A Project Report

On
HINDUSTAN PETROLEUM
CORPORATION Ltd

Prepared and presented

To
EAST WEST
INSTITUTE OF MANAGEMENT

Under the guidance of

East West College of Management

Department of Management

Mahalakshmi ma'am..
 DECLARATION

I, hereby, declare that the work reported in the

Project Report entitled “Hindustan petroleum
Corporation Ltd” submitted at East West
College of Management is an authentic record
of my work carried out under supervision of
Mahalakshmi Ma'am.

I have not submitted this work elsewhere

for any other degree or diploma. I am fully
responsible for the contents of my project
report.
 ACKNOWLEDGEMENT

I would like to thank my faculty Ms Mahalakshmi

whose guidance helped me a lot with structuring
my project.

I owe the present accomplishment of my project to

my friends, who helped me immensely with
materials throughout the project and without
whom I couldn’t have completed it in the present
way.
I would like to extend my gratitude to my parents
and all those unseen hands that helped me out at
every stage of my project.

CONTENTS
 Introduction
 Micro scenario
 Macro scenario
 The World of HPCL
 Economies of Scale
 Profit Margin
 Hindustan Petroleum

INTRODUCTION
The oil and gas sector is among the eight core industries in
India and plays a major role in influencing decision making for
all the other important sections of the economy.
Indians economic growth is closely related to energy demand
therefore the need for oil and gas is projected to grow more,
thereby making the sector quite conductive for investment.
The government of India has adopted several Policies to fulfill
The increasing demand. The government has allowed 100 per
cent Foreign Direct Investment [FDI] in many segments of the
sector, and refineries, among others. Today, it attracts both
domestic and foreign investment, as attested by the presence
of reliance Industries Ltd [RIL] and cairn India.

MICRO SCENARIO
India is expected to be one of the largest contributors to non-
OECD petroleum consumption growth globally. Oil imports rose
sharply to US 87.37 billion in 2017-18 from US 70.72 billion in
2016-17. India retained its spot as the third largest consumer of
oil in the world in 2017 with consumption of 4.69 mbpd of oil in
2017, compared to 4.56 mbpd in 2016.
India was the fourth largest liquefied natural gas [LNG]
importer in 2017 after japan, South Korea and China LNG
imports increased to 26.11 bcm in 2017 -18 from 24.48 bcm in
2016-17
Gas pipeline infrastructure in the country stood at 16,226 km at
the beginning of February 2019.

MACRO SCENARIO
The world energy scenario depicts a picture of concern. The
adverse effects on environment caused by the production and
consumption of energy have resulted in severe environmental
impacts across the globe. The supply of energy is expected to
remain adequate in coming years. However, imbalance of
energy consumption is prevalent around the world. Energy
consumption is high in most developed countries. On the other
hand, the developing countries need to consume more energy
to ensure economic growth. According to estimates, energy
consumption in developing countries is only one-tenth of that
in the developed countries. The economic development of
many countries is hindered due to “energy poverty”.

The major sources of energy in the world are oil, coal, natural
gas, hydro energy, nuclear energy, renewable combustible
wastes and other energy sources. Combustible wastes include
animal products, biomass and industrial wastes. In 1999, the
total supply of primary energy in the world was 9,744.48 MTOE
(Million Tons of Oil Equivalent). According to estimates of 1999,
the total supply of energy in the world in 2010 is projected to
be 11,500 MTOE and that in 2020 is expected to be 13,700
MTOE. The contribution of different energy sources to the total
supply of energy in the world are –

 Oil - 35.1%
 Coal - 23.5%
 Natural gas - 20.7%
  Renewable combustible wastes - 11.1%
 Nuclear - 6.8%
 Hydro - 2.3%
 Other sources – 0.5%
The total consumption of energy in the world in 1999 was 6,753
MTOE. The proportion in which energy from different sources
was consumed is –
 Oil - 42.7%
 Natural gas – 16%
 Electricity - 15.4%
 Renewable combustible wastes - 14.2%
 Coal - 8.2%
 Others - 3.5%

Oil is the most important and abundant source of energy in the

world. It is also the most highly consumed. However price of
crude oil is very volatile and supply is driven by price. While
developed industrialized countries consume around 43 million
barrels daily on an average, developing countries consume only
22 million barrels per day on an average.

Oil production is already peaking or will reach its peak within

four years. After oil production begins to drop even enormous
efforts to drill and produce more oil will not be able counteract
the depletion of the world’s largest oil fields. The result will be
rapidly increasing oil prices which will bring on worldwide
periods of depression that will draw down the energy demand
just enough to keep outright shortages from being widespread.
Nonetheless a long period of economic decline is expected
eventually alleviated by new technology and turn over to use of
alternative energy sources.

Pessimists view the occurrence of peak oil to be either

imminent or very close. A turn to both non-conventional and
alternative energy sources as not being possible on a large scale
in the near future and thus there will be an unavoidable energy
gap between demand and supply for the next 10-20 years.

Assumptions:
 No large oil fields are likely to be found in the future
 Although market forces will encourage increased
spending, new oil put into production will not be able to
compensate for the depletion of old oil fields
 New technology allows more rapid extraction of oil but will
not substantially increase the total recoverable oil from a
field
  Stated reserves, especially in the middle east are
overestimates of actual recoverable oil
 Non-conventional oil and alternative energy sources will
not be able to completely fill the gap left by oil depletion
after peak oil has occurred because the technologies will
take too long to fully implement and none replace all the
benefits of oil without their own risks.

The World of HPCL

As one of the largest public sector enterprises under the
Ministry of Petroleum and Natural Gas, Government of India,
HPCL is a designated Navratna with a remarkable history and
heritage of over four decades. HPCL ranked 70 and 69 by
market capitalisation, as on March 31, 2019 on the Bombay
Stock Exchange and the National Stock Exchange
HPCL owns and operates two major refineries located in
Mumbai and Visakhapatnam, producing a wide variety of
petroleum fuels and specialties. We also own and operate
India’s largest lube refinery, which produces lube base oils of
international standards. We operate and hold a 48.99% equity
stake in the 11.3 MMTPA HPCL Mittal Energy Limited (HMEL)
refinery at Bathinda in collaboration with Mittal Energy
Investments Pte. Ltd. and a 16.96% stake in the 15 MMTPA
Mangalore Refinery and Petrochemicals Ltd. (MRPL).

We have the second largest share of product pipelines in India

with a pipeline network of more than 3,370 km for transporting
petroleum products. Our pan-India marketing network
comprises 14 zonal offices in major cities and 133 regional
offices. This network is supported by our supply and
distribution infrastructure comprising terminals, pipeline

Economies of Scale
HDFC Securities has a buy call on Hindustan Petroleum
Corporation (HPCL) with a target price of Rs 476.

The current market price of HPCL is Rs 243.80.

Time period given by the brokerage is one year when HPCL

price can reach the defined target.
However, FY18 performance reflects strong operational
performance in both refining and marketing businesses.

Core EBITDA (net of inventory gains/losses, forex gains/losses,

one-off costs, and other operating income) and PAT were thus
up 34.5 per cent and 49.2 per cent YoY.

Conscious efforts over the last six years to improve distillate

yields has resulted in 630bps and 230bps increase in HSD and
total distillate yield despite increase in the proportion of sour
and heavy crude over FY13-18.

Since peaking in Aug-17, HPCL has fallen nearly 48 per cent,

while the Nifty is up by nearly 16 per cent.

This was mainly due to 1) The inadequate and untimely Petrol

and Diesel retail price hikes, as oil prices surged, and 2)
Expected subsidy burden.

Profit Margin
HPCL Q4 profit jumps 70% YoY to Rs 2,970 crore as margins
improve
Oil marketing player Hindustan Petroleum Corporation
(HPCLNSE 0.26 %) on Monday reported 69.91 per cent year-on-
year rise in profit at Rs 2,969.92 crore for the quarter ended
March 31.
The firm had posted a profit of Rs 1,747.89 crore in the
corresponding quarter last year.

Total income rose 9.88 per cent YoY to Rs 73,672.50 crore from
Rs 66,983.38 crore.

The board of the company has recommended a final dividend

of Rs 9.40 per equity share.

HPCL management said that crude oil prices have remained

volatile due to uncertainties in demand-supply cycle. It expects
demand for diesel to grow by over 3 per cent in 5-7 years.

https://www.bharatpetroleum.com/YourCorner/petrozine/qua
rt2_2011/index.html
https://www.ibef.org/industry/oil-gas-india.aspx
https://economictimes.indiatimes.com/markets/stocks/recos/b
uy-hpcl-target-rs-476-hdfc-
securities/articleshow/65777154.cms?from=mdr
https://economictimes.indiatimes.com/markets/stocks/earning
s/hpcl-q4-profit-jumps-70-yoy-to-rs-2970-crore-as-margins-
improve/articleshow/69414439.cms
REFERRED FROM ABOVE LINK