Bharat Petroleum: Oil’s Well That Ends Well
At a time when crude prices dropped dramatically, P. Balasubramanian has taken BPCL to its highest-ever net profit
P. Balasubramanian took over as the Director of Finance at Bharat Petroleum Corporation Limited (BPCL) during a critical development phase. He had a lot to focus on; the main target to prioritise BPCL’s Rs. 50,000-crore outlay on infrastructure-related investments over the next four years.
But things haven’t been the best that they could be since Balasubramanian, better known as PB, took charge on 1 April 2014. The period has witnessed widespread turbulence in the oil sector with crude oil prices registering a huge downfall — dropping from a peak of US$115 per barrel in June 2014 to below $30 per barrel recently. The dwindling margins due to inventory trading and valuation losses were coupled with depreciation of the Indian rupee versus the US dollar and low growth in the petroleum sector.
But PB wouldn’t give up easily. It’s in his nature to persist and persevere. Born in Thiruthuraipoondi, Tamil Nadu, he is a chartered accountant by profession and joined BPCL as a senior accounts officer in 1985. In the last three decades, he worked across various facets of finance in BPCL, including corporate treasury, corporate finance, international financing, M&A, and commercial finance.
His dedication and outstanding performance over the years led him to be chosen as Director Finance to replace S. Varadarajan, who progressed to take over as the chairman and managing director of the company.
But amidst all the chaos, PB managed to navigate BPCL through troubled waters successfully. His formula? Exemplary inventory management, newer and cheaper ways of funding, and close monitoring of expenses.
His persistence has paid off. BPCL delivered one of the best performances amongst all oil marketing companies in FY 2014-15 in terms of highest gross refining margins, highest net profit as a percentage of sales, highest return on equity and lowest debt equity ratio.
In 2014-15, BPCL achieved the highest ever net profit of Rs. 5,085 crore. The growth story continued in the first nine months of FY 2015-16 with BPCL recording a net profit of Rs 4,883 crore. BPCL’s market capitalisation has risen substantially as well.
From a closing share price of Rs 446.90 on April 1, 2014, BPCL’s share price peaked at Rs. 972.05 on July 22, 2015, taking the market capitalisation up to Rs 70,287 crore.
According to PB, with major refinery expansion projects at various stages of construction cycle and marketing infrastructure gearing up to combat deregulation, BPCL has achieved the highest ever capex spends of Rs 9,959 crore in 2014-15. It is expected to spend around Rs. 11,000 crore in FY 2015-16 and roughly Rs 10,000 crore every year for next five years.
About the many changes in BPCL, PB says: “In true spirit of the digital age that we now find ourselves in, BPCL has successfully conceptualised and established a state-of-the-art Business Process Excellence Centre.”
He cites the quick and seamless implementation of the government’s scheme of Direct Benefit Transfer of LPG Subsidy through strong IT and process integration as an example of exemplary execution.
But he believes that there are plenty more challenges ahead.
“With the world witnessing disruptive digital technologies and changing consumer behavior, the challenge is how to leverage technology to provide astounding consumer experiences,” he says.
PB’s prepared to face the challenges and take the company from strength to strength. Amidst it all, he manages to find time off to listen to retro music, read and try his hand at photography.
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