HPCL has approved a Rs 2,500 crore share buyback plan as the company management feels the share price is lower than the value it deserves.
Hindustan Petroleum Corporation Ltd’s (HPCL) Chairman and Managing Director Mukesh Kumar Surana credits refining margins, favourable exchange and inventory gains for doubling of the company’s second-quarter net profit.
The company has reported Rs 2,477 crore net profit in July-September as compared to Rs 1,052 crore a year back, said Surana in talks with CNBC-TV18.
The MD said the significant improvement in the profitability despite challenges including the lockdown due to COVID-19 pandemic was a result of strategic planning in refinery and marketing operation, better inventory management, and better production placement, and thus, containing the de-growth to less than the industry.
The company earned $5.11 on turning every barrel of crude oil into fuel in the second quarter of the 2020-21 fiscal as compared to a gross refining margin of $2.83 a barrel. This included a $2.33 per barrel inventory gain from buying cheaper crude oil earlier and processing in Q2. This translated into Rs 1,780 crore of gain. Besides, the firm also had a forex gain of Rs 524 crore, Surana said.
Domestic sales volume during July-September was 8.10 million tonnes, compared to 8.95 million tonnes in 2019, which was 90.5 percent of the last year volume during the same period.
The firm also achieved an overall combined capacity utilisation of over 100 percent at its refineries by optimising the day-to-day crude run rate and regulating the product procurements from other sources.
The HPCL refineries processed 4.06 million tonnes of crude oil in the quarter, compared to 4.56 million tonnes in 2019. HPCL recorded 22.5 percent jump in lube sales during the quarter compared to the same quarter in 2019, and continued to be largest lube marketer of India. It also exported 9,000 tonnes of lubes during the period and added new geographies to its market reach.
During the quarter, 303 new retail outlets were commissioned, taking the total retail outlet network to 17,171 as of September 2020. HPCL also commissioned 37 new LPG distributorships during the quarter, taking the total LPG distributorships to 6,153 as of September 2020.
The firm has also approved a Rs 2,500 crore share buyback plan as the company management feels the share price is lower than the value it deserves. In a stock exchange filing, HPCL said it will buy back up to 10 crore shares for no more than Rs 250 apiece. The company plans to buy back 6.56 percent of the total shares.
“HPCL hqad always been investor-friendly and we have given liberal bonuses and dividends in the past. Of course, we did not do the buyout earlier. But the management believes that this is a good time where the cost of the equity and borrowing is lesser and the share price is not reflecting the intrinsic value of the share,” Surana told the news channel.
He said at HPCL, they believe that based on the fundamental that the growth path the company has, with the financial performance that the company has displayed even during the challenging time, the value of shares is not reflecting that. “It is our duty to create value for our shareholders. This is the fundamental basis on which the buyback has been announced,” Surana added.(With inputs from PTI)