from other refineries by year-end amid high demand growth; own refineries expected to meet 89.27% of MS and 79.34% of HSD requirements in FY 2026-2027.
• External environment remains uncertain entering H2 FY 2026-2027 — management expressed confidence in navigating near-term volatility while building long-term value; no IRR disclosed for the AP project at the ~$15-20/bbl mid-cycle crack scenario posed; numbers to be shared once FID is clear.