HPCL returns to profit before either of its two big new projects earns what was guided

Hindustan Petroleum made a pre-tax profit of ₹6,768 crore in the September 2026 quarter, three months after a pre-tax loss of ₹17,446 crore. Its operating margin, operating profit as a share of sales, returned to 6.8%, level with a year ago. On those figures the refiner and fuel retailer looks back to normal. The recovery, though, came from its existing refineries and fuel pumps, before either of the two large projects it spent recent years building began to earn what management had guided they would.

Capital work in progress, the value of assets still under construction, fell by more than half in the year to September as the Vizag residue upgrade, commissioned in January, moved onto the books as working plant. The first-quarter loss has left its mark. Standalone borrowings rose by ₹17,802 crore since March, and even after the second-quarter profit the first half of the financial year is a pre-tax loss of ₹10,678 crore.

The Vizag unit shows the gap most clearly. It turns the heaviest residue of crude oil into lighter, more valuable fuels, and management said in May 2025 that it would add $2-3 to the refining margin on every barrel. Later that year it put the contribution at ₹2,500-3,000 crore a year of EBITDA, earnings before interest, tax, depreciation and amortisation. In January it targeted full utilisation by March 2026; in May it expected full ramp-up within a month or two, and the unit is still not there. The company now says the unit runs at 60-70% of capacity. The company was direct that the unit is not yet earning the guided margin, which it said had at times come close to a dollar a barrel. Vikas Kaushal, the chairman and managing director, said he hopes to reach the guided benefit by March or earlier, while the unit is still being stabilised. The company described the unit as the first of its technology anywhere, and Kaushal said it had not been able to buy the crudes best suited to it.

The Rajasthan refinery at Barmer, a joint venture in which HPCL holds the majority stake, is also short of what was guided. Management valued HPCL's share of its EBITDA at full run at ₹5,000-5,500 crore a year. In July management expected 80-85% utilisation from October; it is running at about 60%, the start-up rate it had guided, and management says it is holding to full running in December, once a sulphur-recovery unit lets it process higher-sulphur crude. Management expects the refinery to make a pre-tax profit in October even at that rate, though the company stressed that this was an early expectation and not guidance. For now the refinery adds nothing to HPCL's share of profit from its joint ventures, and Kaushal expects it to weigh on consolidated profit next year.

So what lifted the quarter was the old business, and part of that may not repeat. The company's opening remarks called the help from inventory small. Answering questions later, Kaushal said crude held at the end of June had been written down to that month's lower price, which helped refining margins in July. The two accounts point different ways on size. A margin equal to a year ago suggests ordinary profitability returned, but management also called the current quarter challenging because crude prices are high.

Management has set its own checkpoints: it expects to report the Vizag unit's utilisation and margin effect at the next quarterly results, and the Rajasthan refinery at full run from December. Until those arrive, the second-quarter profit reflects the refining cycle more than the plants meant to lift HPCL's earnings.