Hindustan Petroleum Corporation Limited (NSE: HINDPETRO) Q2 2025 Earnings Call dated Oct. 25, 2024
Corporate Participants:
Rajneesh Narang — Director Finance
K. Vinod — Executive Director, Corporate Finance and Chief Financial Officer
Analysts:
Varatharajan Sivasankaran — Analyst
Probal Sen — Analyst
Amit Murarka — Analyst
Sabri Hazarika — Analyst
Sumit Rohra — Analyst
Kirtan Mehta — Analyst
S. Ramesh — Analyst
Mayank Maheshwari — Analyst
Puneet Gulati — Analyst
Vishnu Kumar — Analyst
Rituparna Ghosh — Analyst
Shivansh — Analyst
Gagan Dixit — Analyst
Vimal Sampat — Analyst
Umar Farooq — Analyst
Meet — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Hindustan Petroleum Corporation Limited Results Conference Call hosted by Antique Stock Broking. [Operator Instructions] Please note that this conference has been recorded.
I now hand this conference over to Mr. Varatharajan Sivasankaran from Antique Stock Broking Limited. Thank you. And over to you, sir.
Varatharajan Sivasankaran — Analyst
Thank you, Nikita. Good afternoon everyone. It’s my pleasure to extend a very warm welcome to all the participants and the management of HPCL led by Mr. Rajneesh Narang, Director Finance and holding additional charge of CMD as of now; Mr. S. Bharathan, Director Refineries; Mr. K. Vinod, Executive Director, Corporate Finance and CFO and his entire team.
I would like to hand over the call to Mr. Rajneesh Narang for his opening remarks and then we can move to the Q&A.
Rajneesh Narang — Director Finance
Yeah. Good afternoon, Varatha, and all the participants who are attending this con call. Very good afternoon to all of you. We had our board meeting in the first half of this — of today and it is matter of pride for me to say that in this quarter, the HPCL had a good fiscal performance both in refineries as well as marketing. As regards the standalone revenue is concerned — the standalone revenue from operation is concerned, it is INR108,216 crores vis-a-vis INR102,618 crores in the corresponding previous period. In terms of the fiscal, growth we achieved 8.2% over the previous corresponding period.
The standalone profit after tax during this quarter is INR631 crores. The primary reason for lower PAT are the suppressed marketing margins on select petroleum products, reduced refining margins due to lower cracks and falling international crude and product prices.
I’ll just give a brief of what exactly these three — what are the impact of these three like in terms of the success marketing margin. In terms of LPG, we had an under recovery of INR4,400 crores during this entire half year and if we have to take only the quarter that is Q2, it’s almost INR2,057 crores of under recovery, which sitting as a negative buffer in our book. And in terms of the refining margin, the cracks have significantly come down and if I have to give you a benchmark, the Singapore GRM during the corresponding period of the previous year it was $10 a barrel, whereas in this quarter it is $4 a barrel. So primarily since the GRMs were significantly lower in this period for MS and HSD, there was an impact as regards with refinery GRMs are concerned.
And third, during this quarter, the crude prices with respect to the previous quarter have come down by almost $5 a barrel. This reduction of $5 a barrel both in terms of crude as well as the various finished products which we hold has an impact of almost INR1,400 crores in terms of inventory loss. If I had to talk about the GRMs, the GRMs during this quarter were $3.12 per barrel vis-a-vis $13.33 per barrel during the corresponding period. This reduction as I’ve already stated is in line with the trend of international benchmarks and coded frac.
Now coming to the fiscal performance. The refineries recorded crude throughput of 12.06 million metric tons. The refineries had operated 103.7% of the installed capacity. We’re an increase of almost 8.2% over the throughput on 11.15 million metric ton during the corresponding period last year April to September ’23. Now if you take specifically the Q2, the throughput was 6.3 million metric tons and the refineries had operated at capacity utilization of 107.7%. We have also added new crudes to our basket. Two new crudes we have started processing at Vizag and taking the total crude basket to almost 13 [Indecipherable] which we are having.
In terms of the marketing sales, we recorded 24.25 million metric ton registering a growth of 7.3% as against 32.59 million metric ton during the corresponding previous year. The company recorded sales volume of 11.62 million metric ton during second quarter registering growth of 8.2% as against 10.74 million metric ton during the second quarter of the previous year. On the domestic front, HPCL achieved sales volume of 5.6% during the quarter as against CSU industry growth of 1.8% registering a market share gain of 0.78%.
In terms of the product-wise motor fuels were growing at 4.5%. The aviation business has been growing at 19.6% and in case of lubricants, we are growing at almost 5%. And even as regards the petrochemical where we are — we have already entered the market a year back, we are doing almost 30.4 PMP. As regards the pipelines are concerned, we had a throughput of 6.53 million metric ton vis-a-vis a growth of 6.5% over the previous financial year. In terms of our growth project during this period, we invested INR3,771 crores to strengthen our designing and marketing infrastructure including investment in joint venture and subsidiary companies. And the total capex during this half year is almost INR6,590 crore.
As regards our Rajasthan refinery, the construction of all process units are progressing in full swing. The current fiscal progress is concerned is almost 83% and if I take the refining unit, it is more than 92%. The key process unit which is BHP [Phonetic], the hydrogen generation unit, they are under pre-commissioning. And as regards the crude oil pipeline for both imported as well as domestic, the job is almost nearing completion.
As on 30 September, the total commitment on the project is almost INR70,872 crore. And as regards the capex outflow is concerned is INR50,570 crore. As regards our Vizag Refinery modernization unit of residue upgradation facility that is the water upgradation facility, we have started the pre-commissioning of this unit and we expect that in the last quarter that is Q4 of this financial year, the unit would be commissioned. The moment this unit gets commissioned, it will be able to have a higher distillate yield whereby we — should enable us to process or upgrade the bottoms to higher distillate products. This unit is one of the largest and most energy efficient unit and the technology is the one of this scale which is being implemented by us.
During this second quarter, we commissioned 353 retail outlets taking the total number of outlets to 22,501. We also commissioned six new LPG distributors taking the total count to almost 6,354. In terms of new business initiatives, we have started manufacturing lube [Indecipherable] 500 neutral base oil in our Mumbai refinery. Our aviation business achieved a significant milestone by securing order for developing and operating the fuel farm and the interplane services in the new airport — greenfield International airport which is likely to come up in Bhogapuram, Visakhapatnam. This airport is being set up by GMR by name of GMR Vishakhapatnam International Airport Limited.
There was a new feather in cap for our lubricant business whereby we made the first ever export sales to USA, thus increasing our footprint to more than 30 countries now. As regards our plan of value unlocking in the lubricant business, we have already — in line with the recommendations of the consultants, we have already started taking initiatives around supply chain, cost optimization, product mix spread and also rolled out customer engagement programs for improving our reach as well as improving the efficiency in this business line. As regards our plan for this carve out, we are actively pursuing the same with the appropriate authorities for seeking approval for going ahead on this.
As regards our HP R&D center, the total patent as on 30 September is 606 which we have filed, out of which 232 patents have already been granted. There have been various niche technologies which we have developed there. One of them is digital, the technology which has reached the commercial scale is the vapor recovery plant based on HP VRU technology which we have already implemented in our Hessen terminal. Further, we have developed the HP VRA which is a drag using additive for reducing pressure drop in product pipeline and it has been successfully tested at a commercial scale in our GES pipeline.
The state-of-the-art catalyst additives and absorbent scale up facilities have been commissioned and made operational, thus empowering the scaling up of our R&D center’s innovative catalysts and products for field level demonstration. At Vishak Refinery, we have commissioned the first ever green hydrogen plant in any refinery. The plant capacity is 370 PPA of green hydrogen using green power and we have already started taking 3 megawatt green power through Discom for the same. We have also floated another tender for 5 PMP PA per annum for green hydrogen that is under the site 2 team of the government.
Similarly, our newly formed wholly owned subsidiary HP Renewable and Green Energy Limited is already working on plans on renewable on almost around 250 to 300 megawatt capacity at various places. They also signed an MoU with [Indecipherable] for cooperation and collaboration in the field of green hydrogen and its derivatives. So these are primarily the main highlights of HPCL during this quarter.
I’m open to taking up any questions. Thank you.
Questions and Answers:
Operator
[Operator Instructions] The first question is from the line of Probal Sen from ICICI Securities. Please go ahead.
Probal Sen
Yeah. Thank you for the opportunity. sir. I had a couple of questions. The first was with respect to this LPG under recovery. Just to sir understand this INR2,000 crore is loss that is actually sitting in our P&L. When you say that you are building it in a negative buffer, can you just make us understand a little bit on the accounting of this? Is the loss actually there in the marketing segment reported numbers or is it not part of it? Not very clear on that.
Rajneesh Narang
It is part of the reported number. The loss has been considered in our book. If it is a positive buffer, we create a table and we don’t take it in our revenue or take it as a part of the income. But however, if it’s a negative buffer, it goes as a part of our P&L charge.
Probal Sen
So sir, is it reasonable to assume that this kind of a run rate will continue given that not much has happened in terms of being compensated for this? Should we be building in this INR2,000 crore every quarter now as of this point?
Rajneesh Narang
So I don’t think that would be the right way of looking at it. Right now, yes, during this period, the LPG prices were higher. So that’s the reason why the under recovery went from whatever. And going forward, we’ll have to see as to how the LPG price is there. But anyway, if the under recoveries are going to be there, definitely we have taken up with the government for necessary support on this.
Probal Sen
Understood. The second question was, sir, you thankfully appreciate that you mentioned the inventory loss number of INR1,400 crore. Just wanted to understand is it possible to split it between what was there in refining and what was there in marketing segment out of this?
Rajneesh Narang
Approximately INR750 crores was in marketing and INR650 crores.
Probal Sen
INR650 crores was the refining and around INR750 crores was in marketing, right. Sir, just lastly and I’ll come back, but one more question with respect to refining against the last year number where Singapore was at $10, but we reported about $13 because of various factors, diesel split being higher, perhaps Russian crude was a factor versus that in this quarter we have actually now gone down to a discount versus the benchmark GRMs. Is it possible to sort of, get a sense of why this has happened? Is it mostly because Vizag performance is impacted by the pre-commissioning activities and inventory or is there any other reason for it? Just if you can give us a sense here.
Rajneesh Narang
Yeah. Primarily if you see in the same period in the previous — corresponding previous year instead of the loss of INR645 crores — INR650 crore, we had an entry gain last year of INR900 plus crores. So virtually that INR1,500 crores is the difference on account of inventory.
Probal Sen
Right. And we are still getting around 35%, 40% from Russia, sir, in terms of our crude?
Rajneesh Narang
Yeah.
Probal Sen
Okay. I have more questions sir, but I believe I’ll come back in the queue. Thank you, sir. Thank you so much for your time.
Rajneesh Narang
Thanks.
Operator
Thank you. The next question is from the line of Amit Murarka from Axis Capital. Please go ahead.
Amit Murarka
Yeah, hi. Thanks for the opportunity. So I also see your net debt has gone up quite sharply in this quarter. So could you help understand what are the factors behind that?
Rajneesh Narang
Yeah. See, the debt has primarily gone up. One is the subsidy which we have receive almost INR1,700 crores from the government that — there is a increase there. Secondly, the inventory now with Vishak refinery coming into almost full level production, where if you see during this quarter, we have almost processed around 3.8 million metric tons of product. We have to hold higher inventory for crude as well as higher inventory for the product. One more reason is that during this period, we had a inventory of almost — additional inventory of almost INR2,000 crores because during this — the month of August and September, there were rains and on account of which the demand was also muted. This resulted in some increase in inventory for the quarter. So primarily around INR2,000 crores, INR3,000 crores has gone up because of the inventory and around INR1,500 crores to INR2,000 crores is on account of amount receivable from government.
Amit Murarka
Understood. Also what is the capex plan for this year now?
Rajneesh Narang
Capex we’ll doing around INR12,000 crores to INR13,000 crores. Out of that, we have already done INR7,500 crores.
Amit Murarka
Sorry, how much have you done?
Rajneesh Narang
INR7,187 crores — sorry, INR6,588 crores.
Amit Murarka
Okay. You’re almost at the halfway mark. And also for the Rajasthan refinery, has there not been much progress in this quarter? Because even last quarter I think you had mentioned similar numbers on completion. 92% for refining and 80% for overall.
Rajneesh Narang
No. Refining now actually is 74%…
K. Vinod
92% plus. Towards the end, since we are going to our recommissioning and commissioning, the percentage will not be same. But in actual progress towards commissioning, it will be very close.
Amit Murarka
And commission using is Q4 and petchem will be what, one year after that?
Rajneesh Narang
Maybe after six months after that.
Amit Murarka
Okay. And could you also share HMEL performance for the quarter?
Rajneesh Narang
You want the quarter number or the half year?
Amit Murarka
Whichever you find.
Rajneesh Narang
During the half year, they had processed around 6.54 million metric ton of crude. The GRM was around $9 a barrel. And they had a — during this six month period, they had a loss of around INR300 crores.
Amit Murarka
INR300 crores. And EBITDA?
Rajneesh Narang
EBITDA is around INR2,000 crores.
Amit Murarka
Sorry, how much?
Rajneesh Narang
Around INR2,000 crores.
Amit Murarka
Okay. Okay, that’s all for mine. Thank you.
Operator
Thank you. The next question is from the line of Sabri Hazarika from Emkay Global. Please go ahead.
Sabri Hazarika
Yeah, good afternoon, sir. So first question is on this Vizag. I think so you are basically in the process of commissioning the [Indecipherable]. And by Q4 you are saying the entire VRMP will be ready, right?
Rajneesh Narang
Right. Yeah.
Sabri Hazarika
And so in terms of volumes we have already seen the upside. But the GRM, we will put $3 of incremental GRM which we have been suggesting for that you can assume from FY ’26 onwards, is that right?
Rajneesh Narang
Yeah, that is right.
Sabri Hazarika
Okay, sir. And is it like fully — I mean, in the books of account, is there any more capitalization left or is that like mostly capitalized INR27,000 crores, INR28,000 crores?
Rajneesh Narang
No. For Vishak, around INR11,000 crores is yet to be capitalized. That will get capitalized in the last quarter. INR11,000 crores of additional CW will basically get expensed in Q4.
Sabri Hazarika
Okay. So right now, I mean, just to get a sense of overall marketing numbers. So I think as you can see there’s no change in pricing. So I think the margins are quite high. At the same time, LPG losses have further increased because with winters I think the prices of Arab Gulf LPG has also gone up. So if I look from a working capital point of view, not assuming that some subsidy may come later down the line, but in terms of debt and working capital, are you in a comfortable position right now or can you see short-term debt going up further in the incoming process?
Rajneesh Narang
No. Debt is not going to go up.
Sabri Hazarika
Right now because of high auto fuel margins you are able to like whatever like lockers are there in LPG.
Rajneesh Narang
Yeah.
Sabri Hazarika
Okay, sir. Just a small follow up. You said last year the inventory gain was around INR960 crores in refining last year Q2, right?
Rajneesh Narang
I said around INR900 crores I said.
Sabri Hazarika
Around INR900 crores, which is around inr650 crores. Okay. Thank you so much.
Operator
Thank you. The next question is from the line of Sumit Rohra from Smartsun. Please go ahead.
Sumit Rohra
Yeah, hi, sir. Very good afternoon to you. Sir, firstly, I mean, I would like to — because numbers are crowded, many inventory movement along with LPG, etc. So your reported number is INR650 crores and we have absorbed INR800 crores of LPG losses and inventory loss of INR1,400 crore. Am I right?
Rajneesh Narang
Yes.
Sumit Rohra
So effectively, I mean, so if I understand correctly, sir, that means if you add this back, we would technically be at somewhere around the INR3,500 crores mark?
Rajneesh Narang
Yeah, that would be the normalized profit. You are right.
Sumit Rohra
Okay. And sir, now for the — okay, if I see that in the first quarter again you were way down because of these concerns of LPG. So effectively where I’m trying to understand sir because see the matter of fact is that anyway investors are quite shaken up because of the results which is reported on the headline numbers. So if you can read through the numbers on the core performance of the company. Is my understanding correct that we are on — like we have done about INR5,500 crore of PAT in the first half. So effectively what I’m trying to get at is that our profitability has actually now substantially gone up from the past because of the projects and because of volume throughput coming. Is that correct, sir?
Rajneesh Narang
You’re right. The core profitability will almost get doubled than what we used to do earlier that was before we more than double.
Sumit Rohra
Okay. So sir, effectively I mean if I can put it in simple terms is that — our core profit should be about INR5,000 crores, INR5,500 crores for the first half which means that without the residual upgradation project we have actually come to this level which means that with the residue of Vizag kicking in F26 our profitability can be substantially in the five figure mark.
Rajneesh Narang
Yeah, you’re right.
Sumit Rohra
Okay. And my next question sir is on the lubricant part — yes.
Rajneesh Narang
With the current trend of the crude now, crude if you see primarily now it is ranging between 72 to 78. Current level and the crude remains range bound, then the profitability which we are referring to is likely to mature in the quarter.
Sumit Rohra
Okay. Understand this. Okay, sir. Coming to my next question, sir, is on the value unlocking part of the lubricant. So if you can please help understand effectively because the thing is that today our market cap of INR1,000 crore or sub INR80,000 because of the market crash today I don’t know exactly what it is, but somewhere around there. Clearly, I mean, it’s not reflecting it from an investor angle, right, because I mean on one side you’ve got Bama refinery. On the other side, you’ve got Vizag. On third side you’ve got lubricant which is the biggest, which is a 40% market share. So sir, if you can help understand in the lubricant part where exactly are we today in terms of the demerger and value unlocking?
Rajneesh Narang
See, we would need since I’ll be carving out this lubricant business, it would — there’s going to be a change as regards because I’ll be forming another company out of the existing company. So we need the approval from the Government of India for the same. We have already taken up with the Government of India on as regards the demerger is concerned. So that approval we are waiting because that would need an approval from the Ministry of Finance from Deepam and [Indecipherable]. We are waiting for their approval.
Sumit Rohra
Understood sir. Thank you very much. And sir, just one last thing before I end. Sir, I mean, we have a presentation which we have given to the exchanges I think sometime back in which we are talking about a INR40,000 crore EBITDA, you know, which is basically once the projects are commissioned. So we actually think that, that could be beaten because of the quality of the projects what we have now.
Rajneesh Narang
Yeah. We stand by what presentation we have. There is no doubt on that.
Sumit Rohra
Okay, sure. Thank you, sir. And wish you a very Happy Diwali and to you and your entire team, sir.
Rajneesh Narang
Thank you.
Operator
Thank you. The next question is from the line of Kirtan Mehta from BOB Capital Market. Please go ahead.
Kirtan Mehta
Sir, couple of clarification on the Vizag expansion. In terms of the expansion in the current environment in a like-to-like case, how much profitability or EBITDA is added because of the expansion? Will you be able to give us some color? And second part was for the RUFMA. If this environment continues, so what could be the margin upgradation instead of $2 to $3 per barrel? Could you also provide some color under the current environment?
Rajneesh Narang
See, if I take the mid cycle GRMs and calculate, the expansion of refinery from 8.33 million to 15 million tons and bottoms upgradation to rough that was to add almost INR4,500 crores to the profitability of Vishak. Now out of that around INR2,000 crores to INR2,500 crores is because of the capacity expansion. The balance is on account of the bottoms upgradation.
Kirtan Mehta
Understood, sir. Second question was about the Bhatinda. Could you also share the current petrochemical utilization and its contribution at the gross margin level?
Rajneesh Narang
They are operating today at more than 90%. That’s what I can say as regards the operation of the plant is concerned. What exactly you wanted of Bhatinda?
Kirtan Mehta
Contribution at the gross margin level, petrochemical contribution gross margin or EBITDA level?
Rajneesh Narang
I don’t have it right now. We’ll share it separately.
Kirtan Mehta
Sure. And the last question was about the Chhara lengthy terminal. When do we expect to start operating?
Rajneesh Narang
Before this financial year.
Kirtan Mehta
And what is the current bottleneck which we need to resolve to operate it?
Rajneesh Narang
No, right now, we will shortly be coming in the market to put the commissioning cargo. Last time in April, we had brought a cargo, but we could not commission because the field conditions became rough and all. After that, the monsoon season had started. So effective October only in the fair weather season we could bring the cargo. So that cargo we’ll be bringing it in December or January and then commission. Otherwise we have got all the port approvals, the objective and all. Everything is in place. There is no issue. Only thing is we’ll have to bring the cargo and commission it.
Kirtan Mehta
And what could be utilization over first couple of years in terms of the million ton? We had said previously our own demand could be of the order of 2 million ton also.
Rajneesh Narang
Correct. For HPCL, our Mumbai refinery going forward even HMEL and Rajasthan refinery, the gas would be moving from there only because from Chhara we are connected to the national grid. It will go from there itself to all the places. Moment Vizag is connected to — through pipeline. Right now, Vishakhapatnam pipeline is half late and yet to be completed. The moment that also gets completed even Vishak [Indecipherable]. So that can go from here. So if I see my in-house consumption itself is more than 1.5 million to 1.7 million metric tons among these three units. Plus I have my own GS where I can send plus now LNG trucking is picking up gradually. So we are already set up for LNG outlets. We have planned to scale up that facility also. A lot of new demand is coming up from LNG trucking also. And we see there’s a lot of potential as regard LNG is concerned. And definitely the capacity utilization will also keep on improving as we go ahead.
Kirtan Mehta
Thank you sir for this clarification. I will get back in the queue.
Rajneesh Narang
Thank you.
Operator
Thank you. The next question is from the line of S. Ramesh from Nirmal Bang Equities. Please go ahead.
S. Ramesh
Thank you and good evening. Sir, in refining, what do you expect to change that will get the industry going back to normal X margins? Do you see capacity closures or are you waiting for demand for petrol and diesel to improve over time? What are the variables you would expect to change that will see some visible improvement in GRMs going forward?
Rajneesh Narang
See, compared to the August and September, we are already seeing an uptick as regards the GRMs are concerned. The Singapore GRMs if you take the benchmark Singapore GRM, they had gone down to $3.2 a barrel. Today’s morning number if you see it is already reached $4.7 a barrel. Now I’m sure with winter season picking up and all China demand and all, those are the factors which will scale it up. So GRMs are likely to improve only.
S. Ramesh
Yeah. So I understand the short-term moment. What I am trying to get at in terms of the structural outlook for refining as a business because there is a lot of excess capacity, there is weak demand. So in terms of demand and supply, do you see supply reduction or capacity closures happening in the next 12 years which will give some structural improvement in the output for GRMs?
Rajneesh Narang
Yeah, that would continue to happen. Even now it is happening whereby few of the inefficient refineries they closed down and like fortunately for us we have recently revamped our refineries or Rajasthan refinery which is coming up is going to be a new refinery, most energy efficient refineries and all. So all those people who have old refineries or inefficient refineries, definitely there is a case for them to shut down and for us it becomes an opportunity.
S. Ramesh
Okay. Now on the city gas distribution business and LNG can you share some numbers in terms of when you see the commercial contribution from your stand-alone GAs in your P&&L and what is the kind of volume and say top line and EBITDA again look at per cubic meter or whatever you can share say over the next two years in CGD?
Rajneesh Narang
Even today we are doing around 0.4 million, 0.45 million metric ton of natural gas and LNG even today doing that and the same once our terminal is commissioned, we will start bringing our own LNG cargoes and we have planned to scale it up to 2.5 million in the next two years.
S. Ramesh
Yeah. This is on LNG. On the city gas distribution volumes, can you give some color in terms of the progress on the network expansion, the capex and the volumes you expect to do? And some indicator in terms of how much it can add to your profitability on a standalone basis?
Rajneesh Narang
See, every year we are doing a capex of almost INR1,800 crores to INR2,000 plus crores in the CGD space and we have already the network which we have put almost more than 130 odd CNG stations where we have our own GAs, we have already started getting the revenue from them while they are not huge numbers, but they have already started contributing to our bottom line.
S. Ramesh
So just one last thought on that. So if you take a three to five year view, once you have a significant number of CGD GAs, what is the internal business plan throwing up in terms of volumes and revenue and EBITDA just to get a…
Rajneesh Narang
EBITDA we aim around INR1,000 crores from this next five years.
S. Ramesh
Okay. Thanks a lot and wish you a Happy Diwali. Thank you very much.
Rajneesh Narang
Thank you.
Operator
Thank you. The next question is from the line of Mayank Maheshwari from Morgan Stanley. Please go ahead.
Mayank Maheshwari
Thank you for the call, sir. The first question was more on the operational side. In terms of the Vizag, I think it got pushed about by a quarter or so in terms of the startup. Do you see any other challenges in terms of further ramp up on the Vizag side or you think you’ll be able to deliver full volumes on the upgrade by the June quarter fully?
Rajneesh Narang
So Vizag if you see in the latest quarter we have already done 3.8 million metric ton which is equivalent to the additional capacity what we have installed. So the full volume is already realized and with the completion of bottoms upgradation even the value realization will be done.
Mayank Maheshwari
Bottoms upgradation, we should be able to kind of see the full impact by March quarter or this more looks like a June quarter thing?
Rajneesh Narang
It should happen in the March quarter.
Mayank Maheshwari
Okay. And sir, the second thing was in terms of the Rajasthan refinery, what would be the net debt sitting on the books at Rajasthan right now?
Rajneesh Narang
Around INR35,000 crores to INR37,000 crores.
Mayank Maheshwari
Okay. Got it. And sir, the last thing was more related to the marketing side of the business. You have obviously done very well. I think you have kind of got some market share on the diesel side. Like can you just kind of tell us about how you are doing some of these market share gains? And is there more scope for you to kind of grow market share in some of these spaces?
Rajneesh Narang
Yeah, that’s always our result to gain more market share. And if you see consistently past four quarters we have been gaining in terms of market share itself not only in the MS and HSV space, but also in our direct sales and the lubricant sales also, even NPG and ATS if you see. We are having good volumes and with market share growth in business line also.
Mayank Maheshwari
Thank you. Just on the marketing point, sir, industrial side, how are you seeing competition and like can you give us a bit of a sense subjectively as well how is competition doing? How margin is doing on the industrial side?
Rajneesh Narang
Industrial has always been quite competitive both from diesel, bitumen and all. And as regards the competition is concerned, yes, in the industrial side, we have a market share of around 13% in that case. IoT is the major one, almost 70%. So that gives us an opportunity to increase our market share there. So that is one area where we are focusing as to how we can increase our penetration into bitumen as well as the specialty products of hexane, NPO and others.
Mayank Maheshwari
Okay, sir. Perfect. Yeah, thank you.
Operator
Thank you. The next question is from the line of Puneet Gulati from HSBC. Please go ahead.
Puneet Gulati
Yeah, thank you so much. And my first question is on what is the LPG price that you need to reach zero under recovery?
Rajneesh Narang
It should be increased by almost INR200 per cylinder.
Puneet Gulati
INR200 per cylinder. And in terms of Russian crude, what is the discount you’re enjoying currently?
Rajneesh Narang
It varies every month.
Puneet Gulati
Yeah. On average, for example, last quarter.
Rajneesh Narang
Pardon.
Puneet Gulati
Last quarter, what would it have been on an average or a range if you can give around?
Rajneesh Narang
It’s around INR170 to INR180.
Puneet Gulati
Sorry.
Rajneesh Narang
Around INR170 to INR180 per cylinder.
Puneet Gulati
No. On the Russian crude I’m asking, the discount on Russian.
Rajneesh Narang
Discount has come down significantly, but it’s still cheaper than the other two.
Puneet Gulati
Any range that you can share in terms of discount dollar per barrel?
Rajneesh Narang
No.
Puneet Gulati
Okay. And you talked about INR4,500 crore as incremental profit from Vizag. What is the underlying GRM you assume for that?
Rajneesh Narang
Around $6 to $8 a barrel. It will increase by another $2, $3.
Puneet Gulati
And that’s your GRM, not the single benchmark GRM.
Rajneesh Narang
Yes, we have worked on our.
Puneet Gulati
$6 to $8 and then $2 incremental for the average refinery upgradation part.
Rajneesh Narang
Yeah.
Puneet Gulati
And lastly, if you can talk about any cost escalations you’re seeing on the Rajasthan refinery side and the Vizag project side? Revised cost numbers.
Rajneesh Narang
Revised number for Rajasthan is INR73,000 crores. Since it’s a EPC contract, most of the — I gave you the number. The total commitment is INR70,872 crores as on date.
Puneet Gulati
Okay. And Vizag?
Rajneesh Narang
Vizag INR30,000 crore is the total public cost.
Puneet Gulati
Okay. And no change because now you should have a concrete view of this cost, right?
Rajneesh Narang
Yeah. This is final, right.
Puneet Gulati
This is final cost. Okay, that’s great. Thank you so much and all the best.
Operator
Thank you. The next question is from the line of Vishnu Kumar from Avendus Spark. Please go ahead.
Vishnu Kumar
Sir, thanks for your time. On the incremental GRM that you mentioned sir, the $6 to 8$, this is an absolute or like we should consider $3 plus $4 which means the range is about $10 to $12?
Rajneesh Narang
No. The question there what was asked is what is the mid cycle GRMs who are concerned. So there I said we consider around $6 to $8 and most rough we consider an incremental of $2 to $3 a barrel.
Vishnu Kumar
Got it. Once we have the bottom upgradation completely done, can we increase the Russian intake of crude in Vizag and is it possible? If possible, how much can we get to?
Rajneesh Narang
We’re already at around 40% we are there. Depending on the opportunity, it can go by more than 10%, 15%.
Vishnu Kumar
So we already reached 40%. Maybe we can go to 50 is what you’re saying.
Rajneesh Narang
Right.
Vishnu Kumar
Understood. Sir, marketing business if you could just help us understand what would be the per liter diesel and petrol margin this quarter and also if possible for the last two quarters?
Rajneesh Narang
I can only give you the entire marketing margin, not product wise.
Vishnu Kumar
Okay, sir. Thank you.
Operator
Thank you. The next question is from the line of Rituparna Ghosh from Argus Media. Please go ahead.
Rituparna Ghosh
Sir, thank you for taking the call. My question is regarding what sort of long-term tenders you are seeing in terms of Chhara LNG terminal?
Rajneesh Narang
Can you just repeat your question please?
Rituparna Ghosh
Yes. What sort of long-term LNG contracts are you seeing from Chhara LNG terminal?
Rajneesh Narang
You’re talking about sourcing or…
Rituparna Ghosh
Sourcing. Yes sir. Sourcing.
Rajneesh Narang
Yeah, we will be tying up for our requirements because this terminal is a 5 million metric ton terminal. Like if I told you that we have a plan to reach 2.5 million metric ton in the next two years. So I need to contract that much quantity only then I can be there. So we will be gradually phasing our procurement plans in line with our business plan to increase the LNG volume.
Rituparna Ghosh
Okay. Sir, in line by which you will be closing the deal or what sort of response are you getting from the global market in terms of the sourcing?
Rajneesh Narang
They are already in market as regards long-term coping is concerned and the response has been quite good.
Rituparna Ghosh
Okay. And sir, second question is regarding the building of breakwater facility at the terminal. How far has the work been reached?
Rajneesh Narang
For the LNG terminal the breakwater which is required is around 1,900 meters. Now out of that 1,900 meters, 1,050 meters have already been done and the balance also it has reached 4 meters below the water level. Up to that place it has been done. Now with the fair weather season starting effective October, the work will shortly start over there for building — completing the balance part. We are hopeful that in this fair weather season, the same should be complete.
Rituparna Ghosh
Sorry, sir, you’re hopeful to complete the work by this fiscal year?
Rajneesh Narang
In this fair weather season.
Rituparna Ghosh
In this weather season. And sir lastly to confirm what you already mentioned, you will be getting the commissioning cargo December or January, correct, sir? Yeah,
Rajneesh Narang
December or January we’ll be getting the cargoes.
Rituparna Ghosh
Perfect, sir. Thank you so much.
Operator
Thank you. The next question is from the line of Shivansh from Desolado [Phonetic] Advisor. Please go ahead.
Shivansh
Hello. Hi. Yeah. Am I audible?
Rajneesh Narang
Yes.
Shivansh
So the question was like with the changing geopolitical dynamics in Russia, so do you think the discount factor you’re getting from Russia is going to increase or decrease in the coming near future?
Rajneesh Narang
See, one thing is there, see, I don’t buy Russian crude just because it is a Russian crude. I buy because it makes value in my system. So long Russian crude will make value in our system and it is better than processing other crude, we will be processing the Russian crude. So depending upon the — how the environment behaves or what is the level of discount and all that, the same would be analyzed on a case to case basis and accordingly the sourcing will be done.
Shivansh
Okay, thank you.
Operator
Thank you. The next question is from the line of Gagan Dixit from Elara Securities. Please go ahead.
Gagan Dixit
Yeah. Thanks for taking my question, sir. Sir, there’s a one month news that was your parent company ONGC is planning the 12 million ton refinery in UP Prayagraj. So is there any possibility that this HPCL will also be involved in the later stages for that? Because the parent company…
Rajneesh Narang
You should ask this question to the parent company because I am not aware of that.
Gagan Dixit
Okay. That’s from my end.
Operator
Thank you. The next question is from the line of S. Ramesh from Normal Bang equities. Please go ahead.
S. Ramesh
Thank you very much for the follow up. So you have the renewable subsidiary. So just like NTPC is planning to do a float, when do you think you can reach a commercial scale to think of a listing like NTPC? Any thoughts on that?
Rajneesh Narang
Maybe maximum two years we should be reaching that.
S. Ramesh
Okay. And any numbers you can share in terms of what is the scale in terms of megawatts of power, some sense in terms of investment? Can you share some numbers over the next two years?
Rajneesh Narang
Right now, we are doing around 200 plus megawatt of renewable there. We have plans to set up more CBG plants also under that and maybe by end of the year, we may tie up another 200 odd megawatts and next two years we want to be touching around 2, 2.5 gigawatt.
S. Ramesh
And what will be the size of the balance sheet or investment over the next two years?
Rajneesh Narang
It will be around 15,000 — INR20,000 crores is what we had anticipated, the renewables as well as the biofuel.
S. Ramesh
Okay. So on MRPL there has been a lot of tracking and sorting on the merger proposal given the kind of challenges your refiners are facing. Do you think you will again take that issue? Is there any progress likely on the MRPL merger?
Rajneesh Narang
Currently there is no such discussion. As and when it comes, we’ll definitely review.
S. Ramesh
Okay. Thank you very much.
Operator
Thank you. The next question is from the line of Vimal Sampat, an individual investor. Please go ahead.
Vimal Sampat
Yeah, good evening. My question is pertaining to lubricant business. By when do you think we will be able to demerge?
Rajneesh Narang
The moment we get the approval, it may take another six to eight months after that for the entire process to complete.
Vimal Sampat
Okay. And yeah, we are planning to manufacture some products for Chevron. Can you please give some more clarity on that?
Rajneesh Narang
We are already manufacturing the same in our plant.
Vimal Sampat
Okay. So is it a kind of technical tie up or only job work we are doing? What is it?
Rajneesh Narang
It is both.
Vimal Sampat
Okay. And then we will marketing jointly or they will do it in their name only or how or through our network we will do it?
Rajneesh Narang
They are directly marketing, but they can use our network also.
Vimal Sampat
Okay. And second thing now in next two, three years with our lubricant business and green this thing all will be demerged. So I mean — and our refineries also we have joint ventures. So we will be a very large conglomerate. I mean, how are you looking at it? I mean, looking at…
Rajneesh Narang
HPCL is already a separate company. It’s not demerged. It is already a separate company. Then we have the gas, HP LNG. That is a separate company. Right now, we are talking about lubricant.
Vimal Sampat
Only lubricants. And this — because gas also will be very significant contributor to us. So in future you may demerge gas also?
Rajneesh Narang
Gas is a separate company.
Vimal Sampat
Okay. Gas is totally…
Rajneesh Narang
LNG terminal is separate company.
Vimal Sampat
No, I’m talking about these CGD and this biogas. What CBG what you are going to do.
Rajneesh Narang
We will evaluate that as and when — once GST and all is implemented, we will see at that point.
Vimal Sampat
Okay. That’s all. Thank you.
Operator
Thank you. The next question is from the line of Umar Farooq from Crisan [Phonetic]. Please go ahead.
Umar Farooq
Hello. So thanks for bringing up the question. So the question is regarding as we have seen a drop in crude oil prices. So what are we expecting for the upcoming quarter to be like in regards with marketing margins? If we can show some — shed some light on that.
Rajneesh Narang
Can you just repeat the question please, a bit louder.
Umar Farooq
So with the crude oil prices declining and if you expect crude oil price to remain as you have said to around $78 — to $78 a barrel. So what are we expecting for quarter three of this fiscal regarding the marketing margins?
Rajneesh Narang
See, that we gave you a number. In case we get our normative margins and all, the numbers here will be — in the initial questions we had covered that. And in case the prices of the crude are going to be around the level at which they are then in such case there will be no incident of any inventory loss or gain.
Umar Farooq
So my second question would be as we — the center has been pushing so much on ethanol blending to reach either ’25, ’26. The ethanol production capacity has also increased to 1,623 liters as achieving [Indecipherable] reported. So by when do we — can we expect it’s not blending to reach 20% of targeted blending? Is it possible that we achieve it by next fiscal or do we have to wait for that?
Rajneesh Narang
Even today the ethanol blending is almost 15.9% which is being done. And what has been said is by ’25, ’26 the ethanol supply year, FY year 20% target is to be achieved and it will be done by that time. And today there is no problem as regard availability of ethanol is concerned. So gradually this percentage you will see that it will keep on increasing and the target of 20% in FY ’25, ’26 will be achieved.
Umar Farooq
Okay. So I had this issue because very recently ethanol producers have complained — have raised issues or just not procuring enough ethanol. So that was leading to excess supply in the market. So was there any problem or are we on this facing any issues in regards to procuring ethanol? Maybe if it more from producers that 15% what we are at now could be 16 or 17%.
Rajneesh Narang
Yeah. If availability is higher, we’ll go for higher percentage.
Umar Farooq
Okay, thanks, sir. That’s all for me. And I wish everyone a Happy Diwali.
Rajneesh Narang
Thank you.
Operator
Thank you. The next question is from the line of Meet, an individual investor. Please go ahead.
Meet
Hi. Hello. Hi sir. Thank you for the opportunity. My question was the $6 to $8 GRM that you mentioned, midcycle GRM. So is this for the company or is this in reference to the Singapore GRM?
Rajneesh Narang
Company.
Meet
Okay. And this leads to — you are saying at this level it leads to a PAT addition of INR4,500 crore in Vishak for 15 million metric tons of capacity, right?
Rajneesh Narang
I referred with respect to the pre-expansion and pre-investment.
Meet
So this is addition of the total?
Rajneesh Narang
Not addition. This is — when the refinery was at 8.33 million, by doing all these investments, it would have resulted in an increase of INR4,500 crores.
Meet
Right. And my second question is regarding HRRL. So in the presentation we had mentioned a $20 mid cycle blended GRM. So is that still valid or like what do you expect the blended GRM to be for HRRL?
Rajneesh Narang
Those are the numbers at which the financial appraisals have been done. If you calculate it today, maybe the number would be different. But this number will keep on changing. This project which is coming up is going to come up for next 20, 25 years. So things will keep on changing over a period of time. At a particular moment of time, we will say — you will see that sometimes it will be better or sometimes it will be less. But over a period of time, this is the number which we define as realized. If you take a case last year there was a period when the GRMs used to be in double-digits, it used to $13, $14 on MS, HSV processing only. But today the GRMs are lower. So these things, these cycles will keep on coming and going. But when you evaluate a project, you evaluate considering a particular level or particular period what the GRMs are likely to be. So the numbers which we have — we have considered for HRRL is the number which you are referring to.
Meet
Right. So for a INR8,000 crores EBITDA we would require something like what $12 GMR from HRRL?
Rajneesh Narang
I don’t have the numbers right now, but I will share it separately.
Meet
Sure. Thank you thank you for the opportunity.
Rajneesh Narang
Thank you.
Operator
Thank you. As there are no further questions I would now like to hand the conference over to Mr. Varatharajan Sivasankaran for closing comment.
Varatharajan Sivasankaran
Thank you, Nikita. Sir, if you have any closing comment to make, please.
Rajneesh Narang
We already said what we thought was the relevant. Regards this quarter is concerned, I only take this opportunity on my personal behalf and on behalf of our Director Refineries because we know that all our HPCL staff and employees, we wish each and every participant a very Happy Diwali and to them as well as to you, Varatha and all the best to you all. Thank you
Varatharajan Sivasankaran
Thanks a lot, sir. I wish to thank all the participants and the management for taking time out and discussing in great detail. Wish you all a Happy Diwali. Have a nice day.
Operator
[Operator Closing Remarks]