HPCL FY26: Record profits, rapid deleveraging, and a tougher start to FY27

Hindustan Petroleum Corporation Limited closed FY 2025-26 with record profitability, all-time-high refining throughput, and a visibly stronger balance sheet. The company reported revenue from operations of ₹4,78,543 crore in FY26, with standalone profit after tax of ₹17,175 crore. Consolidated PAT was ₹18,047 crore. The year also marked a sharp deleveraging move, with standalone debt equity improving to 0.80 as of March 31, 2026, from 1.38 a year earlier.

Operationally, HPCL posted its highest-ever refinery throughput of 26.04 MMT, supported by above-nameplate utilization at both Mumbai and Visakh refineries. Market sales (including exports) rose to 51.45 MMT. Refining economics were supportive through most of the year, with FY26 gross refining margin (GRM) at US$8.79 per barrel, while Q4 FY26 GRM was reported at US$ 14.27 per barrel.

But the narrative did not end with a clean victory lap. In the earnings call, management described a sharp disruption late in the year driven by geopolitics and supply chain stress, including extreme crude price volatility and challenges in LPG availability. The company also cautioned that the first quarter of FY27 could be loss-making due to high crude prices and relatively lower product prices, while declining to give a numerical guidance given volatility.

FY26 performance: profits up, leverage down

HPCL’s reported FY26 results were backed by three levers that were repeatedly emphasised across the presentation and management commentary.

First was operational performance. Refinery throughput reached 26.04 MMT in FY26, up 3.0% YoY. Visakh refinery processed 16.04 MMT and Mumbai refinery 10.00 MMT, both operating above their nameplate capacities. Distillate yield reached 75.8% in FY26, with Visakh refinery achieving 74.5%.

Second was growth in marketing volumes. Sales volume (including exports) increased 3.3% YoY to 51.45 MMT, with domestic growth of 2.6%. The combined sale of petrol and diesel was 31.06 MMT, while LPG sales were 9.41 MMT.

Third was cost and balance-sheet discipline. The CMD highlighted the company’s cost takeout program, Samriddhi, delivering ₹1,691 crore of accruals in FY26. Management also linked the deleveraging to tight capex prioritisation, working capital reduction, and lower interest costs versus the prior year.

Dividend distribution was also highlighted. The board recommended a final dividend of ₹19.25 per equity share (face value ₹10) for FY26, in addition to the interim dividend of ₹5.00 per share.

Large projects: HRRL and RUF move from capex to execution

HPCL’s medium-term operating profile depends heavily on commissioning and ramping up new assets. Two projects dominated discussion.

The first is the HPCL Rajasthan Refinery Limited (HRRL) project, a greenfield integrated refinery and petrochemical complex at Pachpadra, Rajasthan, structured as a JV of HPCL (74%) and the Government of Rajasthan (26%). The company disclosed that the Ministry of Petroleum and Natural Gas approved a revision of HRRL project cost from ₹43,129 crore to ₹79,459 crore, with HPCL equity investment of ₹19,600 crore to maintain its 74% stake.

In the investor deck, HRRL is positioned as a high-complexity project (Nelson Complexity Index 17.0) with 26% petrochemical yields and large polymer capacities, including polyethylene and polypropylene. The call indicated that trial operations had processed crude and that LPG had been produced and sold. However, a localized fire in the CDU on April 20, 2026 delayed the commissioning timeline. Management said restoration work is in progress and that production of diesel and petrol is expected to start in May 2026. It also guided that initial operations could be around 60% utilisation in June, with ramp-up from Q2 and petrochemicals to be added gradually.

The second is the Residue Upgradation Facility (RUF) at Visakh refinery, which management said was commissioned on January 3, 2026. The CMD acknowledged that stabilization has been slower than expected due to catalyst clogging, requiring shutdown and restart. Management expects full ramp-up in 1 to 2 months and indicated that meaningful financial accretion is likely from Q2.

These projects matter because HPCL’s own presentation ties future bottom-line expansion to the maturing capex cycle. The deck also outlines a five-year capex and equity investment program (FY24 to FY28) of about ₹77,000 crore, with an “investment shift” that includes renewables, biofuels, gas, alternate fuels, and net zero.

Transition agenda: gas, renewables, hydrogen, and net zero

HPCL continues to position itself as a transitioning energy company, not only an oil marketing company. The deck sets out four broad growth pillars: growth in existing and adjacent businesses, leveraging new growth engines, investment in green and emerging opportunities, and leveraging digital technology.

On natural gas, HPCL disclosed participation across the value chain, including a 5 MMTPA LNG regasification terminal at Chhara, Gujarat, through a subsidiary. In the call, management stated that the port’s breakwater is about 90% to 95% complete (around 1,800 to 1,850 meters) with about 100 meters pending. This should allow operations for 10.5 to 11 months of the year, excluding peak monsoon. HPCL also announced a 10-year LNG sale purchase agreement with Abu Dhabi Gas Liquefaction Company (ALNG), a subsidiary of ADNOC Gas.

On renewables, the company reported installed wind and solar capacity of 235 MW as of March 31, 2026 and targeted 2,400 MW by 2027-28. It also stated that 95% of retail outlets were solarised as of March 31, 2026. A wholly owned subsidiary, HPCL Renewables and Green Energy Limited, is operational to consolidate green opportunities.

On green hydrogen, the presentation states a 370 TPA green hydrogen plant was commissioned at Visakh refinery and positions this as the first green hydrogen plant in any Indian refinery. The deck also shows a target of 9,670 TPA by 2029-30, including a 5,000 TPA project at Visakh and a 4,300 TPA project at HRRL.

On net zero, HPCL reiterated its commitment to achieve net zero Scope 1 and 2 emissions by 2040, with a stated investment plan of ₹60,000 crore. The roadmap breaks this down into levers and allocations, including efficiency, renewables, biogas fuel switching, green hydrogen, CCUS, and flare reduction.

What to watch: near-term volatility versus medium-term commissioning benefits

Management’s tone in the call was balanced. It highlighted FY26 as a year of record results and clear balance-sheet improvement, while also warning that near-term profitability could come under pressure if the crude-product pricing gap persists.

Two risk markers were explicit. The first is macro volatility and the likelihood of losses in Q1 FY27, which management stated it would not quantify. The second is execution risk around large project commissioning and stabilization. HRRL’s April fire and RUF’s slower stabilization both underline that the benefits from a maturing capex cycle will be earned through ramp-up discipline.

At the same time, HPCL’s FY26 execution on cost takeout and deleveraging stands out. The company ended the year with record PAT, improved leverage, and a portfolio roadmap that spans refining, petrochemicals, gas, renewables, hydrogen, and digital initiatives. The next phase for investors is likely to hinge on whether HRRL and RUF translate from engineering milestones into sustained EBITDA improvement under volatile fuel-market conditions.