On 15th September 2017, HPCL Conducted its 65th AGM. Important Extract’s of C&MD’s Speech covering the salient performance of the year 2016-17 are as
It gives me great pleasure to share that the year 2016-17 has been the year of best ever all round performance of your company since its formation 43 years ago. A year, in which your Company has delivered highest ever net profit, refining throughput, market sales and return to shareholders.For the first time ever, the profit after tax in a financial year crossed Rs. 6,000 crore mark on standalone basis to reach Rs. 6,209 crore and Rs. 8,000 crore mark on consolidated basis to reach Rs. 8,236 crore.
On the back of this impressive performance, the Board of your Company has declared issue of bonus shares in September 2016 in the ratio of two equity shares for one equity share held. This was closely followed by another bonus share issue in July 2017 in the ratio of one equity share for two equity shares held. This means, every shareholder who owned 2 equity shares of HPCL before September 2016 and continue to own it, now holds 9 equity shares of HPCL.
The market capitalization of your Company has more than doubled during 2016-17 to reach Rs. 53,380 crores as on 31 st March 2017. You will be happy to note that as on 31 st August 2017, market cap of your Company stood at approx. Rs. 74,355 crore. This breakthrough performance was achieved through collective endeavor of all the functions and business units to create value for all the stakeholders. Your constant support and trust in us continue to inspire us to scale new peaks of success year on year.
During the year, Shri S Jeyakrishnan and Shri Vinod S Shenoy were appointed as whole time directors on the Board as Director (Marketing) and Director (Refineries) respectively effective 1 st November, 2016. Smt Asifa Khan and Shri G V Krishna were appointed as Additional Directors & Non-Executive Independent Directors effective 13 th February, 2017 and Dr. T N Singh was appointed as Additional Director & Non-
Executive Independent Director on the Board effective 20 th March, 2017.
Indian Economy
Indian economy maintained its momentum as a bright spot in the world economy with a higher GDP growth of 7.1% on the back of a stable macroeconomic environment of low inflation and low interest rates coupled with good monsoon. Regulatory & structural reforms signified the thrust of Government of India for accelerating economic growth and making the country the destination of choice for investment.
Roll out of the ‘Goods and Services Tax (GST)’ is expected to yield substantial growth dividends from higher efficiencies by removing tax barriers. The flagship programs like Make in India, Digital India, Startup India and Skill India have started impacting the economy positively and will accelerate growth and development in the future. The bold initiative of ‘Demonetization’ had also had its intended impact on the cash centric informal segment of the economy.
The economic growth is projected to remain strong in India driven by a transformational reforms oriented government, supportive population dynamics, steadily rising aspirational middle class & increase in disposable incomes. The rapid urbanization, growing industrialization, modernization and rise of a New India will support consumption, and oil demand is likely to grow in tandem with the rising per capita energy consumption levels.
Developments in Oil Sector
The year 2016-17 was yet another year of low crude oil prices and Brent averaged at US$ 49 per barrel. However, Oil prices recovered from the 12-year low witnessed in the previous year, to reach US$ 54-55 per barrel during Jan-Feb’17 and witnessed a decline thereafter. It is anticipated that the Brent crude oil prices may remain range bound around US$ 45 to 55 per barrel during 2017-18.
Lower crude oil prices had a positive impact on Indian economy due to reduced cost of imports. Government of India has plans to reduce oil import dependence by 10% by 2022 and has launched various initiatives for promoting domestic production of Oil & Gas, increase use of alternate fuels and move towards a low carbon economy.
To improve the accessibility and availability of clean cooking fuels Pradhan Mantri Ujjwala Yojana (PMUY) was launched which has brought social transformation in the lives of millions of women from BPL (below Poverty Line) households. Oil Marketing Companies have released more than 2.8 crore connections under this scheme since the launch of the scheme on 1st May 2016 by the Hon’ble Prime Minister.
To reduce the emission intensity in the transport sector, Government of India had rolled out BS-IV specification Petrol and Diesel on pan India basis effective 1st April 2017. Technology was also leveraged to incentivize cashless transactions to transition India to a less cash economy. Swachh Bharat Abhiyan galvanized the society to move towards cleaner India.
The initiatives by the Government to build a vibrant and ‘New India’ have also spurred growth. The consumption of petroleum products grew by 5.2% in India to reach 194 million tonnes during 2016-17. Among major products, Petrol and Diesel grew by 8.8% and 1.8% respectively despite witnessing a slowdown of growth in the last quarter. LPG started replacing kerosene and other form of native fuels like wood, cow dung cakes etc. in rural areas and grew by 9.8% owing to successful implementation of Pradhan Mantri Ujjwala Yojana (PMUY). This coupled with voluntary surrender of PDS kerosene quota by some States led to 21% decline in Kerosene consumption. Increased air passenger traffic due to rising incomes, Government’s push towards air connectivity to second rung cities and low-cost aviation improved Aviation fuel sales by 12.1%.
To leverage the combined strengths of National Oil companies, build scale, enhance efficiency and increase global competitiveness, Government of India is focused on creating synergy among the oil companies. Recently Government of India has announced its decision to consider strategic sale of its 51.11% of total paid up Equity holding in your Company to Oil and Natural Gas Corporation Ltd. (ONGC). It is envisaged that even upon proposed acquisition of GOI’s equity holding in HPCL by ONGC, HPCL will continue to be a listed Central Government Public Sector Enterprise (CPSE) retaining its cultural uniqueness and Brand identity, distinct from ONGC.
The focus is to introduce new technologies, create a vibrant and investor friendly upstream sector for production of Oil & Gas, transform India into a Refining and Petrochemical hub, create a national natural gas grid, move to a market driven pricing, leverage technology for reducing costs, introduce innovative payment solutions and transition the country to a low carbon economy.
HPCL Performance
It gives me great pride and happiness to present the details of the financial and physical performance of your Company for the Financial year 2016-17, which, as I have already conveyed, is the best ever all-round performance of your Company since its formation. Your Company has scaled a new peak in the year 2016-17 in its journey of continued excellence.
Financial
Your Company registered gross sales of Rs. 2,13,489 crore during 2016-17 and achieved the highest ever profit after tax of Rs. 6,209 crore which has substantially exceeded the previous high of Rs. 3,726 crore achieved last year by 67%. Your Company continues to be a Fortune Global 500 Company with a ranking of 384 and is ranked 48th in the list of Platts Top 250 Global Energy Companies.
The excellent financial performance led to increase in the earnings per share to Rs. 61.12 in 2016-17 from Rs. 36.68 in 2015-16. Your Company has declared/proposed total dividend of Rs. 30.00 per share(ex-bonus) for 2016-17 and issued bonus shares twice for the year, the details of which I have already shared.
Borrowings continued to be low at Rs. 21,250 crore mainly on account of lower crude oil prices and were mainly short term, reducing the long term debt to equity ratio from 0.96:1 in the previous year to 0.51:1 as on 31st March 2017.
Physical
Both refineries at Mumbai and Visakh maximized crude processing and achieved the highest ever combined refining throughput of 17.81 million tonnes with a capacity utilization of 113%. Your Company’s refineries achieved combined Gross Refining Margin of US $ 6.20 per barrel during 2016-17.
Refineries also recorded the highest ever production of Petrol, Diesel, LPG, Bitumen & Lube Oil Base Stock with the lowest ever specific energy consumption. Both refineries put in enormous efforts to ensure uninterrupted supply of Petrol and Diesel while simultaneously preparing to upgrade infrastructure, and successfully supplied Petrol and Diesel conforming to BS IV specifications from 1st April 2017.
Projects Completed during the year
To achieve growth and cater to the increasing fuel demand, your Company is strategically investing in infrastructure across the oil & gas value chain.
I am happy to convey that our Hon’ble Prime Minister dedicated the newly commissioned 443 KM long Rewari-Kanpur Pipeline with receiving terminal at Kanpur to the Nation in December 2016.
Another significant milestone was the commissioning of 355 km long Mangalore-Hassan-Mysore-Yediyur LPG Pipeline. This is the first LPG pipeline commissioned by your Company and will help in catering to the growing LPG demand in southern India and reduce the transportation cost in an environment friendly manner.
Corporate Social Responsibility
In line with the vision to be a model of excellence and help drive inclusive growth, your Company continues to work responsibly for the development of the under-privileged communities and empowerment of marginalized sections of the society.
During 2016-17, your Company expanded its reach to bring happiness in the lives of over 36,000 people across the country through community interventions in areas of Childcare, Healthcare, Education and Skill Development.
Under Swachh Vidyalaya Abhiyaan,191 toilets were constructed in government schools during 2016-17, taking the total number to 1436 toilets across 15 states. In addition, a number of Swachh Bharat activities including Shram Daan, Walkathons, Cleanliness drives, Tree Plantation and Community Awareness Campaigns etc. were undertaken at various locations across the country during the year.
Internal Control and Risk Management
Your Company has robust internal control processes for smooth and efficient conduct of business and has adopted a well-defined risk management process. Review of risks including crude supply disruption, crude price volatility, foreign exchange exposure, intensity of competition etc. are being regularly monitored for suitable risk mitigation plans and interventions.
Corporate Governance
Your Company is committed to maintain high corporate governance standards and has developed a culture of transparent, fair and accountable governance practices. Thrust is on sustained value creation for all stakeholders and strengthening the bond of trust and confidence in stakeholder relations. Provisions stipulated in SEBI Listing regulations relating to Corporate Governance requirements have been complied with.
