Section I – Profile of the Borrower

A. Borrower Details

Name of Borrower: उधारकर्ता का नाम M/s HPCL Rajasthan Refinery Limited (HRRL)
CIN/ सीआईएन U23201RJ2013GOI043865
REGN. NO./ पंजीयन सं. 043865
LEI Number 335800C3Y2CNMBC1AX78 valid upto 20.11.2022
Specified Borrower Yes
PAN/पैन AADCH2828K
Address/पता Registered Office/ Corporate office:
Tel Bhavan, Sahkar Marg, Lal Kothi Vistar, Jyoti
Nagar, Jaipur – 302005
Constitution: (change, if any, in Public limited Company
constitution since last renewal
sanction) संयोजन: (संयोजन परिवर्तन, यदि कोई हो
पिछले नवीकरण अनुमोदन के बाद)
Listed/ सूचीबद्ध Yes / No
If Yes: N.A.
DATE BSE NSE
CMP - - -
52W HIGH - - -
52 W LOW - - -
Sector/क्षेत्र Priority / Non-Priority / SME / Medium or LSI /
Infrastructure / Other sector
RMD Outlook on Industry: Petroleum - Refining and Marketing Industry –
Outlook - Marginally Positive as on 30.06.2022.
Location of the unit:इकाई का स्थान: Proposed 9 MMTPA Greenfield Refinery cum
Factories / Units: कारखाने/ इकाईयां: Petrochemical Complex at Tahsil Pachpadra, District
Barmer, Rajasthan
Line of Activity/ Nature of Business/ Producing Refinery and Petrochemical Products
गतिविधियाँ / व्यवसाय की प्रकृ ति
CIS Activity Code/ Product Code --
सीआईएस गतिविधि कू ट
Relationship since: 07.01.2019
कब से ग्राहक है:
Date of incorporation: निगमन की तारीख 18th September 2013
Chief Promoter Executive / HRRL is a Joint Venture (JV) company of Hindustan
मुख्य प्रवर्तक / कार्यकारी: Petroleum Corporation Limited (“HPCL”) and
Government of Rajasthan (GOR).

Names of Directors / Name of the director/ Designation Net As on

Partners / Sole Proprietor promoter worth date
and their net worth: Mr. M.K. Surana Chairman Not Applicable
निदेशकों/ साझेदारों/ एकल स्वामियों का नाम और as Personal
Mr. Pushp Kumar Joshi Director
उनकी निवल मालियत Guarantee is not
(HPCL Nominee)
stipulated
Mr. Vinod S. Shenoy Director
(HPCL Nominee)
Mr. Rajneesh Narang Director
(HPCL Nominee)
Ms. Rama Gummalla Director
 (HPCL Nominee)
Director
Dr. Subodh Agarwal
(GOR Nominee)
Director
Mr. Akhil Arora
(GOR Nominee)

B. Share holding Pattern

Share Holding pattern Shareholding Pattern of HRRL as on 31.03.2022-
(as on last financial year ended
date): Detailed Shareholding of Shareholder No. of Shares %Shareholding
5% and above to be furnished.
HPCL 4,26,61,37,000 74%
Others to be grouped and
furnished/ GOR 1,49,89,13,000 26%
शेयरधारिता का स्वरूप (तारीख को समाप्त वित्तीय वर्ष)
Total 5,76,50,50,000 100%
प्रस्तुत की जाने वाली 5% या उससे अधिक की विस्तृत
शेयरधारिता।

D. Management Profile: HRRL is a JV of HPCL (74% of Equity) and GOR (26% of Equity).
Brief profile of Promoters / Key management personnel:
(Cover in brief the following points)
a) Track Record
b) Credentials
c) Capabilities – Financial, Managerial, Technical
d) Succession plans
e) Governance
f) Peers: i) Related
ii) Others

Hindustan Petroleum Corporation Limited (HPCL):

HPCL is a Government of India enterprise and one of the largest integrated petroleum
refining and energy marketing company in India. HPCL is a Schedule ‘A’ CPSE. HPCL is a
“Maharatna” Public Sector Undertaking and has vast experience in construction and
operation of refineries and marketing of petroleum products. It owns and operates 2
refineries - one in Visakhapatnam with a capacity of 8.30 MMTPA and the other in Mumbai
with a capacity of around 9.5 MMTPA. HPCL also holds around 48.99% stake in HPCL Mittal
Energy Limited which owns and operates 11.3 MMTPA refinery at Bhatinda, Punjab. Its
group company MRPL also owns and operates a 15 MMTPA refinery & petrochemical
complex located in Mangalore.

During FY 21-22, the company’s total revenue from operations was Rs. 3,72,642 crore and
PAT was Rs. 6383 crore. HPCL is an integrated oil company with refineries and strong
marketing infrastructure including terminals/ depots, retail outlets, etc. The Company has
domestic credit rating of AAA (Stable) from CRISIL indicating high credit quality and low risk
while its international ratings are BBB- (Negative) from Fitch and Baa3 (Negative) from
Moody’s indicating investment grade.

As an integrated oil company with refineries, marketing terminals/depots and retail outlets,
HPCL is playing a significant role in the nation’s economic development and growth. The
Company has developed a vast experience in operation & maintenance of refineries and
pipelines over the years and has a large marketing and distribution network for retail auto-
fuels, industrial fuels, ATF, LPG and lube oils spread all over the country. HPCL is also
present in the field of Exploration and production (E&P) and have participating interest in
Indian E&P block and through its subsidiaries holding participating interest in domestic oil
and gas assets.

Government of Rajasthan (GOR):

GOR is promoting industrialization in the state of Rajasthan to improve economic welfare of

the state and its citizens. GOR has entered into a partnership with HPCL to set-up a
petroleum refinery cum petrochemical complex in the state and utilize the crude produced in
Rajasthan, to the extent permitted by the proposed refinery configuration. In this regard, a
Revised Joint Venture Agreement (JVA) was signed between GOR and HPCL on 17 th
August 2017 for setting up a 9 MMTPA refinery cum petrochemical complex.

GOR has already allotted 4,567 acres of land to HRRL for setting up Refinery Complex &
township. Project land has already been transferred by GOR to HRRL under 99 year lease
arrangement.GOR has allotted 97 acres of land for water reservoir and pumping station. As
per Revised JVA, GOR shall be providing HRRL, every year, an Interest Free Loan of Rs
1,123 crore for a continuous period of 15 years beginning from the year in which the
commercial production commences at the refinery. The same shall be repayable from year
16 to year 30, starting from the year of commencement of operations. GOR shall make
provisions for the Interest Free Loan amount every year in Budget Finalization Committee
proceeding of the Directorate of Petroleum, GOR. Further GOR has issued a separate order
for providing Interest Free Loan to HRRL & has notified the same in the Gazette. Also, a
separate State Support Agreement dated March 08, 2019 has been entered into between
GOR and HRRL which specifies mechanism for ensuring fund flow of Interest Free Loan.
Each year, the Interest Free Loan disbursement shall be in two equal installments, 1 st
installment on or before 30th June & 2nd installment on or before 31 st December of the
financial year. The said loan repayment shall also follow similar mechanism.

HPCL has deputed officials/personnel having requisite skill and experience in Project
implementation & operations at key managerial positions.

Product

1. Product–
FY 24-25 to FY 29-30 FY 30-31 onwards
Particulars
MMTPA % MMTPA %
Product Mix
BS VI Gasoline 0.995 10.7 0.92 9.9
BS VI Diesel 4.04 43.4 4.16 44.8
Polypropylene 1.07 11.5 0.99 10.6
LLDPE 0.48 5.2 0.48 5.2
HDPE 0.48 5.2 0.48 5.2
Butadiene 0.15 1.6 0.15 1.6
Benzene 0.13 1.4 0.14 1.5
Toluene 0.10 1.1 0.11 1.1
Product Sulphur 0.16 1.7 0.18 1.7
Fuel & Losses 1.68 18.1 1.68 18.1
Total Quantity 9.28 100% 9.29 100%

2. Place-
a) Total land required for the Project is 4,567 acres which would be used for setting up
process units, offsites, utilities and other infrastructure facilities, control room, electrical
substation, mandatory green belt, township, and other units. The Project land for
Refinery Complex of 4,567 acres has already been transferred by GOR to HRRL under
a 99-year lease. The Project land for Refinery Complex of 4,567 acres is spread over
the Sanjiyali Roopji Kanthwada and Sanjiyali Padamsingh Kanthwada villages of
Pachpadra Tahsil of Barmer district.
The entire area is sandy with flat terrain without any major undulations. 98% of the land
is owned by the salt department of the Government of Rajasthan. The refinery site is
located very near to the National Highway NH-112 which connects Jodhpur to Barmer
and SH-28. Pachpadra is located equidistant from Jodhpur and Barmer towns.
b) In addition to above, around 97 acres of land is required for water reservoir and
pumping station at Nachna, at around 230 km from refinery site which has been allotted
by GOR under a 99-year lease.
c) Further, additional land of 375 acres shall be subleased from APSEZL at the Mundra
port for the COT Terminal.
d)
The Refinery shall be located at Pachpadra in Barmer, Rajasthan as shown under:

Project Location

Top Five Buyers / Percentage to Aggregate Sales.

(Rs. In Crs)

FY Names of Top 5 Total sales to % aggregate Outstandin Related to the

buyers the buyers sales g company or not
Products produced will be marketed by HPCL. In this regard, a product-offtake agreement will be
undertaken between the entities, and a marketing terminal is to be set up by HPCL adjacent to the
refinery complex.
Presently, the quantum of petroleum products marketed by HPCL is higher than the quantum of
products produced by its own refineries. With an offtake agreement with HRRL, HPCL’s dependence
on other refiners shall reduce. Moreover, the project is favourably located to meet the growing
demand for petrochemical products due to close proximity to demand markets in western, northern,
and central India.
Top 5 suppliers / percentage to aggregate purchases (Rs. In Crs)

FY Names of Total purchase % aggregate Outstanding Related to the

Top 5 thr’ the Purchases company or not
suppiers suppliers
Being an integrated refinery-cum-petrochemicals complex, the project is expected to have cost
advantage over standalone petrochemical facilities that source raw material from other
refineries. Flexibility in using imported and Rajasthan crude mix (being low-sulphur crude, it should
help improve profitability) should benefit the company. Main products will be BS-VI grade high-speed
diesel, motor spirit, and value-added petrochemical products, such as polypropylene, butadiene,
linear low-density polyethylene, high-density polyethylene, benzene and toluene

H. Snapshot of Holding/Group/Investment Companies

Company/ Parameter HPCL

Activity Oil Refining & Marketing
Constitution Public Sector Unit
Bankers/FI State Bank of India, Punjab National Bank, Union Bank of India, Bank of
Baroda, Bank of India, HDFC Bank, Citibank, Standard Chartered Bank,
ICICI Bank
FB Limits 24,000 Crs
NFB Limits 17,000 Crs
Rating (LT) CRISIL AAA/Stable (Reaffirmed)
Status Standard

Section II - Due Diligence and Risk Assessment

A. Credit Rating of the company:

i) Internal Credit Rating (RAM) (As per ABS as on 31.03.2022)

Facility Obligor/ Valid Upto

Year Combined
Project
202 Term Loan 31.03.2024
IB A+ IB AA
2
202 Term Loan IB A+ IB AA 31.03.2023
1

ii) External Rating

Year of Rating Rating Agency Long term Short term

2022 CRISIL dated 24.11.2021 CRISIL AA/Stable -
(Reaffirmed)

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL AA/Stable’ rating on the long-term bank facilities of HPCL
Rajasthan Refinery Ltd (HRRL).

The rating continues to factor in the technical, managerial, and financial support from the parent,
Hindustan Petroleum Corporation Ltd (HPCL; ‘CRISIL AAA/FAAA/Stable/CRISIL A1+’),
which has 74% shareholding in the company. The established position of the parent in the Indian oil
refining and marketing sectors, support from the Government of Rajasthan (GoR) - the other
shareholder - and fiscal incentives in the form of interest-free loans also support the rating.

The rating also factors in the favourable project configuration (integrated petrochemicals complex,
ability to produce BS-VI-grade automotive [auto] fuels and value-added petrochemical products, and
flexibility in input crude mix), and criticality to HPCL (similar line of business, board control and an
offtake agreement). These strengths are partially offset by susceptibility to project-related risks,
especially in regard to implementation and stabilisation.

The project has witnessed a sharp cost escalation from original estimates of Rs 43,129 crore due to
commodity price escalation as the earlier estimates were linked to dated index of 2017 and partly due
to extension in scope of work.

Additionally, the scheduled commissioning of the project could be extended from earlier timelines of
December 2023. The lockdowns imposed to contain the second wave of the Covid-19 pandemic
resulted in delays in order awarding as well as construction activities. However, post that there has
been ramp up in activities with cumulative spending of Rs 10,500 crore as of September 2021.
Furthermore, a cumulative commitment of Rs 37,124 crore has been achieved as of March 2021.

Analytical Approach
CRISIL Ratings has applied its parent notch-up framework to factor in the extent of support received
by HRRL from HPCL. Operational, financial, and managerial support from the parent should continue.

Key Rating Drivers & Detailed Description

Strengths

Strong support from parent and GoR

HPCL’s established position in the Indian oil refining and marketing sector, experience in
implementation and operations of large-scale projects, and continued support during project execution
and post commencement of operations should continue to benefit HRRL. Products produced will be
marketed by HPCL. In this regard, a product-offtake agreement will be undertaken between the
entities, and a marketing terminal is to be set up by HPCL adjacent to the refinery complex. HRRL
also benefits from the financial flexibility it derives from being a part of HPCL. Furthermore, as on
March 31, 2021, the parent infused about Rs 1,798 crore.

Key management personnel (technical, financial and human resources), to monitor and ensure
completion of the project as per schedule, are allocated by HPCL. Moreover, the board of
directors has representatives from the parent, including a common chairman.

As per the joint venture agreement, the GoR will provide viability gap funding in the form
of an interest-free loan of Rs 1,123 crore per annum for 15 years, resulting in improved internal rate of
return for the project. Furthermore, two nominees on the board have been appointed by the
government to closely monitor progress.

HPCL’s majority ownership in, and the strategic importance of, HRRL underscores the parent’s moral
obligation to provide need-based support.

Favourable project configuration

Being an integrated refinery-cum-petrochemicals complex, the project is expected to have cost
advantage over standalone petrochemical facilities that source raw material from other
refineries. Flexibility in using imported and Rajasthan crude mix (being low-sulphur crude, it should
help improve profitability) should benefit the company. Main products will be BS-VI grade high-speed
diesel, motor spirit, and value-added petrochemical products, such as polypropylene, butadiene, linear
low-density polyethylene, high-density polyethylene, benzene and toluene. The high complexity of the
project will support higher gross refining margins, compared to the existing HPCL refineries at Mumbai
and Visakh.

Presently, the quantum of petroleum products marketed by HPCL is higher than the quantum of
products produced by its own refineries. With an offtake agreement with HRRL, HPCL’s dependence
on other refiners shall reduce. Moreover, the project is favourably located to meet the growing
demand for petrochemical products due to close proximity to demand markets in western, northern,
and central India.

Weakness
Exposure to project implementation and stabilisation risks
Project implementation risk remains high, given the early stage of execution and significant cost
overrun on a combination of material price escalation, particularly steel prices (as the original
estimates were linked to 2017 index when project was approved) and due to extension in scope of
work with increase in petrochemical capacity. Further, delay in commissioning has also pushed up
interest during construction. The project implementation risk is exacerbated with rise in project costs
and further slippage in commissioning timelines. But all the critical regulatory and environmental
clearances have been received, and the company is in process of securing funding tie-up for the
incremental costs.

Also, once commissioned, the project remains exposed to risks related to stabilisation, akin to all
greenfield projects. On commencement, ability to ramp-up and achieve optimum capacity
utilisation and operating efficiency will be critical.
 Liquidity: Strong
The project cost includes interest during construction and has a built-in contingency plan to take care
of variation in design estimates and escalation in commodity and construction costs, if any. Timely
contribution of equity by both HPCL and GoR is expected, while the debt availed has 4.5 years of
drawdown period, a moratorium of two years during the initial stabilisation phase, and thereafter
quarterly repayment for 18 years. Additionally, the parent, HPCL, being a public sector undertaking
with Maharatna status, and with strong business and financial risk profiles, should
support any additional cost or time overrun.

Outlook Stable
HRRL will remain strategically important to HPCL and continue to receive support during project
implementation and after commencement of operations.

Rating Sensitivity factors

Upward factors
 Achievement of major milestones ahead of the expected schedule within budgeted cost
 Ramp up of operating profitability post stabilisation and interest coverage ratio of 2.2 times on
a sustained basis
 Increase in stake by HPCL

Downward factors
 Time or cost overrun, or stabilization-related issues.
 Delay in committed equity contribution from the promoters.
 Lower-than-expected support from HPCL
 Downgrade in rating of HPCL by 1 notch

B. RMD Advisory:
RMD Note date Overall Risk observed in the proposal is ‘Medium’ on account of Low
Comments : Risk for Ratings and Medium Risk for other parameters. Detailed RMD
Advisory and reply on the same is given in Annexure I of Executive
Reply /Justifications: Summary.

F. Credit Information Report

Details of Credit Information obtained from other Banks / Financial Institution:
Company is existing customer credit information obtained from other consortium member
banks.

G. Exchange of Information sent / received upto:

Exchange of information sent upto Sep’2022 quarter and received from SBI & Union Bank of
India for Sep’2022. From other banks EOI received upto June’2022.

Details of Current Accounts maintained with other than lending banks: Nil
Company is maintaining current account with SBI (Lead Bank) only.

H. Compliances:

i) Stock audit / LRMC / LFAR observations with Compliance / Concurrent Auditor’s

report /
Observations in last two RBIA reports /rectification on the report/s (report wise
observations and rectifications / compliance to be furnished)

Report by / Date of Observations/ Position of compliance Date of closure

the report comments / / Likely date of of the report
irregularities pointed rectification
out
RBIA report dated Nil NA NA
02.03.2022
Concurrent Audit Nil NA NA
Report for the month
of Sept -2022

Comments on QIS / FFR statements, Stock statements & MSOD: N.A.

Whether QIs / MSOD received in time: N.A.
If no, to confirm whether penal interest is recovered or nor: N.A.

ii) Specific observations / adverse remarks made by CMO in the latest monthly report
/ stock Inspection report:

CRM’s Reports submitted up to Major observations - Nil

30.09.2022
Unit inspection by CRM on Our bank official visited the site jointly with member
banks on 26.08.2022. No adverse observation
noted.

Unit Inspections by Branch Branch Manager/ DGM (Joint visit by member

Manager / Other officials. banks)– 17.08.2022
Mr Kamlesh Kayarkar, Sr Manager (Joint visit) –
26.08.2022
Unit Inspections by Auditors / --
Inspector of Branches / Other
officials from ZO on
Comments of the Officials No adverse observation noted
 Section III - Banking Relationship
A. Credit History with our Bank:

Sanctioning Date of Limits sanctioned Internal External Rating

Authority sanction Rating (Long Term)
FB NFB Total
MC 09.12.2021 2000.00 (2000.00) 2000.00 IB AA CRISIL AA
(Stable)

B. Details of Existing Facilities & Position of Account:

With our bank: ( Rs. In

Crs )
DL /
Existing rate of
Amount
Account Excess / Interest /
Facility Limit Disbursed Balance
Number Overdue * Commission
Till
12/10/2022
SBI 6M MCLR
+ 0.45% i.e.
Term 681430680 8.10% p.a.
2,000 1007.19 1007.19 --
Loan 5 Next reset
date:
03.04.2023
*Overdue since: NA, under disbursement stage.

E. Facilities with other banks and position of the same (Rs in crore)

With other Bank(s): [Position as on 30.09.2022]

Sr. Name of the Bank/ FI Limit O/s as on Available for
No. Sanctioned 30.09.2022 disbursement
1 State Bank of India 15000.00 7313.35 7686.65
2 Bank of Baroda 4000.00 1950.21 2049.79
3 Canara Bank 2000.00 975.12 1024.88
4 Punjab National Bank 3750.00 1828.37 1921.63
5 Indian Bank 2000.00 975.12 1024.88
7 Union Bank of India 1000.00 487.56 512.44
8 IIFCL (UK) – FCTL 1003.00 0.00 1003.00
Total 28753.00 13529.73 13529.73
 Section IV - Financial Performance
A. Key Financial Indicators: (Standalone)
(Rs in
crore)
Particulars Audited Audited Audited Audited
Year Ending - > 2019 2020 2021 2022
Profit & Sales/Revenue 0.00 0.00 0.00 0.00
Loss
Other Income 8.59 4.54 0.44 11.68
(48.53 (33.41
Net Profit/(Loss) 7.40 ) ) (22.37)
Balance 214.7
Sheet Fixed Assets (Gross) 1 215.09 220.01 409.17
212.1
Fixed Assets (Net) 3 210.89 213.86 399.27
Capital Work in
Progress 914.48 2770.31 6420.16 15386.04
Other Non-Current
Assets 39.33 295.66 818.99 1322.01
345.9
Current Assets 4 224.43 161.79 157.49
Total Assets 1511.89 3501.30 7614.79 17264.80
1,203.2
Paid up Capital 5 1,755.05 2,430.05 5,765.05
1,187.7
TNW 1 1,690.69 2,332.28 5,644.84
1,187.7
ANW 1 1,690.69 2,332.21 5,644.84
Long Term Liabilities 1.62 1,577.57 4,438.54 10,004.59
321.0
Short Term Liabilities 1 231.19 842.13 1,613.46
24.9 (6.76 (680.35 (1,455.97
NWC 4 ) ) )
Financia TOL/ TNW 0.27 1.07 2.27 2.06
l Ratios
Current Ratio 1.08 0.97 0.19 0.10
Debt Equity Ratio 0.00 0.93 1.90 1.77
EBIDTA/Sales (%) - - - -
PAT/Sales (%) - - - -
Others (46.65 (33.26
Cash Profit 6.71 ) ) (24.29)
NFB Limits - - - -
CRAR* - - - -
Gross NPA* - - - -
Net NPA* - - - -
* in case of NBFC/HFCs.
Comments

a. Sales
The project is under construction stage. Hence nil sales is reported. SCOD of the project is
01.07.2024. The operations will commence in FY 24-25.

b. Other income
The Company has reported Other Income in FY 2022 of Rs. 11.68 crores, while it was Rs.
0.44 crores in FY 2021. The major source of other income is interest income of Rs.9.76 Cr
from Bank Deposits etc. and forex gain of Rs.1.92 Cr during FY 2022.

c. Profitability
Since the company has not started its operations and the Project is under the construction
phase. Company has incurred losses of Rs.22.37 crores in FY 2022 as compared to losses
of around Rs.33.42 crores in FY 2021. Net loss has reduced in FY 2022 due to increase in
other income during the year.

d. Paid up capital/TNW
The paid up share capital of HRRL as on 31st March 2022 is Rs. 5,765.05 Crore consisting of
Equity shares. Paid up capital increased from Rs. 2,430.05 Crores in FY 2021 to Rs.
5,765.05 Crore in FY 2022 on account of issuance of 333,50,50,000 equity shares of Rs. 10
each subscribed by HPCL & GoR
TNW as on 31st March 2022 was Rs. 5,644.84 Crore as against Rs.2332.28 crore as on 31 st
March 2021.

e. NWC & Current ratio

NWC is negative since the Project is under implementation. Hence Current ratio is not
applicable.

f. Debt Equity Ratio & TOL / TNW Ratio

Debt Equity ratio is 1.77 & TOL/ TNW ratio 2.06 as on 31.03.2022 which is within the
benchmark level.
 Section V- Credit facilities and Assessment
A. Assessment of Fund Based Working Capital Limits:

N.A., Only Term Loan facilities has been sanctioned. The project is under implementation
stage.

B. Assessment of Non Fund Based Working Capital Limits:

N.A.

C. Assessment of Term Loan:

Project Loans : ( The project loans , among others, should consider the following
aspects )
a) Area / Geography - Refer Section I
b) Input related
c) Proposals / Clearances
d) Agreement
e) EPC contract
f) O & M Contract
g) Cost – Means (sources), capabilities / reasonableness of the cost
h) Viability

For Fresh Term Loan:

1. Purpose of the Term Loan:
Original Project:
The Company was incorporated to set up a green field refinery cum petrochemical complex,
with a capacity of 9 MMTPA in Barmer district, Rajasthan.

The Project includes setting up an energy efficient and environment friendly refinery cum
petrochemical complex with a capacity of 9 MMTPA, producing clean fuels and petrochemicals;
setting up pipeline for transportation of both Rajasthan Crude and imported crudeand water to
the refinery site; Captive Power Plant for meeting refinery power and steam requirement; crude
and product storage facilities; township and allied facilities and utilities.

The Project shall be utilizing locally available crude from Rajasthan block i.e. Rajasthan Crude
and imported Arab Mix crude for the initial 6 years.Subsequently, from the 7 th year onwards, it
shall be entirely using Arab mix crude. The Project will be producing clean fuels such as BS-VI
grade Motor Sprit (MS or Petrol) & BS-VI grade High Speed Diesel (HSD or Diesel) and
Petrochemical products such as Polypropylene, Butadiene, LLDPE, HDPE, Benzene and
Toluene. The Project will cater to the increased demand of petroleum and petrochemical
products in the country and the Western, Northern and Central parts of India in particular.
Based on Engineers India Limited (EIL) the appraised Project Cost of Rs 43,129 crore was
funded in D:E ratio of 2:1, i.e. Project Debt of Rs 28,753 crore and Project Equity of Rs 14,376
crore. The Project Debt facility has been assigned a rating of AA (Stable) (Nov 2021) by
CRISIL.

Revised Project (Proposed):

Based on the inputs received from Process licensors and EIL, certain changes have been
proposed in the scope and size of the Project for improvement in revenue, reliability, energy
optimization, maintenance ease and latest environmental norms compliance.

As mentioned in the EIL Technical Documents, there is an estimated Project Cost Revision of
Rs 29,808 crore, primarily due to the following factors: -

(i) Escalation; (ii) Exchange Rate variation; (iii) Changes in Taxes & Duties and (iv) Changes in
Project scope & size. There is also variation in the soft costs such as IDC, Financing Charges &
Margin Money for Working Capital. Consequently, the Revised Project Cost is estimated at Rs
72,937 crore.

The Revised Project Cost is estimated at Rs 72,937 crores as summarized below: -

(Rs crore)
Source of Funds Original Incremental Total
Project Cost 43,129 29,808 72,937
Means of Finance
- Equity (A) 14,376 9,936 24,312
- HPCL share (A1) 10,638 7,353 17,991
- GOR share (A2) 3,738 2,583 6,321
- Revised Project Debt (B) 28,753 19,872 48,625
- Original Project Debt (B1) 28,753 - 28,753
- Incremental Project Debt (B2) - 19,872 19,872
Total Means of Finance 43,129 29,808 72,937
Project D/E (B / A) 2:1 2:1 2:1

The Incremental Project Cost works out to Rs 29,808 crore. Breakup of the same is as
under:

S.
Factor for Cost Increase Cost (Rs Cr)
No.
1 Escalation 15,615
2 Exchange Rate variation 1,011
3 Change in Taxes and Duties 1,751
4 Changes in Project Size and Scope 11,395
5 Change in Soft Cost 36
Total 29,808
 Scope Change Cost Details
S. No. Factor Analysis for Cost Increase due to Scope Change Cost (Rs Cr)
1 Facilities due to Regulatory Requirement post DFR 221
2 Specific exclusions in DFR (piling) required only on need basis 1,225
3 Post DFR Engineering Changes 9,949
Total 11,395

The proposal for funding of the incremental debt is under process with all the existing lenders.
Further, in-principle sanctions/final sanctions of Rs 27276.00 Cr received from new lenders
(not part of the existing consortium) for incremental debt of Rs.19872.00 in the Project Cost.
2. Detailed break up of project cost
At the time of Original Financial Closure, the Project Cost was appraised at Rs 43,129 crore,
comprising of Core Cost of Rs 34,717 crore, contingency of Rs 1,562 crore, IDC and
financing charges of Rs 6,080 crore and Margin Money of Rs 770 crore.

The Project Cost was funded in Debt: Equity ratio of 2:1 i.e. Debt of Rs. 28,753 crore and
Equity of Rs. 14,376 crore. Financial Closure for the Project was achieved in Jan 2019 by
tying up Rs. 28,753 crore through a mix of RTL and ECB from a consortium of banks led by
State Bank of India.

Basis the EIL Technical Documents and inputs provided by HRRL, the Revised Project Cost
is estimated at Rs 72,937 crores as summarized below:

 The revised Project Core Cost is estimated at Rs 64,489 crore.

 Further, as per EIL Technical Document, a contingency has been considered @ 2% of
amount of Purchase Order (PO) already placed and @ 5% of the amount of POs yet to
be placed (estimated during H1FY2022) has been considered to take care of any
exigencies and inflation. The contingency works out to Rs 1,937 crore.
 The soft costs (IDC, Margin Money, and financing costs) have been calculated based
on various financing assumptions (detailed in ensuing sections) and added to the core
cost to arrive at the total Revised Project Cost. The soft costs are estimated at Rs 6,511
crore.

Thus, total Revised Project Cost works out to Rs 72,937 crore as summarized in the table
below: -

S No Amount
Cost Head
Rs. Crore#
1 Land 355
2 Licensor Charges 1,906
3 PMC/EPCM/OBE Fee 2,523
Plant & Machinery
4 Process Units 34,503
5 Utilities & Offsites 11,229
6 Captive Power Plant 3,250
Sub-total Plant & Machinery (4 + 5 + 6) 48,982
7 COT 1,253
8 Pipelines 4,230
S No Amount
Cost Head
Rs. Crore#
9 Roads & Buildings 1,760
Others (incl. site development, ETP, Township, Owners’
10 3,480
exp., start-up)
Total Revised Project Core Cost 64,489
11 Contingency 1,937
12 IDC & Financing charges 5,514
13 Margin Money for WC 997
Total Revised Project Costs 72,937
Notes:- # The Foreign Cost component is estimated at Rs 8,479 crore equivalent.

The Exchange Rate considered for the conversion of Foreign Cost component to INR is INR
72.79/USD as of March 2021 rate with depreciation of 2% p.a. The Exchange Rate considered for the
conversion of Euro cost USD is USD 1.18/ EURO as on 31st March 2021.

Revised Project Cost

Based on the inputs received from Process licensors and EIL, certain changes have been
incorporated in the scope and size of the Project during licensor selection and BDEP stage
for improvement in revenue, reliability, energy optimization, maintenance ease and latest
environmental norms compliance.

EIL has prepared a document titled ‘Report on the Scope Changes and Cost Revision’ dated
July 2021 incorporating the various changes in the Project vis-à-vis EIL DFR and an
addendum to the document dated Oct 2021 incorporating the cost revision on account of
changes in the scope & size of the Project (both documents are collectively referred to as
“EIL Technical Documents”).
As mentioned in the EIL Technical Documents, there is an estimated Project Cost Revision
of Rs 29,808 crore, primarily due to the following factors: -
(i) Escalation; (ii) Exchange Rate variation; (iii) Changes in Taxes & Duties and (iv) Changes
in Project scope & size. There is also variation in the soft costs such as IDC, Financing
Charges & Margin Money for Working Capital.

Consequently, the Revised Project Cost is estimated at Rs 72,937 crore.

Analysis of Increase in Project Cost

The Revised Project Cost is Rs 72,937 crore and therefore, the Incremental Project Cost is
Rs 29,808 crore. As per EIL Technical Documents and inputs from HRRL, the increase in
Project Cost is due to the following factors:

a) Escalation:The Project was approved basis the DFR, which was made by EIL basis
February 2017 prices. No provision for cost escalation was provided in the estimate for
Project construction period. The Project is now scheduled to be completed by March
2024 (Mechanical Completion).
In order to assess the impact of Escalation on the Project Cost, the EIL DFR cost was
escalated using the Wholesale Price index (WPI) & Consumer Price Index (CPI) for the
Indian component and Chemical Engineering Plant Cost Index (CEPCI) for the foreign
component. The WPI indices for “Mild Steel Flat Products” and “Metal Products /
Manufacture of Fabricated Metal Products, except Machinery & Equipment” indices have
been considered. The WPI and CPI have been applied at 60:40 ratio on the Indian
component of the DFR hard cost. Out of the total WPI escalation component, 40% has
been escalated using “Mild Steel Flat Products” indices and 60% has been escalated
 using the “Metal Products / Manufacture of Fabricated Metal Products, except Machinery
& Equipment” indices considering the composition of the input material.
Also, there is substantial increase in the manpower cost due to revision in the minimum
wages by the government. The manpower cost for highly skilled personnel has also gone
up. The revised estimate considers the actual escalation till Mar 2021 and estimated
escalation till the completion of the Project based on standard indices. For the period
April 2021 to Mar 2024 the monthly escalation factor calculated basis the indices for the
period Feb 2017 – Mar 2021 has been applied on prorated basis as per capex phasing
considered.
The estimated increase in Project Cost due to escalation is Rs 15,615 crore.

b) Taxation:The original cost estimate was made considering the taxes and duties
prevalent in FY 16-17 comprising of excise duty of 12.5%, WCT/ VAT of 12.5%, service
tax of 15%, CST of 2% and other taxes for the input cost. Subsequently, implementation
of GST regime has resulted in increase in the ProjectCost as the effective GST rate of
18% is higher than earlier tax rate.Furthermore, since the major products like MS & HSD
and feedstock like crude oil and natural gas are not under prevailing GST regime, 100%
input tax credit on capital expenditure is not available which was available in earlier tax
regime before GST.
The estimated increase in Project Cost due to change in taxes and duties is Rs 1,751
crore.

c) Forex Variation: The original cost estimate was made with the exchange rate prevalent
at the time of DFR for foreign component. There has been substantial rupee depreciation
from Rs 66.99/USD in Feb 2017 (DFR date) to Rs 72.79/USD in Mar 2021 and the same
is to be factored in the revised cost. The revised estimate considers the actual foreign
exchange rate variation till Mar 21 and estimated depreciation of 2% per annum on the
foreign exchange component from Apr 2021 to Mar 2024 (Mechanical Completion date).
The estimated increase in Project Cost due to change in exchange rate is Rs 1,011
crore.
In case of further increase in project cost due to forex variation, Sponsors have agreed to
provide Sponsor’s Support Undertaking that they will arrange funds for the purpose of
meeting Cost Overrun requirements of the Borrower in relation to the Project, in
proportion to its shareholding in the Borrower.

Sl.No Head DFR Cost Variance on FE Tax Variance

Account of Variance
Escalation
1. Land 200 - - -
2. Licensor Charges 910 353 112 46
3. PMC/EPCM/OBE Fee 2121 545 0 107

4. Process units 17208 7966 742 874

5. Utilities & Offsites(U&O) 5696 2830 32 289
6. Captive Power 2975 1659 0 151
Plant(CPP)
7. Catalysts/ Chemicals 624 344 91 32
8. Piling 0 0 0
9. Total Plant & Machinery 26502 12799 865 1346
(4 to 8)
10. Crude Oil 500 260 13 25
Terminal(COT)
Sl.No Head DFR Cost Variance on FE Tax Variance
Account of Variance
Escalation
11. Pipelines 3039 1080 0 154
12. Roads& Buildings 309 104 0 16
13. Others (Site Grading, 1136 474 21 57
ETP, Owner’s
Construction Expense,
Township etc)
14. Total Hard Cost 34717 15616 1011 1751
15. Soft Cost (WCM,IDC, 8412 - - -
Contingency)
16. Total Project Cost 43129 15616 1011 1751

d) Changes in Scope and Size of the Project:

There is an increase inProject Cost of Rs 11,395 crore due to Scope change, details of
which are given below:

There is increase in Project Cost of Rs 11,395 crore due to Scope change because of
Regulatory Requirements, additional piling required due to soil condition and engineering
changes as mentioned in the table below:

S. Cost (Rs
Factor Analysis for Cost Increase due to Scope Change
No. Cr)
1 Facilities due to Regulatory Requirement post DFR 221
Specific exclusions in DFR (piling) required only on need
2 1,225
basis
3 Post DFR Engineering Changes 9,949
Total 11,395

The details are given below: -

i. Facilities due to Regulatory Requirement post DFR

At the time of DFR, there was no separate SO2 emission norm for Continuous Fluidised Bed
Combustion (CFBC) boiler stacks for solid fuels. In Jan 2018, a new norm was introduced to
meet 100 mg/N cu.m. of SO2 in stack emissions of CFBC boiler. This change necessitated
introduction of Fluidised Gas Desulphuriser facilities costing Rs 114 crore.
Further, Environmental clearance stipulated Enterprise Social Commitment (ESC)
expenditure of Rs 107 crore. Hence, the increase on account of statutory/ regulatory
requirement is Rs 221 crore.

ii. Specific exclusions in DFR (piling) required only on need basis

Subsequent, to carrying out the detailed soil investigation extensive piling was required due
to poor soil bearing capacity and existence of saltpans, which was not considered in DFR.
Total number of Piles considered is 1,11,565 with Pile diameter 500 mm. The cost of piling
required is Rs 1,225 crore.

iii. Post DFR Engineering Changes

a) The DFR estimation was done prior to selection of the licensors basis the UOP
 configuration model and considering indicative in-house data.
b) However, after finalization of the licensors and receipt of the process packages, upon
completion of the necessary front-end engineering wherein finalization of equipment
level details and obtaining detailed utility requirements from the process licensors,
resizing of certain process units and facilities was required.
c) Furthermore, specific analysis was carried out to optimize the product yields and
improve operational reliability, which has also necessitated certain engineering scope
changes. The above exercise envisaged to give increased petrochemical yield of about
14%.
d) Further, there was a requirement to ensure the flexibility to process Rajasthan + Arab
Mix crudes, certain design margins were required to be included in some process units
to take care of various possible processing scenarios.
e) Utilities, Offsites and other facilities requirement was worked out considering the revised
unit requirements. In order to facilitate phased shutdown of units for maintenance and in
case of emergencies, certain facilities and storage capacities were added.

The total increase in capital cost because of above Post DFR Engineering changes is Rs
9,949 crores which is 23.1% of the approved Project cost. The original DFR had a stated
accuracy of ± 20%.

Compliance with RBI Guidelines:

As per the EIL Report, the increase in Project Cost is on account of following factors – (i)
Changes in Project Scope (Rs 11,395 crore); (ii) Escalation in Project cost due to increase in
commodity & labour costs (Rs 15,615 crore); (iii) Taxes & Duties variance, FX variance and
variance in Soft costs (Rs 2,798 crore)

The additional debt requirements of the captioned Company towards change in scope & cost
overrun, value of which are arrived separately (Rs 11,395 Crore due to scope change & Rs
18,413 Crore due to cost overrun- Total Rs.29,808 Crore). As per RBI master circular for
Prudential Norms & Income Recognition dated 01.10.2021 there are two clauses/paragraphs
with regards to financing of scope change and cost overrun. The same are as below:

Clause 1: 4.2.15.5.3 -
"Where the initial financial closure does not envisage such financing of cost overruns, banks
are allowed to fund cost overruns, which may arise on account of extension of DCCO upto two
years and one year from the original DCCO stipulated at the time of financial closure for
infrastructure projects and non-infrastructure projects (including commercial real estate
projects) respectively, without treating the loans as ‘restructured asset’, subject to the following
conditions:

a) Banks may fund additional ‘Interest During Construction’, which may arise on account of
delay in completion of a project;
b) Other cost overruns (excluding Interest During Construction) up to a maximum of 10% of the
original project cost;
Clause 2: 4.2.15.6.2 -
Any change in the repayment schedule of a project loan caused due to an increase in the
project outlay on account of increase in scope and size of the project, would not be treated as
restructuring if:
a) The increase in scope and size of the project takes place before commencement of
commercial operations of the existing project.
b) The rise in cost excluding any cost-overrun in respect of the original project is 25% or more
of the original outlay.
c) The bank re-assesses the viability of the project before approving the enhancement of scope
and fixing a fresh DCCO.
d) On re-rating, (if already rated) the new rating is not below the previous rating by more than
one notch.

In the instant case:

1) The quantum of cost overrun, alone, is given to be Rs 18,413 Crores which is more than
10% of the original project cost of Rs 43,129 Crores.
2) The quantum of increase in project cost due to change in scope of the project is given to be
Rs.11,395 Crores which is more than 25% of the original project cost

In this scenario, when the amount of cost overrun and scope change is separately identifiable,
Lead Bank has sought for an opinion with regard to

1) whether both the above RBI clauses are independent of each other i.e. if the increase in
project cost due to change in scope is more than 25% of the original project cost then only the
clause 4.2.15.6.2 will apply and not the other clause.

2) Whether both the RBI clauses will apply simultaneously i.e. clause 4.2.15.5.3 for financing
the cost overrun part and clause 4.2.15.6.2 for the scope change part.

The LLC M/s Cyril Amarchand Das has opined as under:

Quote
We note that pursuant to Paragraph 4.2.15.5.3 of the RBI circular on ‘Prudential norms on
Income Recognition, Asset Classification and Provisioning pertaining to Advances’ dated
October 1, 2021 (“IRAC Norms”), banks are eligible to fund cost overrun (subject to certain
conditions) only up to 10% of the original project cost (other than in case of the interest during
the construction period) where such increased costs are due to extension of date of
commencement of commercial operation, without treating the loan as a ‘restructured asset’.
Having said the above, we also note that RBI has under Paragraph 4.2.15.6 of the IRAC
Norms, specified the following:

“Any change in the repayment schedule of a project loan caused due to an increase in the
project outlay on account of increase in scope and size of the project, would not be treated as
restructuring if:
a) The increase in scope and size of the project takes place before commencement of
commercial operations of the existing project.
b) The rise in cost excluding any cost-overrun in respect of the original project is 25% or more
of the original outlay.
c) The bank re-assesses the viability of the project before approving the enhancement of scope
and fixing a fresh DCCO.
d) On re-rating, (if already rated) the new rating is not below the previous rating by more than
one notch.”

Accordingly, it appears that the above mentioned 2 provisions are independent of each other
and apply in different scenarios. Therefore, if it can be demonstrated that the rise in cost is on
account of increase in scope and size of the project, and the other conditions specified under
Paragraph 4.2.15.6 of the IRAC Norms have been complied with, Paragraph 4.2.15.6 of the
IRAC Norms will be applicable. Lenders may consider requiring this aspect be confirmed from a
subject matter expert from a technical and factual perspective. Please note that our views
expressed above are based on interpretation of regulations set out above and this position, to
the best of our knowledge, is untested before any court of law or regulator. Please note that our
views will not be binding on an Indian court, or any statutory authority, government agency or
department (including RBI), which would have independently satisfied for the purpose of
interpretation and application
Unquote

Considering that increase in Project Cost of Rs 11,395 crore is on account of changes in the
scope of the Project, the financing of the Revised Project Cost is proposed to be done in
compliance with the RBI “Master Circular - Prudential norms on Income Recognition, Asset
Classification and Provisioning pertaining to Advances” dated 1 st October 2021, clause
4.2.15.6.2.The compliance of the proposed Debt Financing with the RBI IRAC norms is as
given below:

S.
Condition Comments
N.
The rise in cost excluding any cost- The increase in Project Cost of Rs 11,395 crore
overrun in respect of the original due to Scope change is approx. 26.4% of the
1
project is 25% or more of the Original Project cost of Rs 43,129 crore. Hence
original outlay complied.
According to the Original Financial Closure, the
The increase in scope and size of
Commercial Operations Date for the Project
the Project takes place before
2 was 1st Jan 2024. The increase in scope and
commencement of commercial
size has taken place before 1st Jan 2024. Hence
operations of existing project
complied.
The bank re-assesses the viability
of the Project before approving the Bank has carried out fresh assessment of the
3
enhancement of scope and fixing a Project. Hence complied.
fresh DCCO
On re rating (if already rated), the CRISIL has reaffirmed the credit rating for the
new rating is not below the Revised Project Debt Facility at the same level,
4
previous rating by more than one i.e. AA (Stable) in November 2021, hence
notch complied.
Thus, the proposed Project Debt Financing for the Revised Project Cost comply with the
requirements of the applicable RBI IRAC norms.

The entire Revised Project Cost of Rs 72,937 crore is proposed to be funded in original D:E
ratio of 2:1 i.e. Debt of Rs 48,625 crore and Equity of Rs 24,312 crore.

Compliance with RBI Guidelines:

As per the EIL Report, the increase in Project Cost is on account of following factors – (i)
Changes in Project Scope (Rs 11,395 crore); (ii) Escalation in Project cost due to increase in
commodity & labour costs (Rs 15,615 crore); (iii) Taxes & Duties variance, FX variance and
variance in Soft costs (Rs 2,798 crore)

The additional debt requirements of the captioned Company towards change in scope & cost
overrun, value of which are arrived separately (Rs 11,395 Crore due to scope change & Rs
18,413 Crore due to cost overrun- Total Rs.29,808 Crore). As per RBI master circular for
Prudential Norms & Income Recognition dated 01.10.2021 there are two clauses/paragraphs
with regards to financing of scope change and cost overrun. The same are as below:

Clause 1: 4.2.15.5.3 -
"Where the initial financial closure does not envisage such financing of cost overruns, banks
are allowed to fund cost overruns, which may arise on account of extension of DCCO upto two
years and one year from the original DCCO stipulated at the time of financial closure for
infrastructure projects and non-infrastructure projects (including commercial real estate
projects) respectively, without treating the loans as ‘restructured asset’, subject to the following
conditions:
a) Banks may fund additional ‘Interest During Construction’, which may arise on account of
delay in completion of a project;
b) Other cost overruns (excluding Interest During Construction) up to a maximum of 10% of the
original project cost;
Clause 2: 4.2.15.6.2 -
Any change in the repayment schedule of a project loan caused due to an increase in the
project outlay on account of increase in scope and size of the project, would not be treated as
restructuring if:
a) The increase in scope and size of the project takes place before commencement of
commercial operations of the existing project.
b) The rise in cost excluding any cost-overrun in respect of the original project is 25% or more
of the original outlay.
c) The bank re-assesses the viability of the project before approving the enhancement of scope
and fixing a fresh DCCO.
d) On re-rating, (if already rated) the new rating is not below the previous rating by more than
one notch.

In the instant case:

1) The quantum of cost overrun, alone, is given to be Rs 18,413 Crores which is more than
10% of the original project cost of Rs 43,129 Crores.
2) The quantum of increase in project cost due to change in scope of the project is given to be
Rs.11,395 Crores which is more than 25% of the original project cost

In this scenario, when the amount of cost overrun and scope change is separately identifiable,
Lead Bank has sought for an opinion with regard to

1) whether both the above RBI clauses are independent of each other i.e. if the increase in
project cost due to change in scope is more than 25% of the original project cost then only the
clause 4.2.15.6.2 will apply and not the other clause.

2) Whether both the RBI clauses will apply simultaneously i.e. clause 4.2.15.5.3 for financing
the cost overrun part and clause 4.2.15.6.2 for the scope change part.

The LLC M/s Cyril Amarchand Das has opined as under:

Quote
We note that pursuant to Paragraph 4.2.15.5.3 of the RBI circular on ‘Prudential norms on
Income Recognition, Asset Classification and Provisioning pertaining to Advances’ dated
October 1, 2021 (“IRAC Norms”), banks are eligible to fund cost overrun (subject to certain
conditions) only up to 10% of the original project cost (other than in case of the interest during
the construction period) where such increased costs are due to extension of date of
commencement of commercial operation, without treating the loan as a ‘restructured asset’.
Having said the above, we also note that RBI has under Paragraph 4.2.15.6 of the IRAC
Norms, specified the following:

“Any change in the repayment schedule of a project loan caused due to an increase in the
project outlay on account of increase in scope and size of the project, would not be treated as
restructuring if:
a) The increase in scope and size of the project takes place before commencement of
commercial operations of the existing project.
b) The rise in cost excluding any cost-overrun in respect of the original project is 25% or more
of the original outlay.
c) The bank re-assesses the viability of the project before approving the enhancement of scope
and fixing a fresh DCCO.
d) On re-rating, (if already rated) the new rating is not below the previous rating by more than
one notch.”

Accordingly, it appears that the above mentioned 2 provisions are independent of each other
and apply in different scenarios. Therefore, if it can be demonstrated that the rise in cost is on
account of increase in scope and size of the project, and the other conditions specified under
Paragraph 4.2.15.6 of the IRAC Norms have been complied with, Paragraph 4.2.15.6 of the
IRAC Norms will be applicable. Lenders may consider requiring this aspect be confirmed from a
subject matter expert from a technical and factual perspective. Please note that our views
expressed above are based on interpretation of regulations set out above and this position, to
the best of our knowledge, is untested before any court of law or regulator. Please note that our
views will not be binding on an Indian court, or any statutory authority, government agency or
department (including RBI), which would have independently satisfied for the purpose of
interpretation and application

Unquote

Considering that increase in Project Cost of Rs 11,395 crore is on account of changes in the
scope of the Project, the financing of the Revised Project Cost is proposed to be done in
compliance with the RBI “Master Circular - Prudential norms on Income Recognition, Asset
Classification and Provisioning pertaining to Advances” dated 1 st October 2021, clause
4.2.15.6.2.The compliance of the proposed Debt Financing with the RBI IRAC norms is as
given below:

S.
Condition Comments
N.
The rise in cost excluding any cost- The increase in Project Cost of Rs 11,395 crore
overrun in respect of the original due to Scope change is approx. 26.4% of the
1
project is 25% or more of the Original Project cost of Rs 43,129 crore. Hence
original outlay complied.
According to the Original Financial Closure, the
The increase in scope and size of
Commercial Operations Date for the Project
the Project takes place before
2 was 1st Jan 2024. The increase in scope and
commencement of commercial
size has taken place before 1st Jan 2024. Hence
operations of existing project
complied.
The bank re-assesses the viability
of the Project before approving the Bank has carried out fresh assessment of the
3
enhancement of scope and fixing a Project. Hence complied.
fresh DCCO
On re rating (if already rated), the CRISIL has reaffirmed the credit rating for the
new rating is not below the Revised Project Debt Facility at the same level,
4
previous rating by more than one i.e. AA (Stable) in November 2021, hence
notch complied.
Thus, the proposed Project Debt Financing for the Revised Project Cost comply with the
requirements of the applicable RBI IRAC norms.

The entire Revised Project Cost of Rs 72,937 crore is proposed to be funded in original D:E
ratio of 2:1 i.e. Debt of Rs 48,625 crore and Equity of Rs 24,312 crore.
 Section IX- Recommendation
SWOT Analysis:
Strength  HPCL Rajasthan Refineries Ltd is a Joint Venture company of HPCL – a
“Maharatna” Public Sector Oil major in India and Government of Rajasthan.
HPCL has inherent strengths and a vast experience in successful
implementation and operations of large-scale project in India. It owns and
operates 2 refineries - one in Visakhapatnam with a capacity of 8.33
MMTPA and the other in Mumbai with a capacity of around 7.5 MMTPA.
Further HPCL also holds around 48.99% stake in HPCL Mittal Energy
Limited which owns and operates 11.3 MMTPA refinery at Bhatinda, Punjab
and 16.96% equity stake in its group company Mangalore Refinery and
Petrochemicals Limited, which owns and operates a 15 MMTPA refinery at
Mangalore.
 Presence of GOR as one of the HRRL’s shareholder helps in expediting the
process of getting necessary approvals for the Project. The entire land
required for the Project has been allotted by GOR and the 4,567 acres of
land for the refinery site has already been transferred in the name of HRRL.
Additionally, as mentioned in the SSA and GOR notification, GOR shall be
making available water from Indira Gandhi Canal for the Project. Also, GOR
shall make available power required for construction of the Project.
 As per the Revised JVA and SSA, GOR shall provide an Interest Free Loan
of Rs 1,123 crore p.a. for a continuous period of 15 years starting from 1 st
year of operations, the same shall be repaid in the subsequent 15 years i.e.
from Year 16 to Year 30, post commencement of operations. The Interest
Free Loan helps in improving Project’s debt serviceability and profitability.
 HPCL would enter into a product Off-take Agreement with HRRL purchasing
refinery products. Considering presence of HPCL’s pan-India marketing
network, its marketing experience and its existing petroleum product sales
volumes exceeding the products produced in its own and JV refineries,
refinery petroleum products will find a ready market.
 The Project is located in Rajasthan, which is a product deficit market in
western part of the country and is witnessing high growth for petroleum
products. Thus, a ready market shall be available for the Project.
  The Company shall benefit from HPCL’s expertise in sourcing crude for the
refinery, thereby getting better terms from the crude suppliers.
 The Project will also be producing BS VI compliant fuels and value-added
petrochemical products including Polypropylene, HDPE, LLDPE, Butadiene,
Benzene and Toluene and would cater to the growing demand for
petrochemicals in the Project catchment area.
 An integrated Refinery cum Petrochemical Complex producing multiple
petrochemical products shall significantly reduce the vulnerability of the
Project to petrochemical industry cycles.
 The existing design of process units provides flexibility in using quantum of
Rajasthan Crude as well as imported crude mix without requiring any
additional capex in future years towards making design changes.
 The Company will be importing crude using dedicated crude pipeline
available from COT in Gujarat to Pachpadra which helps in assuring crude
supply.
Weakness  The prices of crude, petroleum products and petrochemical products are
linked to international prices and are thus exposed to volatilities in the
international crude & product prices. The same may result in volatility in the
earnings of the Company. However, considering that the product prices
follow the crude oil prices with a lag helps in mitigating risk on account of
increased crude oil prices.
 The refinery is located in Barmer, Rajasthan and has low access to export
markets due to its landlocked location. However, the consumption of
petroleum and petrochemical products in India is expected to increase as
evidenced by low per capita consumption vis-à-vis global consumption.
Thus, most of the products are expected to be sold domestically. The
location of Project is expected to benefit the company due to proximity with
demand market in western, northern and central India.
Opportunities  The Indian petroleum product market is expected to grow at the rate of
about 3.5-4% p.a. With India having one of the lowest per capita
consumptions of energy, the petroleum products market is expected to grow
at a faster rate. It is expected that there will be a deficit of MS and HSD in
the Project catchment area, thus production of MS & HSD from the Project
can entirely be consumed in the catchment area itself. Thus, the products
will find a ready market.
 The per capita consumption of petrochemical products in India is lower than
the global average. The domestic demand for these products is expected to
grow at a CAGR of 7-8% p.a. Even after considering other projects currently
under construction/FID achieved; substantial portion of the petrochemical
products from the Project can be consumed domestically in the initial couple
of years; going forward, entire production can be consumed domestically.
 Rajasthan Crude being a low sulphur crude with paraffinic characteristic
helps in improving Project’s profitability. The proposed crude mix profile,
wherein availability of Rajasthan Crude is considered only for initial 6 years,
is based on existing production plan for the said oil fields. However, with
necessary capex investment the field has potential of producing crude oil for
extended periods. Any additional capex plan by the operator resulting in
improvements in the crude oil availability from the field is expected to benefit
the Project.
Threat  Capacity additions planned in the domestic and international petrochemical
industry may lead to the country becoming an exporter of petrochemical
products in the future. At the same time domestic demand of Polypropylene,
Butadiene, LLDPE and HDPE is expected to increase going forward. Also,
the Project being an integrated refinery-cum-petrochemical complex, it will
 have a cost advantage over standalone petrochemical complexes which
source raw material from refineries at a higher cost. Further as the Project is
closer to the demand markets in North India, it will enjoy freight benefit and
hence can tap into this market.
 Any control on selling prices of MS and HSD may adversely impact the
margins of fuel retailers. Further in the present case, Company’s products
will be marketed by HPCL, and it will sell the products to HPCL as per
applicable refinery gate pricing.
 Competition due to alternative sources of energy is expected to increase
and the same may impact domestic demand for petroleum products.
However, considering the growing demand of petroleum products,
convenience and transportability of petroleum products, slow pace of growth
of alternate energy sources and investment requirements, alternate energy
sources may co-exist with demand for petroleum products but are not
expected to pose a threat to upcoming refining capacities in India.
 Introduction of EV may result in a reduction in consumption and hence
demand for MS and HSD. However, given the challenges in mass adoption
of EV no significant impact is envisaged on oil refining and marketing sector.
Besides the Project also has in-built flexibility to produce larger quantities of
Petrochemicals products by reducing the fuels throughput, which will further
mitigate the threat from the adoption of EV.