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 Q3 FY '22 Earnings Conference Call hosted by Macquarie. [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. Thank you, and over to you, sir.
Thank you. And at the outset, we'd like to apologize for the delayed start for the HPCL earnings call. HPCL management is represented by Mr. Mukesh Kumar Surana, who's the Chairman and Managing Director for HPCL as well as other members of the senior management team. With that, over to you, sir.
Yes. Thank you, Aditya, and thank you very much for all the investors and the analysts who have joined this call. First of all, my apologies on behalf of HPCL for slightly delayed on this. Just to start with, I'll give some initial comments, and then probably we can take the questions. So on a broader scale, the petroleum product consumption in India has almost inching towards the pre-pandemic level. If we see April to December '21, total cumulative consumption is almost 97% of what it was in April to December 2019. If we consider the -- only the December figure, it is even better almost to 98% or so. With petrol or gasoline, it is almost 14% up from the pre-pandemic level. Gas oil is almost 98% or 98.5% of pre-pandemic level. And aviation fuel is in the range of around 74% of pre-pandemic level. And LPG had always been up around 6%. The crude oil prices had been volatile in the recent past because of the supply concerns and the ongoing geopolitical tensions and as of January [ '22 ] is almost hollering at around 7-year high levels. And the concerns on Omicron are receding, and it is appearing that the demand will be back to pre-pandemic level already there or whatever is a little bit not there, we'll be above it. As far as HPCL is concerned, one of the highlights of this quarter was full commissioning and stabilization of the Mumbai Refinery Expansion Project after a very complex revamp of some of units and addition of new process facilities. You may be aware that we took a shutdown in April to take this revamp and unfortunately, it did coincide with the second wave of corona. And we did impact the job progress, especially because of restriction on oxygen use, which elongated the shut down a little bit and then it coincided with the monsoon. So it did had a slightly -- it took more time than what we initially had budgeted for. But the good part is we could complete it in spite of all the odds and taking full precautions. And I'm happy to share that in spite of such a severe second wave, we did not lose any life during the revamp shutdown, even though we had at one point of time, 18,000 people at our site in the peak of the second wave. All the units as of today are -- have been operating and Mumbai Refinery is now operating at its enhanced capacity of 9.5 million metric tonne per annum. And Vizag Refinery is operating at above its design capacity. I also wish to say that this expansion, apart from the capacity increase, will also enhance the energy efficiency, reduce carbon intensity and improve the distillate yield at Mumbai Refinery. The -- as far as refinery throughputs are concerned, during the quarter, we had a throughput of 4.24 million metric tonne compared to 4 million metric tonne the same quarter last year. GRM was $6.39 compared to $1.87 last quarter. Nine months GRM are $4.5 compared to $2.35 for the last year 9 months. Market sales are 10.54 million metric tonne, which is the second highest market sale. The highest was in Q3 of 2019 of 10.54 million metric tonne compared to 10.4 million metric tonne last year. HPCL for the first time, crossed INR 1 lakh crore sales -- quarterly sales figure. During this quarter, the gross sale was INR 1,03,080 crore against INR 77,113 crore last year. The market total in 9 months, HPCL registered a growth of 7% over the corresponding previous year. The total sale was 27.2 million metric tonne versus 25.4 million metric tonne last year. In this period of April to December, gasoline has recorded a growth of 14.6%; gas oil, 7.1%; and LPG, 2.9%. The total profit after tax of HPCL on a stand-alone basis for the quarter was INR 869 crores compared to INR 2,355 crore last year. The profit was primarily affected because of inventory losses due to price fluctuation in Q3 2021 compared to inventory gains, which were there in the Q3 of 2020. Also in -- we could have covered a part of it due to robust GRMs in the refinery side, but incidentally, because we were in the stabilization phase, we could not realize the full valuation of the robust GRM. Now the good part is that this was more a onetime event as far as the sharp changes in the market pricing. And as far as the units are concerned, they are fully stabilized, and we are expecting the next quarter to have the positive impact of higher refinery throughput at Mumbai Refinery expansion from next quarter onwards. HPCL 9 months profit was INR 4,587 crores versus INR 7,646 crores during the corresponding period of previous year. The reason is the same, which I mentioned to you earlier. Apart from that, there was also the exchange rate fluctuation, [ ERB lost ] for the 9 months if we consider together. There was marginal increase in the depreciation because of the commissioning of Mumbai Refinery expansion by around INR 200 crores. Then in this year, apart from the figures, we have installed new -- opened 386 new retail outlets where this HPCL retail network has become now 19,602. We have commissioned a Hissar depot with a 10-kilometer dedicated tap-off pipeline from Ramanmandi to Bahadurgarh, which will bring the further optimization of logistic costs. Three new LPG plants have been commissioned: one in Rayagada in Odisha, Goalpara in Assam and Gonda in Uttar Pradesh, along with augmentation of facilities at various other LPG plants. We are also constructing 80,000 tonne per annum capacity LPG Cavern at Mangalore -- 80,000 metric tonne storage capacity LPG Cavern at Mangalore, which is in progress, it should further help optimizing the cost. 91 additional CNG -- dispensing CNG stations have been commissioned. With this, HPCL has got facility to dispense CNG at 900 outlets as of today. EV charging facilities have been provided at 655 outlets as of December '21, and we plan to extend to 5,000 retail outlets in the next 3 to 4 years. After the 11th CGD bidding round, HPCL now has got CGD authorization for 21 geographical areas, covering 38 districts in 9 states. And HPCL intend to invest around INR 9,600 crore on development of CGD network in these geographical areas in the next few years. Construction of 5 million metric tonne LNG regasification facility at Chhara is in going full swing. Now that project, after HPCL acquiring 100% of the stake, is being executed under HPCL's wholly owned subsidiary, which is called HPCL LNG Limited. I'm also happy to share that HPCL R&D Center at Bangalore has received 116 patents for developing new products and technologies in a very short period of 5 years since its commissioning in 2016. So while this is a young R&D, but it has got quite commendable performance. As far as the environmental concern, HPCL is committed to conduct business with an objective to preserve the environment and contribute to sustainable development. In this context, HPCL is in process of developing a validated road map with the help of a world-renowned consultant to achieve net 0 Scope 1 and 2 emissions by 2040. The details of which will be released in due course of time within this calendar year itself. I'm also happy to share that HPCL is the first oil and gas company in India and only the second company in India took place an order for electrolyzer-based green hydrogen plant of 370 tonne per annum capacity for its Vizag Refinery, which is likely to be commissioned by December 2022. We have got plans to have green hydrogen capacity of around 24,000 tonne per annum over a period of time. We are also constructing a 100 KL per day capacity 2G bioethanol refinery in Bhatinda, with agri waste as a feedstock and a 14 tonne per day capacity compressed biogas plant at Badaun in Uttar Pradesh. HPCL also owns and operates 2 ethanol plants in Bihar through a subsidiary company. We've got 101 megawatt of wind farms in Rajasthan and Maharashtra and around 48.8 megawatt of solar power capacity [indiscernible] and HPCL is working further in the renewable space. Vizag Refinery Expansion Project is in advanced stage, and the expansion entities are likely to be completed by March. The residual upgradation facility which will enable substantial improvement in refinery complexity and the GRM is under construction. One important milestone for residual upgradation facility was fabrication, transportation and election of world heaviest LC-MAX reactor along with 2 other LC-MAX reactors, which has been completed in this quarter. So this was a major milestone as far as residual upgradation facility is concerned. It was a 2,300-tonne single vessel. Construction at Rajasthan Refinery and petrochemical complex is in full swing and all orders for this project has been placed. The major pipelines of HPCL, which are under construction, basically Vijayawada-Dharmapuri, Hassan-Cherlapalli LPG pipeline, Palanpur-Barmer pipeline are progressing ahead of schedule. In nonfuel retailing, recently, we commissioned 2 more convenience stores under our brand, Happy Shop, one at Bandra West in Mumbai and another at Millennium outlet, Visakhapatnam. This is in addition to the one which we opened in September '21 at Nepean Sea Road in Mumbai. We have also launched a pure online convenience store under the same brand name, Happy Shop at Madurai. And the product range in each of these shops has been planned to suit the test and preferences of the local neighborhoods. And customers have got a choice to do online shopping with door delivery at HP Pay App or they can visit the stores. HPCL has also started marketing bottled water under the name Paani@Club HP from various outlets of HPCL. And as you may be aware, HPCL was also a recipient of Oil Marketing Company of the Year Award by FIPI in 2021, recognizing HPCL performance in oil and gas marketing. And we have also been awarded excellent category in our MOU performance with one of the highest score -- not one of the highest -- the highest score in oil marketing -- PSU oil marketing companies in India. So with this, with the refinery expansion of Mumbai completed, both the refineries operating at more than 100% of its capacity, the margins looking good as far as GRMs are concerned. We are -- we think that the projects are pitching in right time. And the next year, we'll see the commissioning of Vizag Refinery expansion, followed by residue upgradation facilities and the Chhara terminal and HMEL's petrochemical edition project. And to that next year, means after that next year, we'll see the Rajasthan Refinery commissioning. So that is the plan forward. HPCL is very actively working on the energy transition space in terms of EV; in terms of green hydrogen; in terms of LNG, CNG and P&G and the renewables space. And we are also working on charting out our net-zero road map. So with this, I hand it over back to you, Aditya, for further questions which the investors may have. Thank you.
[Operator Instructions] The first question is from the line of Dhaval Joshi from Sundaram Mutual Fund.
Thanks for such a brief summary of key results. Sir, just quickly only one question from my side. Q-o-Q, if I look at your refining margins have been pretty good. It has been in line with the intentional trend. Even at the same time, your marketing margin, if I look at on petrol and diesel, which is a major component of the total volumes, that was also better Q-o-Q if we calculate that. Though you said that there is an inventory loss in the marketing. But I just wanted to check with you, are we bearing any sort of LPG under-recoveries? Because it seems that clearly such a low marketing margins implies that understanding that we are or OMCs, I think so, bearing any LPG under-recovery. So can you please clarify on that front, if possible, sir?
See, LPG is a controlled commodity. So it will be premature for me to answer that question.
So I mean -- so what was the under recovery on LPG for the quarter, sir? Can you help me with that?
No, we will not be able to give that answer to you. What I mentioned is that LPG is a controlled commodity. So there is a pricing which government decides and...
That I know, sir. Yes. So...
As of today, to say that whether there is under-recovery or not an under-recovery, see, the accounting follows one principle, okay? Okay. So accordingly, the accounts are made. The principles are a different issue. So I think it will be slightly premature for me to answer that question right now.
Fine. Fine. How much outstanding left from the government side on LPG and [indiscernible] under-recovery for the year? Can you help me with that number?
No, [indiscernible], there is no under-recovery...
Yes. And LPG, how much is left?
That is the first question only.
The next question is from the line of Saket Kapoor from Kapoor & Company.
Sir, just for the sake of repetition also, you did spoke about that the additional time which the refineries took for stabilization resulted in loss of some products being sold. So could you quantify for us, had been -- had the refineries run at the optimum levels, what would have been the impact, sir, to the bottom line?
See, the question is that we did 4 million metric -- 4 million tonne -- 4.24 million tonne versus 4 million tonne last year, okay? So the question is that we would have got the benefit of that additional capacity earlier, so that will be around 0.5 million metric tonne. That is one part of it. But the second is because there are a number of units which are revamped and there are a number of units which are added. And then you have to stabilize it sequentially. So to realize the full benefit of full GRM, they all have to work at the capacity and as per the efficiency. But when you are commissioning the unit one by one in the stabilization phase, you are not able to realize the full margin. That has been one of the impacts...The second thing is during [indiscernible], you normally have slightly higher fuel and loss. Now that fuel and loss when the crude prices are high, get valued at higher prices. So probably -- means, I will admit that probably when you say that some of the impact must be common to all 3, why it is more in your case? So in other cases, the higher margins on the higher refinery capacity would have covered that part. But in our case, because it coincided with our refinery stabilization and commissioning, we could not get offset the 2. So that is a onetime [indiscernible]. But yes, in a quarter, it does. From outside perspective, I thought that, that clarification is important for me to give it you.
So sir, for both the quarters, ending September and December, there was the impact of this stabilization and ramp-up of the units?
Yes, yes, yes. It was. Because the -- normally, we would have completed the shutdown by June and would have got to stabilize somewhere in middle of September or middle of August or end of August. But because the April to June was a peak second wave. In fact, I would like to give credit to our refinery guys that in spite of that, they did that and completed the shutdown during that period. In one way, it was good that it was a period of lesser demand. But at the same time, the one thing which happened is in Bombay, the back end is the monsoon. So during the end period of the shutdown, if it -- the monsoon started coming, so it did get elongated a little bit. And second thing was we need certain consultants and the foreigners who come for commissioning period at that time because of corona, the delta thing. There were certain international flights also were stopped. So it did. And the second thing is that after that you complete the commissioning, but commissioning has to go sequentially, the primary unit has to get first and then the secondary unit comes. And so it did get a little bit elongation, which affected both the quarters. In fact, in both the quarters had those things [indiscernible] done much better. In fact -- would have been the excellent quarters, both. Operationally, no issue, but apart from this.
Okay. Sir, for the inventory part, sir, can you quantify, sir, what was the inventory gains for the last year and the inventory losses for this quarter, sir, just to have a like-for-like comparison?
No, we could have done that, but the last quarter onwards, we stopped giving those inventory gain-loss because it was creating more confusion in the market. So March onwards, we had not been giving. So it is not correct on our part that when there is a gain, we don't tell and when there is a loss we tell, it will look like a selective information decimation. So I can only say that last year, this quarter, we had a gain. And this quarter, we have got a loss. And then if we say that because these are [indiscernible] total is a substantial amount.
Okay. And sir how do we explain the sharing profit...
Mr. Kapoor, may we request you to come back in the queue for a follow-up, please? The next question is from the line of Pinakin from JPMorgan.
Sure, sir. So sir, this quarter's earnings are very, very puzzling given that the company reported over $6 of GRMs. And in the December quarter, there was no retail fuel price cut and oil was on an upward sloping curve. So the only sense -- the only missing pace in the puzzle is that the company actually reported a large loss on LPG sales. Would you confirm that there was a loss in the accounting on LPG sales done?
Pinakin, I think I answered this question. The first question was this only.
Yes, sir, but it is not clear whether there was a loss or there was not a loss because refining and marketing does not look like there would be -- explain the big earnings miss.
In fact, actually, because I did not share the inventory loss number. Had I done that probably it would have answered the question. See, I can only -- for the comfort of you all, I can only mention one part, okay? That as far as this quarter is concerned, the difference is -- actually, there is also -- you might recall, there is an excise duty cut, okay? -- INR 10 diesel and INR 5 [indiscernible] that came on 3rd of November. So you have the inventories in the system, which is excise duty paid. So -- but as per the law, then once it is announced, you can't recover that.
Okay. Fair enough, sir, that explains a lot...
Does that answer your question?
Yes, sir, that answers...very, very helpful.
That gets accounted as an inventory loss because this is the difference between what I hope got versus I did get, right? So that is the answer, actually, but -- and that answer almost everything what you're asking. And in our case, because we've got the pipeline's network, which is the second last year, and the marketing infrastructure is also good, which helps us in many ways. But if there is such a big drop, then it does impact us also. Now a part of this would have got covered or whole of this also would have got covered had I been running the refinery at the full capacity during the same period, it might happen in other cases. But because it coincided incidentally with a refinery shutdown and stabilization period, so we couldn't -- and so we couldn't realize the full benefit of the GRMs and the same time to cover this. So largely, these are the 2 questions which answers the whole gamut of the thing.
Yes, sir. Yes, sir. It does. It does. No sir, just wanted to clarify the -- any excise loss you would bear as a company, it will be on the fuel that is sitting in your pipeline and at your dealer network?
See, basically, what happens is -- no, even depot, terminals also because -- see, basically, once the product is out of the refinery, it is duty paid. Now that is the invert by cost to marketing setup. Now once the -- now while it's in larger interest, it's good to reduce the taxes. But that is the way law is that you can't charge that to the consumer if the product is already -- what is the price because once I'm declaring a price on daily basis, [indiscernible] the benefit.
The next question is from the line of Mayank Maheshwari from Morgan Stanley.
So I think most of the questions from your previous answer are answered, but I think the one question I had was more related to the consolidated accounts related to your associates. I think you've seen a big jump in your earnings there. Can you just clarify -- we already know MRPL numbers, but I think can you just tell us on the HMEL side, what has been the progress in terms of the upgrade? And how much of that has actually helped your contribution this year, this quarter, specifically? And any other updates around...
HMEL has done very well this year. In fact, HMEL posted a profit of INR 1,400 crores in this quarter, okay? -- sorry, 9 months, INR 1,400 crores in 9 months. And the petrochemical project is yet to be commissioned. It is nearing completion. So we should be getting completion of that by the -- maybe May or so.
Okay. And sir, any updates on the Vizag Refinery upgrades that what has been the status and where are we on progress for that?
The Vizag Refinery, we are nearing -- means, proceeding towards the completion. We are hoping to complete the thing by March and try to commission the unit in the first quarter of the next financial year and stabilize that. And the bottom upgradation by December '22. That's what our anticipation is.
The next question is from the line of Rakesh Sethia from HDFC Mutual Fund.
Sir, just one question on the Mumbai Refinery. Is the refinery [ working ] at 100% utilization in the sense that should we expect all the economic benefit of both higher throughput and the margin should start flowing from the fourth quarter onwards?
Yes, yes. Because we are already running at 9.5 million tonne plus capacity right now. And all the units are stabilized also on that.
Okay. Understood, sir. And sir, can you share the same time line for the Vizag Refinery? Would the benefit of higher margins of the bottom upgradation would start to flow from, let's say, fiscal '24 itself?
Fiscal '24, yes, definitely because December '22, I'm telling completion, so yes, fiscal '24, you should get the margin. Yes. That is '23-'24, right?
Yes, yes. That is correct.
Yes, yes. You should get that. So '23-'24 probably should get the full benefit of Vizag Refinery expansion, including the bottom upgradation.
Understood, sir. Sir, just one bit on this. The Bhatinda petrochemical expansion, what's your progress there? And when should we expect the higher margin...
It is 98% complete and some of the facilities have started commissioning also. So we are hoping for product out somewhere in April and/or May on this.
The next question is from the line of Saurabh Handa from Citigroup.
Sir, previously, just on CapEx, you have said that this year, you're looking at around INR 14,000-odd crores and a similar level for next year. Can you confirm if that is still the case? And can you give any guidance for the year after that is fiscal '23-'24?
Yes. So this year was INR 14,500 crores and we are on course for that, that's number one. And next year also, we are likely to have this similar CapEx. Of course, the controls will be different a little bit, but -- means the allocation will be different. But yes, the total CapEx will be around INR 14,500 crores.
And the year after, sir. Sir, I'm talking about the year fiscal '23-'24, year ending March '24?
'23-'24 will be lesser than INR 14,500 crores. It will reduce -- it should be around INR 11,000 crores or so.
Okay. And just a continuation of this over the next, say, 3 to 5 years, do you have any sense of how much you could be spending on your new energy investments? So be it on green hydrogen or on renewable sort of everything put together, either if you a number or some percent...
Okay. In next 5 years, 30% of our investment is going to be for other than our traditional business.
And would this include the CGDs also, the CGD investment you spoke about?
Yes, it will include CGD, it will include chemicals, it will include nonfuel retail, it will include green and renewables, it will include green hydrogen, it will include wind power, solar, biofuels, CBG.
Okay. Sir, just a little more granularity of the 30%, I mean how much would be nonfossil fuel? Basically, I'm looking at the pure sort of new energy [ goods ], so excluding gas and chemicals?
Almost full of -- more than 20% will be nonfossil.
The next question is from the line of Varatharajan Sivasankaran from Antique Limited.
So maybe you're talking about the ethanol plant, can you highlight what is the kind of production you've already had so far, sir, this year? So while we look for the numbers, if you can give us some perspective on the blending progress as well as far as the government is concerned, talking about...
Yes, you are talking about ethanol blending or eternal production?
No, the first question was on the production numbers, sir.
Okay. I'll give you the number because that is under our subsidiary company.
Sure. And as far as ethanol blending is concerned, how do you look at the road map, sir, the government is looking at a 20% kind of number? When are you likely to start on 20%? And are you likely to impact all India coverage of 20%?
So the government has already announced the E20 program, and we are all working to head towards -- by 2025, it is supposed to be E20, and it will be graded approach. This year, it is supposed to be E10. And in this number of policy initiatives are also taken. Basically, it is the availability of ethanol and that is how the grain-based distilleries and the 2G distilleries are coming into picture in addition to better prices for sugar and molasses-based ethanol. So right now, it is in the range of around 8.6% or so, and HPCL has done the highest blending among the industries. In fact, some of the initiatives, which HPCL took specifically was even moving because there is a mismatch between the production states and the consuming states in the country. There are some states which produce more than 10% even now, like UP and Karnataka and Maharashtra. While there are some states, we do not produce at all. So HPCL did took some new initiatives like moving ethanol by rails and even ethanol blended petrol by wagons, which initially was considered to be a bit trouble. And for that, we did devise some specific gasket materials, specific fittings, et cetera. And HPCL was the first to move a full rake of ethanol from Kanpur to almost the eastern part of the country.
And sir, given the availability constraint in ethanol, how do you see the rollout happening, sir?
So I think E10 will definitely be achieved in this year. That's the way I see. And the various initiatives which has been taken recently when a tender was floated for 1G grain-based ethanol plant, the response were overwhelming. In fact, the response is more than what we would have been needing. So if all those -- even if whatever the people who have put their [indiscernible] if those plants come into picture, we are on track for E20. Even you discount certain percentage, then also we should be on track.
The next question is from the line of S. Ramesh from Nirmal Bang.
Can you hear me?
Yes, yes.
So the first thought is, if you're looking at the plans by the industry to set up compressed biogas plants, how does the economics was because your input gas cost is going up. And there is the fixed price at which the OMCs are expected to buy compressed biogas at INR 46 a kg. So what is so reading of that business in terms of the economics at the current gas prices?
No, it is reasonably good. In fact, the current gas prices are quite high. So that makes sense.
Yes. But the price you are supposed to pay INR 46 per kg [indiscernible] that you have to make a margin. So I'm just wondering whether...
The CNG is not a control pricing. So I'm buying at a certain rate, but there is a marketing freedom on that.
Okay. Fair enough. And the second part is similarly on the ethanol blending, how you work out the economics in terms of the margins? There's going to be a blended margin, where there will be some kind of [ cross-utilization ] because you have to pay a certain price to buy the alcohol and buy the sugarcane for your alcohol...
See, the rate of ethanol has been already declared by the government for various types of input raw material from which the ethanol is produced. So there is a different price for the ethanol, which is produced from molasses C, different for molasses B, different from sugar syrup, different from grain. So the price at which the ethanol is being procured is already declared price. The end price of the fuel is a blended price.
Okay. Fair enough. One last thought on the Rajasthan Refinery Petrochemicals. So it's coming online by FY '24 and starting production by FY '25. How do you see the market for the refined products and petrochemicals? And how long do you think that the project will take to stabilize to start generating cash profits?
So actually, some of the units are getting ready much earlier than FY '24, to be very honest with you. The FY '24 when we say, we are talking about the last units. So because of this corona, et cetera, some of the unit's order we already placed and they have already progressed. So we will start the pre-commissioning, et cetera, of these units one by one by one earlier. So that it takes lesser time in the last. And otherwise also because the greenfield refineries. So there's such a huge complex, you cannot commission in one go, and there are sequential activities. So -- in fact, we are expecting some of the units to start getting completed in this financial year '22-'23 itself. So we'll start pre-commissioning of those units so that the last of the unit comes in March '24. And I think in another 6 months, we should be able to get the stabilized products.
So sir, in terms of the economic viability, in terms of selling the products given the certain demand and supply for petrochemicals and refined products, we are confident of being able to achieve the breakeven and the expected returns on that?
Yes. Because the -- 2 reasons, the refinery and petrochemical margins are actually better than what it was when we envisaged the projects, number one. Second thing is HPCL as a company is short of products even on the refinery products. Number three, we have got a good pipeline network to transfer the product even to the coast from there if you wish to or the hinterland, if you wish to. We have got the Mundra-Delhi-Kanpur pipeline, if you remember, which will be connected to Barmer from Palanpur, we are running a pipeline from to Barmer to Palanpur for that. And as far as petrochemical is concerned, because HPCL will have a reasonable with HMEL and altogether, we'll have reasonable, say, in petrochemical market after we have this. So -- and in addition to that, Rajasthan government is coming out with a plastic park around the refinery. They are already working on that. So we are quite confident of tough market for these products. I see absolutely no -- in fact, even after commissioning of HRRL, we will be short of product.
The next question is from the line of Kirtan Mehta from Bank of Baroda Capital Markets.
I had sort of a couple [Technical Difficulty]
Excuse me, this is the operator. Sir, I'm sorry to interrupt, your voice is breaking.
[Technical Difficulty].
Sorry, sir, your voice is breaking again, sir.
Hello?
Yes, now we can hear you a little better.
Yes. The question was about the [Technical Difficulty].
Sorry to stop you again, sir. Sir, your voice is breaking. Can't hear you clearly.
I'll probably take these questions offline. I'm sorry.
Yes, yes. You can put it to us, and we'll reply to you.
We take the next question from the line of Amit Murarka from Axis Capital.
So on the point on excise duties [indiscernible] just wanted to reconfirm, so broadly, that would be 15 days of market inventory that you will hold for [indiscernible].
Okay. So what is your question?
No. So I'm just trying to understand what is the quantum of the hit because of that? So is it roughly like INR 10 billion to INR 11 billion or would it be higher?
If I understood your question correctly, you were asking -- you are trying to calculate the hit because of excise. Is that correct?
Yes, yes. That is INR 5 and INR 10 on the volume. So I was just trying to see like it's roughly 15 days of inventory that you hold, right, typically?
Yes. Actually, not getting into the specific, but it will -- it explains the difference in the profit.
The next question is from the line of Nitin from Yes Securities.
My first question is related to the net-zero target that you spoke about -- you said that there will be more details down this calendar year. But I just wanted to have your thoughts on what all activities are planed under like during the net-zero target and would that evolve [indiscernible] of our refinery basically sectors and our retail networks and would that also entail CapEx? So your thoughts on that?
There are certain actions which we have already been taking irrespective of the net-zero targets, et cetera. For example, I'll quote a few. We are already working on having the renewal power for Barmer Refinery and for Vizag Refinery expansion. And both the refineries will be needing the substantial power. In fact, in Mumbai, we had been using the renewal power for some time. And we were among the first to use the open access power, unlike many of the other refineries in India. So the use of green power is one of the actions which we are working on. We did take the actions because all these projects of expansion also had a reduction in the carbon intensity objective, and that is why in Mumbai Refinery earlier, we had 3 vacuum distillation units, which we now -- we'll be operating only 2. So the new one, which is installed is a bigger capacity. And we will shut down one of the vacuum distillation units, which brings the energy efficiency and reduce the carbon intensity as well. In Vizag, via the bottom upgradation in it, will make the fuel -- it will make it a 0-fuel oil refinery basically. In addition to having a hydrocracker and having the larger 9 million tonne distillation unit, even though we have announced the expansion capacity from 8.33 to 15, that is around 6.66 or so. But basically, we will be -- the new unit, which is being put up is of 9 million tonne so that we can shut down one of the old CDU unit of 1.5 million metric tonne. So we have -- while designing the units, we have tried to bring that part. Similarly, in Barmer Refinery, across the units, we have done the energy optimization. In addition to that, as I mentioned earlier that we have announced a 380 tonne per annum capacity hydrogen -- green hydrogen electrolyzer-based green hydrogen plant, which we have just placed an order and we are the first among the OMCs to place that order, and that will be commissioning by December '22. And in the time to come, we will be further adding the green hydrogen capacity. On the marketing front, we are setting up the 2G, 1G CBG plant, and we are blending ethanol in biofuels, in petrol and biodiesel in diesel. And we are setting up the LNG terminal and the CNG facilities, which are the lower carbon intensity fuels. So there are a number of actions. We are working on a whole road map rather than -- and we are getting into a very systematic fashion, and we will reveal the details during the course of the year that what are our action plans for that.
Understood. And sir, my second question is on rather bookkeeping one. So would you be able to help me with the kind of inventory that you were holding on through on the product side at the end of the quarter in terms of maybe days of inventory [indiscernible]?
I'll get you the details. Right now, I don't have off hand, but I can get you that.
The next question is from the line of [indiscernible] Capital.
Sir, it's very heartening to see that we are rolling out our nonfuel retail venture. So sir, on that front, can you just share some thoughts on what's the kind of road map we have on the Happy Shop venture of our, sir? And sir, secondly, just...
[ Sumit ], just repeat the question. I just missed that.
Yes, sir. So basically, my question on the Happy Shop, I saw that we launched 2 outlets and one also online venture. So sir, can you please share some thoughts on our Happy Shop venture, which is a nonfuel outlay? What is our road map? Or I mean, what are we thinking on the Happy Shop's expansion plan? And sir, secondly, just to touch base upon the point which you clarified, which is very heartening was on the excise duty part. So sir, today, we are the second largest pipeline company of having a network of nearly [indiscernible] kilometers of pipeline. So sir, is it -- you're safe to assume that if our pure company like BPCL, which is about INR 2,200 crore kilometer pipeline, if they report inventory loss because we -- our pipeline is double of BPCL. So can we safely assume that we can extrapolate the figures if they declare, -- can we extrapolate that in kind of inventory loss because we are double of BPCL in terms of pipeline. Is my thought process correct, sir?
Yes. To some extent, correct, without answering the specific, but I can say that all the 3 companies would have suffered this loss. Only thing is because this would have got offsetted against the higher refinery margins because both of them had the higher refining capacity, and they were not under shutdown. In our case, incidentally, it can be coincidentally just so happened that the timing of that has collided in the same quarter where we were in the start-up and commissioning phase. So as such, our refining capacities are lower than that. That is a fact. But sometimes it works to our advantages also. But in this case, we didn't have -- we couldn't realize the full value of the higher GRMs because we were in the stabilization phase. So in a normal running unit, the type of optimum yield which we get, during the stabilization phase, we will not get. Second thing, the fuel and loss will be higher during the stabilization phase, second thing. So on the refining side, while the GRMs are good, but the rupees crore will not be commensurate with these GRMs to that extent. And so we will not be able to cover this, and that's why it is reflecting. And I fully appreciate the concerns which some of you may have that all of us sudden [Foreign Language] and that is one of the reasons that we thought of having this conference call today to clarify this because it will not come very easily to the mind the people that oh, this can be the reason. Yes.
Okay. Okay. And sir, sorry, I mean...
Yes, coming back to your HP -- yes, so only to conclude this, this is a onetime impact, and -- so that is what it is. So it has nothing to do with the operation of the company or a perennial nature of the issue. Okay, that's one part of it. And the second part, the commissioning of the part, I already mentioned that all the units are stabilized on Mumbai Refinery. The second part is, as far as Happy Stores are concerned, we have opened 3. One was there, 2 we opened recently. We got a plan to open 10 in the immediate near future, and we want to take it to 700 in next 5 years. So that is what the plan is. We are working on it. And it will have both the online and offline mode of -- so there are various models which we are working on it. And we are very happy with the response which we have received on these outlets so far, the Nepean Sea Road, which was the first, and it has encouraged us tremendously. And based on the demand of the people, that is how we went on the pure online mode in Madurai, where actually the physical store we are yet to open, but we already started doing on online mode, delivery basis.
Sir, sorry, I mean you mentioned 700 stores, but your voice broke in between. So you're targeting...
I repeat again, I said that 10 stores we want to go immediately. In the next 5 years, we'll have around 700 stores like this across India.
Okay. Got it.
The second part is we are very happy with the response which we have received on the stores, what are the 3 stores we have opened, and that has encouraged us to open more. In Madurai, we have gone on an online mode also, even though we have not started a physical store, but we already started an online store on a book and door delivery basis. And so we are -- our all stores will have that model of physical as well as the online mode. So we are very encouraged with this response.
Okay. Excellent. And sir, sorry, if I just may ask one very quick question. So sir, what is our total operational pipeline capacity today?
We have got 27 million metric tonnes per annum.
Our pipeline capacity.
Yes. One minute, one minute. 29.7 million metric tonnes. See, just before the next question, I take somebody asked what is the finished good inventory? It was to the extent of 3,000 TMT. Okay. And there was one question earlier on HMEL profitability. I did tell the 9 months period, but in this quarter itself, they had a profit of INR 1,013 crores. And the ethanol production was 8,536 KL in the 9 months, which we passed on. And just for information, these 2 ethanol plants, which we have got, they also produce sugar, power and ethanol. So 8,500 KL of ethanol and 37,400 metric tonne of sugar was produced in that and in addition to that, the power also. There are 2 mills to that, which is operated by HBL. Yes, please go ahead.
Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.
So first of all, thank you very much for all joining in slightly late, but I think I forgot to wish you all a very happy New Year because we are meeting for the first time in this new year. I fully appreciate the concern which you all would have got at seeing the results because we are quite conscious that the expectations of our investors are high from HPCL, and we are committed to keep up the expectation of our investors. And the reason for the mismatch in the expectation and the result I explained, there is a onetime issue, which coincided with something which was -- we were in the process. But I'm quite convinced that we took a shutdown at the right time to complete because at the time, the demand was low. At the same time, with the way the corona has behaved in the last 2 years, we cannot be keeping on postponing this type of the projects. So we had to take a call and we did take -- every call has got its plus and minuses. So while I'm happy that HPCL in spite of all the trouble, our team could complete this project at the peak of the corona. In fact, just to mention that we had to use some advanced technologies because when oxygen was not available for gas cutting, we used the waterjet cutting for doing the job. In fact, we had installed a whole COVID testing mechanism within the refinery for 18,000 people. So everybody who was entering was -- rapid antigen test was conducted. We hired a full building to convert into hospital to take care of our people. So otherwise, it is not easy to manage 18,000 workforce at site at the peak of that -- but as I mentioned, we are happy that we didn't lose any life in this project. We did have some infection, but we were able to take care of all of that. Now with the -- as far as the future is concerned, the -- I believe that the refining margins will be good at least for a few quarters, and we should be getting the benefit of it. I believe that HPCL has speeded its projects at the right time, and we should get the benefits of these projects in time to come. The -- our various forays are yielding dividends. And in next 2 years, the balance projects should also get commissioned and should give good benefit to all our stakeholders. And I think in 2 years' time, you will see the profile of the company quite different -- the size and the profile are quite different than what it is today. Thank you so much. With this, I wish you all the best. Thank you.
Thank you very much, sir. Ladies and gentlemen, on behalf of Macquarie, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.