Rating Rationale
November 05, 2019 | Mumbai
Bharat Petroleum Corporation Limited
Rated amount enhanced
Rating Action
Total Bank Loan Facilities Rated Rs.68343.5 Crore
Long Term Rating CRISIL AAA/Stable (Reaffirmed)
Short Term Rating CRISIL A1+ (Reaffirmed)
Rs.1500 Crore Non Convertible Debentures CRISIL AAA/Stable (Reaffirmed)
Rs.1000 Crore Non Convertible Debentures CRISIL AAA/Stable (Reaffirmed)
Rs.1000 Crore Non Convertible Debentures CRISIL AAA/Stable (Reaffirmed)
Rs.15000 Crore Short Term Debt Programme CRISIL A1+ (Reaffirmed)
Rs.4500 Crore Commercial Paper (Enhanced from Rs.3500 Crore) CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its ratings on the bank facilities and debt instruments of Bharat Petroleum Corporation Limited (BPCL) at 'CRISIL AAA/Stable/CRISIL A1+'.
The ratings continue to reflect continued support received from the Government of India (GoI). The ratings also factor in the company's established retail network and branding initiatives, and strong operating efficiency. These strengths are partially offset by exposure to project implementation risks, and limited pricing flexibility, given the controlled price environment for certain products.
CRISIL has taken note of media reports suggesting the government of India's (GoI's) intent to partly or fully disinvest its 53.3% stake in BPCL. However there has been no official communication from the GOI, in this regard. CRISIL continues to monitor developments on the stake sale, change in the government support philosophy, and its management control, which will remain key rating sensitive factors.

Analytical Approach

For arriving at the ratings, CRISIL has combined the business and financial risk profiles of BPCL and its subsidiaries, including Numaligarh Refinery Ltd (NRL; 'CRISIL AAA/Stable/CRISIL A1+'); and joint venture (JV), Bharat Oman Refineries Ltd (BORL; 'CRISIL AA+/Stable/CRISIL A1+'). The subsidiaries have been fully consolidated and the JVs have been proportionately consolidated. That is because CRISIL believes NRL and BORL are strategically important to BPCL's business risk profile, as they reduce the latter's dependence on other refiners, to source products for retail operations in central India. Furthermore, the ratings factor in support from GoI.

Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description
* Continued support from GoI
The oil refining and marketing activity is strategic for India's economic development. Oil marketing companies (OMCs) dominate the domestic market for key petroleum products, such as motor sprits, high-speed diesel, superior kerosene oil (SKO), and liquefied petroleum gas (LPG). Continuous supply of these products remains contingent on smooth operations of OMCs like BPCL. Any diminution in BPCL's strategic importance, or in GoI's management control will constitute a key rating sensitivity factor.
GoI has supported OMCs through budgeted subsidies and discounts from upstream companies, thereby minimising their sales-related under-recovery burden. Post deregulation of diesel, under-recoveries have declined significantly, further aided by favourable crude prices and reduced consumption of subsidised LPG. CRISIL believes GoI will continue to support BPCL, by absorbing a large portion of its sales-related under-recoveries, if any. That said, any change in adequacy and timeliness of GoI support is a rating sensitivity factor.

* Established retail network and branding initiatives, supporting revenue growth
BPCL accounts for nearly 15% of the country's refining capacity, and has around 21% share in the domestic petroleum market, as of August 2019. The market position is underpinned by the company's entrenched marketing and distribution infrastructure, with around 14,802 retail outlets. BPCL also has an active domestic LPG customer base of 6.8 crore, as of August 2019, and has undertaken aggressive branding and marketing exercises. These initiatives will help the company maintain its established position in the domestic petroleum market.

* Strong operating efficiency
High capacity utilisation at refineries ensure strong operating efficiency. Furthermore, proximity of refineries to the coast gives BPCL a logistical advantage, and helps control transportation cost in procuring crude. The refinery at Numaligarh, Assam, with capacity of 3 million metric tonne per annum (mmtpa), has high operational efficiency, reflected in healthy gross refining margin (GRM), even after excluding excise duty benefit, and has fared consistently better than other public sector refiners. GRM could improve further, supported by modernisation and capacity expansion of the refineries at Kochi and Bina, Madhya Pradesh.

* Exposure to project implementation risks, given the large investment plans
BPCL has undertaken several projects, which include increasing the refining capacity at Kochi (from 9.5 mmtpa to 15.5 mmtpa, commissioned in fiscal 2018) and Bina, setting up a petrochemical unit, modernising and augmenting the pipeline and city gas distribution infrastructure, and investing in exploration and production. Experience in implementing and operating large projects will hold the company in good stead. Nevertheless, project cost and timelines, and stabilisation of operations after completion, will be key monitorables.
* Limited pricing flexibility for SKO and LPG
BPCL faces under-recoveries owing to controlled prices of domestic SKO and LPG. While the GoI has provided budgetary support, absence of an institutionalised mechanism to meet under-recoveries, has led to delay in subsidy receipts. This risk is partially offset by deregulation of petrol and diesel (a major contributer to under-recoveries), implementation of the Direct Benefit Transfer scheme (DBT; or Pratyaksha Hastaantarit Laabh- PAHAL) for LPG, ongoing implementation of DBT for SKO, and clarity given by GoI on subsidy sharing. CRISIL believes these initiatives will help streamline the mechanism for meeting under-recoveries. However, timely receipt of subsidy and a well-defined institutionalised mechanism will be necessary for ensuring financial health of the sector on a long-term sustainable basis.

Liquidity: Superior
BPCL enjoys superior financial flexibility, driven by support from the GoI. The portfolio of oil bonds, large unutilised bank limit, and access to low-cost funds from both domestic and overseas markets, can also help raise resources when needed. Annual capex of Rs 8,000-10,000 crore, is likely to be met via internal accrual and external borrowing. Long-term debt of Rs 1800-1900 crore in fiscal 2020, and Rs 3,220 crore in fiscal 2021, is expected to be funded via operational cash flows and fresh debt.
Outlook: Stable

CRISIL continues to factor GoI's support to BPCL, because of its strategic importance, and criticality of the sector, to GoI.

Rating sensitivity factors
Downward factor
* Significant increase in sales-related under-recoveries on a sustained basis, leading to increase in amount recoverable under subsidy scheme, from Rs 8,651.69 crores as on March 31, 2019.
* Change in support philosophy of GoI.

About the Company

BPCL, a GoI undertaking (53.3% ownership as on June 30, 2019), was set up as Bharat Refineries Ltd (BRL) in 1976, by the amalgamation of Burmah Shell Oil Storage and Distribution Company of India Ltd with Burmah Shell Refineries Ltd. In 1977, BRL was renamed BPCL.
BPCL is an integrated refining and marketing company. It is India's second-largest oil marketing and the third-largest refining company, with a consolidated refining capacity of 36.5 mmtpa, representing 15% of India's total installed capacity. The company operates two refineries, both along the west coast: a 12-mmtpa refinery in Mumbai and a 15.5-mmtpa refinery in Kochi. It also owns a 61.65% stake in NRL, which has a refinery with capacity of 3 mmtpa in North-East India. BPCL, through its JV BORL, operates a 6-mmtpa refinery in Bina. Retail operations are supported by a nationwide marketing network, comprising 14,447 retail outlets and 1948 kilometre of product pipelines.

Key Financial Indicators (Consolidated)*
Particulars Unit 2019 2018#
Revenue Rs Cr. 296,985 235,024
Profit After Tax (PAT) Rs Cr. 8,521 9,786
PAT Margin % 2.9 4.1
Adjusted Debt/Adjusted Networth Times 1.31 1.15
Interest coverage Times 11.42 17.83
*Above numbers reflects analytical adjustments made by CRISIL Ratings;
#Historical financial statements prepared under Indian GAAP vary from financial statements prepared and presented in accordance with IndAS, fiscal 2017 onwards

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
ISIN Name of instrument Date of allotment Coupon Rate (%) Maturity date Issue size (Rs.Cr) Rating assigned with outlook
INE029A07075 Debentures 10-Mar-2017 7.35% 10-Mar-2022 550.00 CRISIL AAA/Stable
INE029A08040 Debentures 16-Jan-2018 7.69% 16-Jan-2023 750.00 CRISIL AAA/Stable
INE029A08057 Debentures 11-Mar-2019 8.02% 11-Mar-2024 1,000.00 CRISIL AAA/Stable
NA Debentures** NA NA NA 1,200.00 CRISIL AAA/Stable
NA Commercial Paper NA NA 7-365 days 4,500.00 CRISIL A1+
NA Short Term Debt Programme NA NA 7-365 days 15,000.00 CRISIL A1+
NA Fund-Based Facilities* NA NA NA 22,855.0 CRISIL AAA/Stable
NA Fund-Based Facilities# NA NA NA 9,912.50 CRISIL AAA/Stable
NA Proposed Fund-Based Bank Limits NA NA NA 610.00 CRISIL AAA/Stable
NA Proposed Fund-Based Bank Limits$ NA NA NA 16,561.50 CRISIL AAA/Stable
NA Non-Fund Based Limit NA NA NA 16,312.0 CRISIL A1+
NA Proposed Non Fund based limits NA NA NA 110.00 CRISIL A1+
NA Proposed Non Fund Based Limits@@ NA NA NA 1,982.50 CRISIL A1+
*Rs 3690.0 crore is interchangeable with non-fund-based facilities
#Equivalent to USD 1625 million. 1 USD=INR 61
$Equivalent to USD 2715 million. 1 USD=INR 61
@@Equivalent to USD 325 million. 1 USD=INR 61
Annexure - List of Entities Consolidated
Company % Consolidation
Bharat Gas Resources Limited 100.00 Subsidiary
Bharat Oman Refineries Limited 50.00 Joint Venture
Bharat PetroResources JPDA Limited 100.00 Subsidiary
Bharat PetroResources Limited 100.00 Subsidiary
Bharat Renewable Energy Limited 33.33 Joint Venture
Bharat Stars Services Private Limited 50.00 Joint Venture
BPCL-KIAL Fuel Farm Private Limited 74.00 Joint Venture
BPRL International BV 100.00 Subsidiary
BPRL International Singapore Pte Ltd. 100.00 Subsidiary
BPRL International Ventures BV 100.00 Subsidiary
BPRL Ventures BV 100.00 Subsidiary
BPRL Ventures Indonesia BV 100.00 Subsidiary
BPRL Ventures Mozambique BV 100.00 Subsidiary
Brahmaputra Cracker and Polymer Limited 10.11 Associates
Central UP Gas Limited 25.00 Joint Venture
Delhi Aviation Fuel Facility Pvt. Limited 37.00 Joint Venture
DNP Limited 26.00 Joint Venture
Falcon Oil & Gas BV 30.00 Joint Venture
FINO Paytech Limited 20.75 Associates
Goa Natural Gas Private Limited 50.00 Joint Venture
GSPL India Gasnet Limited 11.00 Associates
GSPL India Transco Limited 11.00 Associates
Haridwar Natural Gas Pvt. Ltd. 50.00 Joint Venture
IBV (Brasil) Petroleo Ltda. 50.00 Joint Venture
Indraprastha Gas Limited 22.50 Associates
JSC Vankorneft 7.89 Associates
Kannur International Airport Limited 21.68 Associates
Kochi Salem Pipeline Private Limited 50.00 Joint Venture
LLC TYNGD 9.87 Associates
Maharashtra Natural Gas Limited 22.50 Joint Venture
Matrix Bharat Pte. Ltd. 50.00 Joint Venture
Mozambique LNG 1 Pte. Ltd. 10.00 Associates
Mumbai Aviation Fuel Farm Facility Private Limited 25.00 Joint Venture
Numaligarh Refinery Limited 61.65 Subsidiary
Petroleum India International 18.18 Associates
Petronet CI Limited 11.00 Associates
Petronet India Limited 16.00 Associates
Petronet LNG Limited 12.50 Associates
Ratnagiri Refinery & Petrochemicals Limited 25.00 Joint Venture
Sabarmati Gas Limited 49.94 Joint Venture
Taas India Pte Ltd. 33.00 Joint Venture
Vankor India Pte Ltd. 33.00 Joint Venture
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  4500.00  CRISIL A1+  25-02-19  CRISIL A1+  08-10-18  CRISIL A1+    --    --  -- 
            27-07-18  CRISIL A1+           
Non Convertible Debentures  LT  2300.00
CRISIL AAA/Stable  25-02-19  CRISIL AAA/Stable  08-10-18  CRISIL AAA/Stable  10-04-17  CRISIL AAA/Stable  15-04-16  CRISIL AAA/Stable  CRISIL AAA/Stable 
            27-07-18  CRISIL AAA/Stable  20-02-17  CRISIL AAA/Stable       
            27-04-18  CRISIL AAA/Stable           
Short Term Debt  ST  15000.00  CRISIL A1+  25-02-19  CRISIL A1+  08-10-18  CRISIL A1+  10-04-17  CRISIL A1+  15-04-16  CRISIL A1+  CRISIL A1+ 
            27-07-18  CRISIL A1+  20-02-17  CRISIL A1+       
            27-04-18  CRISIL A1+           
Fund-based Bank Facilities  LT/ST  49939.00  CRISIL AAA/Stable  25-02-19  CRISIL AAA/Stable  08-10-18  CRISIL AAA/Stable  10-04-17  CRISIL AAA/Stable  15-04-16  CRISIL AAA/Stable  CRISIL AAA/Stable 
            27-07-18  CRISIL AAA/Stable  20-02-17  CRISIL AAA/Stable       
            27-04-18  CRISIL AAA/Stable           
Non Fund-based Bank Facilities  LT/ST  18404.50  CRISIL A1+  25-02-19  CRISIL A1+  08-10-18  CRISIL A1+  10-04-17  CRISIL A1+  15-04-16  CRISIL A1+  CRISIL A1+ 
            27-07-18  CRISIL A1+  20-02-17  CRISIL A1+       
            27-04-18  CRISIL A1+           
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Fund-Based Facilities* 22855 CRISIL AAA/Stable Fund-Based Facilities* 22855 CRISIL AAA/Stable
Fund-Based Facilities# 9912.5 CRISIL AAA/Stable Fund-Based Facilities# 9912.5 CRISIL AAA/Stable
Proposed Fund-Based Bank Limits 610 CRISIL AAA/Stable Proposed Fund-Based Bank Limits 610 CRISIL AAA/Stable
Proposed Fund-Based Bank Limits$ 16561.5 CRISIL AAA/Stable Proposed Fund-Based Bank Limits$ 16561.5 CRISIL AAA/Stable
Non-Fund Based Limit 16312 CRISIL A1+ Non-Fund Based Limit 16312 CRISIL A1+
Proposed Non Fund based limits 110 CRISIL A1+ Proposed Non Fund based limits 110 CRISIL A1+
Proposed Non Fund based limits@@ 1982.5 CRISIL A1+ Proposed Non Fund based limits@@ 1982.5 CRISIL A1+
Total 68343.5 -- Total 68343.5 --
*Rs 3690.0 crore is interchangeable with non-fund-based facilities
#Equivalent to USD 1625 million. 1 USD=INR 61
$Equivalent to USD 2715 million. 1 USD=INR 61
@@Equivalent to USD 325 million. 1 USD=INR 61
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Petrochemical Industry
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt
Criteria for Notching up Stand Alone Ratings of Entities Based on Government Support

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