Hindustan Petroleum Corporation Ltd

BSE: 500104 | NSE: HINDPETRO | ISIN: INE094A01015 
Market Cap: [Rs.Cr.] 17,967.71 | Face Value: [Rs.] 10
Industry: Refineries

Management Discussions
Management Discussion And Analysis Report

: 2013-14

DEVELOPMENTS IN THE ECONOMY AND THE OIL SECTOR

Indian economy fared marginally better in 2013-14. The Gross Domestic Product (GDP)increased by 4.7% in 2013-14 compared to 4.5% in 2012-13. As against 1.4% in 2012-13,agriculture sector growth in 2013-14 was very good at 4.7%. Industrial growth remainedstagnant. For the second consecutive year, GDP growth in the industry sector was less than1%. Manufacturing and mining GDP respectively declined by 0.7% and 1.4%. Services sectorgrowth in 2013-14 was 6.8%, marginally less than last year’s growth of 7%. The growthin GDP for the trade, hotels and transport and communication sectors during 2013-14 was 3%as against 5.1% in the previous year. As compared to 2012-13, growth in other servicessector was better in 2013-14.

At around United States Dollar (US$) 107 per barrel, average crude price in 2013-14 wasslightly lower than 2012-13 average of US$ 110 per barrel. However, benchmark prices werehigher when denominated in Indian Rupee due to depreciation of rupee. With the UnitedStates (US) Fed signaling tapering of Quantitative Easing (QE) in May 2013, money rushedout of emerging economies, including India. Capital outflows amid a large Current AccountDeficit (CAD) caused rupee to depreciate sharply against US dollar, from 55 per US$ on May22, 2013 to 68 per US$ on August 28, 2013. A slew of measures by Reserve Bank of India(RBI) with respect to the policy rate, liquidity and forex swap facilities helped build upreserves during September to November 2013. Depreciation of rupee helped exports whilemoderation of imports lowered trade deficit. India’s trade deficit at US$ 147.6billion during 2013-14 was about 25% lower than that of US$ 195.7 billion during 2012-13.CAD to GDP ratio, which had reached 4.8% in 2012-13, narrowed to 1.7% in 2013-14. Withrevival of capital flows and lower CAD, concerns about the financing of CAD eased duringsecond half of 2013-14. The Rupee stabilized and moved in a narrow range of 60-63 per US$between November 2013 and March 2014.

In January 2013, Oil Marketing Companies (OMCs) were authorized to increase dieselprices in small increments at regular intervals. Periodic increase in fuel prices did leadto some decline in under-recoveries of OMCs. Under-recoveries on diesel sales at Rs.62,837 crore were lower in 2013-14 compared to Rs. 92,061 crore in 2012-13.Under-recoveries on Superior Kerosene Oil (SKO) and Liquid Petroleum Gas (LPG) sales in2013-14 were higher than that of 2012-13. As against Rs. 1, 61,029 crore under-recoveriesincurred by OMCs in 2012-13, total under-recoveries on sales of diesel, kerosene and LPGin 2013-14 were Rs. 1, 39,869 crore.

Sluggish economic activity coupled with sector specific factors led to only a marginalincrease in the consumption of petroleum products in 2013-14. Total petroleum productconsumption was about 160 million metric tonnes (MMT) in 2013-14 compared to 157 MMT in2012-13. Major increase was in the consumption of petrol, LPG and petcoke. Petrolconsumption increased by about 1.4 MMT in 2013-14, recording an increase of about 9% over2012-13 level. Year-on-Year (y-o-y) growth in LPG consumption was about 5% in 2013-14translating into incremental volume of 0.7 MMT. With y-o-y growth of 15%, incrementalconsumption of petcoke in 2013-14 was about 1.5 MMT. Increase in consumption of theseproducts was offset by decline in consumption of fuel oil, naphtha and diesel. Fuel oilconsumption declined by about 1.5 MMT in 2013-14, a y-o-y fall of about 19%. Naphthaconsumption fell by about 0.8 MMT, declining by about 7% over 2012-13 level. Switchover tonatural gas by major consumers accounts for most of the decline in consumption of bothproducts. Diesel consumption declined for the first time since 2001-02 and recorded a dropof 0.7 MMT with y-o-y fall of 1%.

PERFORMANCE PROFILE

The Corporation has secured ‘Excellent’ rating in terms of the Memorandum ofUnderstanding(MOU) signed with the Government of India for the year 2012-13 with an MOUscore of 1.034. This is the best score amongst all the Public Sector Undertakings (PSUs)under Ministry of Petroleum & Natural Gas(MOP&NG) for the second consecutive year.The performance for the year 2013-14 is discussed below:

Gross Sales

The Gross Sales of the Corporation (inclusive of excise duty) for the year ended 31stMarch, 2014 was Rs. 2,32,188 crore as compared to Rs. 2,15,666 crore in the previous year.The total sale of products (including exports) for 2013-14 was 30.96 MMT as against 30.32MMT during 2012-13.

Profit before Tax

The Corporation has earned a Profit before Tax of Rs. 2,616 crore in 2013-14 ascompared to Rs. 1,475 crore in 2012-13.

Provision for Taxation

An amount of Rs. 882 crore has been provided towards income tax for 2013-14 consideringthe applicable income tax rates as against Rs. 570 crore provided during 2012-13.

Profit after Tax

The Corporation has earned a Profit after Tax (PAT) of Rs. 1,734 crore during thecurrent financial year as compared to Rs. 905 crore in 2012-13. The Profit after Tax wasachieved after absorbing an under-recovery of Rs. 482 crore on sale of sensitive productsduring the year.

Depreciation and Amortisation

Depreciation for the year 2013-14 was Rs. 2,202 crore as against Rs. 1,984 crore forthe year 2012-13.

Borrowings

The borrowings of the Corporation were Rs. 32,165 crore as on 31st March, 2014 ascompared to Rs. 33,789 crore as on 31st March, 2013. Borrowings during the year weremainly through short term foreign currency loans and commercial paper. Long Term Loanswere borrowed at competitive rates. External Commercial Borrowings (ECB) of Rs. 5,992crore were taken during the Financial Year 2013-14 for working capital purpose. The longterm debt to equity ratio stands at 1.05:1 as on 31st March, 2014 as against 0.75:1 as on31st March, 2013.

Capital Assets

Net Fixed Assets (including Capital Work in Progress) increased from Rs. 27,722 croreas on 31st March, 2013 to Rs. 30,498 crore as on 31st March, 2014. During the year, HPCLinvested Rs. 2641.87 crore on Plan Projects.

Investments

Investments as on 31st March, 2014 were Rs. 10,860 crore as compared to Rs. 10,627crore as on 31st March, 2013.

Gross Refining Margins (GRMs)

Gross Refining Margin of Mumbai Refinery averaged at US$ 5.38 /bbl during the year asagainst US$ 2.08 /bbl for the year 2012-13.

Gross Refining Margin of Visakh Refinery averaged at US$ 1.50/bbl during the year asagainst US$ 2.08/bbl for the year 2012-13.

Earnings per Share

Earnings per share for the current year is Rs. 51.20 as compared to Rs. 26.72 in2012-13.

Dividend

Dividend of Rs. 15.50 per share has been proposed for the year 2013-14. The dividendwould result in total payout of Rs. 614.07 crore, including Dividend Distribution Tax.

REFINERIES

Global Scenario

World GDP grew by 2.9% in 2013 led by growth in Asia Pacific region & US. 2013-14saw a major shift in oil market due to continued refinery closures in western hemisphereand refining capacity addition in eastern half. On demand side, World added about 660thousand barrels per day (Kbd) refining capacity led by Saudi Arabia, which put downwardpressure on Asian refining margins. On supply side, 2013-14 was worst hit year by supplydisruptions from Iran, Libya & Nigeria.

Year 2013-14 also witnessed the highest ever production of tight oil (shale) in the USwhich reduced its dependency on West African crude. This contributed in pressurizing Brentand diverting oil flows to Asia especially to India.

As per Energy Information Administration (EIA), first quarter (Q1) of 2013-14 witnessedvery high US Crude inventory of 392 Million barrels, an all-time high, which exerteddownward pressure on crude. Brent averaged $102.43/bbl in first quarter of 2013-14,representing a sharp decline of $10.14/bbl from the previous quarter. This sharp declinewas also caused partially due to seasonal weak demand and by the persistently weakeconomic outlook in Europe, as well as poor economic growth. Increased supplies of lightcrudes in Europe weighed on Brent while stronger demand for heavier Mideast crudes stemmedthe decline in Dubai prices resulting in very narrow Brent – Dubai differential of $1.64/bbl.

Crude oil markets rallied across the board in July 2013, propelled by increasedrefinery runs in the US, Europe, Asia and the Middle East and supply outages in Libya,Iraq and Yemen. Brent regained strength in Q2 of FY 2013-14 and averaged $ 110.29/ bblposting an increase of $ 7.86/bbl. Brent was supported by reduced crude supplies headingto the Mediterranean in the wake of sharply lower exports of Libyan crude due to a strikerelated shutdown of shipping terminals and a shift in Russian crude exports to Asianmarkets.

Oil market escalated in tandem with rising geopolitical tensions over Syria’ssuspected use of chemical weapons on civilians at end of August 2013. Markets were furthersupported by the near total outage of Libyan crude oil production by striking industryworkers, facility guards and warring militias. Crude oil prices for benchmark crudestrended lower throughout September as tensions eased over the standoff with Syria, Dubaiand Brent posting a marginal month on month average increase. The Brent premium over Dubaiwidened again due to the relative strength of low sulphur crudes in European markets.

Quarter 3 of FY 2013-14 began on positive note as risk of confrontation in Iran haseased following discussions in Geneva between the 5 permanent members of UnitedNations (UN) Security Council & Germany and Tehran over the latter’s nuclearprogramme. Brent was down a more modest $2.75/bbl in October, to $109/bbl, with a 2013peak in North Sea output and poor refining margins partially offset by the loss of Libyansupplies.

The weaker market for Brent continued into November 2013 with the Month1 (M1), Month2(M2) spread moving into contango. By contrast, stronger demand for heavier Mideast crudesprovided spot Dubai crude with some support. Dubai prices were off by a relatively small$1.65/bbl in October, to an average $106.60/bbl. As a result, the Brent Dubai spreadnarrowed to an average around $3.6/bbl in September and $2.4/bbl in October. Thenarrowing Brent Dubai spread led to an increase in arbitrage flows, with Asian refinersscouting out North Sea and West African crudes pegged to Brent prices. In Europe, the neartotal absence of Libyan crude supplies due to the continued shutdown of shipping terminalssupported Brent prices in December 2013.

Total global oil demand rose by an estimated 1.2 million barrels per day (mbpd) in2013. This is due to much stronger than expected oil use in the US and smaller increasesin Western Europe in last quarter of 2013, despite significant downward demand estimatesfor China and Japan in the same quarter. Spot crude oil prices weakened in January 2014month on month (m-o-m) by $2.65/bbl to $108.17/bbl for North Sea Dated. Mideast Dubai, aheavier crude grade than Brent, declined by a steeper $3.88/ bbl to an average $104.02/bblfor January. Expectations of weaker demand heading into the spring refinery turnaroundseason, added downward pressure on prices, with global refinery throughputs forecast toplummet by 2.5 million bpd. Crude Oil market ended year with slightly low m-o-m withseasonally weaker demand and scheduled maintenance in the Atlantic basin and Asia curbingrefining runs in all major markets.

Weakness in crude market got reflected in product market as well. Singapore crackingmargin for Q1 got settled at $ 6.65/bbl dropped by $ 2.05 /bbl as compared to previousquarter. Refined product crack spreads largely declined in July on the back of strongerbenchmarks crudes and rising product inventories. Asian Fuel Oil crack dropped sharply inQ2 due to falling bunker demand and monsoon season. Gasoline also showed weakness alongwith decline in Fuel Oil crack, which impacted refinery margins adversely. Spot productcrack spreads posted diverging trends in August, with the US partially insulated from thesurge in crude prices on account of shale gas crude oil supplies, which pressured crackspreads in Asia and Europe. Gasoline crack spreads fell across the board, suffering fromboth strong crude prices and lower US and Singapore spot prices as the driving season cameto a close. All these factors weighed down on Singapore cracking margin which postedmodest average of $ 5.27/bbl. Middle distillates crack spreads increased across allregions in October as demand strengthened ahead of winter and supplies tightened in linewith sharply reduced refinery throughputs due to seasonal plant maintenance. Product crackspread movements were mixed in latter half of Q3.

In last quarter, Asian refiners benefitted from improving cracks at the light end ofthe barrel as increased petrochemical demand and refinery outages supported naphtha andgasoline prices. An increase in imports from India, where the refineries underwentmaintenance, helped to push up prices, which in turn drew in supplies from Europe, theMiddle East and the US. Accordingly, naphtha cracks strengthened in these markets over thequarter and ended with average of $ -1.46/bbl while occasionally going into positiveterritory. Gasoline and Gasoil also registered their strongest number in this quarter.

Singapore GRM was under pressure during 2013-14 and declined to USD 5.76 /bbl for theyear compared USD 7.74/bbl for 2012-13. Mumbai Refinery GRM has improved to US$5.38 /bbl in 2013-14 from US$ 2.08 /bbl in 2012-13 due to better operational performance.Visakh Refinery GRM has been lower at US$ 1.50 /bbl in 2013-14 compared to US$ 2.08 /bblin 2012-13 mainly due to unplanned shutdowns during 2013-14.

Crude Oil Imports

HPCL imported 12.03 of crude oil as compared to 12.02 MMT in 2012-13. The average costof crude oil imported in 2013-14 was at US$ 107 per barrel as compared to US$ 110 perbarrel in 2012-13 primarily on account of lower international crude prices. The averageexchange rate was INR 60.75/ $ as compared to INR 54.66/ $ in 2012-13.

HPCL uplifted 3.77 MMT of indigenous low sulphur crude oil (Mumbai High, Ravva andKrishna-Godavari Basin). The price of Ravva is linked to regional markers like Tapis andMinas crude which are disconnected from comparable markers on account of their decliningproduction. This has resulted in Ravva crude price being higher than equivalent importedcrude and has impacted HPCL’s margin adversely. HPCL has taken up with MOP&NG onboth pricing and allocation of Ravva crude. With the support of MoP&NG, the Ravvaallocation has been addressed in the current year. The balance crude requirement wasmainly met through term imports and spot purchases. Total high sulphur crude oilprocurement of 9.16 MMT was done through term contracts from the Gulf region. Mainsuppliers included Saudi Arabia, United Arab Emirates, Iraq and Kuwait. Total low sulphurcrude oil procurement of 2.87 MMT was sourced through term and spot purchases.

Due to prevalent economic sanctions by the US and the European Union on Iran, it hasbecome progressively difficult to lift Iranian crude oils since they specifically prohibitprovision of insurance cover to Iranian crude oil shipments for both vessel as well ascargo. Even refinery asset insurance under mega insurance corporate policy has prohibitedto process Iranian Crude oil. During the year, 12.03 MMT of crude oil was imported throughocean transportation from Arabian Gulf, West Africa and Far East. All the term crude wastransported by Shipping Corporation of India (SCI) under Contact of Affreightment (COA)with HPCL. For spot purchases of crude, vessels were chartered directly by HPCL atcompetitive freight / charter hire through global enquiries. Except a low spike in July -August 2013 and a big surge in Dec 2013 - January 2014, shipping freight markets continuedto be low during the year. To reduce overall crude procurement costs, HPCL continuedchartering of Very Large Crude Carriers (VLCCs) for Low sulphur spot crude cargoes whichdischarged crude to Visakh Refinery through Single Buoy Mooring (SBM). Crudetransportation through VLCCs is currently done with partial cargo loading due to tankagelimitations at Visakh refinery. The expected commissioning of Indian Strategic PetroleumReserves Limited (ISPRL) with additional storage capacity would enable HPCL to furtheroptimize crude transportation by VLCCs and obtain significant freight benefits.

Physical Performance & Initiatives

During the year 2013-14, HPCL’s refineries have maximized crude processing whichenabled in achieving a combined refining throughput of 15.51 MMT with a capacityutilization of 105%, in spite of unplanned shutdowns at Visakh refinery.

HPCL Refineries have made remarkable efforts for improvement in the yield of valueadded products. Mumbai Refinery has augmented Propane De-Asphalting (PDA) unit capacity by40% which will result in production of high value added product Bright Stocks. VisakhRefinery has also taken the initiative of commissioning chiller package in FluidizedCatalyst Cracking (FCC) unit and has also started adding bottom cracking additive to thecatalyst used in FCC for maximizing LPG yields and reduction of heavy ends production.Propylene Recovery Unit (PRU) capacity has also been augmented to enhance the existingproduction of value added products.

Environmental consciousness has always been foremost for the corporation. Accordinglyinitiatives to reduce Suspended Particulate Matter (SPM) and Sulphur emissions wereundertaken by refineries through installation of Flue Gas Desulphurization (FGD) facilityfor treating FCC off-gases. This has enabled both the refineries to have flexibility toenhance High Sulphur crude processing as well. Additionally, refineries have beencontributing in conservation of water resource to the community by reuse/ recycleoperations; Mumbai refinery has conserved 565 thousand kilo liter (TKL) in 2013-14 withstate of the art Integrated Effluent Treatment Plant (IETP) facilities. Visakh refineryhas sea water treating facilities to meet part of its utility requirement with a treatedwater output of about 605 TKL in the year thereby conserving equal amounts of naturalresource.

To produce BS-IV specifications Diesel, HPCL has set up Diesel Hydro Treater(DHT) Unitswith associated facilities at both Mumbai and Visakh Refineries. Mumbai Refinery hascommissioned the facility during 2013-14. Visakh Refinery has accomplished mechanicalcompletion of the unit while the pre-commissioning/Commissioning activities are inprogress.

To improve the refinery operations, both Mumbai and Visakh Refineries have undertakenperformance bench marking study by M/s Solomon Associates (SA) along with otherrefineries. The exhaustive study made by them has brought out gaps in critical KeyPerformance Areas (KPAs). In order to address these gaps several short term measures forimprovement have been identified and are being implemented. Similarly major initiativeslike heat integration with capacity expansion along with residue up gradation are proposedto be taken up as a long term measures.

The above initiatives have resulted in Mumbai refinery recording the best ever SpecificEnergy Consumption of 75.4 MBTU/BBL/ NRGF (Million British thermalunits/Barrel/Nelson’s refining gross factor) against MoU Excellent target of 87.0.Similarly, Visakh refinery has achieved the best ever Specific Energy Consumption of 83.9MBTU/BBL/NRGF against MoU Excellent target of 87.0. The energy conservation measuresundertaken by both refineries during the year 2013-14 have resulted in a savings of 25,535SRFT/year (Standard Refinery Fuel Tonnage per year).

During the year, Mumbai refinery has recorded the best ever production of High SpeedDiesel (HSD, 2166 TMT), Rubber Processing Oil (RPO, 146 TMT) and Lube oil Base Stock(LOBS, 386 TMT) through effective utilization of assets. By blending reformate sourcedfrom domestic imports, Visakh Refinery was able to enhance production of Motor Spirit(MS), and has recorded the best ever MS ( BS III grade) production of 1100 TMT and LPGproduction of 423 TMT during 2013-14.

Visakh Refinery suffered a setback due to unplanned shutdowns at one of its crudedistillation units and an incident at cooling tower complex. This has affected refinerythroughput and hence production of petroleum products. All out efforts were done torestore normalcy and bring back the refinery to regular operations by December 2013 andthe refinery was operating at full crude processing capacity by 4th quarter of 2013-14

Enhancement of refining capacity

As a part of the strategic objective HPCL plans to enhance the refining capacity bysetting up a green-field refinery at Pachpadra, Barmer district, Rajasthan in addition toundertaking brown field expansion of its existing Mumbai and Visakh Refineries. This greenfield refinery at Rajasthan will be wellhead refinery and an integrated petrochemicalcomplex with a refining capacity of 9 million metric tonnes per annum(MMTPA) andcapability to process indigenous Mangala crude oil being produced from local Cairn Oilfields with a capital outlay of about Rs. 37,000 crore. A joint venture agreement withRajasthan Government has been signed to incorporate a new company "HPCL- RajasthanRefinery limited" ("HRRL") Participation of Govt. of Rajasthan is first ofits kind partnership with state government as an equity stake holder in the RefiningSector. Pre-project activities such as obtaining environmental clearance, soilinvestigation at site and Licensor selection etc. have commenced.

Visakh refinery modernization project is being taken up to augment existing refinerycapacity from 8.3 MMTPA to 15 MMTPA along with the state of the art secondary processingand Bottoms upgradation units. Mumbai refinery expansion plan is envisaged to augmentexisting refining capacity from 6.5 MMTPA to 9.5 MMTPA. Pre Project activities for boththe refineries expansion are underway.

HPCL as Anchor tenant had planned a grass root 15 MMTPA Petrochemical cum petroleumIntegrated Refinery in the Visakhapatnam Petroleum Chemicals and Petrochemicals Investmentregion (PCPIR). HPCL has plans for implementation of this project in collaboration withNational and International Oil / Petrochemical companies after conducting the feasibilitystudy and financial assessment.

MARKETING

HPCL continued to record robust physical sales growth during the financial year byimplementing effective marketing strategies under challenging business conditions andenvironment. The Corporation has registered a total Products sale (including exports) of30.96 MMT during FY 2013-14 vis--vis sales of 30.32 MMT during the preceding year. Ithas been a significant year for the Corporation, with a growth of 4.1% in Market sales(Domestic market) over the sales volume of previous year, compared to 0.6% growth for thepublic sector oil companies. This performance has enabled the Corporation to improve itsmarket share by 0.71% amongst Public Sector Oil companies to 20.90% during the currentyear 2013-14 against 20.19% in the previous year. Individual Marketing SBUs performance iscovered in the sections below.

Retail

Retail strategic business unit (SBU) continued to play a pivotal role for the companyaccounting for a major share of total sales volumes. The business vertical’sphilosophy of strategic network expansion remained a key focus area, with addition ofRetail Outlets in identified geographies. Combined with the parallel thrust on businesssolicitation and process improvements, the SBU registered another stellar performanceduring the year. The excellent performance during the year sequentially over the decademade it a "Decade of Excellence" for this SBU, which has the highestweightage in the Companies top line.

The physical volumes recorded during the year by the SBU crossed 21 MMT, whichtranslates to significant addition of over 11 MMT to the annual volumes over the lastdecade i.e., more than doubling of the sales volumes in the decade. These sales gains havecome on the back of unrelenting focus on customer delight initiatives and processes,coupled with strengthening the network capabilities, deployment of information technologyacross critical marketing practices and enhanced dealer connect features who are the lastlink in this Business to Consumer(B2C) business. The market gains over the last 10 yearsconsecutively had a salutary impact on the company’s Total Motor Fuel (TMF) marketshare, which now stands at 25.35%, which corresponds to an increase of 0.15 % over theprevious year.

With regard to individual products, the vertical has recorded Petrol (Motor Spirit)sales growth of 8.7 % in the year 2013-14 vis--vis historical, which compares favourablyagainst PSU oil industry growth of 8.4% for the year. Similarly, Diesel (High SpeedDiesel) also registered better than PSU oil industry growth at 6.6% which is 0.7% higherthan PSU oil industry growth.

The Retail network expansion continued, with the commissioning of 723 new RetailOutlets during the year, including 223 outlets in rural areas which has been a specialfocus area for the company considering the business volumes likely to be generated withthe country’s GDP growth getting back to a strong growth path. The Corporation hascome within striking distance of the 13000 mark of retail outlets with the final tallystanding at 12869 retail outlets as of March 31, 2014.

‘DriveTrack Plus’ and ‘Payback’ form the premiere loyaltyprogrammes and have been the subject of focused attention by the company. Over 3000outlets are enrolled in the programme which constitutes about 25% of the retail network.The robust Technology platform and applications is the key to efficient management of thisvery large scale programme, in which a unique online architecture based on smartcardsenables users to transact even in the remotest locations seamlessly. The technologyupgrades in the DriveTrack Plus programme helps customers to manage their working capitalbetter and access over both internet and mobile platforms enables their vehicles to fuelat the designated outlets in a trouble-free way. On the technology enhancement front, thePayback programme also saw the facility of Real Time Burn across nearly 2000 activeoutlets along with various redemption campaigns to delight the customers.

Retail has continued to leverage Information Technology (IT) for enhancing customersatisfaction for which a key action area is product quality assurance. Retail Automationsystem was installed as a Quality Assurance (QA) tool at 160 Retail Outlets during theyear, taking the total number of automated outlets to 2100 as of March 31, 2014. AnotherIT based initiative was rolled out for enhancing the up-time of the Dispensing Unitsinstalled at outlets, titled ‘Retail Outlet Maintenance Management System’. Thisweb based multi user application provides real time tracking and enables both managementand maintenance of the units at least cost. Another industry first initiative forenhancing marketing efficiencies by leveraging Technology was a web based Pricing Tool Kitfor calculation of Retail Selling Price (RSP) for all variants of Petrol and Diesel. Thisapplication provides real-time information to the Retail Dealers and field officers onprice changes through SMS alerts and emails. Concurrently, all retail outlets have beenmapped into Google Map, through which any customer can ascertain the price of Petrol andDiesel at each retail outlet enroute while travelling and stop to fuel at the mostsuitable outlet.

Allied business streams remained a focus area, in which mutually beneficialpartnerships with banks is one part. A record 500 ATMs have been commissioned at RetailOutlets taking the total tally to 1550 which in addition to enhancing the customerexperience at retail outlets also contribute significantly to the non-fuel revenues.

To be competitive in the challenging business environment, Retail is focussed onstrategies for customer gains and retention.

LPG

LPG Marketing in the country has seen dramatic changes over the last few years, withIndia having the unique distinction of the largest number of domestic consumers suppliedin cylinders vis--vis any other country. For HPCL, LPG business line accounts forapproximately 14% of the total sales volume, with sales for FY 2013-14 at 4205 TMTvis--vis 4020 TMT the previous year, corresponding to a growth of 4.60 %. The businessvertical has maintained a commendable performance during the year, retaining the industryNo. 2 position in total LPG Sales with a 26.73 % market share. The vertical achieved a LPGbottling of 4001 TMT during the year, which is an increase in productivity of 3% overprevious year.

HPCL continues to maintain its market leadership position in the profitable and highlycompetitive Non-Domestic Bulk LPG segment, with 43 % market share. Two new exclusiveNon-Domestic LPG distributorships were added to the network during the year in importantmarkets, for future gains. Allied Retail Business stream also remained a focus area, andthis stream has contributed a significant Rs. 75 crore approx. profit during the year.Implementation of primary and secondary Supply distribution model and meticulous inventorymanagement across the chain also resulted in substantial savings of Rs. 124 croreapproximately during the year.

Keeping in focus deliverables listed in the corporate plan - Target Shikhar,comprehensive strategic actions were implemented to penetrate the rural domestic LPGmarket. 219 new LPG distributorships were commissioned under the Rajiv Gandhi Gramin LPGVitaran Yojana in addition to 95 new regular domestic LPG Distributorships during FY2013-14. The SBU also launched 5 Kg LPG cylinders sales initiative thru Retail Outlets inselected cities for tapping the significant segment of consumers with this pack sizerequirement e.g., IT professionals, BPO employees etc.

LPG SBU is acknowledged in the industry for its infrastructural strength and furthersteps were taken during the year for augmenting LPG bottling capacity by 60 TMT along withincreasing the bulk LPG storage capacity by 610 TMT during the year. Some of the keyprojects completed during the year are Anantapur LPG Bottling Plant (AP) with a bottlingcapacity of 75 TMTPA, 2.7 Km long LPG Pipeline connecting ONGC Hazira to HPCL Hazira LPGPlant, Mounded Storage Vessels (MSV) at Paharpur LPG Plant (WB) with augmentation ofbottling capacity. During the year, Mechanical completion of the project for 8400 MT LPGMounded Storage at Mangalore LPG Import Facility (MLIF), Mangalore was also completedwhich makes it the largest LPG MSV storage of HPCL. Two new marine LPG unloading arms wereinstalled at New Mangalore Port Jetty No. 12 as part of the above project.

As part of the Government strategy for monitoring and controlling subsidy costs andensure availability to genuine domestic LPG users, the vertical has taken the lead inimplementing Know Your Customer (KYC) norms and deployment of Direct Benefit Transfer forLPG consumer scheme of the government (DBTL). The SBU rolled out ‘ProjectLakshya’ for purifying the existing customer database with various phases such as KYCupdation, customer verification, identification and dropping of multiple connectioncustomers / shifting them to non-subsidised category and through de-duplication exercisejointly with other marketing companies. In this initiative, a Super Computer was deployedfor

Futures & Options Quote
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383.10    [1.20] ([0.31]%)
Instrument: FUTSTK
Expiry Date: 31-Jul-2014
Open Price: 383.25
Average Price: 384.99
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Key Information

Key Executives:

Shrikant M Bhosekar , Company Secretary

Nishi Vasudeva , Chairman & Managing Director

G K Pillai , Director(PartTime NonOfficial)

Avinash Chander Mahajan , Director(PartTime NonOfficial)


Company Head Office / Quarters:

Petroleum House,
17 Jamshedji Tata Road,
Mumbai,
Maharashtra-400020
Phone : Maharashtra-91-22-22863900 / Maharashtra-
Fax : Maharashtra-91-22-22872992 / Maharashtra-
E-mail : corphqo@hpcl.co.in
Web : http://www.hindustanpetroleum.com

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