Annual Report Analysis

Bharat Petroleum Corporation Ltd
Speeding Ahead BSE Code 500547 NSE Code BPCLEQ Bloomberg Code BPCL@IN Face Value 10 CMP Rs 342 Market Cap Rs 102bn
(as on August 20th 2004)

Industry Background
The Indian economy bounced back during 2003-04 and registered a handsome 8.2% growth in GDP. The robust GDP growth led to 3.4% increase in petroleum products consumption at 107.7mmt as against 104.2mmt in the previous year. The productwise consumption break-up is as follows:
Products HSD ATF Bitumen LPG Kerosene 2003-04 37.2 2.5 3.4 9.3 10.2 2002-03 36.6 2.2 2.9 8.3 10.4 Growth (%) 1.6 13.6 17.2 12.0 (1.9)

Share Holding Pattern
1% 14% 10% 3%

Figures in mmt (million metric ton)


Govt. of India Banks, FIs, Insu Cos, Private Corporate Bodies

Mutual Funds and UTI FIIs Indian Public

Share Price Chart

The regulation on parallel marketing of kerosene saw HSD consumption growing at a healthy rate in later half of the fiscal, even registering a double digit growth in the last quarter of the fiscal. Interestingly, HSD consumption growth was negative in first half of the FY04. Automobile boom led to a growth of 5.2% in MS consumption, whereas Naphtha sales dropped by about 3% due to increasing acceptance of natural gas in place of naphtha. The domestic refinery capacity in fiscal 2003-04 increased to 118mmt from 115mmt in FY03. All the refineries put together recorded a throughput of 121.77mmt thus achieving a 103% capacity utilization. Export of petroleum products jumped 56% in US$ terms. Export of ATF, HSD and MS grew 138%, 90% and 27% respectively. The fiscal saw unabated rise in crude prices, particularly in later half of the year. The average Brent crude oil prices increased to US$29/bbl in FY04 as against US$27/ bbl in the FY03. However, the increase in product price was higher than the increase in crude price, thereby leading to improved refiners’ margins across the world. The fiscal also saw entry of private and foreign players viz Reliance, Essar and Shell in retail business, which is expected to witness major restructuring in the delivery mechanism to the consumers. Another important event in the industry was commissioning of first LNG (Liquified Natural Gas) terminal by Petronet LNG Ltd, the company promoted by oil PSUs and Indian financial institution for import and regassification of LNG. Natural gases are environment friendly and are expected to replace a major quantum of industrial liquid fuels in the days to come.

August 25, 2004


as LPG is a small part of their business. the duty cut will not have any severe impact on their balance sheet. as there is no duty cut on crude oil and duty cut on LPG will not have any material impact. The OMCs can change prices within 10% of the price so arrives at and for change beyond this band the OMCs have to take permission from the Oil ministry. as the lower refinery margins will be setoff against increased marketing margins. However with the fundamentals in favor of refineries.Annual Report Analysis Government Policies During first week of August the Government came out with a guideline on petroleum product pricing. The prices of MS and HSD will be based on mean of last three months and last 12 months average CIF prices of respective products. This will help OMCs to stem downward pressure on marketing margins. August 25. The integrating company will not have any impact. The ONGC and GAIL will be least affected. and partially set-off losses on account of under-recovery on LPG and kerosene subsidy. Under the mechanism the oil marketing companies (OMCs) will be given autonomy to change prices within a band. The recent cut in custom and excise duty on petroleum products by the Government will put pressure off the marketing margins of the OMCs. The cut in custom duty on petroleum products will reduced refinery margins and will affect standalone refinery the most. 2004 2 .

59 1.62 1. It commands about 22% of retail market share.92 5.6 4.23 4.46 FY00 FY01 FY02 Middle Distillates FY03 FY04 Light Distillates Heavy Distillates August 25.59 FY02 3. Exhibit 1: Source of Crude Oil in mmt 10 8 4.13 4. 2004 3 .07 2.22 mmt 6 4 2 0 6.41 2. which is to be increased to 12mmtpa by the end of the FY05 with investment of Rs183bn.23 FY03 4.9bn in FY04.48 2.18 5.64/bbl as against US$3.74 FY01 Imported 3. The high GRM was achieved despite reduction in Mumbai High crude supply.54 FY04 Bombay High To overcome the reduced availability of Mumbai high crude the company has started scouting for new types of crude oil for enhancing its crude basket which already include 61 kinds of crude.73 mmt 4. despite having 17% of nameplate refining capacity inclusive of its subsidiary.Annual Report Analysis Company Background The company is a major downstream oil company in the domestic market with turnover of Rs534bn and PAT of Rs16.9mmtpa based on processing of neat Middle East crude.55 FY00 2.48 2.5 1.71/ bbl in FY03.23 4. Exhibit 2: Production in mmt 9 8 7 6 5 4 3 2 1 0 1.48 2. Businesses Refinery The company has an installed refining capacity of 6.43 2.76mmt of crude during the year and registered gross refinery margins (GRM) of US$4.32 5. The refinery processed 8.42 1.

79 11.2 0.57 5. defense) and tying up with OEMs (original equipment manufacturers) like Hero-Honda.51 5.79 0. Exhibit 3: Market sales Volume mmt 25 20 15 mmt 10 5 0 FY00 FY01 Retail Lubes FY02 Direct FY03 Aviation LPG FY04 1.88mmt in FY03. August 25. It sold 8.27mmt was slightly less than the last year’s.44 11.12 11.Annual Report Analysis Retail BPCL is the second largest retailer in the country.52 5.05mmt of fuel through its outlet as against 11. which was at 5.89 12. Overall it sold 12.03 0.33 0.11 2.11 1. 2004 4 . the company also forayed into gas marketing through Petronet LNG Ltd. which helped company achieve sustainable growth rate. Retail accounts for 60% of the total sales.54 11.21 0.3mmt.49 5. It is the market leader in premium fuel category. with its brand “Speed” accounting for 49% of the market share with sale of 0. institutional sales (railways. thus adding 2 retail outlets per day and taking its retail outlet counts to 5530 in FY04.3 0.241mmt.43 0. However gross margins increased from Rs850/ton in FY03 to Rs950/ ton in FY04.09mmt and 1.51 5.11 1.61 0. During the year. Lubricants Lubricants sales increased by 7% to Rs6. The company adopted multi-pronged strategy eg direct marketing.25 0.8bn during the year and thereby increasing its market share by 0. The company has highest throughput per retail outlet in the industry of 200kl (kiloliters).11 Industrial and commercial (I&C) Sales volume in this segment at 5.51mmt of HSD and kerosene respectively during the year. The company added 739 outlets to its network including re-sitement of 63 retail outlets.2% amongst PSU players.33 0.11 2.

which will help the company to tab Shell’s international customers in India. The company was formed to provide impetus in the development of pipeline network throughout the country. NRL has the nameplate refinery capacity of 3mmtpa.46mn).81% of the paid-up equity of the KRL.31mn (Rs44. 2004 5 .8% of market share catering to 19.09in FY04 as against Rs32.86mn) due to rise in Base Oil prices and reduction in other income.67% increase in sales volume as against industry average of 11.1bn (Rs105.2mmt in FY04 as against 1. Its EPS stands at Rs40.53mmt thus registering a growth of 9. Aviation The aviation business clocked volume of 0.96% of the paid-up equity in NRL. With aggregate sales volume at 2.5mmtps. however its PAT fell to Rs50.68mn (Rs2.93 in FY03. The company achieved a turnover of Rs115.14bn (Rs1. Kochi Refineries Ltd (KRL) BPCL owns 54.9bn) and PAT of Rs5.Annual Report Analysis LPG The LPG business registered 14. It recorded a turnover of Rs32.63%. Petronet India Ltd (PIL) It’s a joint venture. Subsidiaries and Associated Companies Numaligarh Refinery Ltd (NRL) BPCL holds 62. The KRL’s refining capacity is to be increase by 2. It has tied up with Shell Aviation.88 in FY04 as against net profit of Rs10. The JV recorded a turnover of Rs2. the company commands 25. whereas its throughput was 2.33mmt.5mmtpa with the investment of Rs18bn.5mn) and a net loss of Rs43. The company registered a revenue of Rs9.8mn in FY03.7bn) in the FY04. The refinery has total installed refining capacity of 7. August 25.05bn) and PAT of Rs2.5bn) during the year.16mn (Rs62. Bharat Shell Ltd It is a joint venture with Shell of Netherlands to market Shell branded lubricants. where BPCL hold 16% of the equity with investment of Rs160mn.2bn (Rs28.88mmt in FY04.4m customers through 1922 distributors across the country.25% during the year.5bn (Rs4.

9bn (Rs3. where BPCL owns 26% equity with an investment of Rs260mn. IOC.Annual Report Analysis Petronet CCK Ltd (PCCKL) It’s a joint venture between BPCL and PIL. The company clocked a turnover of Rs4. was incorporated for importing LNG and setting up LNG terminals at Dahej having a 5mmtpa capacity and another at Kochi to supply natural gas. Indraprastha Gas Ltd (IGL) IGL a joint venture set-up with GAIL for supply of CNG (compressed natural gas) to the household and automobile sector in Delhi. ONGC and GAIL which hold 12.5% equity each.5% equity in the company. BPCL invested Rs315mn to acquire 22. The PCCKL owns Kochi-Karur pipeline. Petronet LNG Ltd (PLL) PLL. The company registered turnover of Rs309. 2004 6 .8mn (146mn) and cash profit of Rs24. a joint venture promoted by BPCL.5bn) and PAT of Rs8219mn (trs539. August 25.8mn).7mn during the year as against cash loss of Rs15.6mn in FY03.

7) 21.0 2.597 (9.050 26.0 3.697 27.7bn in FY04 on account of foreign exchange gain to the tune of Rs637.52%.355 16.935 12.332 17. ATF).909 41.192 56.5bn in FY04 as against Rs435.67 FY04 529. higher realization and 2.377 1.8 27.500 47. 2004 (%) 7 .828 11.066 13.327 18.33 FY03 475.204 28.9mn during the year.556 11.459 19.131 8. Over the last decade sales and other income together registered a CAGR of 16.49 CAGR (%) 10.7 23.7 Reading Between the Lines… Sales and Other Income The company saw its net sales increasing by 11% to Rs482.3 33.4 (13.7bn in FY03 on account of better product mix (in favor of value added products eg LPG.144 4.4 20.369 7.498 2.Performance highlights of the last five years Particulars (Rs in mn) Sales & Other Income % yoy EBITDA % yoy Interest PBT PAT % yoy Export EPS FY00 358.268 8.946 35.1 6.76 FY02 425.844 11.1 11.4 1.7 8.2 17.Annual Report Analysis Financial Analysis .39 FY01 471.730 23.6 13.017 5.6% increase in volumes.7 2.532 31. Other income increased by 35% to Rs4.016 21. Exhibit 4: Sales and Other Income over the last 10 years 600000 500000 Rs in mn 400000 300000 200000 100000 0 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 50 40 30 20 10 0 -10 -20 Sales& Other Income Growth Rate August 25.2) 29.551 28.5 24.18 24.911 17.854 9.

589 30.000 38. Over the last decade EBITDA saw a CAGR of 17. Further ONGC had to offer discount on purchase made by the company under the subsidy (on LPG and kerosene) sharing mechanism as devised by the Government.000 FY01 FY02 34. 2004 (%) 8 . EBITDA increased by 17.000 40.000 100. 704 FY03 FY04 Imported Indigenous Exhibit 6: EBITDA over the Last Decade 35000 30000 25000 20000 15000 10000 5000 0 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 35 30 25 20 15 10 5 0 Rs in mn EBITDA Growth Rate August 25. 389 33. Exhibit 5: Crude Mix and Cost 120. Appreciation in Rupee vis-à-vis USD and decline in the ratio of costly Mumbai High crude were other reason for decline in crude cost.3%. 528 61.4% yoy to Rs33bn as against Rs27.000 Rs in mn 80. 445 60.Annual Report Analysis EBITDA During the FY04. 166 34.000 20. as the company entered into long term contract with suppliers. 177 50. 429 28.7%. During the last year company’s crude purchase cost declined by 7.2bn in FY03.

Annual Report Analysis Bottomline PAT increased by a whopping 35% yoy to Rs16.57% over the last decade.9bn in FY04 as against Rs12. which was at US$4. The PAT registered a CAGR of 21. Appreciating Rupee during the fiscal and discount offered to the company on crude purchase from the ONGC under the subsidy sharing mechanism led to reduced crude prices.5bn in FY03.64/bbl and reduced input cost. on back of increased refinery margins. Exhibit 7: PAT over the decade 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 50 40 30 20 10 0 -10 (%) Rs in mn PAT in Rs mn Growth Rate Exhibit 8: Profitability Ratios 45 40 35 30 25 20 15 10 5 0 FY02 OPM (%) FY03 PAT % ROCE FY04 RONW August 25. 2004 (%) 9 .

39 6. 67 56. 25 7. 4 Rs 30 27. 5 FY00 FY01 FY02 DPS EPS FY03 FY04 Working Capital Management The company’s working capital management improved dramatically from a net working capital position of Rs6bn in FY02 to a negative working capital of Rs686mn in the FY04. 5 11 15 17. thereby indicating overall improvement in working capital position. Exhibit 10: Turnover Ratios 70 60 50 Days 40 30 20 10 0 FY02 Debtors days FY03 Inventory days FY04 Creditors days August 25. At the same time all the turnover ratios registered declined in FY04 in relation to the FY03. 33 20 10 0 23. 76 28. 2004 10 .Annual Report Analysis Exhibit 9: EPS and DPS 60 50 40 43. The prime reason behind this development was steep increase of 68% in creditors over the last three years.

2004 D/E Ratio 11 .00 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 The D/E ratio has declined consistently after touching its highest level in the year 2000-01. though in a volatile fashion.Annual Report Analysis Solvency Parameters Exhibit 11: Debt/Equity Ratio over the last 10 years 1.80 0. Similarly current ratio have remain stable at 1:1 level. though it did not breach the crucial 1:1 level. As a result interest costs have also declined.40 0.60 0.20 1.20 0.00 0. Thus all the parameters indicate towards healthy fiscal situation. August 25.

thus avoiding considerable risk involved in the exploration business. The pipeline is being developed on a common carrier principle.9mmtpa to 12mmtpa by the end of FY05. The company is expected to set-up 700 retail outlets during the FY05. which is at 200kl) in retail business. which help company consolidate its marketing operation and will also act as an entry barrier for upcoming private and foreign players. The company is also eyeing lucrative city gas distribution business. It already has a presence in this business through joint ventures eg Mahangar Gas. Though. where it will take a stake in a developed oil field. Despite the recent cut in custom duties on petroleum products. creation of surplus within the it in marketing or new product launches . which augurs well for the company. which will help company diversify earning streams. Retail With the entry of new players and consequent increase in competition the industry dynamics will take a structural shift. and is planning to extend it to Delhi. even if the company has to export its surplus. The future would involve uncertain will able to maintain its leadership position (in terms of throughput per outlet. 2004 12 . which offer great potential considering legislative move towards making all public transport run on cleaner and cheaper CNG (compressed natural gas). The company’s definite but small step towards vertical integration will help stabilize volatility in its earnings and secure its input requirements. the strong refiners’ margin prevailing throughout the world is making refinery attractive. high customer expectations and competition for experienced manpower. The company is also exploring “farming in” opportunities. Others During the FY04 the company commissioned its pipeline extension from Manmad to Indore. The shift towards NG/LNG as cheaper alternate to liquid fuels like naphtha/furnace oil is a cause of concern on two counts. However. the company’s scale and its reputation as an innovator . first loss of market sales and second. August 25. we have surplus refinery capacity. refineries are expected to register high GRMs on back of continued favorable crude/ product prices.Annual Report Analysis Outlook Refinery The company is expanding its refinery capacity from existing 6. change in dealer-distributor loyalty. Indraprastha Gas.

474 47.Annual Report Analysis Income Statement Period (Rs in mn) Net Sales Operating expenses Operating profit Other income PBIDT Interest Depreciation Profit before tax (PBT) Tax Profit after tax (PAT) Extraordinary / prior period items Adjusted profit after tax (APAT) FY02 (12) 358.897 8.624 21.512) 6.074 38 87.552 (53) 8.600 4.005 9.859 7.543 (453.25) 16946 Balance Sheet Period (Rs mn) Sources Share Capital Reserves Net Worth Loan Funds Def Tax liability Total Uses Gross Block Accd Depreciation Net Block Capital WIP Total Fixed Assets Investments Total Current Assets Total Current Liabilities Net Working Capital Intangible Asssets Total FY02 (12) 3.416 56.654 21.465 27.865 (7435) 12.974 38.974 39.016 23.683 4.451 99.466 87.352 (1050) (5612) 26.806 (41.544 2.497 58.451 (51.198 (3066) (4810) 13.041 85.394 55.026) 23.062 83.751) 18.207) 51.000 44.407 19.000 36.552 (49.618 August 25.770 83.134 (2459) (4809) 19.321 (4770) 8.331 14.689) 54.224 93.077 74.21 12500 FY04 (12) 482.798 FY04 (12) 3.430 70.450 FY03 (12) 3.101) (686) 127 93.946) 3.487 6.618 63.798 111.668 3.690 (9409) 17281 (335.618 92.295 (339.474 32.020 (79. 2004 13 .695 (412.000 55.669 33.415 (84.695 (45.120) 60.498 FY03 (12) 435.989 85.497 26.860) 28.

667 (12.144 (13.923) (2.636 FY04 26.401 (14.032 (16.435) 477 35.915) 1 28.849 2.809 2.461 1.657) (23.079) (419) 25.266 6266 August 25. 2004 14 .176 9 1.Annual Report Analysis Cash Flow Statement Period (Rs mn) Net profit before tax and extraordinary items Depreciation Interest expense Interest income Dividend income Operating profit before working capital changes Add: changes in working capital (Inc)/Dec in (Inc)/dec in sundry debtors (Inc)/dec in inventories (inc)/dec in other current assets Inc/(dec) in sundry creditors Inc/(dec) in other current liabilities Net change in working capital Cash from operating activities Less: Income tax Inc/Dec in Def Tax Asset/liability Net cash from operating activities Extraordinary inc/(exp) Cash Profit Cash flows from investing activities (Inc)/Dec in fixed assets (Inc)/Dec in intangible asset (Inc)/Dec in Investments Interest received Dividends received Net cash from investing activities Cash flows from financing activities Inc/(Dec) in debt Direct add/(red) to reserves Interest expense Dividends (inc)/dec in loans & advances Net cash used in financing activities Net increase in cash and cash equivalents Cash at start of the year Cash at end of the year Cash at the end of the year as per B/S FY03 19.050) (5.301) (5.297 3.625) (5.050 (747) (1.417) (38) 2.558 37.961) (0) (1.745) 3.612 1.459 (1.144) 31.019 (9.079 419 (8.292 747 1.395) (89) 1.604 1.690 5.556 (7.459) (5.629) (0) (2.865 4.743 6743 218 1.274) (15.445 6.332 1.920 42.597 70 35.409) 758 28.830 16.208) (477) 6.306 5.367 (335) 28.743 6.000) (10.

Regd.1 40.7 5.4 5. Nirlon Complex. This report is for information purposes only and does not construe to be any investment.0 6. 2004) Market capitalization (Rs in mn) Enterprise value (Rs in mn) FY02 (12) 28.2 2.7 1.46 19.9 61.5 39.4 35.0 340. Goregaon(E) Mumbai-400 063.5 5.0 2.: +(91 22)5677 5900 Fax: 2685 0585.7 300.69 22.4 6.0 133. of equity shares (in mn) CMP (Rs) (August 20.4 8.0 1.1 102.9 0. legal or taxation advice.661 Published in August 2004.0 4500 4999.4 56.0 5250 5923 300.7 0.1 29.4 2.5 6.3 1.1 36.5 0.3 11.96 18. We have exercised due diligence in checking the correctness and authenticity of the information contained herein.4 3.1 10. 2004 15 .5 17.1 102.0 21. Off: 24. © India Infoline Ltd 2003-4.146 FY04 (12) 56.Annual Report Analysis Ratios Period Per share ratios EPS (Rs) Div per share Book value per share Valuation ratios P/E P/BV EV/sales EV/ PBIT EV/PBIDT Profitability ratios OPM (%) PAT % ROCE RONW Liquidity ratios Current ratio Debtors days Inventory days Creditors days Leverage ratios Debt / Total equity Component ratios Raw material Staff cost Other expenditure Payout ratios Dividend Payout Ratio Dividend (Rs in mn) Total dividend (inc div tax) (in mn) No.7 45.0 340.7 15.1 0. Tel.3 4.5 195.2 32.072 FY03 (12) 41.8 3300 3300 300.0 6. IIL and/or its subsidiaries and/or directors.6 0.1 38.0 158.8 26.030 137.2 1.7 7. All rights reserved.2 8.4 27. It is not intended as an offer or solicitation for the purchase and sale of any financial instrument.0 7. but do not represent that it is accurate or complete.2 12. employees or associates may have interests or positions.5 1. Any action taken by you on the basis of the information contained herein is your responsibility alone and India Infoline Ltd (hereinafter referred as IIL) and its subsidiaries or its employees or directors. financial or otherwise in the securities mentioned in this report. Off W E Highway. The recipients of this report should rely on their own investigations.030 122.0 29.6 0. India Infoline Ltd.7 5.7 4.1 102.3 1. associates will not be liable in any manner for the consequences of such action taken by you.3 5. IIL or any of its subsidiaries or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this publication.0 340.2 2. August 25.9 33.030 128.0 1.9 3.

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