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Photo: Ramesh Pathania/Mint
Photo: Ramesh Pathania/Mint

BPCL to slash FY21 capex by 36% amid covid-induced stress

  • BPCL posts a consolidated loss of 1,819.6 crore in Jan-Mar quarter on inventory loss and lower gross refining margin
  • A huge capex would impact the refiner’s borrowing levels and debt-equity ratio, the board concluded.

MUMBAI : Bharat Petroleum Corp. Ltd (BPCL) has decided to slash capital expenditure for 2021-22 by 36%, or 4,500 crore. “We have categorized our projects into minor and major projects. Any project having an investment of less than 150 crore, is a minor project, and has been put on hold," said Vijayagopal N., director, finance, BPCL.

This is a conscious decision as the board decided not to burden the company at this time with a huge capex, which would impact the borrowing levels and debt-equity ratio, he said. “It will, however, not have any major impact on the future of our company."

BPCL on Wednesday plunged to consolidated loss of 1,819.6 crore for the quarter ended 31 March, on an inventory loss and lower gross refining margin.

The second-largest fuel retailer had a year-earlier net profit of 2,051.4 crore.

“The outbreak of novel coronavirus, globally, and the resultant lockdown in many countries, including in India from 25 March, has impacted the group’s business," said the state-run fuel retailer.

Consequently, lower demand for crude oil and petroleum products has impacted their prices and consequently, refining margins globally. “Due to this, certain finished goods inventory and certain raw materials of the group have been valued at net realizable value/replacement costs, which are lower than cost. The impact of the same has been reported under exceptional items for 1,310.35 crore," it added.

Refiners across the world were affected after countries announced coronavirus-induced lockdowns to contain the spread of the pandemic, which crimped demand. This reflected in the benchmark Brent crude future losing 65% in the March quarter to hit a multi-year low of $22.74 a barrel.

BPCL, however, expects fuel demand to return to pre-lockdown levels post-monsoon, considering that the rains generally result in weak demand for fuel in India. “The current demand for petrol and diesel is at 70% of levels seen before the lockdown," said Vijayagopal, adding that demand for petrol is recovering faster than the demand for diesel.

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