To continue creating value for stakeholders; maintain GRMs at $5.5-6/bbl: HPCL

According to him, crude oil prices are unlikely to go above USD 60 per barrel and would more likely remain in USD 45-55/bbl range.

Overall the growth in first quarter was good. The demand scenario looks good, so would be able to add good volumes, said Surana.

Earlier there were talks of first a merger between MRPL with HPCL and then HPCL with ONGC, with regards to that Surana said there is no doubt that there are synergies between MRPL and HPCL but he would not like to speculate on which mergers might happen first etc as of now.

Below is the verbatim transcript of the interview.

Latha: There is so much of news and noise around the much talked merger of HPCL and ONGC. What is the latest you can give us?

A: There is already more than required information in the public domain right now. So we will let you know the more specific news as and when it comes. Right now we will rest it and give them breather.

Anuj: Let us talk about the overall business growth. The last one or two month was a bit rough in terms of demand growth. An update on that and also on GRMs if you could give an update on that?

A: I think we should be able to maintain the GRMs around USD 6 per barrel percent or so; somewhere around USD 5.5-6 per barrel. Still the data has to be worked out; we need to exactly workout the inventory still but I think we should be able to maintain around USD 5.5-6 per barrel.

Latha: Can you give us some idea of what was the quarter gone by and what kind of volumes you are seeing going ahead, any surprises on the volume side?

A: Overall the quarter one growth is good actually. In the initial months, April or so, it was down, but actually the motor spirit (MS) has grown by around 9 percent or so and high speed diesel (HSD) also, a reasonable growth. LPG has grown by around 10 percent. So, it is a reasonable growth overall.

Latha: What is your expectation for the remaining part of this year or even for next year?

A: We need to see how the crude prices move. While it shows a move towards firming up, then again it comes back, but I don’t think crude prices would go beyond USD 60 per barrel even now. So it will continue to be in that range of USD 45-55 per barrel in my opinion. The GRMs like the HSD cracks are firm right now and MS cracks are also reasonable. So, I think on a year basis, GRM of USD 5.5-6 per barrel is sustainable.

Reema: When investors ask you this question about a mega merger, what do you tell them?

A: I said earlier also that the way I see is that the brand and identity of HPCL will continue to be maintained irrespective of whichever type of arrangement ultimately works out. We are sure that as far as HPCL brand and identity is maintained, we will be able to add value to our stakeholders.

Anuj: That is the important point because at the end of the day people would want to distinguish between downstream and upstream companies and would want a separate entity or identity for HPCL?

A: I appreciate that and we really thank all our investors for the trust and the confidence which they had continued to show in us and remain invested in us. We will try to ensure that we maintain their trust.

Anuj: Is there any other point which you have put specifically on the merger and if you can talk about that?

A: The only thing is because right now the exact contour of this thing is yet to emerge, and so commenting on the things which are work in progress item, it will be slightly speculative and slightly out of place. However, as I mentioned to you, in my opinion, the brand and identity of HPCL will continue to be maintained and we will have the autonomy also and therefore if that is done, in that case we can continue to operate and create value for all our stakeholders, shareholders, and that will be our intention as a professional management.

Latha: I know you don’t want to say anything more in terms of what you have been told by the government, but last time you told us that perhaps a merger of HPCL and MRPL could happen and that could be the first step and then the merger between ONGC and HPCL. Is that how things will pan out?

A: I will not like to hazard a guess. What I mentioned last time is that MRPL has got a synergy with HPCL because they have got a refinery and HPCL sells more than what we produce. They don’t have the marketing arm to that extent HPCL and MRPL have got synergy. Now, what happens, which way the actual alignment emerges, which happens first, which happens later, whether it happens or not, is a thing which we should talk when the exact details are available on that.