Why did BPCL's profit more than double in Q1 even as PSU saw inventory losses?

The PSU is an oil and gas company, primarily involved in refining and marketing petroleum products.

BPCL operates refineries in Mumbai, Kochi, and Bina, with a combined refining capacity of 35.3 MMTPA.

On Wednesday, BPCL reported more than doubling its first-quarter net profit, as marketing margins surged because of holding retail prices despite a drop in input oil cost.

Its consolidated net profit of ₹6,839.02 crore in April-June – the first quarter of the 2025-26 fiscal year – compared to ₹2,841.55 crore seen in the same period of the last year, according to a stock exchange filing by the company.

The first-quarter profit is a record for BPCL and is more than half of the full 2024-25 (April 2024 to March 2025) fiscal year earnings. It had reported a net profit of ₹13,336.55 crore in FY25.

The profit surge was despite inventory losses arising from selling products at rates lower than the price at which input crude oil was bought at, lower refining margins and unpaid LPG subsidy.

The earnings boost came from holding retail petrol and diesel prices despite a fall in their benchmark international rates. This led to a margin boost.

BPCL's pre-tax profit from the downstream petroleum business (basically fuel retailing) surged to ₹80,60.47 crore in April-June from ₹3,858.90 crore last year.

It earned $4.88 on every barrel of crude oil it processed and turned into fuels like petrol and diesel in Q1, compared to a $7.86 per barrel gross refining margin last year.

The company also had an unpaid LPG subsidy of ₹2,076.2 crore in the quarter.

BPCL and other state-owned fuel retailers like Indian Oil Corporation (IOC) and Hindustan Petroleum Corporation Ltd (HPCL) sell cooking gas LPG at below market price and get reimbursed for the difference as a subsidy from the government.

The subsidy for Q1 has not been paid even though the government has announced a ₹30,000 crore dole for the three companies to cover under-recoveries on LPG last fiscal year and in the current financial year.

BPCL turnover was almost unchanged at ₹1.29 lakh crore when compared to ₹1.28 lakh crore in April-June 2024.

The company processed 10.42 million tonnes of crude oil in Q1 against 10.11 million tonnes of refinery throughput in the same period last year. It sold 13.58 million tonnes of petroleum products in April-June, up from 13.16 million tonnes in Q1 of the last financial year.