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Time for Expansion: BPCL Plans a Whooping Sum of INR 40,000 Cr to Increase Capacity up to 50 MTPA by 2021

News:

Bharat Petroleum Corp (BPCL) has set a target of increasing its refining capacity to 50 million tonne per annum with an investment of Rs 40,000 crore over the next five years as part of its overall Rs 1 trillion capex plan under 'Project Sankalp'. 

Source: ET

SNP Insight:

The ambitious capex plans by state oil refiners targeting growth in times of lower crude oil prices and reduced losses on fuel sales seems to be far fetched for the company. The investments plans would certainly increase the debt to equity ratio of the company from 0.6 in FY'15 to a higher value of 1.5 in coming years.There by it may turn out to be difficult for the company to sustain unless it generates profits of INR 10,000 Cr per annum from current level of INR 2,853 Crores in FY'15.

Source: SNP Infra Research