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Bharat Petroleum Corporation Ltd

BSE: 500547 | NSE: BPCL ISIN: INE029A01011
Market Cap: [Rs.Cr.] 62,249.96 Face Value: [Rs.] 10
Industry: Refineries

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Director's Report
DIRECTORS

On behalf of the Board of Directors, I take pleasure in presenting the Annual Report on the performance of Bharat Petroleum Corporation Limited (BPCL) for the year ended 31st March, 2014.

PERFORMANCE OVERVIEW

Group Performance

During the year 2013-14, the aggregate Refinery throughput at BPCL’s Refineries at Mumbai and Kochi, along with its subsidiary company, Numaligarh Refinery Limited (NRL) and considering 50% throughput of Joint Venture Company, Bharat Oman Refineries Limited (BORL) was 28.69 Million Metric Tonnes (MMT) in comparison to 28.55 MMT in 2012-13. The BPCL Group ended the year with market sales of 34.31 MMT as against 33.67 MMT in the previous year. The group’s exports of petroleum products during the year stood at 3.06 MMT as compared 3.22 MMT in 2012-13.

In the financial year, the group achieved a Gross Revenue from Operations of Rs 2,76,005.09 crores as compared to Rs 2,53,285.57 crores recorded in 2012-13. The Profit after Tax was at Rs 4,052.98 crores in 2013-14 as against Rs 1,936.15 crores in the previous year. After setting off the minority interest, the Group earnings per share increased to Rs 54.08 in the current year from Rs 26.01 in 2012-13.

CONSOLIDATED GROUP RESULTS

2013-14 2012-13
Physical Performance
Crude Throughput (MMT) 28.69 28.55
Market Sales (MMT) 34.31 33.67
Financial Performance Rs Crores
Gross Revenue from Operations 2,76,005.09 2,53,285.57
Less: Excise Duty Paid (11,598.49) (11,104.59)
Net Revenue from Operations 2,64,406.60 2,42,180.98
Gross Profit 10,758.74 8,201.25
Finance Cost 1,982.14 2,518.29
Depreciation & amortization expense 2,610.92 2,462.70
Profit before tax 6,165.68 3,220.26
Provision for taxation – Current (Net of MAT Credit Entitlement) 2,554.43 1,398.88
Profit after Current Tax 3,611.25 1,821.38
Provision for taxation – Deferred (Asset )/Liability (355.31) (72.65)
Short /(Excess) provision for Taxation in earlier years provided for (86.42) (42.12)
Net Profit 4,052.98 1,936.15
Minority Interest 142.30 55.32
Net Income of the group attributable to BPCL 3,910.68 1880.83
Group Earnings per share attributable to BPCL (Rs ) 54.08 26.01

COMPANY RESULTS

2013-14 2012-13
Physical Performance
Crude Throughput (MMT) 23.35 23.21
Market Sales (MMT) 34.00 33.30
Rs Crores
Financial Performance
Gross Revenue from Operations 2,71,037.35 2,50,649.26
Gross Profit 9,554.88 7,787.03
Finance Cost 1,359.08 1,825.24
Depreciation & amortization expense 2,246.82 1,926.10
Profit before tax 5,948.98 4,035.69
Provision for Taxation – Current (Net of MAT Credit Entitlement) 2,275.00 1,173.29
Provision for Taxation – Deferred (294.82) 255.16
Short/(Excess) provision for taxation in earlier years provided for (92.08) (35.66)
Net Profit 4,060.88 2,642.90
Balance brought forward 500.00 500.00
Amount available for disposal 4,560.88 3,142.90
The Directors propose to appropriate this amount as under:
Towards Dividend:
Final (proposed) Dividend 1,229.24 795.39
Corporate Dividend Tax 196.58 127.47
For transfer to Debenture Redemption Reserve 196.84 -
For transfer to General Reserve 2,438.22 1,720.04
Balance carried to Balance Sheet 500.00 500.00
Summarized Cash Flow Statement :
Cash Flows:
Inflow/(Outflow) from operations 8,404.10 5,480.45
Inflow/(Outflow) from investing activities (4,285.89) (2,387.16)
Inflow/(Outflow) from financing activities (6,243.73) (1,743.25)
Net increase/(decrease) in cash & cash equivalents (2,125.52) 1,350.04

Company Performance

During 2013-14, BPCL recorded a Revenue from operations of Rs 2,71,037.35 crores, thus registering an increase of 8.13% over the previous year’s revenues of Rs 2,50,649.26 crores. The profit before tax for the year 2013-14 stood at Rs 5,948.98 crores as compared to Rs 4,035.69 crores in 2012-13. After providing for tax, (including deferred tax) of Rs 1,888.10 crores as against Rs 1,392.79 crores during the last year, the profit after tax for the year was certified at Rs 4,060.88 crores as against Rs 2,642.90 crores reported in 2012-13. This has been an unprecedented performance by BPCL.

In 2013-14, the earnings per share amounted to Rs 56.16 as compared to Rs 36.55 in 2012-13. Internal cash generation during the year increased by 15% and stood at Rs 4,585.64 crores as against Rs 4,001.68 crores in 2012-13.

There was an increase in the amount of taxes and duties contributed to the exchequer by BPCL to Rs 43,602.22 crores from Rs 38,028.20 crores in the previous financial year.

As on 31st March, 2014, the net worth of BPCL was computed as Rs 19,458.76 crores, as compared to Rs 16,634.02 crores as at the end of the previous year.

Dividend

A dividend of 170% has been recommended by the Board of Directors (Rs 17 per share) for the 2013-14, on the paid-up share capital of Rs 723.08 crores. The dividend of Rs 1,425.82 crores (including Rs 196.58 crores for Corporate Dividend Tax) will be disbursed from the amount of profit after tax.

Borrowings

In March 2014, the Company has issued 3% Bonds 2014 - 2019 for CHF 200 Million. The Net Proceeds of this Bond Issue were used for working capital purposes.

The Bonds are listed on the SIX Swiss Exchange.

There has been a 26% reduction in the amount of borrowings from banks as at year end to Rs 13,843.68 crores from Rs 18,774.07 crores as at 31st March, 2013. The loans from

Oil Industry Development Board have also recorded a decrease to Rs 321.25 crores as at 31st March, 2014 as compared to Rs 593.50 crores at the end of the previous year. Debentures worth Rs 700 crores issued during the year 2012-13 remained outstanding as on 31st March 2014. The Collateralized Borrowing and Lending Obligation (CBLO) through Clearing Corporation of India Limited amounted to Rs 1,101.25 Crores as at 31st March, 2014. 4.625% US Dollar International bonds issued during 2012-13 of USD 500 Million (equivalent to Rs 3,004.99 crores) remained outstanding as on 31st March 2014. No Commercial Papers remained outstanding as on 31st March 2014, as compared to Rs 430.00 crores as on 31st March 2013. 3% Swiss Franc International Bonds issued during 2013-14 of CHF 200 Million (equivalent to Rs 1,350.39 crores) remained outstanding as on 31st March 2014.

The amount of deposits, matured but unclaimed, at the end of the year was Rs 0.14 crores. This pertains to 34 depositors.

Capital Expenditure

The total amount of Capital Expenditure incurred during the year 2013-14 was Rs 5,560.39 crores as compared to Rs 3,544.40 crores during the year 2012-13.

C&AG Audit

The Comptroller and Auditor General of India (C&AG) has no comment upon or supplement to the Statutory Auditors’ Report on the Accounts for the year ended 31st March 2014. The letter from C&AG is annexed as Annexure E.

REFINERIES

MUMBAI REFINERY

The Corporation’s refineries achieved excellent performance during 2013-14 consistently registering an overall capacity utilisation of over 100%. During the period under review, Mumbai Refinery achieved throughput of 13.03 MMT of feedstock (crude oil and other feedstock) as against 13.10 MMT achieved in 2012-13. Despite having planned shutdown of two crude processing units, Mumbai Refinery achieved this level of throughput representing a capacity utilization of 108.6% almost similar to previous year utilization levels.

During the period under review, Mumbai refinery achieved its highest ever production of 83 TMT of Propylene (C3), 1437 TMT of Motor Spirit (MS) and Methyl Tertiary Butyl Ether (MTBE), 5577 TMT of High Speed Diesel (HSD), and 239 TMT of Lube Base oils. Mumbai Refinery has again demonstrated its ability to meet the demand for MS & HSD complying with Euro IV quality norms.

The Gross Refining Margin (GRM) for the year stood at USD 3.95 per barrel as compared to USD 4.67 per barrel realized in 2012-13. The overall gross margin for the refinery in 2013-14 amounted to Rs 2,340 crores as compared to Rs 2499 crores in 2012-13. The lower GRM in Mumbai Refinery for the year 2013-14 can be attributed to lower product cracks.

KOCHI REFINERY

Kochi Refinery, for the second year in succession, achieved a throughput crossing the 10 MMT mark by clocking 10.32 MMT in 2013-14 as compared to 10.10 MMT in 2012-13.The capacity utilization of the refinery during the year was 108.6% as against 106.3% in the previous year. During the year, Kochi Refinery achieved its highest ever production of 514 TMT LPG, 1529 TMT of MS, 466 TMT of ATF and 4761 TMT of HSD.

The GRM for the year 2013-14 amounted to Rs 2,249 crores (USD 4.80 per barrel @ average USD / INR exchange rate Rs 60.50) as compared to the GRM of Rs 2,211 crores (USD 5.36 per barrel @ average USD / INR exchange rate Rs 54.45) for the year 2012-13.

The details of the performance of the Refineries, their activities and future plans are discussed in the Management Discussion and Analysis Report (MD&A).

MERGER OF KRL WITH BPCL

As informed in the last year’s Report, merger of the erstwhile Kochi Refineries Limited (KRL) with BPCL under Sections 391 to 394 of the Companies Act 1956 had been completed, following receipt of the Order dated 18th August 2006 issued by the Ministry of Company Affairs, New Delhi. One of the Shareholders of the erstwhile KRL had filed a Writ Petition in the Delhi High Court challenging the merger. The Court had vide its order dated 3rd October, 2013 dismissed the writ petitions and pending applications in default and on account of non-prosecution.

MARKETING

During the year 2013-14, BPCL’s market sales volume touched a level of 34.00 MMT as compared to 33.30 MMT in the previous year. This represented a growth rate of 2.10% over the previous year. BPCL’s market share amongst the public sector oil companies stood at 23.48% as at 31st March, 2014, as compared to 23.14 % as at the end of the previous year.

A detailed discussion of the performance of the Marketing function is given in the MD&A.

PROJECTS

Integrated Refinery Expansion Project (IREP) at Kochi

The project envisages capacity expansion of Kochi Refinery from 9.5 Million Metric Tonnes Per Annum (MMTPA) to 15.5 MMTPA and modernisation of processing facilities to produce auto-fuels conforming to Euro-IV/ V specifications. It also envisages refinery residue stream upgradation to value added products.

The project involves a capital outlay of Rs 16,504 crores and is expected to be completed in May 2016. The project has achieved an overall physical progress of 47.67 % with cumulative expenditure of Rs 2,563.75 crores as on 30th June 2014.

All the major statutory clearances have been obtained. Jobs relating to HAZOP review of major process units and offsites, 3D model reviews of facilities and site grading and piling of major units have been completed. Civil, structural and underground piping jobs of units and offsites are in progress. Foundations of major equipment and structures are progressing at site. The ordering of major packages and long lead items has been completed. Contracts for all packages, composite mechanical jobs for units and offsites have been awarded.

A work force of more than 6000 labourers has been engaged at site on a daily basis. The IREP site has completed 17.6 million lost time accident (LTA) free man-hours as on 31st July, 2014. Planting of saplings has commenced to develop a green belt of 20,000 trees around the project site. Liquid effluent from all the units of IREP will be converted to De-mineralized water by employing state-of-the-art technology and will be used in boilers. The Government of Kerala continues to provide proactive support to the project including financial incentives. The IREP site has also been declared as a strike-free zone.

Capacity Augmentation of Kota-Piyala Section of MMBPL Pipeline

The capacity augmentation project of the Kota-Piyala section of the Mumbai-Manmad-Manglia-Piyala–Bijwasan pipeline from 2.8 MMTPA to 4.4 MMTPA, to evacuate products from Bina Refinery and also to meet the growing demand for petroleum products in the Northern region has been completed in June 2013. The approved project cost is Rs 152.89 crores and the cumulative expenditure on the project was Rs 135.80 as on 30th June 2014.

Kota Jobner Pipeline Project

To economize transportation of MS/SKO/HSD from BPCL’s Mumbai refinery as well as BORL’s refinery at Bina, the project of laying a 210 km long and 14" (35.6 cms) dia. cross-country pipeline from Kota to Jobner (near Jaipur) was envisaged. The estimated cost of the project is Rs 276.27 crores.

Petroleum and Natural Gas Regulatory Board (PNGRB) authorization for laying the pipeline has been received. The project has achieved an overall physical progress of 74.5% with cumulative expenditure of Rs 139.50 crores as on 30th June, 2014. The project is anticipated to be complete by March 2015.

Continuous Catalytic Regeneration Reformer (CCR) Facilities and Hydrocracker Revamp at Mumbai Refinery

The project has been undertaken to increase the production of Euro IV grade MS and HSD at Mumbai Refinery. This involves revamping of the Hydrocracker Unit to increase its capacity from 1.75 MMTPA to 2.0 MMTPA and setting up of new Continuous Catalytic Regeneration Reformer Unit (CCR) of 1.2 MMTPA capacity with matching new Naphtha Hydro Treater Unit (NHT) and new Pressure Swing Absorber (PSA) Units and other utilities/offsite facilities at an approved cost of Rs 1827 crores.

NHT and CCR units along with offsite facilities were mechanically completed on 10th December, 2013. NHT was commissioned on 13th February, 2014 and CCR was commissioned on 4th March, 2014 with a cumulative expenditure of Rs 1,596.54 crores as on 30th June, 2014.

Replacement of CDU /VDU at Mumbai Refinery

The project envisaged installation of a new state-of-the-art integrated Crude & Vacuum Distillation unit (CDU-4) of 6 MMTPA capacity to improve mechanical integrity and enhance safety & environment in place of the existing old standalone Crude and Vacuum Units.

The project approved cost is Rs 1419 crores and Engineers India Limited (EIL) has been appointed as Engineering, Procurement, Construction & Management Consultant (EPCM) for the project. ‘Petroleum and Explosive Safety Organization’ (PESO), Environment clearance and ‘Directorate of Industrial Safety and Health’ (DISH) approvals have been obtained for the project. The project has achieved overall physical progress of 77.63% and cumulative expenditure of Rs 599.48 crores as on 30th June 2014. Civil and structural work is in progress and the main Crude and Vacuum column has been erected at site. CDU/ VDU heater, cooling tower construction, equipment erection and piping works are in progress. The mechanical completion of the project is scheduled in March 2015.

Pipeline for Transfer of LPG from BPCR / HPCR Mumbai to Uran

The project envisages laying a 28 km pipeline (12 km offshore and 16 km onshore) and provision of 3 x 900 MT Mounded Storage Vessels (MSVs) at BPCL’s Uran LPG Plant. The pipeline is being laid to transfer LPG from BPCL’s Mumbai refinery and the Mumbai refinery of Hindustan Petroleum Corporation Limited (HPCL). This would significantly reduce the road movement of product being currently undertaken by both BPCL & HPCL from their refineries at Chembur, Mumbai. The pipeline portion of the project costing Rs 229.59 crores will be shared equally with HPCL. The MSVs are expected to cost around Rs 47.24 crores and will be on BPCL’s account.

The entire length of pipeline laying has been completed. The project has achieved an overall physical progress of 98.8% with cumulative expenditure of Rs 257.90 crore as on 30th June 2014. Pre-commissioning activities are in progress.

RESEARCH & DEVELOPMENT (R&D)

The Research and Development Centres of BPCL are consistently following the global trends of technology innovations for energizing lives. The R&D Centres are actively involved in supporting the businesses through constant advanced technical support and novel product / process technology development in niche areas leading to new business development. The core research areas are broadly divided into four categories, namely Refinery processes upgradation / optimization, development of novel energy efficient technologies, product development and alternative fuels and energy. R&D capabilities at the Corporate R&D Centre, Greater Noida, Uttar Pradesh, Product & Application Development Centre, Sewree, Mumbai and the R&D Centre at Kochi Refinery are being leveraged towards business growth of the Company and achieving the corporate vision. BPCL’s R&D programmes have been discussed separately in the MD&A. Further, the areas covered under R&D and the benefits derived from R&D activities are detailed in Form B of Annexure A to the Directors’ Report.

NON-CONVENTIONAL ENERGY INITIATIVES

BPCL’s endeavours of reducing the carbon footprint and protecting the environment continued during the year. The Corporation reinforced its footprint in the renewable energy front by installing 5 MW capacity windmills in the hilly range of Kappatguda in Chitradurga District, Karnataka. The windmills are currently in operation and power produced is sold to Karnataka State Electricity grid. This project has qualified for Clean Development Mechanism (CDM) benefit. We are currently evaluating setting up more windmills in Gujarat, Maharashtra, Madhya Pradesh and Tamil Nadu depending on availability of land and other commercial considerations.

BPCL is evaluating a proposal to set up a grid connected Solar Farm of about 5 MW capacity, either on its own or through a Joint Venture, at various select locations, for which feasibility is being carried out.

INDUSTRIAL RELATIONS

The overall Industrial Relations climate remained peaceful and cordial throughout the year. Long Term Settlements on Wages & Other Matters and Promotion Policy have been successfully signed with Marketing Unions in January 2014. Long Term Settlements on Wages & Other Matters with Kochi Refinery and Mumbai Refinery Unions were signed on 30th May 2013 and 31st May 2013 respectively.

FULFILLMENT OF SOCIAL OBLIGATIONS

The true spirit of Corporate Social Responsibility has long since been ingrained in the DNA of BPCL. Our core thrust areas for projects are first Education and Water Conservation, closely followed by Skill Development, Health and Community Development. BPCL achieved its MOU targets for the year 2013-14, which included reaching out to 75,000 children for imparting quality education, 30 villages for Water Conservation through Rainwater Harvesting and 750 beneficiaries for income generation through skill development programs. For Project BOOND, BPCL was recently conferred with World Petroleum Council’s "Excellence Award for Social Responsibility" amongst more than 100 nominations under this category, from across the world.

Project Computer Assisted Learning (CAL) was started in 2009-10 with 11 Zilla Parishad schools in Uran with the NGO, Pratham Infotech Foundation. This was scaled up to over a hundred schools in Mumbai, Uran, Panvel (Maharashtra) and Lucknow (UP). Around 90% of the schools in Uran block are digitally enabled. The Digital Literacy and Life Skills Project, also in partnership with Pratham Infotech Foundation, completed its third and final year across 40 low income/ BMC schools in Mumbai, reaching out to 22,200 children. The one-of-a-kind Science Education Programme, in collaboration with the NGO, ‘Agastya International Foundation’ for children of Government schools near the Solur LPG Plant in Bangalore has been extended to make hands-on science education available among poor rural children and teachers. In addition to the Science Centre hub, mobile science lab and lab-in-a-box activities, BPCL introduced a new "Young Instructor Leader" program. This program is focused at democratizing leadership development and unlocking human potential through the ‘students-teach students’ model. The Teacher Training module too has been started for addressing teacher absenteeism, rote based & uninspiring education and lack of interaction between teachers and the student. So far, we have reached out to over 23,100 children in the last year.

Our Read India project for impacting learning levels of children, has been scaled up to cover 13 blocks and also includes upper primary students in 6 blocks, where focus was on comprehension and application based abilities. We have continued with learning camps for children from the primary level in all 13 blocks. In a third party assessment carried out of the project, it was highlighted that overall learning levels, both of factual knowledge and comprehension, were higher in students who had been a part of the intervention program (learning camps). Around 23,800 children from both, primary and upper primary classes, were a part of our learning camps and benefitted in the last year. Along similar lines, through our project for education of tribal students in Mayurbhanj and Sundergarh districts of Odisha, 4453 children now have access to school education.

This year, we have completed our unique in-house pilot project for professional development of primary teachers & principals from low income schools. Further, we took up a new library project aimed at impacting literacy and reading skills and therefore, increasing creative thinking and supplementing learning on the whole. In order to provide children with access to not only books to read, but also teach them how to manage the entire library, we set up 20 libraries in Mumbai and Delhi where over 3800 children are benefitted.

Project Bala Janaagraha is aimed at instilling good citizenry in children as the key to building good and vibrant nations. This unique civic education project targeted creating responsible and proactive citizens through conducting civic sessions in schools which gave 2247 children know-how about their rights and duties. A Mini Civic fest, City level Civic fest and National Civic fest were held in which the children participated in nationwide competitions.

Through training in the art of chikankari embroidery, 500 women now have steady incomes and are financially independent. Similarly, after training in zardosi & aari work about 200 women in Loni earn and save enough to send their children to school.

A project in Patna named Livelihood Advancement Business School (LABS) consisted of placement linked training of 88 unemployed youth who are now employed in security services, hospitality, ITES, customer relations, sales and housekeeping. We recently began a LABS project for Persons with Disabilities in Mumbai and Noida. The 38 youth who were trained were then placed and tracked for up to 3 months post placement to ensure job retention. Along similar lines in Kolkata, we trained 80 disabled youth from economically backward families in Desktop Publishing. 150 rural youth have been trained in skills like agro equipment repairing, nursery development, vermicomposting and mechanics in Nagpur and Wardha near our business units.

Our water project Rs Boond’ has covered 41 villages this year from Tamil Nadu and Karnataka. Boond now spans across India in Tamil Nadu, Andhra Pradesh, Rajasthan, Maharashtra, Karnataka and Uttar Pradesh. The community that is benefitted by the water-structures built or repaired, plays an active role in building and maintaining the structure that contributes to their daily needs. Over 6100 families have been benefited and over 600 hectares of land are under irrigation ensuring steady water supply for Kharif crops. This project also supports sustainable employment through agriculture, fish culture, cattle rearing and drinking water made available through special biosand filters.

BPCL initiated a pilot project in one of our retail outlets in Padgha where truckers who drive in to fuel can stop and get their eyes checked for free at a fully equipped vision centre. Furthermore, villagers from the nearby community too are served through this vision centre. Over 1000 persons have been tested for free and 25% were dispensed spectacles as well.

With an objective to improve and encourage institutional care and safe delivery of babies under supervised medical attention, we work with Community Health Volunteers (CHV) called Aarogya Mitra in Vikramgad taluka in rural Maharashtra. These CHVs try to achieve enrolment of tribal women in antenatal care and encourage institutional deliveries. They also provide health services to mother and child through homeopathy and create awareness about the importance of healthcare. Through these 35 CHVs, we cover 150 tribal hamlets belong

Futures & Options Quote
Expiry Date :
574.05    [16.50] ([2.79]%)
Instrument: FUTSTK
Expiry Date: 31-Jul-2014
Open Price: 589.50
Average Price: 581.31
No. of Contracts Traded: 5,099
Open Interest: 21,10,500
Underlying: BPCL
Market Lot: 500
Previous Close: 574.05
Day's High | Low: 591.95 | 569
Turnover (Cr.): 148.20
Open Int. Change: -6,11,000 ([22.45]% )
Key Information

Key Executives:

S V Kulkarni , Company Secretary

K K Gupta , Director (Marketing)

B K Datta , Director (Refineries)

Shrikant P Gathoo , Director (Human Resources)


Company Head Office / Quarters:

Bharat Bhavan PB No 688,
4&6 Currimbhoy Rd Ballard Est.,
Mumbai,
Maharashtra-400001
Phone : Maharashtra-91-22-22713000/4000 / Maharashtra-
Fax : Maharashtra-91-22-22713874 / Maharashtra-
E-mail : info@bharatpetroleum.in
Web : http://www.bharatpetroleum.in

Registrars:

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