Hindustan Petroleum Corp Ltd
NSE:HINDPETRO
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Hindustan Petroleum Corp Ltd
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Ladies and gentlemen, good day, and welcome to Hindustan Petroleum Corporation Limited Post Results Conference Call hosted by Macquarie Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aditya Suresh, Head of Research India from Macquarie Capital Securities. Thank you, and over to you, sir.
Thank you. Good afternoon, good evening. Welcome to the HPCL post results conference call hosted by Macquarie. HPCL management is represented by Mr. Mukesh Kumar Surana, Chairman and Managing Director; Mr. Rajneesh Narang, Chief Financial Officer; as well as other members of the finance team at HPCL. With that, I'd like to hand over the floor to Surana, sir. Take it over. Thank you.
Thank you, Aditya. I'm Surana, C&MD HPCL. With me, we have got our CFO, Mr. Rajneesh Narang; and some of my other friends here. First of all, a very good evening to all of you, and thanks for taking time to join this post results conference call because today is the start of the Diwali season. So wish very happy Diwali to all of you and very happy Dhanteras. I wish that the coming year is happy, careful and prosperous for all of you and your near dear ones.During the second quarter of -- second quarter of this year, for the quarter ended September 30, HPCL has posted a profit of INR 1,922 crores -- INR 1,924 crores versus INR 1,795 crores in the first quarter. So it shows a growth of 7.2% over the previous quarter. For the period April to September, the profit is INR 3,719 crores. The gross sales for the quarter is INR 87,311 crores versus INR 61,340 crores in the same period last year. The sales during the half year ended September is INR 1,64,619 crores versus INR 1,07,225 crores in the previous year. The domestic sales volume is 8.79 million metric tonnes against 8.10 million metric tonne in the previous -- in the same quarter of the previous year, which shows a growth of 8%. In the half year, which is completed on September '21, the sales volume is 17.24 million metric tonne, which is with a 12% growth on the same period last year. The growth of ATF is 63%, MS is 23%, HSD is 15% and LPG is 4% for the half year compared to the last year. Our Mumbai Refinery has taken a shutdown. Before I come to this, a larger context on the overall demand scenario. The October month petrol demand was 5.3% higher than September. It was 8.16% higher than the pre-pandemic period. The diesel demand was 20% higher than September and 1.27% higher than the pre-pandemic period. LPG was 15.87% higher than September and -- sorry, 6.04% higher than September and 6.58% higher than the pre-pandemic period. ATF has reached to 65% of the pre-pandemic period, and compared to September, it recorded a growth of 15% -- 15.8%.So good demand recovery in all the products. And with the more and more opening of the aviation sector, the aviation demand has also started picking up, which was the case earlier. And with the industrial demand going to be coming up now, which is also shown with some of the activities, which are some of the indicators like the [ PMI ] has picked up 55.9% in October compared to 53.7% in September. The 8 crore industrial output has increased in September by 4.4%. And with the enhanced vaccination, the possibility or the intensity of the third wave is receding. Then with the festive season coming, winter season coming and the agricultural season coming up, it is expected that the diesel demand should also pick up. And petrol demand has already been above the pre-pandemic levels across 7% to 8% higher and continues to be so because of the personal preferences of the people in driving using more personal vehicles. So overall demand is already picking up. As far as the crude oil scenario is concerned, the crude oil continued to be higher in 80 to 85 range in the recent time, even spiking above 85. And OPEC+ restricting their additional supplies to 400,000 barrels per month. And as of today, there are no signs unless there is some further decision in the next month meeting, that is 4th November meeting, which looks unlikely. In that case, the demand pickup is faster than the supply release, which is keeping the crude prices tight right now.Additional factors which impacted the crude prices were the Hurricane Ida in Gulf of Mexico. Also, there was some disruption in the crude pipeline in Libya. Some of the OPEC+ plus countries even though quota is there not being able to ramp up their production, leading to over compliance to OPEC+ restrictions. And the U.S. additional shale production also taking some time to ramp up. As a result, the inventories have fast stocked up, and there is a demand supply get -- getting created rather the pace of demand pickup is much faster than the pace of demand and the supply picking up.Parallelly, it so happened that the other commodities like coal and gas also the prices went up sharply and some gas to oil switch are hold to gas to oil switch also happened leading to additional demand of around 500,000 barrels of crude. All this led to the higher crude prices. The similar pattern was seen that the cracks were better with the diesel cracks running into $12 to $13. Petrol cracks also got into $12, $13 up to even $15 in between. Petrol cracks were also better. LPG cracks were better. So the product mix improved generally, again, by the similar phenomenon of pickup in demand. And some of the refineries, which were shut down between did not pick up or also some of the naphtha and LPG going as a input to petrochemical feedstock there the petrochemical demand was also high. So this also led to robust GRM Singapore GRM and the benchmark, and the Singapore GRM and almost started touching to $7, $8 currently. With this overall scenario, there was also a parallel narration on the energy transition with the COP26 right now currently going on. And yesterday, there is some announcement by Honorable Prime Minister also on [indiscernible], which narrates about net zero by 2070 and increasing the non-fossil power generation to 500-megawatt and reducing the overall carbon release and 50% of the energy by renewable by 2030, and reduction in emission by 1 billion tonnes by carbon emission by 1 billion tonnes to 2030 and a reduction in the nation intensity of the GDP by 35% by 2030. So there are 5 plans which he has mentioned. So in this scenario, this is a broader scenario. So but I thought that will be important for all the attendees to know. Now on this background coming back to HPCL, as you are aware, HPCL did take a shutdown of Mumbai Refinery in April to complete one of its most complex revamps, which I have seen in India or even overseas also. To complete that revamp and hookup jobs we have taken a shutdown in April. The good part is we could take that shutdown when the demand was low and the margins are also low. But because the corona second wave also came during the same time, there was a little bit of still -- or but I'm happy to share that we have completed that shutdown and the units have started. And I'm also happy to share that even during the second wave of corona, where there were restriction of even the industrial oxygen use, still we managed to complete this shutdown by using some of the new novel methods for doing the job like we used the waterjet cutting. We used the plasma cutting, instead of oxy fuel cutting. And in spite of having 15,000 to 18,000 workers at site, in spite of the severe second corona, we didn't lose any life on that. And all the workers and workforce was employed with full production and the jobs were completed. It did have some impact on the schedule, but we did complete the shutdown. I'm also happy to share that the -- it included almost 2 new units, 6 units revamped, new tank form this whole project. We have already commissioned CDU, VDU and we also tested the full 100% capacity of CDU, VDU. There were downstream minutes, which were revamped 6 units and are commissioned one by one and are in stabilization phase. And as of today, we are running Bombay Refinery at around 80% capacity. Vizag Refinery had one incident of fire in one of the CDU in May, but we have completed the repair and maintenance of that unit also. And as of now, Vizag Refinery is running at more than 100% of the capacity.Overall, put together, HPCL refineries are at more than [ 80% ] capacity with Vizag operating at more than its deepen capacity and Mumbai Refinery, as I mentioned to you, we have tested the unit's its capacity, but just to ensure that all the subsidiaries, which are also mostly commissioned with the last unit getting stabilized and which will be getting completed in this month. So with that, we would be through with this Mumbai Refinery shutdown.But it did had impact on our total throughput and then -- so we clocked a throughput of 5-point -- 5.04 million metric tonne in H1 in spite of both these shutdown. The refinery GRM was $2.44 per barrel in this quarter. And overall, in this half year, it was $2.87 per barrel compared to $2.58 per barrel for the same corresponding period previous. The GRMs were helped by the better product mix but were impacted because of the higher fuel and loss because during the shutdown, startup and stabilization you will have higher fuel and loss component, so there was an impact on the GRM because of that. The second part is because the crude prices were high, the fuel and loss component is also priced at a higher price and that also had an impact. So that is the reason that the -- some people might have found that the GRM of ours was lower than what it could have been or it should have been, but there is a plain simple reason because of that. So overall profit was lesser because, as I mentioned to you, our 1 unit in Vizag and 1 unit in Mumbai were in shutdown and it started and then it was in commissioning phase. So we had lower throughput to that extent, we didn't get the benefit of GRM for those volumes. And the second part, which I mentioned to you that during the stabilization, shutdown and start-up phase, there is a higher fuel and loss. To that extent, we did get an impact on the overall profit. But while it may appear that it's a lower profit, I just wish to mention that this is the highest second quarter profit of HPCL. And that's in spite of this 2 refinery shutdown. And also because the last year, the same quarter, we did much better than others. And there were some industrial products, which are directly correlated to the supply from the refineries like bitumen and crude, which did get impacted because of the shutdown in the refinery. But in the October month, we have picked up again, the volumes on those products again as the refineries have started producing to their capacity.Now during the period, we have also commissioned 440 new retail outlets taking the total retail network to 19,216. We have commissioned 135 retail outlets to CNG facilities. With this, our -- we have got total 809 outlet CNG facilities now and EV charging facilities have been commissioned at 327 stations as of now. And mobile dispensers are provided with 487. You are also may be aware that we launched our nonfuel retail stores under the brand name Happy Store during the quarter. And we are happy to state that we will be starting up more such Happy Shops in the time to come, and in some of the major cities. For the high-end vehicles, we also launched-ultra-premium grade petrol with octane rating of 100. And I'm not sure how many of you are aware that HPCL has got a wallet called HP Pay, and it has been doing quite well with more and more people joining that. Additionally, we also have enabled a co-branded card with ICICI, along with integration to faster and the loyalty program on Drive Track Plus.During the quarter, HPCL did the highest blending percentage of ethanol. We achieved 8.96% ethanol blending, which is the highest in the industry. And we are doing ethanol blending in all the states and in territories of India, with Sikkim also getting added in the last quarter. On the CBG front, now we have issued LOIs to around 227 entrepreneur with a production capacity of 466,000 metric tonnes per annum of CBG, which will be used in CNG station.I'm also happy to share that our R&D center at Bangalore has received 110 such patents in the last 5 years. And which makes it one of the fastest growing R&D in India, and they are working on various purposes, new energy resources, chemical, catalysts. And some other products are also taken to a commercial stage.During the quarter, we have also commissioned a new LPG plant in Assam at Goalpara and a new aviation facility at Rupsi in Assam. Our other expansion project that is HPCL Visakh Refinery Modernization Project is advancing well, and we hope to complete it in this financial year, except the bottom upgradation unit, which will be completed next year. Our Rajasthan refinery project is also going well, and we hope to complete it in the financial year '23, '24 -- by end of financial '23, '24. Chhara LNG terminal, which, as you are aware, we took over 50% of Chhara LNG stake, and that has been renamed as HPCL LNG Limited. That is also progressing well. Vijayawada Dharmapuri pipeline, Hassan Cherlapalli pipeline, Barmer Palanpur product pipeline and Mangalore LPG cover. All these projects are either running on schedule or ahead of schedule, and we hope to complete it quickly.Our 2G ethanol plant in Bhatinda and 1G CBG plant in Badaun are also under construction. So overall, this is the narration, I thought that I put it from my side, and I'm open to questions now. Thank you.
[Operator Instructions] The first question is from the line of Avadhoot Sabnis from InCred Capital.
Sir, your main projects at both Mumbai Refinery and Vizag Refinery expansions are sort of nearly close to completion. Is there any further large projects planned at both the refineries, which could start to work on, once this is done?
No. As of today, we are focused on completing this project, Mumbai Refinery expansion project is almost getting completed with the last units will get stabilized during this month. And Vizag Refinery is in advanced stages. We are looking at certain feature projects on the new site in Mumbai Refinery. In Vizag Refinery, we have not planned anything right now. And Rajasthan Refinery, if at all, we will look something downstream petrochemicals, but first, we'll complete the project, which is on hand. So on the refinery side, if at all the projects come, it can be more towards green hydrogen or renewables or especially the chemicals or petrochemicals. That's way I see, not on the main fuel side.
The second question, sir, is more sort of bookkeeping. If I look at the first and second quarter sort of interest costs of INR 254 crores in first quarter and [ INR 155.5 crores ] in the second quarter. Could you share what was the interest capitalized in quarter 1 and quarter 2? And also, what was the ForEx element in that interest costs in quarter 1 and quarter 2?
Yes, just a minute, I'll give you. In the meantime, if we can take the next question, I will give you but be in this call. I'll mention it.
Sure. Sir, the last question was, could you refresh us now on the overall CapEx for FY '22 and '23 in terms of the overall number, how much is on balance sheet, how much is JV, and if it's possible, deciding factor inside the marketing figure?
So '21, '22? Or '22, '23?
Both, sir.
Okay. So in the year '21, '22, we have got a plan to have around INR 14,500 crores of CapEx, and next year will also be almost similar one. Now which includes our CapEx on our own balance sheet as well as our equity contribution to JV projects, in which mainly it will be Rajasthan Refinery project where we'll have the equity contribution. Otherwise, the other JV projects, we would have already made this contribution in this year as well. Now on the overall basis, if you see the bifurcation of the CapEx, it will be around out of INR 14,000-odd crores, it will be around INR 6,000 crores around refinery and around INR 5,000 crores on marketing and around INR 3,000 crores towards the CNG and 2G and 1G that type of thing.
So both your sources will be the JV, what is not on your balance sheet, what would be sort of a JV contribution number?
So as far as basically as far as JVs are concerned, the main thing will be Rajasthan Refinery, our JV means, I'll include the subsidiaries also. So then...
No, I just -- basically whatever will come in terms of investments rather than in terms of fixed assets. I'm trying to see that.
Yes. So as far as subsidiaries and JVs are concerned, that will not come as a fixed asset that will come as investment only, whether it is subsidiary or JV either way. So that -- so investment given this year. Just a minute. So in this year, as of now, we have already made an investment of INR 1,300 crores in JVs and subsidiaries, out of the total CapEx of INR 6,400 crores, which we have done until September. So in this year, we will have around INR 2,500 crores in the JV. And the next year may have a similar amount almost. Now as far as the just -- does it answer your question?
Yes, absolutely.
Okay. Just the previous question regarding the capitalized interest, which somebody has asked earlier. In the current year, we have capitalized around INR 635 crores of interest and the earlier it was around INR 264 crores. And the foreign exchange capitalization in the current year is around INR 135 crores and last year was around INR 35 crores.
The next question is from the line of Mayank Maheshwari from Morgan Stanley.
Sir, a few questions on, if you can help us around HMEL as well and like you talked about the completion of Rajasthan Refinery by fiscal '24. Can you just also help us understand the progress of how much is completed on that front? What percentage of CapEx is spent? And on the HMEL upgrade as well, if you can give us an idea of what's happening there and where is the progress around the expansion there?
So as far as HMEL petrochemical complex is concerned, that is in various advanced stage where almost 98% complete, and we are hoping to commission it by this financial year-end. As far as HPCL -- this Rajasthan Refinery is concerned, we are almost around 35% on the physical progress, and we have spend around INR 13,000 crores on that already.
Got it, sir. Sir, and the second question is more related to this entire strategy around renewables you did mention about the Prime Minister's commitment earlier. So in terms of when you are looking at your next year's CapEx, is there something that is changing in the mix of the total CapEx or that is still largely focused on the refinery and the marketing side?
No. Actually, our CapEx mix already had a portion which is aligned to this the energy transition, in the sense that we had already under -- itself, I mentioned that we are going to have 5,000 EV stations in the next 3 to 4 years. We did mention the LNG terminal, which is already in progress, which is a low-carbon fuel and the bridge fuel in the time when [ the energy ] comes. And we did already have the approved projects for 2G and 1G ethanol and the CBG projects. So as far as our product mix was concerned or the capital project mix was concerned, we already had the portion, and of the newer sources of energy, the renewable part of the energy. And we are -- to that extent, we are not required to make a substantial change to it. Except that, we are also working now on green hydrogen part, and we will be trying to put up or we will be putting up a 370 tonne per annum capacity pilot green hydrogen plant in Vizag Refinery, which we expect to commission by December '22. So that we already have an past time experience of operating the green hydrogen plant.And I'm also happy to mention that, in fact, our R&D center, Bengaluru, which uses hydrogen for various processes. Since last 1 year, it is using only the green hydrogen, which is electrolyzer bed and using the renewable power. In addition, we also got 101-megawatt of wind mills and a number of solar capacities at various parts in the country and 66-megawatt of solar capacity. And we are also further looking at that space because both Vizag Refinery expansion project and Rajasthan Refinery has got the power which is sourced from the grid, and we have got an opportunity both in terms of environment as well as the cost and optimizing the same by using the renewable power. And we are working on that very closely to find our various models to ensure that how to get the round-the-clock uninterrupted renewable power for refinery type of operations and where various models are being discussed.
The next question is from the line of Varatharajan Sivasankaran from Antique Limited.
I wanted to understand, you've given the [Technical Difficulty] shutdown [Technical Difficulty] very low.
Your voice is breaking in between. Can you be -- can you adjust your mic a little bit?
Is it better now?
Yes, yes.
Given the recent shutdown, were you carrying very low inventory of crude, sir, through the quarter? Will you be able to give us some idea there.
If I understood correctly because there was a voice breakage, you are saying that inventory of crude, is that correct?
That's right.
So actually, you might be aware that we own a part of the cavern in Vizag Refinery, the 0.33 million metric tonne of cavern HPCL owns. Rather, we are the only company who has got a part of the cavern which we own.But apart from that, we do get constrained by the storage spaces at both of our refinery. So to that extent, we do carry the inventory which is required, and it is not directly related to shut down or not the shutdown. But yes, we do have, as of September end, around [ 1,400,000 ] metric ton of crude inventory in and or in transit, which is slightly more than the earlier time.
The next question is from the line of Maulik Patel from Equirus Securities.
Sir, a few question. One, can you just mention the time line for the Chhara LNG Terminal?
So we are hoping to complete in the financial year '22, '23.
Okay. And what would be any new capacity which is contracted? Or what could be the business model of that LNG terminal, you will bring the LNG on your own challenger market?
Yes. Actually, we are doing already LNG business. We are competing and we are selling also to the fertilizer industries, for our own consumption in the refinery like Mumbai Refinery does use the our LNG for its consumption for both production of hydrogen as well as for its boilers and furnaces, et cetera. So we have got a growth which is -- we've got a full dedicated group for sourcing LNG. We are not contracted long term so far on this, but we will be doing it. As far as the terminal is concerned. Right now, we own it fully because we have got our on consumption. We have got a CGD business in 20 geographical areas. So -- but we'll see in future if we need to contract out the gasification capacities to somebody else. We had been getting the inquiries on that. But we have not taken a call that whether we retain it ourselves or we contract it out the part of it. Because we do consider that it is gas and petrochemical is one of the future drivers in the time to come. And gas is going to be a bridge fuel between the fossil fuel to the renewable ones. And there is the focus on increasing the penetration of gas from 6% to 15%. So gas is an important element in this whole thing, and we would like ourselves to be having in each stage of the value chain of gas, which includes the sourcing of LNG gasification, CGD, LNG supply -- LNG as a transportation fuel. So we like to have our space in all this.
The next question is from the line of S. Ramesh from Nirmal Bang.
Can you hear me?
Yes.
Yes. Sir the first part is, since you mentioned you're interested in revising the nonfuel retailing. Can you shed some light in terms of what is the potential gross transaction value you can achieve say in the next 2 years, like kind of net margin you can earn because that's when a business which has a lot of potential. Can you share some light on that?
Right now, I would refrain from giving too much details on this because we are working on that model. We already started one, and we will be starting more. So I think maybe after 6 months, I think I will like to give a bit more detail on this particular part of it. But the only thing I can share is that right now, [ we advance ], but we plan to start around 10 in this financial year and take it to 100 in next 2 to 3 years. So it is -- we are looking at this very intensely. We do consider this to be a growth driver, and we are working on various models of operation of this nonfuel retail. So I'll share more details in future on this.
That would be great. Sir, the second part is, in terms of your plans on the CGD, can you share some light in terms of what is the kind of volume ramp-up we can expect in your geographic areas and when you'll start seeing that be incorporated in your P&L on the stand-alone and the JVs?
No. Right now, what we are selling, it is already there part of our P&L. And as far as JVs are concerned, it comes in the form of a dividend. It -- otherwise, it is in the P&L of the JVs. But the CGDs, which we are doing on our own it is already part of the P&L. But of course, there is a -- volume is slowly ramping up. So for example, in recently the [indiscernible] which we started which is almost 1,041 metric tonnes in this quarter itself or even UP and Uttarakhand, which we very recently started yet around 2,284 metric tonnes in this quarter itself.
Sir, if you can just give us a overall...
But apart from that, the industrial also we have done around 5 parts of LNG -- 118,000 metric tonne of LNG, we have supplied to fertilizer industry in this quarter.
Sir in terms of your perspective, can you share us the aggregate City Gas volumes you're handling now? And what are the kind of contributions linked into your profits? And how do you see that progressing over the next couple of years?
As I mentioned to you that because we are not reporting the segment-wise profitability so that I won't be able to share with you because we have not been doing that. There the CNG profitability is reported separately. So till we adopt, I'll decide to adopt anything like that, that I won't be able to share. But I can only mention that we have got around 20 geographical areas where we have got the authorization in 9 states, which includes UP, Uttarakhand, Maharashtra, Haryana, Gujarat and Bengal also. And there, we had been -- and even Ahmedabad we had before this PNG or the operation change, we had an authorization for supplier CNG. So there, as the various jobs for laying the pipelines, et cetera, while we already started the CNG sales by commissioning the facilities there. And which I mentioned to you the number of CNG stations we have given. But in -- by 2025, we have around 5,300 outlets, which will be dispensing CNG. That is our prospective plan. And therefore, the CNG volume will get ramped up. We think that after commissioning of the LNG terminal, we will have around 10% of our volume in rate basis coming from LNG and CNG that is around 500 metric tonne.
Let me squeeze my last thought. Pretty much all refineries are talking about integrating downstream in petrochemicals. So is there a risk that we will possibly see an overcapacity? And how do you see the prospects for your own petrochemical plant considering that lower capacity could be moving, let say, in the next couple of years. What is your reading on that?
So when we take up the project, we do that all. Consider the long-term demand supply, international demand supply, Indian demand supplied, local, even the areas in which we are setting up the facility, all that is done before we take up a project. And we have recently redone that exercise again as a part of some other things that we are looking at. And therefore, we are very confident of the product mix, which we have got to be able to market it profitably. And so we don't see a concern on that.The second part is, as you are already aware, the per capita consumption, petrochemical consumption of petrochemicals in India is almost 1/3 of the international standard. With the smart cities coming up, with the new age society so to call, which is more upwardly mobile. The demand of petrochemical is going to go up substantially. And the country will need the capacity for petrochemicals. And therefore, the type of product mix, which we have got, we are very sure of marketing.And the second part is that as far as petrochemical is concerned, there are -- the range of use is evolving every day. So while the petrochemical is started with plastic boxes and all, and they have migrated to even the industrial parts like pump shacks, et cetera. And now even though artifacts and even some of the things we could have never thought to be made out of petrochemicals. So the use of petrochemical is a constantly evolving thing. In fact, to share with you, we have recently commissioned our full-fledged lab in our R&D center dedicated only to petrochemicals, because petrochemical is also a business where you can modulate your product suiting to the customer's requirement, and which can be in USD term.
The next question is from the line of [indiscernible] from ICICI Securities.
My first question is on, if you could give us some guidance on likely utilization of both your refineries put together in the second half of this year? And what could one expect as the throughput or utilization in FY '23? And when do you see the benefit of the Vizag Refinery expansion in terms of capacity coming in and in terms of the bottom upgradation coming in?
So as far as HPCL is concerned, even with all this expansion, we'll be short of the refining capacity compared to what we are marketing. So we are marketing it on let's say, pre-pandemic, 2019, we were marketing a volume of around 39 million tonnes because of pandemic last year, we did 36. And if we reach to pre-pandemic this year, it may be around that. But let's assume that we are somewhere in the range of 36 to 40 as of today. And every year, even if you consider 3% to 4% growth, it heads up around 1 million, 1.5 million tonnes additional to that.Now along with all our expansion, including HR [Technical Difficulty] the Rajasthan Refinery also, we'll have capacity of around 45 million tonnes. Out of 45 million tonnes, around 5 million tonnes is petrochemical between HMEL and Rajasthan Refinery put together. So it leaves us with 40 million tonnes. Now the 40 million tonnes is the total product, but there is a fuel and loss also component, which is required to run the refinery. Even we assume 7% or 8% so we'll still be having less product manufactured by us compared to what we are marketing, even there is 0 growth. So as far as HPCL is concerned, we are in a unique position where we won't have tax situation, at least in quite some time to come where we have the idle capacity on the refinery. That is the first part.The second part is, as far as the projects, which are concerned. Mumbai Refinery, I mentioned to you that in the last quarter, we should be seeing the full 100% of the capacity of Mumbai Refinery. Even assuming that, I did mention that we will be able to stabilize all the units in this month itself. But even if conservative, I take even next month, the last quarter, we should definitely see 100% of the capacity of Mumbai Refinery because main CDU, VDU already tested up 100 in the meantime when we were trying to stabilize the other index. As far as Vizag Refinery is concerned, we will start commissioning this unit in the last quarter of this year. We are hoping to complete by December and we start commissioning it. So considering the stabilization, et cetera, we should see in the some throughput may come in the last quarter. But otherwise, next year, first quarter, we should see a reasonable part of that coming and second quarter onwards, we should definitely see the full volume of it coming. The -- as far as the bottom upgradation is concerned, I would say that, that should be -- we should see the benefit in the fourth quarter of FY '22, '23.
And the second question...
One thing, which I can mention more that while I said that we should see in the fourth quarter, the full benefit of it. I also mentioned that we are stabilizing this month. I also mentioned that in the last quarter, we did get -- because of the shutdown and stabilization. But I can also mention that because the downstream units who are getting stabilized in the primary unit was already commissioned. We do have the intermediate inventories, which the benefit of that may accrue in the next quarter.
And my second question was on the CNG part, I missed out the exact, you did mention that you are planning to dispense change through 5,300 outlet, when was this you said 2025?
By 2025.
You probably already said. Okay, my, so the other related question...
It will be slow and gradual. We're already having around 800 outlets right now. And we are adding at a fast pace but we have factored in that at least 5,000 outlets we will be doing it by 25.
So will most of these outlets be on along highways or do you -- are you factoring in any CNG dispensing done by you in big cities where there has been some regulation out last year of allowing competition even in existing areas though we don't know how that's going to pan out. But are you factoring in dispensing some CNG through your own outlets even in cities in Mumbai, Delhi and all or not really?
So there are 2 parts. We are already dispensing CNG from our outlets even in Mumbai, Delhi. So there are 2 parts of it. One thing is we're having an authorization. And second, you're dispensing CNG from newer petrol pumps. So that way, there is no bar on dispensing CNG from your outlets that you are doing all over India, including Mumbai, Delhi everywhere. Now somewhere when you got authorization and the supply of CNG is also done by us. So the areas where CNG have been authorize us the supplying of CNG to any pipeline or petrol pump is also our part. But if we are not running the authorized, then we take the CNG from the person who is authorized and then we sell through our outlets and for that we get a margin effect. So in the first case, when U.S. authorization and if you are supplying through your own petrol pump, you will have the margin for both for supplying also and for selling also. If -- but there also, you can supply to somebody else's also in that case, you will get only margin for supply.Now in the third case, if you are a -- you're not authorized in that area, then you will be taking from somebody, then you will get the margin from the sale. So there are 3 areas, and that's the way it works.
Lastly, in this context, the CGD companies have been telling us that there is that although that [ MPs ] have asked the CGD players to give them enhanced commissions on CNG, and that matter is pending. So how do you see that matter ending? And when do you expect that matter to end? From what I understood...
Then we allow CNG facilities to be installed at our petrol pump, there's a space which it occupies and the space is costly. So the question is that there is to be a share of the margin and the cost between the CBD entity as well as the OMC. And there is a formula -- because working earlier. Now the cost has gone up. So there has to be share on the cost by the both. And there is a discussion, so there are business discussion, which goes in any 2 partners who do the business. So that will be there among ours.
So do you expect a resolution in the next few months or?
It will get resolved business works with the business paradigm and there is interest on both the sides to get it resolved.
I now hand the conference over to the management for closing comments.
So first of all, my thanks to all the people for joining me, taking time out on Dhanteras day. I'm sure that all of you -- if you are not joining already from home, then you got to get back home. And if you are joining from home you must be getting the follow-up call to close the call. So without taking much of time, I wish all of you a very happy Diwali, Dhanteras. Let this Diwali bring all the cheers and happiness and prosperity to all of you and your companies and your families and you as an individual. As far as HPCL is concerned, we'll continue to do whatever we can to ensure that we create value for our stakeholders. I already mentioned to you that, we had taken a number of actions in the past to increase our capacity, to add our portfolio, to add new products to our portfolio, to expand our portfolio, to derisk our business, to have new business models, to have better capital allocation, improve capital efficiency, improve the funding capacity and funding efficiency. In addition to all our new projects, we'll bring the more optimization in costs, energy, intensity. And we are closely working on also ensuring that we are a part of this total energy transition. I still think that while all the newer form of energies will help us in catering to the increasing demand of the energy, but it's still oil. We'll continue to find a permanent part for some time to come. And the requirement would be that we traverse this path such that there is no disruptions and the common man continues to get the requirement of his energy fulfilled. At the same time, we try to find the newer ways of providing that energy which is more environment-friendly and less carbon intensive. And HPCL will continue to work on that. We have already taken certain steps, and we will continue to do more to ensure that we are continuing to provide and fulfill the need of the energy requirement of the country and in the most efficient, cost effective, convenient, economical and environment-friendly and sustainable manner. We are also closely working on the nonfuel part, which I mentioned to you. And that will also provide the additional growth drivers for the company in addition to petchem and gas, which is the thing where HPCL has already taken the [Technical Difficulty]. So with this, I close this call. Thank you very much to Macquarie, Adit to you for hosting this call, and all the people, all the investors who have been so supportive to HPCL always, and we continue to look forward your constant support and guidance and advices from time to time. Thank you so much.
Thank you very much. On behalf of Macquarie, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.