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BW Businessworld

Bharat Petroleum: Swelling Profits

Bharat Petroleum recorded a significant jump in market capitalisation and PAT

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Maharatna Bharat Petroleum Corporation (BPCL) moved up a place to No. 8 in the BW Real 500 rankings 2017. Recently, its board declared a 325 per cent dividend for shareholders — the highest in the history of the public sector undertaking (PSU). Its profit after tax (PAT) in 2016-17 too was at an all-time high of
Rs 8,039.30 crore.

On 7 August, 2017, BPCL’s market capitalisation crossed the Rs 1,00,000-mark and peaked at Rs 1,14,751 crore.The company owes its superlative performance partly to its subsidiary Numaligarh Refinery that earned a PAT of Rs 2,100.17 crore, and to its joint venture Bharat Oman Refineries that recorded a PAT of Rs 808.13 crore.

BPCL’s sales volume, however, surged only marginally by 3.15 per cent to 37.68 million metric tonnes (MMT), while its market share among fellow PSUs took a minor hit, dropping to 22.77 per cent in March 2017 from 22.94 per cent in 2016-17.

At the company’s annual general meeting (AGM) in September 2017, BPCL chairman and managing director, D. Rajkumar, assured shareholders of “beyond fuel initiatives” to “capture the consumer opportunity”. These initiatives include catering to the rural, highway and urban markets. “We envisage that such initiatives shall be crucial to driving profitability in the fast-developing competitive scenario in the oil industry,” he said.

The refining and marketing giant is investing in fresh infrastructure in refining, marketing and oil, and gas exploration to be able to cope up with the demand envisaged from a growing economy. “Investments are being made in the gas and petrochemicals business, with a vision to attain leadership in midstream and downstream gas and petrochemical intermediates,” Rajkumar said in the AGM, adding, “Further, BPCL is in the process of utilising its existing network to promote generation of renewable sources of energy.”

According to domain expert Deepak Mahurkar, leader  Oil & Gas at Pricewaterhouse Coopers, petroleum giants need to diversify into renewable energy more proactively as the demand and requirement for energy in India is increasing at anything between 7 and 11 per cent. “Managing such a high demand for energy is difficult, and India is going urban at a rapid pace. Petroleum products have the capability of filling the glass that is half empty ...” he says.

It is perhaps this realisation that has prompted companies such as BPCL to invest upstream. Bharat Petroleum received its first dividend from its assets in Russia, from its upstream subsidiary, Bharat Petro Resources (BPRL). “With the commencement of revenue from BPRL’s Russian assets and contribution flowing from some of the Indian blocks too, BPRL has now transformed itself into a revenue-generating company, with assets in all phases of upstream ranging from exploration to production,” Rajkumar had informed shareholders.

Bharat Petroleum also worked on its downstream projects last year. It enhanced capacity of Kochi Refinery to 15.5 MMT per annum. “BPCL shall continue with its robust investment plans over the next few years, focusing on developing refining and marketing infrastructure. Conscious and well deliberated decisions are also being made in the upstream business for investments in high potential exploration assets with a trusted partner,” said Rajkumar.