Hope to clock GRMs of $5-6/ bbl in Q4: BPCL

State-owned oil marketing company Bharat Petroleum Corporation's (BPCL) third quarter profit shot up 46.2 percent sequentially to Rs 1,488.6 crore on strong operational performance despite lower other income. Average gross refining margin for the quarter stood at USD 7.67 a barrel, increased sharply compared to USD 1.54 a barrel in September quarter.

P Balasubramanian, director-finance at BPCL, says the December quarter was a good one, especially on the refining side and hopes to clock GRMs of USD 5-6/ bbl in the fourth quarter.

He expects to see better growth in the fourth quarter.Below is the verbatim transcript of P Balasubramanian’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: Can you give us some details about volumes that were processed and more importantly what you might do in terms of volumes in the current quarter as well?A: Last quarter has been a very good quarter as you have seen on all the fronts especially on the refining side. Gross refining margins (GRM) have been very good in the last quarter. We have clocked around USD 7.67 per barrel on a weighted average basis for this quarter. Overall for the nine months also, we have done very well on the GRM which has been highlight of the last quarter’s profits.Having said that, the marketing has also improved, the sales growth has been better than the last quarter, more than almost 6 percent growth overall in that. Industry has been slightly better than us.Coming to the current side, current quarter the marketing growth has been good. We expect that overall the market growth has been far better than what it has been last year. So, far industry has clocked around 5 percent growth in the last nine months. We hope this quarter will be slightly more than that and we will end up the year with good numbers as regards marketing too.Sonia: Can you gives us two numbers, one on GRM, from USD 7.7 a barrel how much can it go to in Q4 and two, on domestic sales volumes as Latha was asking you, this quarter you have done 9.3 mmt. How much can it go up to or down to in the next quarter?A: As regards GRM is concerned, the refining cracks have come down from February onwards. So, perhaps we will not be doing that good in the GRM. However, still I am hopeful that we will be clocking somewhere around USD 5-6 per barrel. Growth has been good and always the last quarter has been better than all the other three quarters put together; the market picks up. So we hope that the growth will be more than what the volumes we have done in the current quarter.Latha: You would also have the advantage of cheaper inventory isn't it, so, that should continue in terms of helping your margins for the current quarter?A: It depends but thing is that last quarter the inventory has come down more than almost around USD 10-12. If the inventory maintains at these level or slightly moves up beyond the USD 32-33 mark and if it touches USD 35 mark definitely the inventory losses will be less in the current quarter. We will regain some of those trading losses that we made last quarter.However, inventory depends upon what is the volatility of the market and how the product and the crude prices move over the period in the next one to one and half months. So, we don’t predict much on the inventory gains or losses, as it comes we go ahead with those numbers. However, overall the marketing growth and what the refining margins is what we look at. Marketing growth will be definitely better than this previous quarter. Refining of course last quarter was one of the spectacular quarters for all the refiners but I don’t think that will continue in the current quarter. So, there will be some slight reduction in the refining margins but I think marketing should compensate for that. Sonia: Can you tell us what will the profits be of the company in Q4 by the end of the year? You are sitting on a base of about Rs 1,500 crore profits now which is a growth of 46 percent quarter-on-quarter (QoQ), where will you stand by the end of the year?A: Definitely we will be better than the last year. I don’t want to guess any numbers because last quarter is not an indicative quarter as regards margins are concerned. However, I think more or less we will be in average of the last three months.Latha: Will your net interest outflow reduce even further?A: No, it is not going that much lower because inventories are maintained more or less at the same level and the prices are also more or less at the same level.Latha: You have a little more money to play with so you don’t have to borrow so much hasn’t your net debt gone down?A: Debt has already come down but we have our projects and other things are going on but of course that doesn’t affect the financial cost. However, having said that, it is more or less static in the last two quarters. Significant differences will not be there and also most of our debts were in the FX side so we have to see how the foreign exchange movement happens.Sonia: On your crude throughput, that has actually fallen a bit compared to what you saw last quarter. It is at 5.9 mmt. What is the expectation going ahead?A: We will be doing more or less at the same levels. Last quarter, there is a small dip; it is only by 0.2 or something, not much of a huge dip. I think we should be doing around 6 mmt in this quarter.