Hindustan Petroleum Corp. (HPCL) has refinanced about ₹50,000 crore of debt at its Rajasthan refinery, securing a reduction of around 105 basis points in borrowing costs and targeting annual interest savings of about ₹1,000 crore through a broader restructuring of the project's finances, Chairman and Managing Director Vikas Kaushal said on Friday.
The refinancing, effective October 3, is expected to save the company about ₹470 crore to ₹550 crore annually, Kaushal told analysts on an earnings call.
Additional equity infusions, conversion of subordinated loans into equity and interest-free state support are expected to further ease the refinery's financing burden as HPCL ramps up operations at the facility.
The 9 million tonnes a year refinery in Rajasthan was built at a cost of ₹79,459 crore, with HPCL (74 per cent) and Government of Rajasthan (26 per cent) as equity partners.
HPCL Rajasthan Refinery Limited (HRRL), the joint venture company, part refinanced existing project loans through ₹8,000 crore in rupee term loans from a consortium comprising the National Bank for Financing Infrastructure and Development (NaBFID), India Infrastructure Finance Company Limited (IIFCL), ICICI Bank Limited, UCO Bank and Punjab & Sind Bank; a ₹2,000 crore working capital demand loan from Bank of Baroda; and fund-based and non-fund-based credit facilities aggregating to ₹400 crore from ICICI Bank Limited.
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The term loan proceeds will be utilised for the part refinancing of existing project loans, while the working capital facilities will support HRRL's working capital requirements and help address cash flow mismatches associated with the project, including its allied utilities and facilities at Pachpadra, District Balotra, Rajasthan.
Kaushal said the financial restructuring is aimed at improving the economics of the Rajasthan refinery, a major new asset that HPCL expects to bring towards full operating capacity by December. The company is also working to stabilise its other complex refining assets and contain costs as volatile crude prices and rising losses on domestic cooking gas threaten near-term earnings.
"We have significantly altered the debt structure of the company," he said, adding that the refinancing and other measures could reduce annual interest costs by about ₹1,000 crore compared with the previous year.
The Rajasthan government infused ₹1,500 crore of equity into the refinery during the September quarter, while HPCL converted ₹4,300 crore of subordinated loans into equity, Kaushal said. The conversion is expected to lower interest costs by about ₹350 crore. Further equity calls are planned over the next one or two quarters.
The state has also committed to providing about ₹1,100 crore annually in interest-free loans, with the first instalment already received, according to Kaushal.
HPCL is seeking to improve the refinery's financial performance as it moves beyond commissioning and begins shipping substantial volumes of products. The facility's commercial operation date was declared on June 22 and it is currently running at about 60 per cent utilisation, broadly in line with earlier guidance.
Almost all secondary processing units are operating in hot circulation, with two units still to be brought into that state. HPCL expects to complete the remaining commissioning work, including the sulphur recovery unit, before moving towards full-capacity operations.
The company expects throughput to reach a run rate of 8 million to 9 million tonnes per annum around December, give or take a week or two, Kaushal said.
The refinery recorded a gross refining margin of about USD 12 per barrel in the September quarter. HPCL expects margins to rise above USD 20 per barrel in the fourth quarter as it transitions to processing higher-sulphur crude, which the facility is designed to handle.
Product shipments have already increased sharply. Kaushal said the refinery shipped about 15,000 tonnes of products on the day before the call, compared with no shipments three months earlier. October shipments are expected to exceed 400,000 tonnes, generating revenue of more than ₹4,000 crore for the month.
Kaushal said the refinery could post a positive monthly profit before tax in October, although he stressed that this was an expression of management's optimism rather than formal guidance, given the volatility of refining margins and the early stage of operations.
"We are very excited on the Rajasthan. We are very bullish on it," he said.
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