Crude oil is a mixture of different compounds which are known as hydrocarbons.

These compounds
are separated using the process called fractional distillation. In this the crude oil in heated up and
then separated out into different compounds by making use of the fact that these compounds have
different boiling points. After the pre processing of crude oil it is then sent to the distillation tower
when the crude oil in vapor form rises up. The distillation tower is hot at the bottom but gets cooler
at the top. As soon as the compounds rise up and they reach a region that has lower temperature
than their boiling point it converts into liquid form. The compounds produced from down up include
bitumen, heavy fuel oils, diesel, kerosene, petrol and at the top LPG.

So after commercial consideration we will see what risks bpcl is subjected to and if it is earning
commensurate amount of returns. Most of these have been covered earlier including price risk,
exchange risk, interest rate risk. Coming on to obsolescence this could include the government of
india pushing forward the electric vehicles into the counrtry by 2025 and companies like Hyundai,
Mahindra rolling out electric vehicles into the market and also the entrance of Tesla in this year. Its is
also subject to other risks like…Taking all these risks into consideration BPCl has clocked 3764 crores
of profit for the current year compared to 2600 crores from hpcl. These figures are comparable to
other competitors as well.

Coming on to basel capital BPCL has long term issuer rating of Baa2from Moody’s, BBB- rating with
stable outlook from fitch rating and national long term rating of AAA by crisil with a stable outlook.
There has been some ambiguity for the rating agencies over the media reports suggesting GOI’s
intent of partly or fully disinvestment of its 53.3% stake in BPCl. BPCL also has significant amount of
collateral for example their 1220 crores of collateral security with clearing corporation of india.
Overall they hint at a lower risk weight and hence a lower basel capital requirement.