BPCL: Should you invest?

About the company: BPCL

• Bharat Petroleum Corporation Limited (BPCL) was established in 1952. It is one of the leading companies in the petroleum sector in India.
• It is a public sector company that is engaged in the business of refining crude oil and marketing petroleum products.

Headquarter	Mumbai, Maharashtra
Sector	Refineries

Area of Operation:

• Vast diversified product portfolio which includes: Fuels & Services, Lubricants, Aviation fuel, Refineries, Natural Gas, Pipelines, etc.
• It has refineries at Mumbai and Kochi, LPG bottling plants, and Lube blending plants at various locations.
• The Corporation’s marketing infrastructure includes a vast network of Installations, Depots, Retail Outlets, Aviation Fuelling Stations, and LPG distributors.

Chairman & MD: BPCL

Shri. Arun Kumar Singh (September’21 – Present)

Board of Committees:

When it comes to remuneration the company’s annual report has mentioned “There is no requirement of disclosure of the ratio of the remuneration of each Director to the median employee’s remuneration and other such details.”

Subsidiaries:

• Bharat Petroresources Limited (BPRL)- BPRL was incorporated in October 2006, as a 100% subsidiary of BPCL, to cater to the upstream activities of BPCL.
• Bharat Oman Refineries Limited (BORL)- BORL was incorporated in 1994 as a Joint Venture between BPCL and OQ SAOC (formerly known as Oman Oil Company SAOC).
• Bharat Gas Resources Limited (BGRL)- Bharat Gas Resources Limited (BGRL), a wholly-owned subsidiary of BPCL was incorporated in June 2018 for handling the Natural Gas business.
• BPCL-KIAL Fuel Farm Private Limited (BKFFPL)- BKFFPL was incorporated in May 2015 to design, construct, commission, and operate the Fuel Farm at Kannur International Airport.
• Apart from these subsidiaries, it is associated with 25+ Joint Ventures Companies and Associates.

Competitors:

• Indian Oil Corporation Ltd (₹ 108,700 Cr.)
• Hindustan Petroleum Corporation Ltd (₹ 37,755 Cr.)

Shareholding pattern:

Top Shareholdings:

• President of India – 52.98%
• LIC of India – 5.91%

Industry Overview:

• This sector is among the eight core industries in India and plays a major role in influencing decision making for all the other important sections of the economy.
• India’s economic growth is closely related to its energy demand, therefore, the need for oil and gas is projected to grow more, thereby making the sector quite conducive for investment.
• India is expected to be one of the largest contributors to non-OECD petroleum consumption growth globally. Crude Oil import rose sharply to US$ 101.4 billion in 2019-20 from US$ 70.72 billion in 2016-17.
• Crude oil consumption is expected to grow at a CAGR of 3.60% to 500 million tonnes by 2040 from 221.56 million tonnes in 2017. India’s oil demand is projected to rise at the fastest pace in the world to reach 10 million barrels per day by 2030, from 5.05 million barrel per day in 2020.

Profit and Loss Statement:

Consolidated P&L (in Rs. Crores):

	Mar-16	Mar-17	Mar-18	Mar-19	Mar-20	Mar-21
Revenue from Operations	1,87,815	2,01,251	2,35,895	2,98,226	2,84,572	2,30,163
Expenses	1,74,844	1,87,468	2,20,578	2,83,113	2,75,597	2,09,170
Operating Profit	12,971	13,783	15,317	15,112	8,975	20,993
Profit before tax	12,132	13,700	14,174	12,905	3,652	22,432
Net Profit	8,089	8,721	9,009	7,802	3,055	16,165
EPS in Rs	37.29	40.20	41.53	35.97	14.08	74.52

Key Pointers:

1. Expenses of the company majorly include 80% Material cost.
2. Decrease in retail demand majorly let to negative growth in revenue.
3. Company made an excellent recovery in its profits.
4. Sales can be categorized as slightly poor over last 5 years.

Balance Sheet:

Standalone Balance Sheet (in Rs. Crores):

	Mar-16	Mar-17	Mar-18	Mar-19	Mar-20	Mar-21
Equity Capital	656	1,311	1,967	1,967	1,967	2,093
Reserves	27,138	30,033	35,108	37,255	35,022	51,634
Borrowings	23,388	35,725	37,659	44,839	65,476	54,532
Trade Payables	8,352	11,382	15,198	17,834	13,108	16,263
Total Liabilities	86,422	1,09,086	1,20,356	1,36,926	1,50,860	1,60,988
Fixed Assets	25,358	33,684	45,539	49,315	60,175	64,098
Investments	9,401	21,327	23,725	24,907	27,029	26,768
Other Assets	34,203	37,241	41,217	49,050	45,900	52,982
Cash Equivalents	4,202	1,885	1,354	663	1,165	8,110
Loans n Advances	6,352	5,839	8,101	14,228	11,692	3,916
Total Assets	86,422	1,09,086	1,20,356	1,36,926	1,50,860	1,60,988

Cash Flow:

Standalone Cash Flow (in Rs. Crores):

	Mar-16	Mar-17	Mar-18	Mar-19	Mar-20	Mar-21
Cash from Operating Activity	11119	9041	11068	10157	7881	23554
Profit from operations	14171	14846	15788	16694	10798	23579
Inventory	1450	-6553	-1333	-404	-389	-6367
Receivables	916	-1956	-2369	-1748	2349	-2589
Working capital changes	331	-1788	-1274	-3531	-692	3779
Direct taxes	-3276	-3904	-3233	-2773	-1827	-3663
Cash from Investing Activity	-9233	-15274	-7066	-10451	-11135	-2573
Fixed assets purchased	-10184	-9559	-7752	-10541	-12197	-9206
Investment Purchases	-714	-11386	-26096	-49830	-39104	-9102
Dividends Received	115	156	332	340	341	1555
Cash from Financing Activity	-1332	4804	-4218	207	3583	-13981
Dividends Paid	-2737	-5495	-3579	-4006	-5327	-4924
Proceeds from borrowings	8381	15018	6235	7403	18439	4996
Repayment of borrowings	0	0	-434	-816	-6023	-16986
Net Cash Flow	555	-1429	-215	-87	329	7000

Financial Ratios:

Stock Price:

1. Current Price	₹ 337
2. Market Cap	₹ 73,039 Cr
3. Yearly fluctuation	₹ 331 – 503

Ratios:

	P/E	ROCE	ROE	Op. Margin	Rev Growth
BPCL	5.54	24.90%	39.55%	10.23%	-19.12%
IOCL	3.19	14.98%	19.85%	12.11%	-23.95%
HPCL	3.9	19.16%	30.48%	7.99%	-13.32%

Strengths:

1. Large product portfolio.
2. DIIs have increased their shareholdings.
3. Strong EPS and Profit Growth in the last FY.
4. Sharp rise in Cash & Cash equivalent.
5. Company has decreased thier borrowings and also increased thier reserves.
6. Reported strong financial ratios.

Weaknesses:

1. Highly import dependent (the cost of raw material is subject to global economy).
2. MFs decreased their holdings in the last quarter.

Opportunities:

1. Loans given to customers for considered good is decreased therefore increasing the company’s cash balance.
2. Undervalued when compared to Industry P/E.

Threats:

1. FIIs have decreased their holdings.
2. The covid-19 pandemic has impacted the sector in ways which may have far reaching and long lasting implications. Even the global energy demand witnessed one of the biggest declines in history.
3. Company like HPCL with much lesser market cap but is at par with BPCL with regards to the financials.

Disclaimer: This shouldn’t be construed as a stock recommendation, investors discretion is advised while investing.

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